Can CBI & SFIO Hold Simultaneous Investigations Into Offences Arising Out Of Same FIR? Supreme Court To Consider

The Supreme Court is scheduled to consider the issue whether both Central Bureau of Investigation (CBI) and Serious Fraud Investigating Officer (SFIO) can hold parallel investigations into offences arising out of the same FIR. 

The issue arose before the bench of CJI Sanjiv Khanna and Justice Sanjay Kumar which was hearing the challenge by CBI against the order of the Karnataka High Court which quashed two cases registered against Vijayraj Surana, Promoter Director of Surana Power Limited, registered under S. 13(2) read with 13(1)(d)of the Prevention of Corruption Act. 

CBI had registered the FIR based on the complaint made by IDBI Bank in which it was alleged the company's account became a non-performing asset from March, 2013 to November 2015 with various Banks. The forensic audit for the financial year 2009-10 to 2017-18 was conducted and it was reported that there was misuse of funds, source of capital, manipulation in project award, accounting manipulation and diversion of funds. Following which it had lodged the complaint.

The single bench of Justice Hemant Chandangoudar noted that the FIRs were lodged on the Forensic Audit Report for the financial year 2009-10 to 2017-18.

The allegations even if accepted on the face of it, the Court said that it would tantamount to the petitioner committing fraud as defined in Explanation (i) to Section 447 of Companies Act. It also pointed out that Section 212 of the Companies Act deals with the investigation into affairs of a company by a Serious Fraud Investigating Officer (SFIO).

Under explanation (i) of S.447, fraud is defined as any act, omission, concealment of facts, or abuse of position with an intent to deceive, gain an unfair advantage, or cause harm to a company, its shareholders, or the public at large.

Today, during the hearing, the CJI verbally remarked that the High Court's judgement seemed incorrect and that it was legally possible for a parallel investigation to be done by the Police or CBI (if law permitted) of the same incident under IPC. 

He also negated the assumption that allowing two parallel investigations would amount to double jeopardy as that would only apply at the stage of prescribing punishment. 

"Prima facie the judgement doesn't appear to be correct, because the law is very clear...normally double jeopardy applies when S. 26 of the General Clauses Act comes into play in case of Punishment. When we say that the offences under the Companies Act can be investigated by the SFIO, it is with regard to the offences mentioned in the Companies Act. But if the same very act or when the requirements (of offence) are slightly different - they constitute an offence under the IPC, the investigation can certainly be done by the police as well as by the CBI, where it is permitted." the CJI said.

Notably S.26 of the General Clauses Act 1897 states : Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence.

Counsel appearing for Surana contended that under S. 212 of the Companies Act, it is mandated that the investigation be transferred to the SFIO as long as the SFIO is seized of the matter. 

"It is not a case of double jeopardy. 212 is provision which gives primacy to one agency and says that only that agency will investigate and all Central and State Agencies will have to entrust the investigation."  He added 

CJI then interjected, "No, that will be wrong, because then so many offences- SFIO cannot deal with" 

The Counsel for the CBI however pointed out that the High Court order has quashed the FIR altogether instead of transferring the case to SFIO. He highlighted that the ramifications of this would mean that no legal action or inquiry would exist against Surana. 

"Quashing the FIR without going into the merits, it will result in double jeopardy even thereafter. Though the order says that the CBI can produce the complaint and papers before SFIO, once the FIR its quashed, the offence will be non-est. If a non-est offence goes to SFIO, they cannot again reopen the investigation" 

The CJI added that although SFIO may have powers to investigate in an FIR relating to offences under the Companies Act, when the offences were under the Prevention of Corruption Act, it was imperative that the police investigate the matter. 

The bench has asked the counsels to prepare short notes addressing the following aspects : (1) allegations against the accused's company under IPC and PCA; (2) the date of registration of FIR and stage of investigation; (3) date on which the investigation was transferred to SFIO ; (4) whether SFIO has filed a charge sheet under the IPC and Companies Act and (5) Provisions which would deal with the investigation being done by SFIO and CBI 

The matter will now be heard in December. 

The High Court in its order made the following observations : 

“Although the CBI has invoked Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, there is no allegation in the first information report that the accused in connivance with the Bank Officials who come under the ambit of public servants as defined under the Prevention of Corruption Act misused funds, source of capital, manipulation in project award, accounting manipulation, and diversion of funds. In the absence of essential elements to constitute the offences under PC Act, the contention of the learned counsel for the CBI that the SFIO cannot investigate the offences under the PC Act is not acceptable, when there is no allegation to investigate the offence under PC Act." 

Case Details : CENTRAL BUREAU OF INVESTIGATION Vs VIJAYRAJ SURANA| SLP(Crl) No. 9381/2024