Why was the plea of Kerala CM’s daughter against an SFIO probe dismissed?

Veena T. Vijayan had approached the Karnataka High Court challenging the Serious Fraud Investigation Office probe citing another ongoing probe, which is dormant now, carried out by the registrar of companies against her company.

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ON Friday, the Karnataka High Court dismissed a plea of Veena T. Vijayan, daughter of Kerala Chief Minister Pinarayi Vijayan and wife of Kerala public works department minister P. Muhammed Riyas.

The plea sought to halt the investigation by the Serious Fraud Investigation Office (SFIO), a probe agency established under the Union ministry of corporate affairs in 2013, into her company's financial transactions.

Veena ran a one-person software company named Exalogic Solutions Private Limited from 2014 to the end of 2022. During a raid by the income tax department on Cochin Mineral Rutile Limited, in which Kerala State Industrial Development Corporation has a 13 percent share worth ₹1 crore plus, the Income Tax Interim Settlement Board discovered that the company had paid Exalogic ₹1.72 crore for services not rendered.

Initially, the Income Tax Interim Settlement Board discovered that the Cochin Mineral Rutile Limited had engaged in approximately ₹135 crore of fictitious transactions. These transactions included a payment of ₹1.72 crore to Exalogic.

This finding triggered investigations by both the registrar of companies and the SFIO into Exalogic. Meanwhile, Veena contested the SFIO probe, citing concerns about duplication with other ongoing investigations.

What does the court Order say?

The court Order in possession of The Leaflet reveals how the SFIO was brought into the investigation.

The Order reads that the interim report necessitated the assignment of investigation to the SFIO, as the submission of the learned Additional Solicitor General of India is that a sum of ₹135 crore has been given away to political entities without any accounting and the transactions were discovered only when the documents of Income Tax Interim Settlement Board were noticed.

According to the learned Additional Solicitor General of India, it is a grave offence, which directly affects the public interest and, therefore, it was handed over to the SFIO.

What is Veena's counsel's contention?

Veena's lawyer, however, contested that when proceedings under Section 210 of the Companies Act 2013 are underway, the assignment of investigation to the the SFIO cannot take place.

The strength on which the said submission was made was that there should be a report under Section 210, as directed, and only then the investigation can be handed over to the SFIO. The effect of such submission was the handing over of the investigation to the SFIO, which should precede a final report under Section 210.

Interestingly, Section 210 does speak of a report, the report can be either interim or final, it need not be the final report.

The court Order sanctioning the SFIO probe reads that during an investigation under Section 210, if the inspectors, out of serendipity, come across information that would prima facie touch upon skullduggery and thereon a necessity emerges to assign the investigation to a multi-disciplinary body such as the SFIO, created under the Act, the court cannot handcuff the Union government against such an assignment.

"If the matter had been entrusted to any other agency outside the Act, it would have been a circumstance altogether different. The protection to any company from duplication of proceedings is kept tight under Section 212 and above all, and after all, it is an investigation," the Order reads.

The court also adds that the investigation is for the purpose of unearthing the alleged unethical activities of the petitioner's company.

While agreeing to the SFIO probe into Veena's company, the Order reads that the Supreme Court, in a plethora of cases, has observed that with the advancement of technology, economic offences have become a real threat to the functioning of the financial system of the country.

Those offences become a great challenge for investigating agencies to detect and comprehend the intricate nature of transactions, as well as the role of persons involved therein, the Order reads.

A plethora of minute exercises are expected to be undertaken by any investigating agency. It is, therefore, to unearth such intricate or minute details about the transactions that it becomes necessary to hand such cases over to a multi-disciplinary body such as the SFIO, the court Order further reads.

"As submitted by the learned Additional Solicitor General, the multi-disciplinary body would bring about multi-departmental correspondence to arrive at any finding. Therefore, no fault can be found with the action of the Union of India in entrusting the investigation to the SFIO," the Order reads.

Additionally, Veena's lawyer said in the court that no reasons are provided to invoke Section 212 of the Act— harbouring offenders— and, therefore, it suffers from non-application of mind.

However, the court said that if the Union government has thought it fit to entrust the investigation to the SFIO, owing to certain factors that have emerged while conducting investigation under Section 210 and in public interest, this court in exercise of its jurisdiction under Article 226 of the Constitution of India (power of high courts to issue writs) would not by a stroke of pen, annul such opinion of the Indian government, unless it is contrary to the statute or the action is demonstrably arbitrary.

Citing Modern Dental College and Research Centre versus State of Madhya Pradesh and Uttam Das Cheal Sunder Das versus Shiromani Gurdwara Parbandhak Committee, the Karnataka High Court said the petition does not deserve to be entertained.

"For the praefectus reasons, the petition stands rejected," the court concluded, dismissing Veena's plea.

Interestingly, the Communist Party of India (Marxist) (CPM), Kerala leadership close to Pinarayi Vijayan has been supporting Veena in the past. They even alleged that she was being hunted for nothing.

But now the CPM Kerala secretary M.V. Govindan has said that Veena will answer the queries on the probe. He asked the media why he should respond to Veena's plea being rejected.

Surprisingly, the Karnataka High Court Order reveals an interesting fact on pages 15, 16 and 17, that the official address of Exalogic had been put down by Veena as the AKG Centre, CPM Kerala's headquarters.

Even though she had used the AKG Centre as her company's address, Veena wasn't responding to mails. Following that, the registrar of companies summoned her and imposed a fine of ₹100,000 for violation of the Companies Act. She paid ₹20,000 and pleaded pardon, which was approved.

Click here to read the order.