Supreme Court Allows SFIO Probe Against Sahara Group Companies

The Supreme Court of India today vacated a stay ordered by the Delhi High Court pertaining to an investigation into the affairs of nine Sahara Group companies.

In 2018, the central government had directed the Serious Fraud Investigation Office to look into the affairs of three Sahara Group companies, namely:

• Sahara Q Shop Unique Products Range Ltd.

• Sahara Q Gold Mart Ltd.

• Sahara Housing Investment Corporation Ltd.

The SFIO, as per the central government's order, was directed to complete the investigation within three months which did not happen, prompting Sahara Housing to approach the Delhi High Court. The high court granted a stay on the SFIO investigation as well as the look out notices issued against Sahara chief Subrata Roy and others.

The plea by Sahara Housing also challenged the subsequent inclusion of six other companies in the ambit of the investigation. The company argued that the six companies included later were never subsidiaries or holding companies of the three companies already under investigation.

The investigation into the six companies were per se illegal, Sahara Housing argued in the high court.

The Delhi High Court in its order found that a case for interim relief was made out and put the investigation and other proceedings on hold.

The order of the high court while granting the stay prima facie noted that:

• There was a clear mandate in law under Section 212(3) that the investigation should be completed within the period specified in the order directing the investigation. In this case, the order had asked for the report to be submitted within three months and that did not happen.

• The government was unable to rebut the position of the six companies that they were not related to the three companies originally under investigation.

• The court found prima facie merit in the argument that the 2018 and 2020 orders do not indicate the reasons or circumstances that compelled the central government to form an opinion to order investigation by the SFIO. Nothing is discernible from the orders as to what cogent material led to the formation of opinion by the government that the affairs of the petitioners were required to be investigated, the high court noted.

The SFIO appealed the high court’s stay order which came up before a bench presided by Justice DY Chandrachud on Thursday.

The top court clarified that it's not making any observations on the merits of the case but decided to vacate the stay ordered by the Delhi High Court. It was not correct for the high court to have stayed the investigation at the interim stage, the apex court held.

It asked the high court to decide on the plea of Sahara companies challenging the investigation within two months of the reopening of the court after vacation.