Why Did Delhi HC Quash The SFIO Probe Against Moser Baer’s Ex-Director Nita Puri?

The Delhi High Court has set aside the Ministry of Corporate Affairs order dated 05.09.2024 directing the Serious Fraud Investigation Office (SFIO) to investigate Moser Baer India Ltd. (MBIL) and its subsidiaries, holding that the direction suffered from incurable legal lacunae.

Justice Sachin Datta, while allowing the petition, held, "Exercise of power under Section 212(1)(c) in a casual or perfunctory manner, seriously undermines the statutory provision itself and the safeguards implicit thereunder. The use of boilerplate language and/or extrapolations from third party documents, without consideration of all the relevant circumstances, reflects a disregard for procedural propriety."

The Court emphasised that an order under Section 212(1)(c) of the Companies Act, 2013 is not a routine administrative measure but “an extremely serious statutory action having grave consequences” and must therefore reflect demonstrable reasons and circumstances warranting such investigation. It was found that the government’s order was issued “in a rather casual manner, unmindful of the statutory pre-requisites” and quashed it along with all consequential proceedings.

Senior Advocate Dr. Abhishek Manu Singhvi, appearing for petitioner Nita Puri, assailed the impugned order as ultra vires, submitting that it failed to disclose the necessity of investigation in public interest or justify the involvement of the SFIO.

He argued that the order was predicated on a flawed assumption that the forensic audits by M/s GSA & Associates and M/s Kashyap Sikdar & Co. revealed Preferential, Undervalued, Fraudulent and Extortionate (PUFE) transactions, whereas the audit reports in fact contained no such findings.

It was also submitted that the “formation of opinion” under Section 212(1)(c) was vitiated by non-existence of relevant circumstances, which is open to judicial review. Reliance was placed on Barium Chemicals Ltd. v. Company Law Board (AIR 1967 SC 295), Rohtas Industries v. SD Aggarwal (1969) 1 SCC 325, and Rampur Distillery v. Company Law Board (1969) 2 SCC 774, to argue that existence of material circumstances is mandatory for exercise of investigative powers.

Bombay High Court judgment in Parmeshwar Das Agarwal v. SFIO (2016 SCC OnLine Bom 9276) was further relied to press on the argument that an order under Section 212 must disclose reasons justifying investigation by SFIO.

The respondent, represented by CGSC Ms. Rupali Bandhopadhyay, defended the order contending that the Ratul Puri vs. Bank of Baroda judgment ("BOB Judgment") concerned only the validity of wilful defaulter declarations and could not constrain the SFIO in discharge of its statutory duties.

It was added that the forensic audits continued to hold relevance for probing the affairs of MBIL and that procedural lapses by banks in declaring wilful default could not nullify the Central Government's independent powers under Section 212. The respondent argued that the BOB judgment did not quash the GSA audit report itself and therefore, the government was justified in relying on it.

Rejecting the government's defence, the Court invoked the principle laid down in Mohinder Singh Gill v. Chief Election Commissioner (1978) 1 SCC 405, followed in Opto Circuit India Ltd. v. Axis Bank (2021) 6 SCC 707 and Ritesh Tiwari v. State of UP (2010) 10 SCC 677, that validity of an administrative order must be tested only on the reasons contained therein and not on fresh grounds introduced later in affidavits.

The Court noted that the counter affidavit attempted to supplement reasons absent in the original order, which was impermissible.

It was further observed that the government had failed to conduct inspection proceedings under Section 206(5) of the Companies Act despite earlier recommending such inquiry in 2018 based on a complaint. This omission aggravated the infirmities in the order.

Brief Background

Moser Baer India Ltd. (MBIL), incorporated in 1983, was engaged in manufacture of optical media.

In 2012, it entered the RBI's Corporate Debt Restructuring scheme and was admitted as a “Class B” borrower without adverse findings.

In 2017, MBIL was admitted into insolvency before the NCLT, and forensic audits were commissioned by the Committee of Creditors.

The Sikdar Report (2018) found no PUFE transactions, while the GSA Report (2019) was later used by Bank of Baroda to declare ex-directors Nita Puri and Ratul Puri wilful defaulters.

The Delhi High Court, in its BOB judgment dated 29.02.2024, set aside that declaration, holding that no evidence of siphoning or diversion was found prior to CDR admission.

The Division Bench upheld this view in appeal on 08.08.2024. Despite these findings, the Ministry of Corporate Affairs, by order dated 05.09.2024, directed SFIO investigation into MBIL, which led to the present writ petition.

Case Title: Nita Puri v. Union of India, W.P.(C) 261/2025

Bench: Justice Sachin Datta

Date of Judgment: August 28, 2025