Delhi HC’s Homebuyer-FIR Quash Didn’t Bar SFIO Probe Into Alleged False ₹725-Crore DHFL Loan Papers And Fund Siphoning: Builder’s Challenge Fails

In brief

The question

Whether the High Court had territorial jurisdiction to entertain the writ petition.

The court held

The Court held that it had territorial jurisdiction and that the Section 212(1)(c) order was supported by demonstrable circumstances; the quashing of the FIR did not bar investigation into the distinct alleged fraud.

It also directed

It declined to interfere with the investigation, dismissed the writ petition, and closed any pending interlocutory applications.

01Facts

The petitioner company developed the “Manor One” housing project in Gurugram.

¶ 3, 8, 11

Homebuyers complained about delayed possession and alleged financial irregularities; an Economic Offences Wing enquiry had recommended filing the complaint, and a later FIR was quashed by the Delhi High Court following a settlement between the company and some homebuyers.

¶ 3, 8, 11

The Central Government nevertheless ordered an SFIO investigation under Section 212(1)(c) of the Companies Act, 2013, citing a CEIB reference concerning an alleged DHFL loan obtained through false documents and alleged siphoning of homebuyers’ funds.

¶ 16–17

The company challenged that order and the subsequent SFIO notice, contending that the opinion rested on a circumstance rendered non-existent by the quashing of the FIR and lacked relevant material.

¶ 2, 5

02Issues

i.Whether the High Court had territorial jurisdiction to entertain the writ petition.

¶ 4

ii.Whether the Central Government’s order under Section 212(1)(c) was liable to be set aside for want of relevant material or application of mind, particularly after the FIR was quashed.

¶ 5, 16–18, 26–30

iii.Whether the quashing of the FIR following a settlement precluded an SFIO investigation into the alleged loan-related fraud and siphoning of funds.

¶ 11, 27–30

03Law Applied

Section 212(1)(c) of the Companies Act, 2013 empowers the Central Government to assign an investigation to the SFIO where, in the public interest, it forms the opinion that investigation into a company’s affairs is necessary.

¶ 15

That opinion must rest on relevant, demonstrable circumstances and reflect application of mind; judicial review examines the decision-making process, not the sufficiency or correctness of the decision as if on appeal.

¶ 18, 20, 23, 26

The Court relied principally on Nita Puri v. Union of India, Parmeshwar Das Agarwal v. Additional Director (Investigation), SFIO, Rampur Distillery and Chemical Co. Ltd. v. Company Law Board, Sunair Hotels Ltd. v. Union of India, and Karvy Stock Broking Ltd. v. Union of India for these principles.

¶ 18–20, 23, 25

A settlement-based quashing of an FIR does not, by itself, determine or extinguish distinct allegations of fraud that were not adjudicated in the quashing proceedings.

¶ 27

Provisions in the judgment · 10 · Linked ones open on LawLens

Companies Act, 2013 Section 206 Section 207 Section 208 Section 210 Section 211 Section 212 Section 217 Section 447

Code of Criminal Procedure, 1973 Section 173 Section 482

04Reasoning

The impugned order identified the CEIB reference and the allegations that the company obtained a DHFL loan of ₹725 crores through false documents and that funds paid by homebuyers were siphoned.

¶ 16–17

Although the FIR had been quashed, that occurred on the basis of a settlement and did not decide the separate allegations concerning the loan and alleged diversion of funds.

¶ 27

The order’s stated investigative scope—including examination of group-company transactions, the loan documents and money trail, and identification of beneficiaries—gave context to the opinion and demonstrated the circumstances considered by the Central Government.

¶ 29–30

The Court found that the counter-affidavit did not materially depart from the order’s stated basis and that the decision-making process was not shown to be arbitrary or legally defective.

¶ 28