NCLAT upholds SFIO’s authority to file IL&FS disgorgement proceedings on behalf of the Union Government

The Central Government ordered an investigation into the affairs of IL&FS and its subsidiaries, including IL&FS Securities Services Ltd. (“ISSL”), by the Serious Fraud Investigation Office (“SFIO”) on 30 September 2018.

After completing the investigation, SFIO submitted its report to the Central Government under Section 212(12) of the Companies Act, 2013 on 14 July 2023.

On 26 September 2023, the Ministry of Corporate Affairs, with the approval of the competent authority, directed the Director, SFIO, to place the investigation report before the NCLT, Mumbai and seek attachment and disgorgement proceedings against the persons/entities identified in the report under Section 447 of the Companies Act.

SFIO thereafter filed Company Application No. 234 of 2025, whose cause title identified the applicant as the “Union of India,” seeking, inter alia, permission to place the ISSL investigation report on record.

The appellants challenged the maintainability of the application, contending that Section 212(14A) empowered only the Central Government to initiate disgorgement proceedings and that SFIO had not been validly authorised under Section 458.

The NCLT rejected the challenge by order dated 17 March 2026.

1. Whether SFIO was competent to present/file the application under Section 212(14A) of the Companies Act when the statutory power to seek disgorgement was vested in the Central Government?

2. Whether the authorisation issued by the Ministry of Corporate Affairs to the Director, SFIO, required a formal notification under Section 458 of the Companies Act, 2013?

3. Whether the application was in substance filed by SFIO in its own capacity, or by the Union of India through an authorised officer?

4. Whether disgorgement and related relief could also be pursued under Sections 241, 242, 246 and 339 of the Companies Act, apart from Section 212(14A)?

Section 212(14A) of the Companies Act, 2013 empowers the Central Government to apply to the Tribunal for disgorgement of assets, property or cash and for personal liability without limitation where an investigation report records fraud and undue benefit.

Section 458 concerns delegation of the Central Government’s statutory powers by notification published in the Official Gazette and laid before Parliament.

The Allocation of Business Rules, 1961 and the Transaction of Business Rules, 1961, framed under Article 77(3) of the Constitution, govern the internal allocation and transaction of Union Government business, including administration of the Companies Act through the Ministry of Corporate Affairs.

The Court relied on Sidhartha Sarawgi v. Board of Trustees for the Port of Kolkata, (2014) 16 SCC 248, which distinguishes impermissible delegation of statutory discretion from permissible authorisation to implement a decision already taken by the competent authority.

It also relied on Shriraj Investment & Finance Ltd. v. Union of India, W.P. (Crl.) No. 1823 of 2020, for the principle that disgorgement and related equitable relief may be sought under Sections 241, 242(1)(l)–(m), 246 and 339 of the Companies Act, independently of Section 212(14A).

Section 79 of the Code of Civil Procedure, 1908 was referred to for the principle that proceedings by the Central Government must be instituted in the name of the Union of India.

The NCLAT held that SFIO did not independently decide to initiate the disgorgement proceedings.

It first submitted the investigation report to the Central Government, which considered the report and decided that proceedings should be instituted; the 26 September 2023 letter merely communicated that decision and authorised the Director, SFIO, to place the report before the NCLT and implement the Central Government’s decision.

Since the application’s cause title identified the applicant as the “Union of India,” the proceeding was legally instituted by the Central Government and not by SFIO in its independent capacity.

Applying Sidhartha Sarawgi, the Court held that authorising an officer to present or implement a decision already made by the competent statutory authority was ministerial or executory authorisation, not a delegation of the statutory discretion attracting Section 458.

The Allocation and Transaction of Business Rules supplied the administrative basis for the Ministry and its authorised officers to transact Central Government business under the Companies Act.

The appellants’ objections based on SFIO’s separate identity and its role in criminal investigations were rejected because any civil or criminal liability would ultimately be determined by the competent Tribunal or Court, and SFIO was not itself imposing such liability.

The Court further observed that disgorgement was not confined to Section 212(14A), as comparable equitable relief could be sought under Sections 241, 242, 246 and 339.

It held that the proceedings were instituted by the Union of India, acting through the Director/SFIO as an authorised officer, and that the 26 September 2023 communication was an authorisation to implement the Central Government’s decision rather than a statutory delegation requiring a notification under Section 458.

The appeals—Company Appeal (AT) Nos. 182 and 183 of 2026—were dismissed, and all pending applications were disposed of.