Delhi High Court poses serious questions to SFIO on Neeraj Singal’s arrest

The Delhi High Court today questioned the Central government and Serious Fraud Investigation Office (SFIO) on their silence on Tata Steel’s takeover of Bhushan Steel under the Insolvency and Bankruptcy Code..A Division Bench of the Delhi High Court comprising Justices S Muralidhar and Vinod Goel was hearing former Bhushan Steel Promoter Neeraj Singal’s bail plea filed by Singal’s mother..Singal, who was the first person ever to be arrested by the SFIO, has been in judicial custody since his arrest on August 8, for an alleged Rs. 2500 crore loan fraud..Questioning the fate of a corporate entity’s criminal liability after its acquisition by another, Justice Muralidhar remarked,.“Why did you permit the sale of Bhushan Steel to Tata Steel if such (allegedly) serious criminal offence was involved. You are the Central Government. I am sure you had the knowledge.”.The Court further asked the SFIO if the National Company Law Tribunal (NCLT), which approved Tata Steel’s takeover of Bhushan Steel, was apprised of the investigation against Singal and others..“Civil liabilities can be transferred as per takeover terms. Can criminal liabilities be transferred“? Justice Muralidhar further remarked..Senior Advocate Kapil Sibal appearing for Singal challenged the retrospective use of the power of arrest by SFIO on the ground that SFIO had been investigating Bhushan Steel since 2016..However, Singal was arrested in August 2018, after the Investigating Agency was granted the power of arrest in 2017..The petition, filed through advocates P K Dubey and Arshdeep Singh, has also challenged Section 212(6)(ii) of the Companies Act, 2013. The petition contends that this provision imposes unreasonable restrictions for grant of bail to persons arrested under the Act, thereby being violative of fundamental rights..Additional Solicitor General Tushar Mehta opposed the bail plea on the ground that a ‘serious fraud’ had been committed..Stating that every additional day in jail was a matter of concern as it takes away the liberty of a person, Justice Muralidhar remarked,.“Show us the case diary, show us the case material. Adjectives can be very attractive. Merely saying adjectives will not suffice.”.Justice Muralidhar also referred to the concept of corporate duality and observed,.“It seems (in the present case) money was infused into the corporate entity. Was the diversion into individual’s account? What did the person do? We cannot be casual about it. It’s about how the Agency approaches an investigation involving a corporate entity.”.He further said,.“If company X is involved in fraud, on a cautious note, arrest everyone and keep investigating. Since I know a company is involved, everybody is in.”.ASG Mehta then stated that he would examine the case from the individual’s point of view, to which Justice Muralidhar said,.“This should have already happened. Is that the approach to liberty?“.Nonetheless, the Court granted one day’s time to the Central Government and Investigating Agency to file their reply stating how Singal’s custody was necessary for the purpose of the investigation..The matter would be next heard on August 21.