Karnataka High Court Issues Notice On Appeal By Company Linked To Kerala CM's Daughter Challenging SFIO Probe Order

The Karnataka High Court on Monday issued notice on appeal filed by Exalogic Solutions Private Ltd, a company of which Kerala Chief Minister Pinarayi Vijayan's daughter Veena Vijayan is a director, challenging dismissal of its plea to quash SFIO (Serious Fraud Investigation Office) probe against it.

Exalogic Solutions had challenged direction of Corporate Affairs Ministry asking SFIO to investigate its affairs. This plea came to be dismissed by an order dated February 16, 2024.

Before the division bench, the company has argued that SFIO investigation under Section 212 of the Companies Act 2013 cannot be ordered before conclusion of probe under Section 210 (Investigation into affairs of company).

“This is an interesting question, I do not think there is any judgment on this Section 212,” a division bench of Chief Justice Vibhu Bakhru and Justice C M Poonacha said today.

Counsel appearing for the company then sought interim protection from any coercive action. The bench however declined to interfere at this stage, stating, “We cannot pass any interim orders in the appeal, the writ petition has been dismissed, but we will examine this question of law on the SFIO's status today.”

As such, notices have been issued to Director, SFIO and Union of India. The matter will now be taken up on December 03.

Exalogic Solutions came under controversy following reports of receiving payment of Rs 1.72 crore from Cochin Minerals and Rutile Ltd (CMRL) over three years since 2017. Based on an order passed by the Income Tax Interim Board of Settlement, which suggested that the amount was paid without availing any services, allegations surfaced that the kickbacks were routed to the company of CM's daughter under the guise of consideration for IT services.

As per the company, it received a communication from the Registrar of Companies back in 2021, initiating inquiry under section 206(4) of the Companies Act to examine its transactions with Cochin Minerals and Rutile Limited (CMRL). The company claims to have duly filed its response and documents, as sought for.

In June 2022, a duly authorised representative of the company appeared before the ROC for hearing and in July the same year, Veena Vijayan herself appeared before the authority to provided necessary clarifications.

However, the ROC issued a show cause notice in August 2023 alleging inter-related party transactions in light of the fact that Kerala State Industrial Development Corporation (KSIDC') owns 13.4% shareholding of CMRL and that KSIDC allegedly acted as per the directions of Kerala CM, who happens to be father of the company's director (Veena).

In January 2024, an inquiry under Section 210 was initiated into affairs of CMRL, KSIDC and Exalogic Solutions. Later on January 31, order for SFIO probe was passed and the company received notices for production of certain documents.

Deputy Solicitor General Shanthi Bhushan H appearing for Union on advance notice claimed that the Ministry's order is merely administrative, asking the company to provide details of several documents.

Case Title: EXALOGIC SOLUTIONS PRIVATE LIMITED AND THE DIRECTOR & Others

Case No: WA 534/2024