SFIO probe into Exalogic is legal and irrevocable: Karnataka HC

Bengaluru: The Karnataka High Court has upheld the legality of the Serious Fraud Investigation Office (SFIO) inquiry into Exalogic Solutions, an IT company owned by Kerala Chief Minister Pinarayi Vijayan's daughter Veena. 

"There is no legal barrier to the SFIO probe. It cannot be interrupted or cancelled. The Central government has handed over the investigation to the SFIO for clear reasons," said the court on Friday dismissing the objections raised by Exalogic.

In his 46-page judgment, Justice M Nagaprasanna also stated the importance of such investigations in addressing financial crimes that pose risks to the economy.

Exalogic had challenged the Ministry of Corporate Affairs' decision to initiate an SFIO investigation, arguing that it was already cooperating with an inquiry by the Registrar of Companies (ROC). According to the IT company, the case they are part of did not constitute a serious offence warranting an SFIO probe under the non-bailable section (212) of the Companies Act. "No section equivalent to Unlawful Activities (Prevention) Act (UAPA) can be imposed into the investigation", argued Exalogic in the court on Friday. 

However, the SFIO counter-argued that the probe was into serious financial irregularities related to the payment of Rs 135 crore by Cochin Minerals and Rutile Limited (CMRL) to political parties. The probe agency also stated that there was evidence that Exalogic received Rs 1.72 crore from CMRL without providing any service. 

The investigation was undertaken based on the interim report received from the Registrar of Companies. Subsequently, investigations by other agencies naturally stalled, said SFIO. The central government has also argued that the probe agency, which has broad powers, could check whether there has been abuse of power.

The case: The SFIO probe surrounds allegations involving Exalogic, CMRL - a Kochi-based black sand company - and KSIDC, a state public sector company with a stake in CMRL. The Interim Settlement Board of the Central Income Tax Department found that CMRL had transferred huge sums of money to Exalogic, which did not provide any services.

The Registrar of Companies (ROC) found that the transaction between CMRL and Exalogic constituted an offence under the Anti-Money Laundering Act and the Anti-Corruption Act.