New Delhi, Appellate tribunal NCLAT has dismissed appeals by audit firm BSR & Associates LLP and its former partner N Sampath Ganesh, in which they challenged the authority of the Serious Fraud Investigation Office (SFIO) to seek disgorgement of assets in a case linked to IL&FS Securities Services Ltd (ISSL).
A three-member NCLAT bench has upheld the order passed by the Mumbai Bench of the National Company Law Tribunal (NCLT), which had on March 17, 2026 rejected their plea contending that SFIO has no power or locus to file any application seeking attachment/disgorgement of assets before NCLT.
The appellants argued SFIO could not file the disgorgement application since it would make SFIO both the prosecutor in criminal proceedings and the petitioner in civil proceedings arising from the same ISSL report – creating a conflict that would prejudice them by letting SFIO impose both civil and criminal liability.
The National Company Law Appellate Tribunal (NCLAT) rejected this outright, terming this argument as “completely baseless” since, the petitioner in the civil proceedings is the central government and not the SFIO, so no such conflict of roles actually exists.
“The institution of either CA 396/2021 and/or CA 234/2025 is not by the SFIO. Most pertinently, the argument that SFIO imposes civil and criminal liability thereby causing prejudice lacks foundation and is illusory as civil and criminal proceedings under the Act are filed before a Tribunal/Court established under the Act for its determination,” said a bench comprising Officiating Chairperson Justice Yogesh Khanna and technical members Barun Mitra and Ajai Das Mehrotra.
Under “disgorgement of assets” a tribunal may order directing individuals or entities to surrender assets, property, or cash they unjustly gained through fraudulent conduct uncovered during an SFIO investigation.
The appellants had challenged an NCLT Mumbai order dated March 17, 2026, arguing that SFIO had no locus to file an application under Section 212(14A) of the Companies Act, 2013, seeking attachment and disgorgement of assets, as this power is exclusively vested in the central government and can only be delegated through a formal Gazette notification under Section 458.
The dispute traces back to a September 30, 2018 order by the central government directing an SFIO probe into IL&FS and its subsidiaries, including ISSL.
SFIO submitted its investigation report on ISSL’s affairs to the central
government on July 14, 2023. Subsequently, on September 26, 2023, the Ministry of Corporate Affairs issued a letter authorising SFIO’s Director to place the report before the NCLT and pursue attachment and disgorgement proceedings under Section 447 of the Act.
BSR & Associates, ISSL’s former statutory auditor, along with Ganesh, contended that this letter was merely an executive order that could not override the Companies Act’s provisions, and that SFIO could not exercise the central government’s discretionary power under Section 212(14A) without formal delegation.
The NCLAT said decision to file plea after considering the material before it, was of the central government and not the SFIO. SFIO was merely authorized to file proceedings before the NCLT.
Moreover “the Petition was filed with the Applicant as the “Union of India” and not the SFIO,” it said adding the decision to file was of the central government and the proceeding too was filed with the central government as the applicant.
The Director, SFIO/SFIO was merely authorised to present/execute the petition that too in the name of the central government.
“On consideration of the matter, the NCLT in the impugned order has arrived at the same finding. Thus, the appellant’s contention the proceeding has not been filed by the central government is incorrect,” it said.
The NCLAT also referred to the Allocation of Business Rules and Transaction of Business Rules, 1961, noting SFIO functions under the Ministry of Corporate Affairs, with its Director holding a rank equivalent to Joint Secretary, and that the September 2023 letter had the approval of the competent authority.
Rejecting the appellant’s contention that SFIO’s dual role as investigator and applicant in civil proceedings caused prejudice, the tribunal said any civil or criminal liability remains subject to determination by the appropriate court or tribunal.
