Delhi High Court quashes SFIO probe into Educomp, eight years after an order that gave no reasons

Justice Amit Mahajan held that the Corporate Affairs Ministry order of 17 August 2018 merely reproduced Section 212(1)(c) of the Companies Act, and that the Oversight Committee minutes offered to prop it up rested on a news article, a letter from an MP and inspection reports that had found no fraud. The 2022 prosecution complaint falls with it.

The order that sent the Serious Fraud Investigation Office into Educomp Solutions Limited in August 2018 ran to four paragraphs. The first recited that the Central Government had the power under Section 212(1)(c) of the Companies Act, 2013 to order an investigation in the public interest. The second ordered one. The third and fourth dealt with the inspectors’ powers and the authority of the signatory. Nothing in it said why. On 16 October 2026 the Delhi High Court quashed that order and everything built on it, including the SFIO’s 2022 prosecution complaint for fraud, false statements and falsification of books against the company’s founder, two other directors, a charitable trust and the former chief financial officer.

Justice Amit Mahajan allowed two writ petitions under Article 226 of the Constitution read with Section 482 of the Code of Criminal Procedure. The first was filed by Vinod Kumar Dandona, an independent director of Educomp; Jagdish Prakash and Shantanu Prakash, directors and shareholders, the latter the company’s founder; and Learning Leadership Foundation, a public charitable trust of which Shantanu Prakash was managing trustee until February 2020. The second was filed by Ashish Mittal, who joined Educomp as senior vice president in 2013, became CFO in 2014 and resigned with effect from 24 February 2018.

A company in debt, a rival in Singapore, and a string of clean reports

The petitioners’ account, as recorded in the judgment, begins with a business partnership that soured. Educomp was incorporated in September 1994. In 2008 the Singapore-based Raffles Group, headed by Hua Seng Chew, entered India and formed joint ventures with Educomp in the education sector, among them Educomp Raffles Higher Education Limited. Shantanu Prakash, who was also president of Jai Radha Raman Educational Society, inducted Chew as a life member and chairman of that society along with eight other Singaporean nationals. The petitioners say the fight that followed over control of that society and its assets is what drove the criminal proceedings against them.

Around 2011 and 2012 Educomp and a subsidiary borrowed from a consortium of about thirteen banks, and in 2012 Educomp raised an external commercial borrowing from International Finance Corporation and Proparco. A liquidity crunch followed in 2013, and the company went through corporate debt restructuring twice between 2013 and 2016. The lead bank, State Bank of Patiala, certified on 13 January 2014 that there had been no diversion of funds, fraud, wilful default or misfeasance. For the second restructuring the lenders had Grant Thornton India LLP forensically audit the accounts from April 2012 to March 2016; that audit, too, found no diversion of borrowings or fraud concerning sales, revenue or receivables.

In 2017 IFC and Proparco complained to the Ministry of Corporate Affairs. The Ministry had already ordered an inspection of Educomp’s books under Section 206(5) of the Companies Act on 18 May 2016. The Regional Director’s report of 31 March 2017 identified regulatory, secretarial and accounting-standard defaults, all compoundable, found no evidence of defalcation, siphoning or misappropriation, and recommended no further investigation. A supplementary report dated 31 July 2017, prepared after examining the IFC complaint, again found no substance in the allegations. The compoundable offences were later compounded before the Additional Chief Metropolitan Magistrate at Tis Hazari between July 2021 and July 2022, on penalties the judgment itemises, the largest being ₹50,000 per accounting standard and the smallest ₹500.

Meanwhile Educomp had filed for its own insolvency under Section 10 of the Insolvency and Bankruptcy Code, and the petition was admitted on 30 May 2017. The resolution professional, by an affidavit of 8 October 2018, reported that no transaction fell within the avoidance provisions of Sections 43, 45, 50 or 66 of the Code.

Then, according to the petitioners, the complaints started. A Raffles complaint reached the Prime Minister’s Office on 28 March 2018. Articles appeared online on Telecom Tiger and The Wire on 3 April, 26 April and 3 July 2018. On 4 April 2018 P.P. Chauhan, a Member of Parliament, complained to the NCLT. Raffles wrote to the SFIO and the Central Vigilance Commission. On 17 August 2018 the Ministry passed order No. 1/52/2017-CL II assigning the investigation to the SFIO.

What happened while the petition waited

The petitioners filed W.P.(CRL) 1242/2022 in 2022, and on 26 May 2022 the Court directed that no coercive steps be taken against them. The investigation nonetheless went on. In October 2022 the SFIO disclosed, in a short reply, that the investigation had been ordered not on documents supplied by Raffles but on the deliberations of an Oversight Committee of the Ministry on 28 June 2018. The petitioners say that was the first time those minutes surfaced.

On 12 December 2022 the SFIO filed Criminal Complaint No. 990/2022 before the Special Court at Dwarka, with an investigation report dated 30 November 2022, for offences under Sections 447, 448 and 449 of the Companies Act. The complaint ran to eight sets of allegations: fraud through paper entities and promoter contribution; diversion of funds towards Educomp Child Care, Little Millennium and The Millennium School; divestment of shares in Vidya Mandir Classes; fraud relating to Mussoorie International School; bogus capital advances; land bought at inflated prices in Rajasthan and Hyderabad; and cheating through inland letters of credit. Against Mittal, the SFIO alleged that as CFO he was responsible for financial statements falsified during his tenure.

Criminal proceedings had also been running in the other direction. In May 2019 Raffles filed a fresh complaint attaching what the petitioners described as fabricated ledger statements of two educational societies. On Learning Leadership Foundation’s complaint, the Economic Offences Wing of Delhi Police registered FIR No. 222 of 2019 against Raffles and its executives. The EOW’s final report of 21 March 2022 found the Raffles material forged and charged its directors and officials with forgery and conspiracy. A supplementary charge-sheet of 12 August 2024 named the SFIO’s first investigating officer, Ashish Harita, and on 23 October 2024 the magistrate directed further investigation into the role of the second. The SFIO and Harita have both moved the High Court to quash those proceedings; those petitions are pending. Complaints by Yes Bank and Axis Bank to the EOW were closed.

Jethmalani’s chart, and the government’s answer

Senior advocate Mahesh Jethmalani, for the petitioners in the first writ, argued that the order fell at the threshold because it disclosed no reason, circumstance or material showing why an SFIO investigation was necessary in the public interest. He relied on the Bombay High Court’s decision in Parmeshwar Das Aggarwal v. Union of India, affirmed by the Supreme Court, for the proposition that the circumstances behind the statutory opinion must themselves be demonstrable, and on a coordinate bench’s judgment of 28 August 2025 in Nita Puri v. Union of India, upheld by the Supreme Court on 27 January 2026. Under Mohinder Singh Gill v. Chief Election Commissioner, he said, the order had to be judged on its own text and could not be supplemented by the Oversight Committee minutes, SFIO pleadings or the investigation report.

He also handed up a chart going through each of the seven items the minutes relied on, arguing that none could justify a criminal investigation: the inspection report had found only compoundable irregularities; the supplementary report had found no violation at all; the Yes Bank fraud monitoring report had led to an EOW complaint that was closed; the IFC complaint rested on the same draft E&Y report the supplementary inspection had already examined; the PMO reference was a forwarded Raffles complaint; the MP’s letter merely repeated The Wire’s allegations; and the article itself was planted by Raffles. He went further, contending that chats recovered by the EOW showed the article had been shared with one Saurabh Sharma on 2 April 2018, a day before publication, and that Raffles personnel were supplying material to the SFIO during the investigation.

Amit Tiwari, Central Government Standing Counsel, argued that the order had to be read with the minutes of 28 June 2018, which reflected detailed deliberation and were implicit in it. The committee had considered the two Regional Director reports together with the MP’s complaint, The Wire article, PMO references, Yes Bank’s fraud monitoring return and inputs from IFC, and had recommended an SFIO inquiry in the public interest. That, he said, satisfied the Nita Puri test. A completed investigation and a filed complaint could not be annulled because the initiating order was defective or the investigation allegedly tainted; the first investigating officer had been repatriated on 31 December 2020, before the report was finalised, and the complaint was filed by the second officer. Relying on State of Bihar v. P.P. Sharma, Sheonandan Paswan, M. Devendrappa and other decisions, he submitted that once a report was before the Special Court, mala fides of the complainant or the agency did not matter if the material disclosed an offence, and that competing forensic reports were matters for trial.

Why the coordinate bench’s dismissal did not bar the petition

The government first argued that the petitions re-agitated what a coordinate bench had decided on 13 October 2022, when it dismissed W.P.(C) 14487/2022 filed by a co-accused, OSN Infrastructure and Projects. Justice Mahajan rejected the objection. The present petition predated that dismissal and the petitioners were protected by an interim order. More to the point, the coordinate bench had dismissed the OSN petition as premature, because the Central Government had not yet received the investigation report or decided whether to prosecute, and had left the petitioner free to challenge any prosecution later. That was not an adjudication on merits and did not attract res judicata. Nor could the progress of the investigation while the petition was pending foreclose scrutiny of the original action.

The test: an opinion whose basis shows on the face of the order

Justice Mahajan set out Sections 206, 208, 210 and 212 of the Companies Act and then quoted at length from Nita Puri, which had in turn drawn on Parmeshwar Das Aggarwal and the Supreme Court’s decisions in Barium Chemicals v. Company Law Board and Rohtas Industries v. S.D. Agarwal on the predecessor provisions of the 1956 Act. The principles he extracted were these. The Central Government’s opinion under Section 212(1)(c) may be subjective, but the circumstances relevant to it must be demonstrable, and when challenged must be shown at least prima facie. The power must be exercised in step with the scheme of Chapter XIV, in which inspection under Section 206 and a report under Section 208 come first; a Section 208 report that finds no occasion for further investigation bears directly on whether Section 212(1)(c) can be invoked. And the order must disclose not only why an investigation is needed but why it must go specifically to the SFIO. The Supreme Court, dismissing the special leave petition against Nita Puri on 27 January 2026, had endorsed judging the order on its own contents and not on fresh reasons, subsequent developments or the SFIO’s report. Justice Mahajan said he was in complete agreement with the coordinate bench.

Measured against that standard, the impugned order failed on its face. The judge reproduced it in full and described it as devoid of any reason whatsoever. It did not show what material had been examined, what weighed with the authority, or why the SFIO specifically had to be brought in. It reproduced the statutory language and nothing else, and that could not demonstrate that the requisite opinion had been formed. An order under Section 212(1)(c), he added, could not be equated with the registration of an FIR, for which the threshold is only an allegation of a cognizable offence. The power carries serious civil and criminal consequences and cannot be exercised as routine administration. The opinion had to be rooted in cogent and relevant material available at the time, discernible from the order itself; unverified allegations or third-party material would not do unless independently examined through the scheme of the Act. That mattered all the more here, because the Ministry’s own statutory reports had found no infraction of the kind that could warrant such an order.

Reading the minutes anyway, and finding nothing in them

Having held that the order gave no reasons, the judge turned to the government’s fallback that it should be read with the Oversight Committee minutes. He rejected it for two reasons. First, an unreasoned order has to stand on its own legs and cannot be rescued by reasons supplied later. Second, even on an independent examination, the minutes did not justify the opinion.

The minutes recorded a meeting chaired by the Additional Secretary, Corporate Affairs, with the Director of the SFIO among those present, at which presentations were made on three companies. On Educomp, the committee took the two inspection reports on record and, citing complaints from the MP, PMO references, the Yes Bank fraud monitoring return, IFC and the issue reported by The Wire, concluded that an SFIO investigation should be carried out in the public interest. The judge went through each item.

The inspection report of 31 March 2017 had itself recorded that the inspection was prompted by a complaint from an advocate, Saurabh Luthra, that the complainant had made vague allegations in order to extort and blackmail the company, that he had admitted malicious intent after the company lodged an FIR against him and withdrawn the complaint, that the Grant Thornton audit had found nothing serious, and that no action was proposed. The presentation to the committee cited this report as independent material without disclosing any of that, or that the violations it listed were compoundable and had been sent for separate prosecution. The committee, the judge found, took note of the report without applying its mind to its findings. The supplementary report had examined the very allegations in the IFC complaint and found no violation; once the statutory inquiry had not substantiated them, the IFC complaint could not stand as separate material.

The Yes Bank fraud monitoring report recorded that the bank had already complained to the EOW. Starting a parallel SFIO investigation on the strength of a matter already under investigation by the competent agency, the judge said, belies any logic. As for the PMO references, no such document had been annexed to the presentation or produced before the Court, and the minutes gave neither a date nor an identification. The only PMO complaint mentioned during the hearing was dated 16 May 2019, nine months after the order. The MP’s letter and The Wire article were, in the Court’s words, self-serving documents that might at best prompt some inquiry but had no independent probative value for a step as serious as Section 212(1)(c).

Justice Mahajan declined to rule on whether the article had been planted by Raffles, or on the timing of the MP’s letter the day after it appeared, because the article could not found an investigation without corroboration in any case. He did say that the cavalier manner in which the material had been cited ought to be deprecated. The officers who act under the Act are experts in corporate governance; their decisions are to be tested against the standard expected of an expert, and they carry a personal responsibility to evaluate material independently rather than mechanically. Once a Section 208 report had found no occasion for further investigation, no newspaper report or MP’s letter could supply the basis. He found the minutes and the consequential order to be an ex facie product of non-application of mind, a mere formality for starting the investigation, which justified the petitioners in alleging arbitrariness and extraneous consideration at the instance of corporate rivals.

Why a filed complaint did not save the investigation

The government’s last line was that the petitions raised seriously disputed questions of fact unsuited to writ jurisdiction, and that the petitioners could seek discharge before the Special Court. Justice Mahajan accepted that a High Court under Section 482 or Article 226 should not conduct a mini-trial or weigh competing expert evidence. But he had done neither. He had examined only whether the investigation was validly initiated, not the allegations or the defence. Once the initiating order was found to have been passed outside the power conferred by Section 212(1)(c), all proceedings flowing from it had to end. Citing Mohinder Singh Gill, he repeated that no affidavit or subsequent report could justify the initial action, and citing Ritesh Tewari v. State of U.P., that once the foundation is defective the superstructure cannot stand. Nor could a petition entertained on notice more than three years earlier be turned away now; relying on A.M. Mohan v. State, he observed that proceedings open to interference at their inception do not acquire immunity because time has passed.

Order

The Court held that the order dated 17 August 2018 could not be sustained in law and quashed it, along with all consequential proceedings emanating from it. Both writ petitions were allowed and all pending applications disposed of. The judgment was reserved on 22 May 2026 and pronounced on 16 October 2026.

Mahesh Jethmalani, senior advocate, appeared with Arshdeep Singh Khurana, Neha Nagpal and others for the petitioners in the first writ; Shikhar Sharma and Harsh Kumar appeared for Ashish Mittal. Chetan Sharma, Additional Solicitor General, and Amit Tiwari and Arti Bansal, Central Government Standing Counsel, appeared for the Union of India and the SFIO.