[Shriya Chakravarthy and Mrigank Pathak are alumni of Gujarat National Law University, Gandhinagar, and have previously served as Law Clerks at the Supreme Court of India. They are presently practising at the High Court of Karnataka and the Supreme Court of India respectively]
Under the Companies Act, 2013 (“the Act”), the procedures for inspection, inquiry, and investigation have been laid down in Chapter 14 under sections 210 to 229. The provisions of sections 210 to 229 of the Act are crafted to address the unique challenges posed in detecting and tackling fraud by a Company or a Body Corporate, as defined and made punishable under section 447 of the Act.
Section 217 of the Act prescribes the ‘procedure, powers, etc., of inspectors’. Section 217(4) provides for examination on oath by an Inspector of the Serious Fraud Investigation Office (“SFIO”), and section 217(7) permits the statement recorded in the course of an investigation under section 217(4) to be used in evidence against the accused, who is one of the persons who may be examined under section 217(4). At first blush, the fact that statements made by individuals during an investigation can be used against them in a prosecution may appear to be violative of the rule against self-incrimination as embodied under Article 20(3) of the Constitution, as also under section 23 of the Bharatiya Sakshya Adhiniyam, 2023 (“the BSA, 2023”) which is in pari materia with section 25 of the Indian Evidence Act, 1872 (“Evidence Act”). Section 23 of the BSA embodies the rule against self-incrimination in providing that “no confession made to a police officer shall be proved as against a person accused of any offence”. In fact, the constitutional validity of section 217 of the Act has been assailed before the Supreme Court in Radhika Agarwal vs. Union of India (W.P. (Crl.) 336/2018), on the grounds set out above, and the same is pending consideration by a three-judge bench of the Court.
In this context, the authors seek to examine whether the bar under Article 20(3) of the Constitution is attracted quastatements recorded under section 217(4) of the Companies Act and whether the admissibility of such statements in evidence, against the person making such statements, under section 217(7), runs counter to the protection envisaged under section 23 of the BSA. Upon undertaking an analysis of the principles guiding the operation of the rule against self-incrimination in the context of the procedure of investigation enshrined under various special statutes, the authors conclude that section 217(4), read with section 217(7), is not violative of Article 20(3) of the Constitution. In arriving at such a conclusion, the authors shall engage in a two-pronged analysis on two distinct questions:
- Whether the bar under Article 20(3) of the Constitution is attracted only in respect of investigation ‘by a police officer’ or even in respect of investigation ‘by an officer having powers akin to a police officer’ as investigation under the Companies Act falls under the latter category?;
- Whether the bar under Article 20(3) of the Constitution is attracted only in relation to penal statutes or even regulatory statutes, such as the Companies Act?
Distinction Between Investigation ‘by a Police Officer’ and Investigation ‘by an Officer Having Powers Akin to a Police Officer’ or ‘Akin to Officer in Charge of a Police Station’:
The Supreme Court, in a plethora of judgments, has aptly highlighted the subtle distinction between investigation ‘by a police officer’ and investigation ‘by an officer having powers akin to a police officer’. Such a distinction is at the core of the issue as to whether the statements recorded by such an officer may be used as evidence against the person making the statement without violating Article 20(3) of the Constitution and section 23 of the BSA.
In State of Punjab vs. Barkat Ram, the Supreme Court was faced with the question as to whether statements made to a Customs Officer who exercises the powers of investigation under the Land Customs Act, 1924, and the Sea Customs Act, 1878, would be hit by the bar envisaged under section 25 of the Evidence Act, and therefore, could not be used as evidence against such person. The majority of the Bench adopted the view that a Customs Officer is not strictly a ‘police officer’ for the purpose of section 25 of the Evidence Act but is only vested with the powers of an ‘officer in charge of a police station’ by way of a deeming fiction, for the limited purpose of conducting investigation under the aforesaid laws. It was therefore held that the bar envisaged under section 25 of the Evidence Act would not be attracted qua the statements made to such an Officer.
In a similar vein, a Constitution Bench of the Supreme Court, in Badku Jyoti Savant v. State of Mysore, unanimously held that the statements made to a Central Excise Officer during an investigation under the Central Excise and Salt Act, 1944, could be used against the person making such statements in subsequent proceedings initiated under the said Act. Such usage would not be hit by the protection under section 25 of the Evidence Act as a Central Excise Officer was not a ‘police officer’ for the purpose of the Evidence Act.
Also relevant is the judgment in State of Uttar Pradesh vs. Durga Prasad, wherein the controversy pertained to whether investigation by an officer of the Railway Protection Force (“RPF”), who had, by virtue of a deeming fiction under the Railway Property (Unlawful Possession) Act, 1966, been vested with the powers of an officer in charge of a police station, would be subject to the rigors of section 25 of the Evidence Act. Answering the said question in the negative, the Apex Court highlighted the distinction between a member of the RPF, who, only for the limited purpose of ensuring the security of railway property, had been vested with the powers of an officer in charge, vis-à-vis a ‘police officer’. The said dictum was followed in Balkishan A. Devidayal v. State of Maharashtra to hold that investigation by officers of the RPF exercising power under the Railway Property (Unlawful Possession) Act, 1966 cannot be equated with investigation by a police officer, and therefore, the statements made to such officer in the course of investigation, cannot stand at the same footing as a confessional statement made to a police officer.
It emerges from the above decisions that officers functioning under special enactments, despite having powers akin to those of a ‘police officer’, are not police officers for the purpose of the Evidence Act/BSA. Therefore, statements made to such officers may be used as evidence against the person making the statement without violating Article 20(3) of the Constitution and section 23 of the BSA.
Distinction Between Penal Statutes and Regulatory Statutes- Whether Determinative in Attracting the Bar Under Article 20(3) of the Constitution and Section 23 of the BSA?
The decisions cited above, which held that the rigors of Article 20(3) and section 23 of the BSA would not be attracted in respect of an investigation ‘by an officer having powers akin to a police officer’, have all been rendered in the context of revenue statutes, such as the Land Customs Act, 1924, the Sea Customs Act, 1978 and regulatory statutes such as the Railway Property (Unlawful Possession) Act, 1966. While the said statutes provide for a procedure for investigation, the power to investigate is made available only under very limited circumstances and may be used only to achieve the limited purpose(s) prescribed under the Act. For instance, the power of search and investigation under the Sea Customs Act, 1978 may be employed by a Customs Excise Officer only with the limited object of safeguarding the State’s revenue by preventing smuggling. Similarly, the primary duty of an officer of the RPF under the Railway Property (Unlawful Possession) Act, 1966 is to safeguard and protect railway property. Powers of arrest and inquiry have been conferred on such officers only to the extent necessary and incidental to their primary regulatory duty of protecting railway property. The limited fields in which the powers of investigation such officers operate are in contrast with the powers of police officers, who have general powers to investigate all cognizable cases. On the other hand, in respect of a statute that primarily deals with the prevention and detection of crime, the power of investigation is all-pervasive, and extends to investigation of all cognizable cases. This elementary difference lies at the heart of all the decisions cited above. Furthermore, in all the aforesaid decisions, the power of investigation is vested with such officers only when it is incidental to their regulatory powers under the respective statute.
The dominant object for which a police officer exercising powers under a penal statute, like the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”) – the erstwhile Code of Criminal Procedure, 1973, or the Narcotics Drugs and Psychotropic Substances Act, 1985 (“NDPS Act”), is appointed is to investigate into offences, whereas, the dominant object for which a Customs Excise Officer/officer of the RPF is appointed is to regulate the State’s finances or ensure the security of property on railways, respectively.
The differences highlighted in this section of the post dealt with by the Supreme Court in Toofan Singh vs. State of Tamil Nadu. The Court, by a majority of 2:1, declared that confessions recorded under section 67 of the NDPS Act would be inadmissible as evidence against the person making such confession and that using such confessions as evidence would violate the person’s right against self-incrimination under Article 20(3), and their right to privacy under Article 21 of the Constitution. Additionally, the Court highlighted the importance of stringent penal statutes like the NDPS Act to be highly cognizant of their impact on an individual’s fundamental rights, particularly the rights under Article 20(3) and Article 21. Rejecting the State’s reliance on Durga Prasad, Badku Jyoti Savant, and Barkat Ram, the Court observed that the said decisions were rendered in the context of regulatory statutes; however, the NDPS was a penal statute, and therefore, confessions recorded under section 67 of the NDPS Act would be inadmissible as evidence against the person making such confession.
Conclusion
From a study of the aforesaid judgments, the following principles emerge, which, although not exhaustive, provide guidance as to the factors that may be borne in mind while determining whether the bar under Article 20(3) of the Constitution is attracted in a given case:
- Whether the statute in question is penal or regulatory: The general statement of the rule, though not to be treated as exhaustive, is that while in respect of statements made to an Officer performing investigative functions under a penal statute, the bar under Article 20(3) of the Constitution and Section 23 of the BSA, would be attracted, the said bar would not be imported in respect of statements made to an Officer performing investigative functions under a regulatory statute;
- Whether the scope of power of the concerned Officer relates to the prevention and detection of crime, generally, or the power is of a limited character.
- Whether the concerned Officer possesses all the attributes of an ‘officer-in-charge’ of a Police Station.
It cannot be disputed that the Companies Act was enacted with a view to regulate transactions in the corporate world. Therefore, the rigors applicable to an investigation under a penal statute may not be axiomatically imported vis-à-vis an investigation under the Companies Act. The dominant object of the Companies Act, including the provisions relating to an investigation by the SFIO, is to control and regulate operations in the corporate world and tackle corporate fraud.The mandate of the SFIO is mainly supervisory and regulatory, as against the dominant object of penal statutes, which is to provide for punishment of a range of intentional acts and omissions enumerated in it. Hence, the bar under Article 20(3) of the Constitution and Section 23 of the BSA would not be attracted as regards sections 217(4) and 217(7) of the Companies Act. The said provisions, in the view of the authors, are therefore not violative of Article 20(3) of the Constitution.
– Shriya Chakravarthy and Mrigank Pathak