NCLAT Upholds SFIO’s Authority to Present IL&FS Disgorgement Proceedings for the Union Government

The National Company Law Appellate Tribunal has dismissed challenges by BSR & Associates LLP and N. Sampath Ganesh to the maintainability of proceedings seeking attachment and disgorgement in the IL&FS Securities Services Limited matter. In its judgment dated 25 August 2026, the Principal Bench at New Delhi held that the Serious Fraud Investigation Office was not acting as an independent applicant when it presented the proceedings before the NCLT; it was implementing a decision already taken by the Central Government and doing so in the name of the Union of India.

What the dispute was about

The appeals arose from an NCLT Mumbai order dated 17 March 2026 in proceedings connected with Company Petition No. 3638 of 2018. The appellants argued that Section 212(14A) of the Companies Act, 2013 expressly gives the power to seek disgorgement to the Central Government and that SFIO therefore lacked the legal authority or locus to file such an application.

They also contended that if the Central Government wanted to delegate the power, it had to follow Section 458 of the Companies Act, which deals with delegation by notification. According to the challenge, an administrative authorisation could not be used to transfer a statutory discretion vested in the Central Government.

Why the September 2023 MCA letter mattered

The appellate tribunal examined the chronology in detail. The Central Government had ordered an SFIO investigation into IL&FS and its subsidiaries on 30 September 2018. SFIO later submitted its investigation report concerning IL&FS Securities Services Limited to the Central Government on 14 July 2023 under Section 212(12).

After considering that report, the Ministry of Corporate Affairs issued a letter dated 26 September 2023 conveying approval of the competent authority for further action. Among other directions, SFIO was told to place the investigation report before the NCLT Mumbai and seek attachment and disgorgement proceedings against persons or entities charged under Section 447.

NCLAT treated the wording and legal effect of this letter as central to the case. It noted that the underlying decision to initiate the proceedings had been taken by the Central Government, while SFIO was authorised to carry that decision into effect.

NCLAT distinguishes authorisation from delegation

The tribunal rejected the argument that the arrangement amounted to an unlawful delegation under Section 458. It drew a distinction between transferring statutory decision-making power and authorising an officer or department to implement a decision already made by the competent authority.

According to the judgment, SFIO did not independently decide to commence the disgorgement action. It first placed the investigation report before the Central Government. The Central Government then decided to proceed and authorised SFIO to present the application. The case was filed with the Union of India as the applicant, not SFIO in its own name.

NCLAT relied on the Government of India Allocation of Business Rules and Transaction of Business Rules to explain how business allocated to the Ministry of Corporate Affairs may be implemented through officers and departments under the ministry. It also referred to the Supreme Court's distinction between delegation of discretion and authorisation to perform implementation or ministerial functions.

Section 212(14A) and the broader disgorgement framework

Section 212(14A) allows the Central Government, where an SFIO report states that fraud has taken place and an undue benefit has been obtained, to approach the Tribunal for orders concerning disgorgement of assets, property or cash and personal liability.

The appellate tribunal also rejected the suggestion that Section 212(14A) is the only route through which disgorgement relief can ever be sought under the Companies Act. Referring to earlier judicial authority, it observed that relief relating to freezing assets and disgorgement may also arise through provisions including Sections 241, 242, 246 and 339, depending on the case.

What happened to the appeals

NCLAT concluded that the maintainability objections were untenable and dismissed Company Appeal (AT) Nos. 182 and 183 of 2026. The bench comprised Justice Yogesh Khanna, Officiating Chairperson, Barun Mitra, Member (Technical), and Ajai Das Mehrotra, Member (Technical).

Why this matters for auditors and corporate-law professionals

The ruling is important because it clarifies how enforcement action based on an SFIO investigation can be institutionally presented when the substantive statutory power belongs to the Central Government. For auditors, company officers and advisers involved in serious-fraud investigations, the judgment signals that a maintainability challenge may not succeed merely because SFIO officers physically present the proceeding, where the record shows that the Central Government made the decision and the Union of India is the applicant.

It also reinforces the practical distinction between the authority that makes a statutory decision and the government machinery authorised to execute that decision. Professionals assessing notices or proceedings connected with SFIO investigations should therefore examine the underlying authorisation, the identity of the applicant and the statutory route relied upon rather than focusing only on which government office filed the papers.

The August 25 ruling leaves the IL&FS-related disgorgement proceedings alive on the maintainability issue. NCLAT has held that SFIO's role in presenting the application was an authorised implementation of the Central Government's decision, not an impermissible transfer of statutory discretion. Parties facing similar proceedings should evaluate both the Companies Act provisions and the government authorisation chain before raising a jurisdictional challenge.

Key takeaway

Fresh NCLAT ruling clarifying a significant Companies Act enforcement issue involving SFIO authority, disgorgement and IL&FS, with direct relevance for auditors, corporate-law professionals and compliance teams.