The Kerala High Court today refused to pass any interim order staying the investigation by the SFIO (Serious Fraud Investigation Office) against the Kerala State Industrial Development Corporation (KSIDC) in relation to the financial dealings between Kerala Chief Minister's daughter Veena Vijayan's IT company Exalogic Solutions Pvt Ltd. and the state-owned Cochin Minerals and Rutiles Ltd.(CMRL).

The Bench of Justice Devan Ramachandran observed during the course of the hearing that the Court cannot let unethical actions be taken lightly. The Court refused to close the plea filed by political leader Shaun George seeking investigation into the affairs of Exalogic Solutions and CMRL.

Senior Advocate CS Vaidhyanathan appeared on behalf of KSIDC in its writ petition challenging the SFIO investigation. He submitted before the Court that KSIDC is a financial institution for the development of industries in the state. "If enquiries like this are ordered, the reputation, the integrity, the credibility of the institution will be affected, I won't be able to raise the finances for the benefit of the industries of Kerala", he submitted.

He told the Court that the interim report does not mention anything about SDIDC and that the nominal director of KSIDC on the board of CMRL has no day-to-day role in the company. He said that the company cannot be brought into the investigation at this stage. He said that satisfaction under Sections 210 or 212 of the Companies Act has to be based on objective materials. He said that there is no objective material against KSIDC. He said that asking whether the company has something to hide is only political rhetoric and not an argument to be raised when fundamental rights are asserted.

"On an abstract line, I agree with what you are saying. Generally speaking, when you are not directly imputed with anything, an investigation may not be necessary. But look at the facts that they are saying. I am not saying that this is true. Just going by what they are saying. They are saying that there are illegal payments to a particular company to an amount of 1.72 Crores. Cumulatively 135 Crores, that too by a company in which you own 13.4% shares and a Nominee Director. Before you continue to argue on those lines, I would request you, please tell me what is your opinion on these statements that are there with respect to the other company?", the Court asked.

Vaidhyanathan responded by saying that it is for Exalogic and CMRL to respond to. The Court then asked whether the Nominee Director was not aware of the 135 Crores. Vaidhyanathan replied that a serious fraud investigation is not required to determine that. He said that every shareholder cannot be held responsible for what the company did. He said that the Nominee Director can only look at what is disclosed in the account or what is brought before the Board of Directors. He said that all documents required by SFIO have been made available by KSIDC.

Advocate R. V. Sreejith appearing for SFIO submitted that the culpability of KSIDC will be known only after the investigation and that it will be better for KSIDC to come out clean from the investigation.

Senior Advocate Vaidhyanathan also told the Court that KSIDC has sought an explanation from CMRL about the alleged illegalities and that they have not responded. The Court then said that it wants to see that letter and see the bonafides of KSIDC.

"The responsibility is very high under the Companies Act. We cannot let unethical actions like this be taken lightly. India is moving on to be one of the biggest economies. We cannot let these kinds of transactions happen....", the Court said.

The Court also said that if any further coercive action is taken against KSIDC, it can come to Court. The Court then adjourned the matter to February 26 for the KSIDC to produce the communication KSIDC addressed to CMRL.

Advocate Paulose Abraham appearing for CMRL in the connected case filed by Shaun George seeking an investigation by SFIO into CMRL and Exalogic submitted that the matter has become infructuous. He submitted that the matter should not be kept pending since it has become infructuous.

The Court said that it is not considering the matter against CMRL today and that both matters will be heard together, and hence refused to dispose of the matter.

Both the cases will now be considered on February 26.