Supreme Court upholds SFIO probe into Zylog Systems Limited
The Supreme Court of India has upheld the Madras High Court’s directions mandating a Serious Fraud Investigation Office (SFIO) probe into the affairs of Zylog Systems Limited, bringing finality to years of litigation concerning the Company’s financial management and governance.
Zylog was placed under provisional liquidation on 3 July 2014 by the High Court on a creditor’s petition. Soon thereafter, the Court observed that the Company was a going concern and directed the Official Liquidator not to close its operations. Acting on this direction, the Liquidator advised the Stock Exchange to keep the Company’s shares actively traded, resulting in continued public investment and significant retail shareholder participation.
In October 2016, the Court-appointed Administrator announced that 2016-17 would mark a turnaround year for the company.
While Zylog continued filing quarterly financial statements until late 2018, it failed to conduct Annual General Meetings (AGM) after 2016 despite multiple Court directions. In response, shareholders approached the Court alleging financial irregularities involving two directors previously named in CBI chargesheets relating to loan defaults.
Shareholders also sought a forensic audit, expressing concerns regarding potential misappropriation of funds and the alleged diversion of Zylog’s profitable Dubai-based subsidiary, Ducont, through circular transactions.
Notably, the Company is reported to have generated INR 895 crores in revenue between 2015 and 2019 from operations in Dubai, the US, and other jurisdictions. Nevertheless, in June 2019, the Administrator submitted a report recommending that the Company be wound up — prompting opposition from shareholders, who sought a comprehensive investigation prior to any liquidation.
On 18 October 2024, the High Court directed the Central Government to examine the matter. Following its review, the Government ordered an SFIO probe on 18 June 2025. Both the High Court’s order and the Government’s decision were challenged but upheld in two separate proceedings of the Madras High Court.
A subsequent Special Leave Petition (SLP) filed before the Supreme Court has now been dismissed. Through its order dated 21 November 2025, the Supreme Court has confirmed that the SFIO investigation shall proceed as directed.
