1996 (12) TMI 296 - HC - Companies Law

Summary

Issues:
Challenge to pendency of Criminal Case under Companies Act, 1956; Existence of prima facie case under section 113 of the Act; Competency of the Magistrate to take cognizance of the offence.

Analysis:
The petition under section 482 of the Code of Criminal Procedure challenged the pendency of Criminal Case No. 78 of 1995 under section 113 of the Companies Act, 1956 against the petitioners. The complaint alleged that the petitioner-company failed to register the transfer of shares in the respondent's name, leading to the Magistrate taking cognizance of the offence. The petitioner contended that the order amounted to abuse of process. The Court focused on whether there was a prima facie case under section 113 and the Magistrate's competency to take cognizance.

The Court found sufficient material on record to support the Magistrate's action in taking cognizance of the offence under section 113. The evidence indicated that the respondent purchased shares but the company failed to register the transfer. The Court emphasized that taking cognizance at the initial stage is distinct from canceling the order later. The Magistrate's powers under section 204 allow for addressing grievances post-summoning. Thus, the Court held that the Magistrate was justified in making the impugned order based on the evidence presented.

Regarding the jurisdiction of the Magistrate, arguments were raised on the cause of action and the respondent's status as a shareholder. The Court dismissed these arguments as misconceived. It noted that the company's business involved transactions nationwide, and the duty to register transferred shares was integral to its operations. Denying relief based on the company's location would undermine statutory provisions and harm public interest. Consequently, the Court overruled the objections on jurisdiction.

In conclusion, the petition was dismissed as the impugned order did not amount to abuse of process or perpetuate injustice. The petitioner could raise objections during the trial, except those related to taking cognizance and jurisdiction. The delay in trial was attributed to the petitioner.