2001 (1) TMI 860 - HC - Companies Law

Summary

Issues: Jurisdiction of the trial court, Compliance with Companies Act, Prosecution powers of SEBI officers, Liquidation proceedings

Jurisdiction of the trial court:
The petitioner, accused No. 2 in C.C.No. 337 of 1997, sought to quash the proceedings against him by the Special Court for Economic Offences, Bangalore City. The petitioner argued that the trial court lacked jurisdiction as the head office of the company was in Delhi, and the offences alleged to have been committed by him fell under the jurisdiction of the Presidency Magistrate of New Delhi. The court agreed, citing section 623 of the Companies Act, which allows for trial within the Presidency town where the offence was committed. Additionally, the court noted that the amendment to section 113 of the Act transferred jurisdiction from regular Magistrate courts to the CLB, further supporting the lack of jurisdiction of the trial court in this case.

Compliance with Companies Act:
The complaint against the petitioner alleged a violation of section 113 of the Companies Act, 1956, regarding the failure to return shares with transfer endorsements within the specified time frame. The petitioner contended that the complaint should have been made by the shareholder to the CLB, which would then take necessary action to rectify the default. The court agreed with this argument, emphasizing that the shareholder is required to approach the CLB for such matters, as per the amended provisions of the Act. Therefore, the complaint filed directly with the trial court was deemed not maintainable.

Prosecution powers of SEBI officers:
The petitioner also raised the issue of prosecution powers delegated to SEBI officers through a government notification. It was argued that individual shareholders were not entitled to file complaints in such cases. While this argument was presented, the court did not delve into a detailed analysis or ruling on this specific issue in the judgment.

Liquidation proceedings:
The petitioner highlighted the ongoing liquidation proceedings against the company in the company court at Delhi, where an official liquidator had been appointed. The petitioner argued that without leave of the company court, legal proceedings against the company or its officers should not proceed, as per section 446(1) of the Act. The court found merit in this argument, stating that the complaint filed without obtaining leave from the company court was not maintainable. Consequently, the court quashed the proceedings in C.C. No. 337 of 1997 against the petitioner based on the lack of jurisdiction, non-compliance with the Act, and the absence of requisite permission from the company court in the liquidation proceedings.