2002 (7) TMI 560 - HC - Companies Law

Issues Involved:
1. Quashing of the private complaint under section 482 of the Criminal Procedure Code, 1973.
2. Allegations of offences under sections 68 and 628 of the Companies Act, 1956.
3. Allegations of offences under sections 409, 420 read with section 120-B of the Indian Penal Code.
4. Jurisdiction and appropriateness of criminal proceedings versus civil proceedings.
5. Role and intention of the accused at the time of making representations.
6. Procedural aspects of taking cognizance and framing charges in private complaints.

Detailed Analysis:

1. Quashing of the Private Complaint:
The petition was filed to quash the private complaint in E.O.C.C. No. 128 of 1999, pending before the Additional Chief Metropolitan Magistrate, Egmore, Chennai. The complaint was filed by M/s. Grandtrust Finance Limited against the petitioners and two other accused for offences under the Companies Act and the Indian Penal Code. The court noted that the complaint was at an initial stage, with no witnesses examined or charges framed. The petitioners sought to quash the complaint under section 482 of the Criminal Procedure Code.

2. Allegations under the Companies Act:
The complaint alleged offences under sections 68 and 628 of the Companies Act, 1956. The first accused, M/s. Sundaram Finance Services Limited, was the sponsor for the third accused, M/s. Vishnu Forge Industries. The complainant was induced to subscribe for shares based on representations that the shares would be sold for a price not less than Rs. 25 per share and listed on the Over the Counter Exchange of India (OTCEI) by April 30, 1996. However, these representations were not fulfilled.

3. Allegations under the Indian Penal Code:
The complaint included allegations under sections 409 (criminal breach of trust), 420 (cheating), and 120-B (criminal conspiracy) of the Indian Penal Code. The complainant argued that the accused had entered into a supplementary agreement without the complainant's knowledge, altering the terms and conditions regarding the sale and listing of shares. This was seen as a deliberate act to mislead and cheat the complainant.

4. Jurisdiction and Appropriateness of Criminal Proceedings:
The petitioners argued that the matter was of civil nature and should be resolved in a civil court, not through criminal proceedings. They cited precedents where the courts discouraged the use of criminal proceedings for issues that could be decided by civil courts. However, the court referred to Supreme Court judgments stating that the mere pendency of civil proceedings does not bar criminal proceedings if the allegations warrant a criminal trial.

5. Role and Intention of the Accused:
The court considered whether there was an intention to cheat at the time of making the representations. The petitioners contended that unforeseen circumstances prevented the company from going public, which at most constituted a breach of agreement. However, the court noted that subsequent conduct and amendments to agreements suggested a deliberate intention to deceive the complainant.

6. Procedural Aspects of Taking Cognizance and Framing Charges:
The court explained the procedure for taking cognizance and framing charges in private complaints. It emphasized that at the stage of taking cognizance, the magistrate only has the complaint and supporting documents. The court must determine if there is sufficient ground to proceed, not necessarily to delve deeply into the merits of the case. The court found that the magistrate had sufficient grounds to take cognizance based on the complaint and supporting documents.

Conclusion:
The court concluded that there was sufficient ground for the magistrate to take cognizance of the offence against the accused. It dismissed the petition to quash the complaint, stating that the issues raised could be addressed during the trial. The court emphasized that the continuation of the proceedings did not constitute an abuse of the process of the court. Consequently, the petition was dismissed, and connected criminal miscellaneous petitions were closed.

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