2008 (4) TMI 502 - HC - Companies Law

Winding up - petition filed under section 446 of the Companies Act 1956 read with Rule 9 of the Companies (Court) Rules 1959 for the quashing of all Civil and Criminal proceedings pending in various Courts and absolving the petitioner from any civil or criminal liability in connection with the affairs of the Company namely Moulik Finance and Resorts Limited Held that - Reserve Bank of India had the power jurisdiction and authority to file a criminal complaint against the alleged default/contravention made by the Company and its Directors. The submission of the counsel for the petitioner that the initiation of the criminal proceedings was wholly illegal and without any jurisdiction is wholly erroneous. No petition can be filed under section 446 of the Companies Act. Section 446 is only an enabling provision and an interlocutory application could only be filed in a pending matter before the Court seeking leave of the Court to file a suit or other legal proceedings against the Company. If any suit or proceedings is required to be instituted or to be continued with then leave of the Court is necessary. Section 446 of the Companies Act however does not prohibit taking actions against the Directors and officers or servants of the Company. This provision cannot be invoked for the quashing of the criminal complaint. In view of the aforesaid this Court is of the opinion that the proceedings initiated by the petitioner under section 446 read with section 633(2) of the Companies Act was not maintainable. Even otherwise on merit the petitioners are not entitled for any relief whatsoever.

Issues Involved:
1. Quashing of civil and criminal proceedings under Section 446 of the Companies Act, 1956.
2. Maintainability of the petitions under Sections 446 and 633(2) of the Companies Act.
3. Jurisdiction and authority of the Reserve Bank of India to file a criminal complaint.
4. Applicability of Section 446 to criminal proceedings.
5. Relief under Section 633(2) of the Companies Act.

Detailed Analysis:

1. Quashing of Civil and Criminal Proceedings under Section 446 of the Companies Act, 1956:
The petitioner sought to quash all civil and criminal proceedings, especially Criminal Case No. 2092 of 2005, asserting that he had resigned from the company and that no leave was taken by the Reserve Bank of India from the Company Court to file a complaint. The court examined the provisions of Sections 45QA, 58B (4AAA), 58C, and 58E of the Reserve Bank of India Act, 1934, which empower the Reserve Bank of India to file a criminal complaint for non-compliance with the Company Law Board's orders. The court held that the Reserve Bank of India had the jurisdiction and authority to file the criminal complaint, and the initiation of the criminal proceedings was not illegal or without jurisdiction.

2. Maintainability of the Petitions under Sections 446 and 633(2) of the Companies Act:
The court noted that under the Companies Act, only certain petitions as provided under Rule 11 of the Company Court Rules can be filed. Section 446 is an enabling provision allowing interlocutory applications in pending matters before the court, seeking leave to file a suit or other legal proceedings. It does not prohibit actions against the directors and officers of the company. The court cited the Supreme Court's decision in Harihar Nath v. State Bank of India, which clarified that Section 446 is intended to save the company from unnecessary litigation and protect its assets for equitable distribution among creditors and shareholders. Consequently, the court concluded that the petitions under Section 446 for quashing criminal proceedings were not maintainable.

3. Jurisdiction and Authority of the Reserve Bank of India to File a Criminal Complaint:
The Reserve Bank of India filed a counter affidavit stating that the petitions were not maintainable under Section 446 and that the Directors could not file an application under this section for quashing proceedings. The court examined the relevant provisions and concluded that the Reserve Bank of India had the power, jurisdiction, and authority to file a criminal complaint against the company and its directors for non-compliance with the Company Law Board's orders.

4. Applicability of Section 446 to Criminal Proceedings:
The court referred to the decision in D.K. Kapur v. Reserve Bank of India, which held that the expression "other legal proceeding and proceedings" in Section 446 must be read ejusdem generis with the expression "suit" and could only refer to civil proceedings, excluding criminal proceedings. The court also cited the decision in Nagarjuna Finance Ltd. v. Kanosika Laboratories Ltd., which held that Section 446 does not embrace proceedings under Section 138 of the Negotiable Instruments Act. Therefore, the court concluded that criminal proceedings are excluded from Section 446, and no permission is required from the Company Court for filing a criminal case against the company or its directors.

5. Relief under Section 633(2) of the Companies Act:
The court examined the applicability of Section 633(2) of the Companies Act, which provides relief to directors in proceedings arising under the Companies Act. The court referred to the Supreme Court's decision in Rabindra Chamria v. Registrar of Companies, West Bengal, which held that Section 633 cannot be applied to liabilities under any Act other than the Companies Act. Consequently, the court concluded that the petitioners could not invoke Section 633(2) for relief in the criminal proceedings initiated by the Reserve Bank of India.

Conclusion:
The court held that the petitions under Sections 446 and 633(2) of the Companies Act were not maintainable and dismissed the petitions. The court also concluded that the Reserve Bank of India had the authority to file the criminal complaint and that criminal proceedings are excluded from the purview of Section 446. The interim orders, if any, stood discharged.

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