2010 (6) TMI 333 - HC - Companies Law

Cognizance of the offences under sections 120B, 406 and 420 of the Indian Penal Code, 1860, against the accused persons including the two petitioners - Held that - In view of the facts and circumstances, it cannot be said that the petitioners had committed any offence, as alleged by the complainant and, accordingly, it was required on the part of the complainant to inform the learned Chief Judicial Magistrate at the time of filing of the complaint petition regarding the present status of the company in question. Had it been disclosed in the complaint petition, there was every possibility of rejection of the complaint petition. In sum and substance, in absence of availability of the correct fact, it appears that the learned Magistrate had proceeded with the complaint petition and passed the order of cognizance. In view of the facts and circumstances, as indicated hereirnabove, the court is satisfied that allowing the present complaint petition to proceed further will amount to allowing abuse of the process of the court. It would also not be appropriate to direct the petitioners to participate in the proceeding, which was stayed in the year 2000, i.e., after a lapse of such a long time. Accordingly, the order of cognizance dated 17-11-1997, as well as the entire proceedings in Complaint Case No. 919 of 1997 is set aside so far as it relates to the two petitioners of this case.

Summary

Issues:
Petition for quashing of criminal proceeding under sections 120B, 406, and 420 of the Indian Penal Code based on incorrect facts and lack of jurisdiction.

Analysis:
The case involved two petitioners seeking to quash criminal proceedings under sections 120B, 406, and 420 of the Indian Penal Code, initiated by the Chief Judicial Magistrate based on a complaint filed by the opposite party. The complainant alleged that the petitioners, who were directors of a company, had cheated him by not refunding his fixed deposits matured on 23-9-1997. However, the petitioners argued that a liquidation proceeding had been initiated against the company prior to the maturity date, divesting them of control. They presented evidence of the appointment of a provisional liquidator by the Delhi High Court in May 1997, indicating that they were not responsible for the non-payment to the complainant.

The High Court examined the facts presented by both parties and the order of the Delhi High Court appointing a provisional liquidator. It concluded that the petitioners were no longer in control of the company by the maturity date of the fixed deposits, making it impossible for them to refund the complainant's amount. The court noted that the complainant failed to disclose the company's status at the time of filing the complaint, which could have led to the rejection of the complaint petition. The court found that continuing the proceedings would amount to an abuse of the court's process and set aside the order of cognizance dated 17-11-1997 and quashed the entire proceedings in Complaint Case No. 919 of 1997 concerning the two petitioners.

In the absence of correct facts and jurisdiction, the High Court allowed the petition to quash the criminal proceedings, emphasizing that the petitioners were not responsible for the non-payment due to the company's liquidation status. The court highlighted the importance of disclosing all relevant information at the time of filing a complaint to avoid unnecessary legal actions and ensure fair proceedings.