2015 (7) TMI 495 - HC - Companies Law

Validity of Summons issued for offence under Section 630 of the Companies Act 1956 - Validity of Board resolution is already in dispute - Held that - In the summoning order dated 20th April, 2010 the Magistrate has referred to the sale deed in favor of the complainant/respondent company as well as the order dated 1st November, 1990 passed by this Court in CA No. 403/90 in CP 115/86 and also taken into account that the petitioner/accused was entitled to receive ₹ 7000 per month House rent allowance. The Magistrate has further recorder in the summoning order that the respondent company is the owner of the said property and that prima facie it does appear that the petitioner has wrongfully withheld the said property despite not being entitled to and the legal notice was served on the petitioner pointing out the said wrongful act and demanding the vacation of the property. The Magistrate on the basis of the averments in the complaint and the evidence placed on record found sufficient grounds to proceed and accordingly summoned the accused under Section 630 of the Companies Act, 1956. The said order is a legally correct order. It is settled law that the complaint under Section 630 of the Company Law may be maintainable despite of pendency of the civil litigation, but the facts in the present case are distinct as it is doubtful whether the complaint in the existing circumstances when the board resolution itself is under dispute is maintainable whether the proceedings can continue, therefore, instead of dismissal of complaint, I am of the view that the summoning order are liable to be quashed. The trial Court is directed not to further proceed with the complaint, the same is sine die adjourned till final conclusion is arrived out between the parties about the validity of board resolution. The respondent is granted liberty to revive the complaint if such situation would arise i.e. after deciding the issue of validity of board resolution by the Civil Court.

Issues Involved:
1. Alleged fraud and suppression of material facts by the respondent/complainant Company.
2. Validity of the Board Resolution dated 14.02.2005.
3. Contempt proceedings related to the violation of the status quo order dated 14.01.2005.
4. Agreement to sell the farmhouse property and related civil suits.
5. Summoning order issued by the Metropolitan Magistrate.
6. Applicability of Section 630 of the Companies Act, 1956.
7. Examination of the complainant under Section 200 of the Cr.P.C.
8. Authorization of the complaint by a valid board resolution.

Issue-wise Detailed Analysis:

1. Alleged Fraud and Suppression of Material Facts:
The petitioner contended that the respondent/complainant Company played fraud upon the trial court by suppressing material facts. These include the Board Resolution dated 14.02.2005, contempt application pending against certain individuals, and the agreement to sell the farmhouse property. The petitioner argued that the summoning order was obtained by suppressing these facts, which would have likely influenced the trial court's decision.

2. Validity of the Board Resolution Dated 14.02.2005:
The petitioner challenged the validity of the Board Resolution dated 14.02.2005, arguing that it was passed in violation of the status quo order dated 14.01.2005. The resolution authorized the filing of the complaint, but the petitioner claimed that it was illegal as the status quo order was in effect, which restrained any such actions.

3. Contempt Proceedings Related to the Violation of the Status Quo Order:
Contempt proceedings were initiated by the petitioner against the individuals who allegedly violated the status quo order dated 14.01.2005. The petitioner argued that the resolution passed on 14.02.2005 was in contempt of this order, and therefore, the complaint based on this resolution was invalid.

4. Agreement to Sell the Farmhouse Property and Related Civil Suits:
The petitioner highlighted that there was an agreement to sell the farmhouse property between the respondent Company and the petitioner, which was the subject of a suit for specific performance. Additionally, a suit for possession of the farmhouse property was pending. The petitioner argued that these civil suits and the related interim orders should have been disclosed in the complaint.

5. Summoning Order Issued by the Metropolitan Magistrate:
The petitioner contended that the summoning order issued by the Metropolitan Magistrate was obtained mechanically, without due application of mind, and was based on twisted facts. The petitioner argued that the complaint was filed with an ulterior motive and personal vengeance, and that it was a family dispute of civil nature, not warranting criminal proceedings under Section 630 of the Companies Act, 1956.

6. Applicability of Section 630 of the Companies Act, 1956:
The respondent argued that both civil and criminal remedies were available, and the mere filing of civil proceedings would not be a sufficient ground to quash the summoning order. The trial court had prima facie observed sufficient grounds to proceed against the petitioner under Section 630 of the Companies Act, 1956. The respondent cited several decisions supporting the view that criminal proceedings could proceed despite pending civil suits.

7. Examination of the Complainant Under Section 200 of the Cr.P.C.:
The petitioner argued that the Magistrate committed a grave error by not examining the complainant as mandated by Section 200 of the Cr.P.C. The petitioner contended that the examination of the complainant was mandatory, and the failure to do so rendered the summoning order invalid.

8. Authorization of the Complaint by a Valid Board Resolution:
The petitioner challenged the authorization of the complaint, arguing that the Board Resolution dated 14.02.2005 was not proved during the pre-summoning evidence and that the individuals authorized by the resolution did not appear before the trial court. The petitioner contended that the complaint was filed without proper authorization, and therefore, the summoning order should be quashed.

Conclusion:
The court concluded that the summoning order was liable to be quashed due to the disputed validity of the board resolution and the failure to examine the complainant under Section 200 of the Cr.P.C. The trial court was directed not to proceed with the complaint until the issue of the validity of the board resolution was resolved. The respondent was granted liberty to revive the complaint if the civil court decided in favor of the validity of the board resolution. The petition was disposed of without expressing any opinion on the merits of the complaint.

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