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2019 (4) TMI 2029 - HC - Companies LawAllegation of fraud, misappropriation, falsification of records and conspiracy - private complaint filed under Section 156(3) of Cr.P.C - HELD THAT - Admittedly, there is a dispute between them regarding the management which has culminated into MOU, later not honoured by both the parties. The 1st petitioner has made a specific declaration that it has become invalid. In the said circumstances, when any member of the company has any grievance or complaint about oppression or mismanagement, he should have resorted to an application to the tribunal as contemplated under Section 241 of the Companies Act-2013 - Chapter XIV of the Companies Act-2013, provides for remedy. Under Section 206 of the Companies Act-2013, the Registrar of the Company, based on the information received by him can seek for explanation, production of document and conduct enquires. If the Registrar is satisfied on the basis of information available with him or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act, he can proceed with inquiry. From the reading of the complaint, it is alleged that the petitioners herein have committed Act of omission and commission and concealment to deceive the complainant/2nd respondent who is one of the shareholders. In such circumstances, the Act provides for him to inform the matter to the Registrar under Section 206 of the Companies Act-2013 who in turn will conduct enquiry. If the enquiry conducted by the Registrar discloses material for further investigation, he under Section 210 of the Companies Act-2013, can report to the Central Government to conduct investigation into the affairs of the Company. This Court of the opinion that the complaint under Section 156(3) of the Cr.P.C before the Judicial Magistrate and seeking registration of the complaint by the Inspector of Police, CCB, Coimbatore, itself an come out of malafide intention to pressurize the petitioners to part away their right of Managing the Company - The complaint on the file of the 1st respondent cannot be probed effectively since it involves intricate facts on accountancy and auditing. Except forensic audit conducted into the affairs of these Companies held by the 1st petitioner and the 2nd respondent, the truth will not come to light. This Court directs the Registrar of Companies to take note of the complaint and cause inquiry, not only the affairs of M/s. M.C. Spinners Pvt Ltd., but also all the other sister concern, in which the 1st petitioner and 2nd respondent are involved and file its report to the Central Government for further action - Petition allowed - decided in favor of appellant.
Issues Involved:
1. Allegations of fraud, misappropriation, falsification of records, and conspiracy. 2. Jurisdiction for investigation under the Companies Act, 2013. 3. Validity of the Memorandum of Understanding (MOU) between the parties. 4. Competence of local police versus specialized agencies for investigation. 5. Procedural appropriateness of the complaint under Section 156(3) of Cr.P.C. Detailed Analysis: 1. Allegations of Fraud, Misappropriation, Falsification of Records, and Conspiracy: The complainant, a director of M/s. M.C. Spinners Pvt. Ltd., alleged that the petitioners engaged in maladministration, forgery, criminal breach of trust, and cheating. Specific allegations included the removal of hypothecated fabric stocks worth ?8,32,14,000/- and machinery worth ?1,89,15,625/- without the knowledge of the bank or other directors, leading to significant financial loss and reputational damage to the company. The complaint also mentioned the unauthorized transfer of vehicles and misappropriation of job work funds. 2. Jurisdiction for Investigation under the Companies Act, 2013: The petitioners argued that the investigation should be conducted as per the procedures outlined in the Companies Act, 2013, specifically by the Serious Fraud Investigation Organisation (SFIO) under Section 212. The court noted that the Companies Act provides a comprehensive mechanism for dealing with issues of mismanagement and fraud within a company, including inquiries by the Registrar of Companies and potential investigations by the SFIO. The court emphasized that the specialized nature of these investigations requires expertise in forensic auditing and corporate affairs, which local police may lack. 3. Validity of the Memorandum of Understanding (MOU) Between the Parties: The petitioners contended that the dispute arose despite a Memorandum of Understanding (MOU) executed on 12.11.2014, which was not honored by both parties. The complainant did not suppress the MOU but claimed it was invalid. The court observed that the MOU's validity and the ongoing disputes between the two groups of companies should be addressed through the appropriate legal channels provided under the Companies Act. 4. Competence of Local Police Versus Specialized Agencies for Investigation: The court acknowledged that while the local police are empowered to investigate offenses under the Indian Penal Code (IPC), the complexity and specialized nature of the allegations in this case necessitate an investigation by a specialized agency like the SFIO. The court highlighted that the Companies Act allows for investigations by other agencies apart from the SFIO, but in this case, the intricate financial and corporate issues involved require the expertise of the SFIO. 5. Procedural Appropriateness of the Complaint Under Section 156(3) of Cr.P.C.: The petitioners argued that the complaint under Section 156(3) of Cr.P.C. was filed with malafide intentions to pressurize them. The court noted that the complainant, being aware of the new enactment and redressal procedures under the Companies Act, should have resorted to those procedures instead of filing a criminal complaint. The court emphasized that the complaint should have been addressed through the mechanisms provided under the Companies Act, including inquiries by the Registrar of Companies and potential investigations by the SFIO. Conclusion: The court quashed the complaint in C.C.No.29 of 2017 on the file of the 1st respondent police and directed the Registrar of Companies to conduct an inquiry into the affairs of M/s. M.C. Spinners Pvt. Ltd. and its sister concerns. The Registrar is to file a report to the Central Government for further action. The court emphasized the need for a comprehensive investigation by specialized agencies to uncover the truth and protect public interest.
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