2022 (1) TMI 1383 - HC - Companies Law

Oppression and Mismanagement - Fraudulent allotment of bonus shares - issuance of bonus to the shareholders who are nonresidents of India and not to all the shareholders, without the approval of the Reserve Bank of India - HELD THAT - It is relevant to note that even in mismanagement, oppression, complaint by any of the minority shareholders, the remedy lies under section 241 of the Companies Act for oppression or mismanagement. Only if the Tribunal gives any finding that there are fraudulent activities and fraud has been committed by any person, give cause of action to proceed under section 447 of the Companies Act. Chapter XIV and XVI of the Companies Act are fact finding procedures. If any irregularities which lead to the fraudulent activities of the company found during the inspection as per the procedure, certainly there cannot be any difficulty in lodging any complaint under section 447 of the Companies Act. hether or not there is mismanagement or oppression, the same cannot be gone into by the Special Court. The Special Court can try the offence on the specific charges. Situation is not ripen for that stage. Only on recording a finding about the fraud committed by the petitioners, the Court can try the offence for specific charges. The criminal Court cannot assume the role of Company Court and investigate the matter. Though much reliance has been placed on the judgment of the Apex Court in the judgment in NATIONAL BANK OF OMAN VERSUS BARAKARA ABDUL AZIZ ANR. 2012 (12) TMI 965 - SUPREME COURT to contend that the Magistrate has considered the sworn statement. In the above case, the Apex Court has held that the High Court instead of quashing the complaint should have directed the Magistrate to pass fresh Orders following the procedure under section 202 of Cr.P.C. In MD. IBRAHIM ORS VERSUS STATE OF BIHAR ANR 2009 (9) TMI 922 - SUPREME COURT , the Apex Court has held that in order to attract an offence under section 464 of IPC, a person ought to have made or executed a document claiming to be someone else or authorised by someone else or he altered or tampered a document or he obtained a document by practicing deception, or from a person not in control of his senses. Except contending that resolution and PAS-3form have been manipulated, the nature of alleged manipulations is totally absent. Therefore, the offence under 464 of IPC is also not made out. In such view of the matter, the entire complaint is liable to be quashed. If at all the respondent is really interested to unearth the mismanagement, oppression or irregularities, he ought to have given a complaint before the authorities. Therefore, it is for the respondent to make necessary complaint to the concerned authorities to conduct enquiry or investigation or inspection in the affairs of the company and take appropriate legal action. By holding, this Court is of the view that the present prosecution is nothing but abuse of process of law and not maintainable. This Criminal Original Petition is allowed

Summary

Issues Involved:
1. Locus standi to file the complaint.
2. Compliance with procedural requirements under the Companies Act and Cr.P.C.
3. Allegations of fraud and false statements under Sections 447 and 448 of the Companies Act.
4. Allegations of forgery under Sections 463 and 464 of the IPC.

Detailed Analysis:

1. Locus Standi to File the Complaint:
The petitioners argued that the respondent, being a minority shareholder, lacked the locus standi to file the complaint under Sections 447 and 448 of the Companies Act. They contended that only the Director, Serious Fraud Investigation Office, or an officer authorized by the Central Government could file such complaints. The respondent countered that Section 439(2) of the Companies Act allows shareholders to file complaints for non-cognizable offenses, and thus the complaint was maintainable.

2. Compliance with Procedural Requirements:
The petitioners asserted that the complaint was taken on file without following the procedure under Section 202 of the Cr.P.C. They emphasized that the complaint should have been filed by an authorized officer under Section 212(6) of the Companies Act for cognizable offenses like fraud. The respondent maintained that the trial court followed due procedures and took cognizance after examining the records and the sworn statement of the complainant.

3. Allegations of Fraud and False Statements:
The complaint alleged that the petitioners, who were directors of a banking company, issued bonus shares to select shareholders, including Nonresident Indians, without RBI approval, and excluded those who voted against them. It was claimed that PAS-3 forms submitted to the Registrar of Companies were fraudulent. The court noted that Section 448 of the Companies Act penalizes false statements, and Section 447 prescribes punishment for fraud involving significant amounts. However, the court emphasized that penal actions under these sections require a fact-finding inquiry or investigation by authorized authorities, which was absent in this case.

4. Allegations of Forgery:
The complaint included allegations under Sections 463 and 464 of the IPC, which deal with forgery and making false documents. The court found that the complaint lacked specific details on how the documents were allegedly manipulated. Citing the Supreme Court's judgment in Mohammed Ibrahim v. State of Bihar, the court highlighted that forgery requires making or altering a document with fraudulent intent, which was not sufficiently demonstrated in the complaint.

Conclusion:
The court concluded that the complaint was not maintainable due to the lack of procedural compliance and the absence of a fact-finding inquiry by authorized authorities. The court quashed the private complaint, emphasizing that the respondent should seek redressal through appropriate authorities for any alleged mismanagement or fraud within the company. The criminal prosecution based on the private complaint was deemed an abuse of the process of law. The petition was allowed, and the connected miscellaneous petitions were closed.