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2021 (1) TMI 854 - HC - Indian LawsScope of the bar of cognizance imposed under Section 439(2) of the Act of 2013 - Section 439(2) of Act of 2013 and Section 19(1) of Prevention of Corruption Act are in pari materia with each other or not - proceedings against the directors of a company and/or the company under Section 439(2) of the Act of 2013. Whether the application in IA No.2/2020 under Order VI Rule 16 of CPC is required to be allowed? - HELD THAT - The averments made and the documents produced therein cannot be said to prejudice or delay the matter inasmuch as the above petition having been filed on 4.08.2020 the respondent having entered appearance and filed its objections on 3.10.2020 the above matter was taken up on 20.11.2020 2.12.2020 14.12.2020 17.12.2020 18.12.2020 when it did not reach on account of paucity of time it was however taken up for hearing on 22.12.2020 at the request of both the counsels. Thus there cannot be said to be any delay on account of the rejoinder the matter was taken up for final disposal at the request of both the counsels on 22.12.2020 the rejoinder having been filed on 11.12.2020 - the filing of the rejoinder and production of documents would not cause any abuse of process of the court. Whether Section 439(2) of Act of 2013 and Section 19(1) of Prevention of Corruption Act are in pari materia with each other? - HELD THAT - The requirement of prior sanction under the Prevention of Corruption Act is to protect an officer against unnecessary prosecution during the time that he was discharging his function as an officer of the State in such situation it is mandated that prior sanction from the concerned authority has to be obtained which authority would apply its mind to the facts and come to a conclusion as to whether the proceedings are to be initiated or not - the same cannot be equated to authorised person under Section 439. There is a specific prohibition to the Court to take cognizance except upon a complaint in writing by the registrar a shareholder of the company or a person authorised by the Central Government in that behalf. Admittedly the respondent is neither the Registrar nor a shareholder nor has he obtained any authorisation from the Central Government. Therefore the respondent would not in my considered opinion have any locus to initiate penal proceedings under Section 439 of the Act of 2013 or even if he initiates any action the court dealing with such a matter cannot take cognizance of such a complaint - the Act of 2013 being a Special enactment containing a specific embargo the embargo is required to be given complete effect to by this Court. This Court cannot travel beyond the intention of the legislature and water down the requirements of Section 439 - the finding of the Special Economic Court in its order dated 3.7.2017 was proper and correct. Section 19 of the Prevention of Corruption Act and Section 439 of Act of 2013 are not pari materia with each other. Whether any person can file a proceedings against the directors of a company and/or the company under Section 439(2) of the Act of 2013? - HELD THAT - Apart from the named persons a complaint can also be filed by a person authorised by Securities and Exchange Board of India in terms of the proviso (1) of Section 439(2) or the Official Liquidator in terms of Section 439(4) no other person can initiate any criminal proceeding against a company for the offence committed under the Act of 2013. Whether the order of Revisional court dated 3.07.2020 requires any interference? - HELD THAT - It is reiterated that it is not the qualification of the accused or the designation of the accused or status of the accused which is of relevance under Section 439(2) of the Act of 2013. Therefore it is not relevant to consider whether the accused were directors or continue to be the directors as on the date of filing of the complaint. The Rivisional Court completely misdirected itself in this regard by adverting to the qualification of the accused rather than the qualification of the complainant. Petition allowed.
Issues Involved:
1. Application under Order VI Rule 16 of CPC. 2. Comparison of Section 439(2) of the Companies Act, 2013 with Section 19(1) of the Prevention of Corruption Act. 3. Eligibility to file complaints under Section 439(2) of the Companies Act, 2013. 4. Validity of the Revisional Court's order dated 3.07.2020. Detailed Analysis: Issue 1: Application under Order VI Rule 16 of CPC The respondent filed an application to strike out certain pleadings and documents from the rejoinder filed by the petitioners, arguing that these were unnecessary, scandalous, and intended to prejudice the court. The court noted that the rejoinder contained details of prior litigation between the petitioner group and the respondent, which were relevant to the case. The court found that the documents produced were public records and the averments made were based on these documents. Hence, the court dismissed the application, stating that the contents of the rejoinder were necessary, not scandalous, and did not delay or prejudice the trial. Issue 2: Comparison of Section 439(2) of the Companies Act, 2013 with Section 19(1) of the Prevention of Corruption Act The court examined whether Section 439(2) of the Companies Act, 2013, which restricts who can file complaints against a company or its officers, is similar to Section 19(1) of the Prevention of Corruption Act, which requires prior sanction for prosecuting public servants. The court concluded that these sections are not in pari materia. Section 19 of the Prevention of Corruption Act aims to protect public servants from unnecessary prosecution, requiring prior sanction from a competent authority. In contrast, Section 439(2) of the Companies Act specifically limits who can file complaints to the Registrar, a shareholder, or a person authorized by the Central Government, thus creating a clear prohibition on the court's cognizance of complaints from unauthorized persons. Issue 3: Eligibility to File Complaints under Section 439(2) of the Companies Act, 2013 The court reiterated that only specific persons mentioned in Section 439(2)—the Registrar, a shareholder, or a person authorized by the Central Government—can file complaints against a company or its officers. The respondent, being neither the Registrar nor a shareholder, and lacking authorization from the Central Government, did not have the locus to initiate penal proceedings. The court emphasized that the legislative intent behind Section 439(2) must be fully respected, and any complaints filed by unauthorized persons cannot be entertained. Issue 4: Validity of the Revisional Court's Order dated 3.07.2020 The Revisional Court had allowed the complaints filed by the respondent, holding that the accused did not fall under the definition of "officer" under Section 2(59) of the Companies Act, thus bypassing the bar under Section 439(2). The High Court found this approach incorrect, stating that the focus should be on the qualification of the complainant rather than the accused. Since the respondent did not meet the qualifications under Section 439(2), the High Court set aside the Revisional Court's order and reinstated the Special Court's dismissal of the complaints. Conclusion: The High Court set aside the orders dated 3.07.2020 passed by the LVIII Addl. City Civil and Sessions Judge, Bangalore, in Criminal Revision Petition Nos. 749/2017 and 750/2017. The court confirmed the orders dated 3.07.2017 passed in PCR Nos. 6/2017 and 12/2017, thereby dismissing the complaints. The petitions were allowed, emphasizing the strict adherence to the qualifications for complainants under Section 439(2) of the Companies Act, 2013.
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