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2024 (4) TMI 871 - HC - Companies LawViolation of Section 233 of the Companies Act 2013 - requirement of holding at least ninety percent of the total numbers of shares for approval of scheme of amalgamation - non-application of mind - HELD THAT - In the present case it is evident that the trial Judge has taken cognizance without any application of judicial mind. The order taking cognizance in this case has been only a formality - There is absolutely no application of mind. Cognizance has been taken casually without any prima facie findings. There is also no reason for the petitioner to commit fraud by making a false statement as the petitioner has the option to take recourse to Sections 233(5) 233(6) and Section 232 of the Companies Act - The Companies are also at liberty to once again convene a meeting of the shareholders secured creditors and unsecured creditors to comply with the provision of Section 233(1)(b) of the Act as per the circular/letter no. 2/31/2013-CAA-CL-V-Pt-2 dated 24.08.2017 of the Ministry of Corporate Affairs New Delhi. It is clear from the petition of complaint that neither the Company nor the persons who were in-charge of the day affairs of the company have been made parties in the case. Without the Company and the persons responsible for the day to day affairs of the Company the prosecution of the petitioner alone who acted on behalf of the company is bad in law and thus clearly an abuse of the process of law. The proceedings pending before the Learned 2nd Special Court Calcutta at West Bengal under Section 448 of the Companies Act 2013 for alleged violation of Section 233 of the Companies Act 2013 is bad in law and thus liable to be set aside - revision allowed.
Issues Involved:
1. Quashing of complaint and proceedings u/s 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013. 2. Interpretation of Section 233(1)(b) of the Companies Act, 2013. 3. Validity of cognizance taken by the trial court. 4. Vicarious liability of the petitioner as Company Secretary. Summary: Issue 1: Quashing of Complaint and Proceedings: The petitioner sought to quash the complaint (No. 35/2019) pending before the 2nd Special Court, Calcutta, filed u/s 448 of the Companies Act, 2013, for alleged violation of Section 233 of the Companies Act, 2013. The complaint alleged that the petitioner, as Company Secretary, provided a false declaration regarding the approval of a scheme of amalgamation by the requisite majority of shareholders. Issue 2: Interpretation of Section 233(1)(b) of the Companies Act, 2013: The petitioner argued that the declaration made in Form CAA-11 was based on the reasonable interpretation of Section 233(1)(b), which requires approval by 90% of the members present and voting at the general meeting, not 90% of the total members. The opposite party contended that the approval required was from 90% of the total number of shares, as clarified by the Ministry of Corporate Affairs' letter dated 24.08.2017. Issue 3: Validity of Cognizance Taken by the Trial Court: The court found that the trial judge had taken cognizance without applying judicial mind, making the cognizance prima facie bad in law. The Supreme Court's precedents emphasized the necessity for judicial application of mind at the time of taking cognizance. Issue 4: Vicarious Liability of the Petitioner as Company Secretary: The petitioner, acting in his capacity as Company Secretary, was made an accused without the company or the persons responsible for its day-to-day affairs being made parties. The court held that the prosecution of the petitioner alone, without implicating the company and its responsible officers, was bad in law and an abuse of the process of law. The Supreme Court's rulings in similar cases were cited to support this conclusion. Conclusion: The proceedings in Case No. Comp. 35/2019 were found to be bad in law and were quashed. The court allowed CRR 2769 of 2019, quashing the complaint and proceedings against the petitioner. All connected applications were disposed of, and no order as to costs was made. The interim order, if any, was vacated, and a copy of the judgment was directed to be sent to the learned Trial Court for compliance.
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