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2024 (5) TMI 555 - HC - Companies LawMisappropriation of funds/assets/shares/stocks of the said company by illegally transferring them to the petitioner no. 4 - offence under Sections 185/447/452 of the Companies Act read with Section 120B of the IPC - requirement of taking cognizance of the offence y Director only - Time Limitation - HELD THAT - Recently, the Karnataka High Court, in its judgement dated 01st March, 2024 passed in SRI. ARUN BALLAKUR AND SMT. MADHAVI BALLAKUR VERSUS SRI. M. KRISHNA REDDY 2024 (3) TMI 1318 - KARNATAKA HIGH COURT , has quashed the proceedings for an offence under Section 447 of the Companies Act initiated on a private complaint by the shareholder therein, on the ground that the cognizance for the offence under Section 447 of the Companies Act can be taken only on a complaint filed by the Director, SFIO in terms of the Second Proviso of Section 212(6) of the Companies Act. The Order dated 05.01.2019 of the learned Trial Court as also the Impugned Order, in so far as it summons the petitioners for the offence under Section 447 of the Companies Act, cannot be sustained and are, accordingly, set aside. Time Limitation - HELD THAT - As the offence under Section 185 of the Companies Act is punishable with imprisonment for a term which may extend to six months or with fine and, therefore, in terms of Section 468 Cr.P.C., the period of limitation shall be one year - In the present case, as the complainant himself is a shareholder of the Complainant no. 2 company, and, in any case, has not pleaded that he did not know of the offence having been committed by the petitioners, the cognizance taken of the offence under Section 185 of the Companies Act which is stated to have been committed between the years 2002-2008, on a complaint filed in 2017, was barred by limitation and is, therefore, bad in law. As Section 452 of the Companies Act is a continuing offence , it continues to be committed as long as the property of the company is withheld by the accused officer of the company. A fresh period of limitation begins to run at every moment such property is in the wrongful possession of such a person - As far as cognizance taken by the learned Trial Court of the offence under Section 452 of the Companies Act is concerned, it cannot be faulted on the ground of being beyond the period of limitation. In the present case, the alleged handing over of the property of the Company by the petitioner no. 1 to the petitioner no. 4, as alleged in the paragraphs 13 and 21 of the complaint, constitutes an offence under Section 185 of the Companies Act. The non-return of the property, that is, loan and the advances, is alleged to constitute an offence under Section 452 of the Companies Act. Therefore, in terms of Section 220 of the Cr.P.C. both the offences can be tried together - it is to be noted that the punishment for the offence under Section 452 of the Companies Act is in fine alone. In terms of Section 468(2) of the Cr.P.C., therefore, the period of limitation for filing of the same would be six months. Therefore, the same shall have no effect on the period of limitation for the offence under Section 185 of the Companies Act. Merely because offence under Section 185 of the Companies Act can be tried alongwith the offence under Section 452 of the Companies Act, the period of limitation does not extend as far as the cognizance of an offence under Section 185 of the Companies Act is concerned. In the present case, however, neither is the offence under Section 120B of the IPC standalone and as a separate offence pleaded by the respondent no. 2 to have been committed by the petitioners, nor has the learned Trial Court taken cognizance of such offence as a standalone or separate offence - The respondent no. 2, cannot take any benefit of the same for seeking an extension of the period of limitation for the offence under Section 185 of the Companies Act. The Order dated 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Sections 185/447 of the Companies Act read with Section 120B of IPC as against the petitioners, cannot be sustained and is liable to be set aside - As far as the Order 05.01.2019 passed by the learned Trial Court, taking cognizance of the offence under Section 452 of the Companies Act read with Section 120B of the IPC is concerned, the same is upheld. The petition is allowed.
Issues Involved:
1. Cognizance of offence u/s 447 of the Companies Act. 2. Limitation period for taking cognizance of offence u/s 185 of the Companies Act. 3. Continuing nature of offence u/s 452 of the Companies Act. 4. Effect of pending complaint by M/s Glory Apartment Pvt. Ltd. Summary: 1. Cognizance of offence u/s 447 of the Companies Act: The court noted that u/s 212(6) of the Companies Act, cognizance of an offence u/s 447 can only be taken on a complaint made by the Director, Serious Fraud Investigation Office (SFIO) or an authorized officer of the Central Government. A private complaint by a shareholder is not maintainable. This was supported by precedents from the High Courts of Telangana, Madras, and Karnataka. Consequently, the Order dated 05.01.2019 summoning the petitioners for the offence u/s 447 of the Companies Act was set aside. 2. Limitation period for taking cognizance of offence u/s 185 of the Companies Act: The court observed that the offence u/s 185, punishable with imprisonment up to six months or fine, attracts a limitation period of one year u/s 468(2) of the Cr.P.C. Since the alleged offence occurred between 2002-2008 and the complaint was filed in 2017, it was barred by limitation. The court dismissed the argument that the offence under Section 120B of the IPC could extend the limitation period for the offence u/s 185 of the Companies Act. 3. Continuing nature of offence u/s 452 of the Companies Act: The court held that the offence u/s 452, involving wrongful withholding of company property, is a continuing offence. As long as the property is wrongfully withheld, a fresh period of limitation begins to run every day. Therefore, the cognizance of the offence u/s 452 was within the period of limitation and was upheld. 4. Effect of pending complaint by M/s Glory Apartment Pvt. Ltd.: The court found that the existence of a similar complaint under Section 630 of the Companies Act, 1956 by M/s Glory Apartment Pvt. Ltd. does not preclude the present complaint at this stage. This issue should be considered by the Trial Court during the trial. Final Findings: The court set aside the Order dated 05.01.2019 taking cognizance of the offence u/s 185/447 of the Companies Act read with Section 120B of IPC. However, the cognizance of the offence u/s 452 of the Companies Act read with Section 120B of IPC was upheld. The respondent no. 2 was granted liberty to move an application u/s 473 of the Cr.P.C. to seek an extension of the period of limitation for the offence u/s 185 of the Companies Act, which the Trial Court should consider in accordance with law. The petition was allowed with no order as to costs.
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