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2022 (7) TMI 206 - HC - Companies LawOppression of minority - the allegations were made against the Company that the Company had forged, fabricated and manipulated the documents, forms, Annual Reports of PARPL and uploaded in the ROC website it was also alleged that 63,000 shares of PARPL were issued illegally to render the respondent No.1 a minority shareholder and to usurp the management of PARPL - offences under Sections 447, 448 and 451 of the Companies Act, 2013, Sections 628 and 629-A of the Companies Act, 1956 and Sections 405, 415, 420, 425, 464, 468, 471 and 120-B IPC. HELD THAT - Under Chapter XXVIII of the Companies Act, 2013 establishment of Special Courts and the offences triable by Special Courts are prescribed under Sections 435 and 436 of the Companies Act, 2013. The act gives a comprehensive procedure as to who has to conduct the investigation and how the investigation has to be conducted and deal with the procedure, powers as well as form. A specialized Investigating Agency is established which is empowered to investigate the offences. The offences under Companies Act, 2013 are deemed to be cognizable, except the offences covered under Section 447 (punishment for fraud). The complainants under the Companies Act are restricted to include only Registrar of Companies, a shareholder/member of the company or any person authorized by the Central Government or any person authorized by the Securities and Exchange Board of India. The Special Court shall take cognizance only on the complaint of persons/authorities mentioned under Section 439 of the Companies Act, 2013. Since the punishment for the offence under Section 448 of the Companies Act, 2013 was also under Section 447 of the Act, it was covered by the bar of taking cognizance under Section 212(6) of the Act - Section 451 of the Companies Act, 2013 would reveal that it would apply for repeated defaults and subsequent convictions. Since the petitioner had not been convicted earlier, subsequent conviction under Section 451 of the Companies Act, 2013 would not apply - Thus, the petitioner could not be prosecuted for the offences under Sections 447, 448 and 451 of the Companies Act, 2013 due to bar of cognizance under Section 212(6) of the Companies Act, when a complaint was not given in writing by the Director, SFIO or any Officer of the Central Government authorized in that behalf by the said Government. However, considering the allegations made by the complainant-respondent No.1 about the annual reports of the company being uploaded in the Registrar of Companies website by fabricating the documents and the allegations that about 63,000 shares of PARPL were issued illegally to render the respondent No.1 a minority shareholder, to usurp the management of PARPL, it is considered that the Company is a necessary party to the proceedings and there is no merit in the contention of the learned counsel for the respondent No.1 in the said regard. The record also would disclose that both the petitioner in Crl.P. No.8025 of 2021 and the respondent No.1 (complainant) initiated civil proceedings against each other. The record also would disclose that the Annual Returns were filed by the Company from 2002-2014 and the said returns were also signed by the complainant showing the shareholding of the petitioner in PARPL company. The complainant did not choose to dispute the said Annual Returns and kept quiet for more than a decade. The filing of the complaint after twenty years alleging fabrication from the year 2002 onwards would only show that it was filed with a malafide intention to take revenge against the petitioner. It is considered fit to quash the proceedings against the petitioners in C.C. No.31 of 2021 on the file of VIII Additional Metropolitan Sessions Judge-cum-Special Judge for Economic Offences, City Criminal Courts at Nampally, Hyderabad - petition allowed.
Issues Involved
1. Quashing of proceedings in C.C. No. 31 of 2021. 2. Allegations of forgery, fabrication, and manipulation of documents. 3. Jurisdiction of the Economic Offences Court. 4. Applicability of Section 212(6) of the Companies Act, 2013. 5. Non-inclusion of the Company as a party. 6. Concurrent proceedings in different forums. 7. Abuse of process of law and malafide intentions. Detailed Analysis 1. Quashing of Proceedings in C.C. No. 31 of 2021 The petitioners sought to quash the proceedings in C.C. No. 31 of 2021 under Section 482 of the Code of Criminal Procedure. The court considered whether the allegations made in the complaint, even if taken at face value, constituted any offence or made out a case against the petitioners. 2. Allegations of Forgery, Fabrication, and Manipulation of Documents The respondent alleged that the petitioners had forged, fabricated, and manipulated documents, including Board Resolutions and Annual Reports, and uploaded these to the ROC website. The complaint included offences under Sections 447, 448, and 451 of the Companies Act, 2013, and various sections of the IPC. The court noted that the Economic Offences Court had not taken cognizance of the offences under Sections 628 and 629A of the Companies Act, 1956. 3. Jurisdiction of the Economic Offences Court The petitioners argued that the Economic Offences Court lacked jurisdiction to take cognizance of the complaint due to the absence of a written complaint by the Director, SFIO, or any officer of the Central Government as required under Section 212(6) of the Companies Act, 2013. The court agreed, stating that the cognizance of the offence under Section 447 of the Companies Act could not have been taken by the trial court on a private complaint, as it is a cognizable offence. 4. Applicability of Section 212(6) of the Companies Act, 2013 Section 212(6) provides that the Economic Offences Court can take cognizance of offences under Section 447 only upon a complaint in writing by the Director, SFIO, or an officer authorized by the Central Government. The court emphasized that this provision acts as a safeguard against frivolous complaints and ensures that prosecution for fraud can only be launched after due investigation. 5. Non-inclusion of the Company as a Party The petitioners contended that the Company (PARPL) was not arrayed as an accused, even though the allegations were primarily against the Company. The court held that the failure to make the Company a party was fatal to the complaint, as the prosecution for fraud under Section 447 must relate to the company in the first instance. 6. Concurrent Proceedings in Different Forums The petitioners argued that the dispute was already being dealt with by the National Company Law Tribunal (NCLT) in Company Petition No. 431/HDB/2020. The court noted that initiating parallel investigations on the same issue could give rise to concurrent findings in different forums. However, the court clarified that pendency of civil proceedings is not a bar to initiate criminal proceedings as long as the ingredients of the offence are made out. 7. Abuse of Process of Law and Malafide Intentions The court considered whether the complaint was an abuse of the process of law and filed with malafide intentions. The court observed that the complaint was filed after a significant delay and appeared to be motivated by a desire to take revenge against the petitioner. The court relied on precedents where it was held that criminal proceedings should not be used as an instrument of harassment or for seeking private vendetta. Conclusion The court concluded that the proceedings against the petitioners in C.C. No. 31 of 2021 were not maintainable due to the bar under Section 212(6) of the Companies Act, 2013, and the failure to include the Company as a party. The court quashed the proceedings and allowed the petitions.
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