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TMI Blog1998 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... id respondent had all along been present during the hearing of the proceeding in court and, thus, was aware of the rival contentions of the parties. At that juncture a question arose as to whether the court had the jurisdiction to try the appellants herein or some of them for alleged offences committed by them under the Eleventh Schedule to the Companies Act read with section 406 thereof. Learned counsel started their submissions on the question as to whether the company court had the jurisdiction to try the criminal offences itself or at all. By reason of the said judgment the learned judge while holding that he had such jurisdiction also appointed Mr. Dipak Kumar Deb as special officer in regard to five companies, viz., Akshay Nidhi Ltd., Ultra Holding Pvt. Ltd., Sree Credit Company Pvt. Ltd., Bhanu Traders Pvt. Ltd. and Free India Dry Accumulators Ltd. superseding the boards of directors of the said companies. Sri Deb was to function as sole person in charge. Certain other directions were also issued as against the appellants. In the appeals filed by the appellants against the said order dated February 6, 1997, a Division Bench by a judgment and order dated June 19, 1997, sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties submitted that keeping in view the fact that all the materials are on record and the parties had almost completed their submissions on the main application, this Bench may dispose of the main application filed by the respondents herein, namely, Bajrang Prasad Jalan finally. The said submissions of learned counsel for the parties had been recorded in the minutes dated April 23, 1998. We are, therefore, concerned with two matters namely, (1) the criminal aspect of the petition and (2) the civil aspect of the petition. We intend to deal with both the aspects separately as the points which would arise for consideration of this court would be different. As the civil aspect of the matter is an original proceeding we intend to dispose of the same by a separate judgment. The order is confined only to the criminal aspect of the matter. However, the facts of the matter in short will have to be noticed at the beginning in order to appreciate the contentions of both the parties. Bajrang Prasad Jalan and Mahabir Prasad Jalan were two brothers. In their respective groups they were shareholders and/or directors of various companies including one known as Akshay Nidhi Limited having it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Holdings Ltd. (Respondent No. 23 in company petition) 20,000 7.Aarkay Mercantile Ltd. 15,000 8.Swagat Properties Ltd. (Respondent No. 24) 15,000 9.Marut Jute Udyog Ltd. (Respondent No. 32) 15,000 10.Bhanu Traders Pvt. Ltd. (Respondent No. 4) 20,000 11.Nityanand Mercantile Ltd. (Respondent No. 22) 20,000 12.Others 20,000 2,00,000 The applicants-respondents in paragraphs 22 to 90 of their application have made various allegations of acts of omission and commission on the part of M. P. Jalan and his group. One of the allegations appears to be falsification of accounts. A learned counsel judge by an order dated February 6, 1997, appointed a learned member of the Bar as special officer in respect of the companies, viz., Akshay Nidhi Ltd., Ultra Holdings Pvt. Ltd., Sree Credit Company Pvt. Ltd., Bhanu Traders Private Limited and Free India Dry Accumulators Ltd. A date was also fixed for criminal trial of the evidence covered by Schedule XI to the Companies Act. Being aggrieved by and dissatisfied with the said order an appeal was preferred by M.P. Jalan which was registered as L.P. A. No. 1 of 1997 and a Division Bench by a judgment dated March 3, 1997, modified the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter if the judge feels that better or further proof is necessary to be given by means of oral evidence from the box and by means of explanation of written argument again from the box. The other and the simpler way of looking at the problem is this. Let us suppose Mr. Mukherjee did not mention the matter in the beginning but mentioned it in reply, i.e., even after Mr. Sen had sat down : can it be said, in the present state of the law that Mr. Mukherjee has called for a trial on evidence only in reply, thus his client should be shut out from going to the box ? Quite clearly the answer to this question will be in the negative. Once the idea of the trial on evidence arose, Mr. Mukherjee's clients supported the idea with full vigour. It cannot be that because Mr. Mukherjee did not mention the trial on evidence in the opening there cannot be a trial on evidence in this section 397/398 matter ever." The finding of the learned trial judge is clearly wrong. The parties had proceeded on the basis that the proceedings under section 397/398 of the Companies Act would be disposed of on affidavits and in that view of the matter, the question of starting the proceeding afresh upon conclusion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a)A list of the accused ; (b)For each of the accused, a charge, containing the sections of which breach is complained of, and the particulars of such breach and the references thereto already made in the pleadings before the court ; (c)A list of witnesses proposed to be called by the petitioners in sup port of their prosecution ; (d)A list of documents which are proposed to be relied on by the petitioners in the prosecution." Before we embark upon the merits of the matter it may be observed that a trial could not have been directed to be commenced unless a cognizable offence has been brought to the notice of the court and the court takes cognizance of an offence whereafter only it can summon the accused to stand trial and thereafter adopt a procedure thereafter meaning thereby whether the trial would be summary one or a warrant one or the same would be tried by a Court of Sessions. It is unfortunate that a trial was directed to commence without knowing who the accused are, what would be the charges against them and, therefore, it is all the more surprising that the applicant was directed to prepare a list of accused and further directed to prepare a charge for each of the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived at only when the hearing of the main case takes place either on affidavits or on evidence. A direction to hold a trial, in our considered opinion, cannot be passed at interlocutory stage. Section 2(11) of the Companies Act defined the court to mean : "(a)with respect to any matter relating to a company (other than any offence against this Act), the court having jurisdiction under this Act with respect to that matter relating to that company, as provided in section 10 ; (b)with respect to any offence against this Act the court of a magistrate of the First Class or as the case may be, a presidency magistrate, having jurisdiction to try such offence." We may put on record that in respect of other companies the respondents had filed similar applications on similar charges, i.e., Debonair Agency Ltd. and Sandip Investment Ltd. Although a great deal of argument has been advanced before us but it is stated that in the other company proceedings, it had been held that fraud had not been proved, but despite the same, the learned trial judge directed holding of trial. It is necessary for this court to consider the question as to whether the principle of estoppel by records would aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The entire approach, to our mind, is erroneous. The suggestion to hold a criminal trial appears to have come up for consideration at the instance of the learned judge, the parties did not say that a criminal trial on evidence should be held. Section 406 of the Companies Act merely said that the provision of sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI in relation to an application under sections 397 and 398 of the Companies Act. Schedule XI which, inter alia, modifies the provision of sections 539 to 544 provide as to what would be the penalty for falsification of book and what would be the necessary ingredients therefor. It may be that such an offence takes place in the course of the trial resulting in a procedure adopted under section 340 of the Code of Criminal Procedure but Schedule XI to the Companies Act creates separate offences although analogous provision exists in the Indian Penal Code. They make the persons liable for punishment if they are found guilty of commission of such offence irrespective of the fact as to whether such falsified books had been produced in a court or not. If the books had been produced in the court and an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 194(1) of the Code of Criminal Procedure, 1898. (ii)or if proceedings are started on an application by the Advocate General under section 194(2) of the Code of Criminal Procedure, 1898. (iii)or if any case is transferred to the High Court under section 526 of the Code of Criminal Procedure, 1898. The same view has been taken in [1949] 1 Cal 24 ; K.Venkata Rao v. State by the Registrar of Companies, Mysore, AIR 1965 Mysore 274 ; [1966] 36 Comp Cas 562 and [1970] All. W.R. 160. Sections 194(1) and 194(2) have been deleted under the Criminal Procedure Code, 1973. This court had the jurisdiction to try a sessions case but even such a jurisdiction has been curtailed by reason of section 8 of the City Sessions Court Act, 1953. Even the said provision now has been deleted in 1969 by West Bengal Act No. 33 of 1969 and thus, this court has no original criminal jurisdiction to try the offence except those which had been initiated prior to the coming into force of the said amendment Act. It also appears to us to be against the basic principle of criminal jurisprudence that a civil and criminal trial should be held by the same court simultaneously. There are instances where civil proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt was given powers to grant compensation which is a civil relief but where the criminal offences under sections 539 to 544 of Schedule XI were created, Parliament in its wisdom did not use the said word. Thus, evidently, a distinction has to be made between civil jurisdiction and criminal jurisdiction in Schedule XI itself and for that purpose, the court is required to take recourse to the purposive approach while interpreting the provision. Let us now consider some of the decisions cited at the Bar. In M.V. Elisabeth v. Harwan Investment and Trading Pvt. Ltd., AIR 1999 SC 1014, the apex court was dealing with the Colonial Courts of Admiralty (India) Act. It held that an action in admiralty would be an action in rem. This decision has no application in the facts of the present matter. In Devarapalli Lakshminarayana Reddy v. V. Narayana Reddy, AIR 1976 SC 1672, the court was concerned with its power to send a complaint to the police for investigation under section 156(3) of the Criminal Procedure Code. The court, however, held (p. 1677) : "This raises the incidental question : what is meant by 'taking cognizance of an offence' by the magistrate within the contemplation of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Criminal Procedure Code. It would not have jurisdiction to try the accused merely on an application made under section 85 of the Companies Act." In Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mills Co. Ltd., AIR 1965 Guj 96, the court clearly held (p. 103) : "These are the only two cases in which on an application under section 397 or 398, the court is empowered to give relief in respect of past and concluded transactions which are no longer continuing wrongs and they are really in the nature of exceptions to the general principle manifest from the language of sections 397 and 398 that the power of the court under both the sections is confined only to making an order for the purpose of putting an end to oppressive or prejudicial conduct and the court cannot make an order setting aside or interfering with past and concluded transactions which are no longer continuing wrongs or giving compensation to the company or the aggrieved shareholders in respect of such transactions." In Hanuman Prosad Verma v. Stock and Finance Ltd. [1985] 58 Comp Cas 338 (Cal), the court was concerned with absolutely a different situation. It lays down that an application under section 4 ..... 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