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TMI Blog2022 (7) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined to dispose of both the petitions by this Common Order. 2. The case of the petitioners in brief was that, the petitioner in Criminal Petition No.8025 of 2021 was the estranged wife of respondent No.1 and daughter of respondent No.2. The respondent No.1, through his General Power of Attorney Holder, lodged a private complaint against her and the respondent No.2 before the VIII Additional Metropolitan Sessions Judge-cum-Special Judge for Economic Offences, City Criminal Courts at Nampally, Hyderabad, for the offences under Sections 447, 448 and 451 of the Companies Act 2013, and Sections 628 and 629A of the Companies Act 1956 and Sections 405, 415, 420, 425, 464, 468, 471 and 120(B) of the Indian Penal Code. 2.1 As per the complaint, the complainant i.e. respondent No.1 and his brother late Mr. Jakka Venkatram Reddy incorporated a Company under the name and style of M/s Peregrine Agro Private Ltd., on 17.01.1997 under the provisions of the Companies Act. At the time of incorporation, the Company had an authorized share capital of Rs.10,00,000/- divided into 1,00,000 shares of Rs.10/- each. The complainant and his brother late Mr. Jakka Venkatram Reddy were promoters/directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplainant and accused No.1 got married on 25.06.2011. Accused No.1 was appointed as Director of the Company on 30.09.2011. The complainant s brother expired on 13.11.2013 due to cancer. The marriage between the complainant and accused No.1 never worked out and totally broke down irreparably. Since 2014, the complainant and accused No.1 were living separately. The complainant on observing that original title deeds of his properties at Bangalore were missing, filed a police complaint before the Police Station Jubilee Hills, Hyderabad, on 03.01.2015 and got a public notice published in the Newspapers dated 05.01.2015. The accused No.1, the brother of accused No.1 Mr. Nekkanti Madhukar and three others made an illegal attempt to trespass into the property of the complainant at Bangalore on 01.04.2015. As such, the complainant filed a complaint vide Crime No.121 of 2015 for criminal trespass on 01.04.2015. The complainant filed a civil suit for injunction vide O.S. No.499 of 2015 before the III Additional Civil Judge, Bangalore Rural, against accused No.1, her brother and three others. Accused No.1 in her written statement claimed that the original documents of title pertaining to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2017 and 03.03.2018. He was not in India on all the said dates. However, in the Annual Returns, it was shown that he had attended the aforesaid Board Meetings, which were ex facie false. The said documents and returns were only signed by accused No.1. The complainant was not even sent a notice with regard to the said meetings. Accused Nos. 1 and 2 falsified records and played fraud not only with the complainant but also with the Registrar of the Companies. They were involved in various irregularities and violated statutory provisions and committed the offences of cheating, forgery, criminal breach of trust, criminal misappropriation, fraud using forged documents as genuine etc. The entire exercise was undertaken by accused Nos. 1 and 2 to usurp the property. 2.6 The petitioner in Criminal Petition No.8025 of 2021 filed a complaint which was registered as Crime No.488 of 2020 in Police Station, Jubilee Hills, against the respondent No.1 for the offences under Sections 498-A and 506 IPC, SectionSs4 and 6 of Dowry Prohibition Act 1961, and Section 30 of Arms Act alleging that the respondent No.1 had threatened her with a gun. She further contended that the complaint against her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation on the same issue, gave rise to concurrent proceedings in different forums. 3.4 He further contended that the allegations made out in the complaint even if taken on their face value, would not prima facie constitute any offence or make out a case against the petitioners and prayed to quash the proceedings 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. 4. The respondent No.1 filed counter affidavit contending that the petitioner had concealed the fact that the cognizance of the complaint was taken as per the orders of this Court in Criminal Petition No.222 of 2021 though it was well within his knowledge as the copy of the order was served on the advocate on record on 22.10.2021, which was on record. The doctrine of comity or amity of Courts would demand that Courts would take a consistent and uniform approach towards administration of justice by taking adequate care to ensure elimination of conflicting orders. He contended that as per Section 439(2) of the Companies Act 2013, the complaint could be made by the Registrar, a shareholder (or a member) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ather as an Additional Director on 09.10.2014 and thereafter as a Director on 30.09.2015. The entire conspiracy was engineered with the sole purpose of ousting the respondent No.1 from any involvement in the affairs of the Company. 4.2 The respondent No.1 further contended that the petitioner illegally and dishonestly misused the blank signed papers obtained by her from him and his late brother to show that she had bought 63,000 shares of the Company in the year 2000 in an alleged Board Meeting on 01.03.2000. The petitioner got created an agreement of sale dated 14.08.2004 as executed between M/s. Peregrine Aids Remedies Private Ltd., and M/s. Tanushree Enterprises Private Ltd., (the petitioner and her former husband Mr. Srinivas Paruchuri were Directors of the said Company) pertaining to purchase of property admeasuring Ac.186.46 cents of dry land owned by M/s Peregrine Agro Private Ltd., for a sum of Rs.3,74,00,000/-. Indeed if the petitioner had become 99% shareholder in M/s Peregrine Agro Private Ltd., on 01.03.2000, there was no reason or occasion to purchase the same land in which she was Director, which would expose falsity of her claim. The said transaction was subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where the fraud in question involves public interest, the term of imprisonment shall not be less than three years. Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent. of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to fifty lakh rupees or with both. Section 448 of the Companies Act, 2013 is punishment for false statement. It reads as follows: 448. Punishment for false statement:- Save as otherwise provided in this Act, if in any return, report, certificate, financial statement , prospectus , statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement,- (a) which is false in any material particulars, knowing it to be false; or (b) which omits any material fact, knowing it to be material, he shall be liable under section 447. Likewise Section 451 of the Companies Act, 2013 deals with punishment in case of repeated defaul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government. Under Section 212 (6) of the Companies Act, 2013, the Economic Offences Court could take cognizance of the offences under Section 447 of the Companies Act, 2013 only by a complaint filed in writing by the Director, SFIO or to any of the Officer of the Central Government authorized in writing in that behalf by that Government. The Economic Offences Court took cognizance of the complaint even though it was not made by the categories of persons prescribed under Section 212 (6) of the Companies Act, 2013 hence, the same was not maintainable. 11. The contention of the learned counsel for the respondent No.1 was that Section 212 of the Companies Act, 2013 was applicable only to the investigation into the affairs of the company by SFIO and the assignment of the same by the Central Government. Under Section 439 of the Companies Act, 2013, the Court could take cognizance of any offence including Section 447 so long as the SFIO had not been assigned the investigation by the Central Government under Section 212 of the Companies Act, 2013. 12. In view of the rival contentions of the learned counsel for both the parties, it is considered necessary to extract the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation. (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, offence covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. (7) The limitation on granting of bail specified in subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected with the affairs of the company. (14A) Where the report under sub-section (11) or subsection (12) states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability. (15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973. (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 shall contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted in respect of any of the matters in Chapter XX or in any other provision of this Act relating to winding up of companies. Explanation .-The liquidator of a company shall not be deemed to be an officer of the company within the meaning of sub-section (2). 15. 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kills in forensic auditing, corporate affairs and capital market would conduct investigation. If the complainant is aggrieved, he should have resorted to the procedure as contemplated under the Act. The Registrar of Companies is a competent person to call for the records, conduct an enquiry and to arrive at an opinion. If there is any material, he would submit a report to the Government for investigation by SFIO. If SFIO is able to collect material sufficient to prosecute then it would file charge sheet after taking necessary sanctions from the Central Government. If the contention of the complainant that any shareholder can file a complaint for fraud is accepted, it would open flood gates for any person commencing criminal proceedings merely by filing a complaint. There were several companies with millions of shareholders. The condition prescribed under Section 212(6) of the Act is a safeguard against frivolous criminal complaints. As such, I do not find any merit in the contention of the learned counsel for the respondent No.1 that a private complaint for fraud is maintainable before the Special Court. 17. The learned counsel for the petitioner contended that in similar circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been brought to the notice of the Court. 21. 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. 22. 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. 23. 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. 24. The learned counsel for the petitioner contended that the Economic Offences Court would not have jurisdiction to take cognizance of the complaint if the offences under the Companies Act were not made out and relied upon Section 436(2) of the Companies Act. Section 436(2) of the Companies Act, 2013 reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened on certain statutes. 28. In N. Gopinath s case (5 supra), the High Court of A.P. by extracting the ratio of the judgment in Sharat Kumar Sanghi s case held that: As per the ratio decided by the Hon ble Apex Court reported in Sharad Kumar Sanghi vs Sangita Rane [2015 (12) SCC 781] it is clear that once a transaction is made with the company, the company being a legal entity, unless and until the company is made as co-accused, the complaint is not maintainable. 29. The contention of the learned counsel for the respondent No.1 was that the accused were arrayed in their individual capacity and not in their representative capacity. Only in cases wherein individuals were arrayed in the representative capacity, the company was made as an accused and during the course of enquiry or trial, if it appears from the evidence that the company had committed offences, the Special Court had power under Section 319 Cr.P.C. to proceed against it. 30. However, considering the allegations made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and members, calls action by members or depositors, rectification of Register of Members, confirmation of reduction of share capital by the company and calling of Annual General Meeting or other meeting of the members in case of default in holding General Meeting comes under the purview of the National Company Law Tribunal. Pendency of civil proceedings is no bar to initiate criminal proceedings as long as the ingredients of the offences were made out and the conditions therein were also satisfied. 33. The learned counsel for the petitioner contended that the allegations in the present complaint would reveal that it was civil dispute being cloaked as a criminal offence only to abuse the process of Court and relied upon the judgments of the Hon ble Apex Court in R.K. Vijayasarathy v. Sudha Seetharam 2019 (16) SCC 739 and Indian Oil Corporation v. NEPC India Ltd. 2006 (6) SCC 736. 34. In R.K. Vijayasarathy s case (6 supra) it was held that: The jurisdiction under Section 482 of the Code of Criminal Procedure has to be exercised with care. In the exercise of its jurisdiction, a High Court can examine whether a matter which is essentially of a civil nature has been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss or ulterior motives on the part of the complainant. Be that as it may. 36. The learned counsel for the respondent No.1, on the other hand, relied upon the judgment of the Hon ble Apex Court in Kamal Shivaji Pokarnekar v. The State of Maharashtra and others MANU/SC/0180/2019, wherein it was held that: The correctness or otherwise of the said allegations has to be decided only in the Trial. At the initial stage of issuance of process it is not open to the Courts to stifle the proceedings by entering into the merits of the contentions made on behalf of the accused. Criminal complaints cannot be quashed only on the ground that the allegations made therein appear to be of a civil nature. If the ingredients of the offence alleged against the accused are prima facie made out in the complaint, the criminal proceeding shall not be interdicted. 37. Learned counsel for the petitioner also contended that there was no application of judicial mind by the Economic Offences Court while taking cognizance of the offences under Section 447 of the Companies Act, 2013 despite the bar under Section 212 (6) of the Act. The cognizance order did not provide any reasons for taking cog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. 39. He further relied upon the judgment of the Hon ble Apex Court in Inder Mohan Goswami v. State of Uttaranchal 2007 (12) SCC 1, wherein it was held that: While exercising the said power court must ensure that criminal prosecution is not used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to pressurize the accused. 40. The Hon ble Apex Court in State of Haryana and Ors. v. Ch. Bhajan Lal and ors. 1992 AIR 604 had enunciated the principles for use of the extraordinary power under Article 226 of the Constitution of India or the inherent powers under Section 482 Cr.P.C. and gave a list of myriad kinds of cases wherein such power should be exercised: (1) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused; (2) where the allegations in the First Information Report and other materials, if any, accompanying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. As per point No.(7) in paragraph 102 of the Bhajan Lal s case also, it was stated that where a criminal proceeding was manifestly attended with malafides or where the proceedings were maliciously instituted with an ulterior motive for wrecking vengeance on the accused and with a view to spite him due to private and personal grudge, it can be quashed, it is considered fit to allow the petitions on the said ground also. 43. Another contention of the learned Counsel for the respondent No.1 was that the Economic Offences Court had taken cognizance as per the direction of this Court in Criminal petition No. 222 of 2021 and the said fact was suppressed by the learned counsel for the petitioners. A perusal of the order of this Court in Criminal Petition No.222 of 2021 would disclose that it c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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