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TMI Blog2022 (10) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany or a person authorized by the Central Government - Sub-Section (6) of Section 212 of the Act specifically deals with the offences covered under Section 447 of the Act and makes it clear that no Court shall take cognizance unless a complaint is made by the Director, Serious Fraud Investigation Office (SFIO) or the officer of the Central Government authorized by a general or special order in writing in this behalf by that Government. Thus, an offence under Section 447 of the Act is given special treatment in terms of Sub-Section (6) of Section 212 of the Act. It is only that procedure which is prescribed under Sub- Section (6) of Section 212 of the Act which would apply. It is held that a shareholder, minority or otherwise cannot initiate proceedings before the Magistrate by himself or herself for an alleged offence under Section 447 of the Act. Whether the offence under Section 447 of the Companies Act, 2013 is a cognizable offence or a non-cognizable offence? - HELD THAT:- Sub-Section (6) of Section 212 of the Act is clear that an offence under Section 447 of the Act is cognizable and the method of taking cognizance is also provided. Thus, it is held that an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this Court seeking for the following reliefs: a. Call for the entire records in C.C.No.561/2016 pending on the file of the learned Principal Civil Judge and JMFC, Mulabagal; b. Allow this petition and quash the entire proceedings in C.C.No.561/2016 on the file of the learned Principal Civil Judge and JMFC, Mulabagal. c. Issue any other order and grant such other and further reliefs as this Hon'ble Court deems fit in the facts and circumstances of the case, in the interest of justice. 2. The petitioner is the accused in P.C.R.No.54/2015 which had been filed by the respondent/complainant herein. The petitioner and the respondent are the directors of the company called MG 6 Wholesale Market (India) Pvt. Ltd. (hereinafter for brevity referred to as 'Company') 3. The petitioner is stated to be owning 55% of the share capital and the respondent is holding 45% of the share capital in the Company. There are various allegations that have been made as regards the petitioner having defrauded both the Company and the complainant and it is in that background that the aforesaid private complaint, was filed. 4. The factual aspects may not be relevant for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffence under this Act except the offences referred to in sub-section (6) of section 212 shall be deemed to be non-cognizable within the meaning of the said Code. (2) No court shall take cognizance of any offence under this Act which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, a shareholder of the company, or of a person authorised by the Central Government in that behalf: Provided that the court may take cognizance of offences relating to issue and transfer of securities and non-payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India: Provided further that nothing in this subsection shall apply to a prosecution by a company of any of its officers. (3) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), where the complainant under subsection (2) is the Registrar or a person authorised by the Central Government, the presence of such officer before the Court trying the offences shall not be necessary unless the court requires his personal attendance at the trial. (4) The provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been assigned by the Central Government to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government within such period as may be specified in the order. (4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to be investigated by an Investigating Officer who shall have the power of the inspector under section 217. (5) The company and its officers and employees, who are or have been in employment of the company shall be responsible to provide all information, explanation, documents and assistance to the Investigating Officer as he may require for conduct of the investigation. (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, 1[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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (12) On completion of the investigation, the Serious Fraud Investigation Office shall submit the investigation report to the Central Government. (13) Notwithstanding anything contained in this Act or in any other law for the time being in force, a copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court. (14) On receipt of the investigation report, the Central Government may, after examination of the report (and after taking such legal advice, as it may think fit), direct the Serious Fraud Investigation Office to initiate prosecution against the company and its officers or employees, who are or have been in employment of the company or any other person directly or indirectly connected with the affairs of the company. 5[(14A) Where the report under sub-section (11) or sub-section (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 appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, Sri. K.V.Sathish, learned counsel appearing for the respondent/complainant would submit that: 7.1. In terms of Sub-section 2 of Section 439 of the Act, a complaint can be filed by the Registrar, a shareholder of the Company or by a person authorised by a central government, in that behalf. The complainant in the present case being a shareholder holding 45% of the share is, therefore, qualified in terms of Sub-section 2 of Section 439 of the Act and as such, the complaint being validly initiated. The Magistrate has taken cognizance thereof, after appreciating all the facts. 7.2. The right to a shareholder being conferred under Sub-section 2 of Section 439 of the Act cannot be said to have been taken away by Sub-section 6 of Section 212 of the Act and therefore, the complaint is not required to be quashed as sought for by the petitioner. 7.3. The petitioner having already approached NCLT, there is a finding which has been rendered therein that the petitioner has committed fraud to the extent of Rs.1,42,84,389/- (One Crore Forty-Two Lakhs Eighty-Four Thousand Three Hundred and Eighty-Nine only). The said finding having been rendered, and fraud has been established. The co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Sub-Section (3) of Section 439 provides that a complaint could be filed by the Registrar or a Shareholder of the Company or a person authorized by the Central Government in that behalf. Thus, any offence being non-cognizable, a complaint could be filed by the Registrar, Shareholder of the Company or a person authorized by the Central Government. However, Sub-Section (6) of Section 212 of the Act specifically deals with the offences covered under Section 447 of the Act and makes it clear that no Court shall take cognizance unless a complaint is made by the Director, Serious Fraud Investigation Office (SFIO) or the officer of the Central Government authorized by a general or special order in writing in this behalf by that Government. Thus, an offence under Section 447 of the Act is given special treatment in terms of Sub-Section (6) of Section 212 of the Act. It is only that procedure which is prescribed under Sub- Section (6) of Section 212 of the Act which would apply. 12.4. Therefore, I answer Point No.1 by holding that a shareholder, minority or otherwise cannot initiate proceedings before the Magistrate by himself or herself for an alleged offence under Section 447 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission payable to a managing or other director, or the manager, of the company, order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an inspector or inspectors appointed by the Central Government and where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punisha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who can then follow the procedure provided under Section 212 of the Act and initiate criminal proceedings against the offenders for an offence under Section 447 of the Act. 15. Answer to Point No.4: Does the order passed by the learned Magistrate in the present matter suffer from legal infirmity requiring interference? 15.1. Having come to a conclusion that no proceedings could have been initiated by a Shareholder by himself under Section 447 of the Act and that the requirement under Sub- Section (6) of Section 212 of the Act was required to be complied with. The learned Magistrate without having gone through and appreciated the provisions of Sections 212, 213, 439 and 447 of the Act, the order of cognizance is contrary to the applicable law and therefore, suffers from legal infirmity requiring this Court s interference. 16. Answer to Point No.5: What order? 16.1. In view of the answers to the above questions, I pass the following: ORDER i. The Criminal Petition is allowed. ii. The proceedings in C.C.No.561/2016 pending on the file of the Principal Civil Judge and JMFC., Mulabagal and all orders passed therein are hereby quashed. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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