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TMI Blog2019 (4) TMI 2109X X X X Extracts X X X X X X X X Extracts X X X X ..... of information available with him or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in compliance with the provisions of this Act, he can proceed with inquiry - Thus, it is very clear that while dealing with the affairs of a company, if any person abuse the position with intend to deceive, to gain undue advantage from, or to injure the interests of, company or its shareholders or its creditors or any other person, he deemed to have committed fraud. In the complaint, it is not only alleged that by his act of commission and omission the petitioners had caused loss to the 2nd respondent but also it is alleged that the bank has declared the company as NPA [Non Performing Asset]. It is alleged that the mismanagement has caused loss of several crores, therefore interest of the bank is also involved. If the allegations are true, the gravity of the offence is grave and fit to be investigated by the Serious Fraud Investigation Organisation which is empowered to investigate offence of this nature, as per Section 212 of the Companies Act - From the complaint, as well as the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly members to an extent of 25.67%. One Mr. Venkatachalam is holding 9.66% of shares and Mr. Sivaram is holding 14.67% of the shares. The said company was incorporated in the year 2011-2012. The administration of the company was left to the 1st petitioner/Mr. R. Doraisamy who is one of the Directors of the company, from the year 2014. Thereafter, Mr. C. Subramaniam, has indulged in maladministration of the company. Taking advantage of the fact that other Directors are busy involved in their personal business, the 1st petitioner in connivance with the 2nd petitioner/Mr. Ramaraj, Financial Officer, Mr. Dhanalakshmi/3rd petitioner and son-in-law petitioners 4 to 6 have indulged in forgery, criminal breach of trust and cheating. Only when State Bank of India, Commercial Branch, Coimbatore informed the complainant and others Directors about the non-payment of loan, they came to know about the offence committed by the petitioners. It is alleged in the complaint that the fabric stocks worth about Rs. 8,32,14,000/- hypothecated to the State Bank of India was removed by the petitioners between 2014 to November 2016, without the knowledge and permission of the bank and other Directors. Based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken for investigation. 4. In the petition to quash the said complaint, the petitioners have submitted that the complaint of the 2nd respondent do not disclose any cognizable offence. It has been filed with a view to wreak vengeance on the 1st petitioner and his family members. The allegations made in the complaint are false and baseless. The 1st petitioner and 2nd respondent were friends for long time and individually running several Companies. Later, they decided to jointly run their Companies and pursuant to that Carona group of companies run by the petitioners and Mehala group of companies run by the 2nd respondent, started operation jointly in the name and style of M/s. Mehala Carona Textile (P) Ltd. Later, misunderstanding cropped up between them and in the presence of well-wisher mediation took place and memorandum of understanding between them was arrived on 12.11.2014. The Mehala groups of companies was exclusively given to the administration of the 2nd respondent. M/s. Sunrise Group of companies were given to the exclusively administration of the 1st petitioner. The Management of the M/s. M.C. Spinners (P) Ltd., was taken over by the 1st petitioner as per the memorandu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through complaint before Magistrate would submit that after the dispute between 1st petitioner and the 2nd respondent arose, they entered into a compromise and executed memorandum of understanding dated 12.11.2014. However, the terms of the MOU was not honoured. The 1st petitioner himself wrote a letter to Board of Directors to M/s. Mehala Carona Textile Pvt. Ltd., on 19.01.2015 recording his stand about the Memorandum of understanding. In the said letter, he has specifically stated that memorandum of understanding dated 12.11.2014 is invalid. While so, it is incorrect to say that in the complaint, the 2nd respondent has suppressed the MOU. The complaint has provided material facts and evidence to prove that after the Management of M/s. M.C. Spinner (P) Ltd., took over by the 1st petitioner, the assets of the Company had diminished. Most of the machineries were removed and sold for pittance to the Companies held by the petitioners. The forgery in the RC book of the vehicles also prima faciely established from the information collected from the Regional Transport Authority. While so, the 1st respondent is fully competent to investigate the offence alleged in the complaint. The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation by other agencies apart from SFIO and sharing of informing. This would clearly indicate that, there is no legal impediment for the 1st respondent to investigate the complaint. If the petition is allowed, the perpetrator of the crime will go free. Merely because the special enactment also provides for investigation and prosecution, it does not take away the powers of the 1st respondent to investigate the offences of cheating, misrepresentation, misappropriation and conspiracy. 13. Before adverting to the legal submissions, few facts which are necessary to decide this application is stated below:- M/s. M.C. Spinners Pvt. Ltd., was registered at ROC in the year 2012. The shares of the company has been held by Mr. C. Subramaniam and his family 50%, Mr. Doraisamy/1st petitioner and his family 26.67%, Venkatachalam 9.66% and Mr. M. Sivaraman 14.67%. 14. In the complaint, it is contended that during the month of April-2014, Mr. Doraisamy took over the absolute administration of M/s. M.C. Spinners Pvt. Limited. He was submitting reports to the other Board of Directors with false information, which the other Board of Directors believed till they received notice from the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are broadly classified as M/s. Mehala group of Companies and M/s. Sunrise group of Companies. M/s. M.C. Spinners (P) Ltd. is one among them, which is classified under the M/s. Sunrise group of Companies. In all these sister concerns admittedly both the 1st petitioner and the 2nd respondent are shareholders either they and their family members are major shareholders or minor shareholders. 17. Admittedly, there is a dispute between them regarding the management which has culminated into MOU, later not honoured by both the parties. The 1st petitioner has made a specific declaration that it has become invalid. In the said circumstances, when any member of the company has any grievance or complaint about oppression or mismanagement, he should have resorted to an application to the tribunal as contemplated under Section 241 of the Companies Act-2013. In this case, Mr. C. Subramaniam, the complaint besides mismanagement had grievance against the co-director that he and his family members have connived together to misappropriate the assets of M/s. M.C. Spinners Pvt. Ltd. In such circumstances, Chapter XIV of the Companies Act-2013, provides for remedy. Under Section 206 of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, the term of imprisonment shall not be less than three years. Explanation.--For the purposes of this section-- (i) fraud in relation to affairs of a company or anybody corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss; (ii) wrongful gain means the gain by unlawful means of property to which the person gaining is not legally entitled; (iii) wrongful loss means the loss by unlawful means of property to which the person losing is legally entitled. 19. Thus, it is very clear that while dealing with the affairs of a company, if any person abuse the position with intend to deceive, to gain undue advantage from, or to injure the interests of, company or its shareholders or its creditors or any other person, he deemed to have committed fraud. 20. From the reading of the complaint, it is alleged that the petitioners herein have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not stop with one company namely M/s. M.C. Spinners Pvt. Ltd., but also all other sister concern, in which the 1st petitioner and 2nd respondent, their family members are involved. The forgery alleged in the transfer of vehicles also not confined to the petitioners and M/s. M.C. Spinners Pvt. Ltd. 22. Across the bar, the learned counsel appearing for the petitioners submit some documents and alleged that it is 2nd respondent who has committed forgery and transferred the vehicles in his name and in the name of other Company, without the consent of the owners namely M/s. M.C. Spinners Pvt. Ltd. 23. Under Chapter XXVIII of the Companies Act-2013 establishment of Special Court and the offence triable by Special Courts are prescribed under Sections 435 and 436 of the Companies Act. When the complaint of complex nature in the administration of the Company to be investigated, the Act gives a comprehensive procedure and powers as well as forum. A specialized investigating agency is also established empowered to investigate. 24. If the complainant really aggrieved and need redressal in the manner know to law, he should have resorted to the procedures, which has been explained abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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