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TMI Blog2024 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 of the Ministry of Corporate Affairs, New Delhi. It is clear from the petition of complaint that neither the Company nor the persons, who were in-charge of the day affairs of the company, have been made parties in the case. Without the Company and the persons responsible for the day to day affairs of the Company, the prosecution of the petitioner alone, who acted on behalf of the company is bad in law and thus clearly an abuse of the process of law. The proceedings pending before the Learned, 2nd Special Court, Calcutta at West Bengal under Section 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013, is bad in law and thus liable to be set aside - revision allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 2013 is misconceived, without any basis and contrary to law. 8. It is submitted, that the ingredients of the offence as alleged in the Complaint Petition are not attracted at all. Further, the alleged violation of Section 233(1)(b) of the Act, 2013 in relation to the Scheme of Amalgamation of Fort Gloster Electric Limited (Transferor Company), the wholly owned subsidiary of the Company with the Company (Transferee Company) (hereinafter referred to as the Scheme) is without any substance or merit. The Scheme was approved by eighty shareholders of the Transferee Company holding one hundred per cent of the total number present and voting at the meeting of the shareholders of the Transferee Company held on 21st August, 2018, wherein the shareholders were also given the option of e-voting from 18th August, 2019 to 20th August, 2019. 9. It is further stated that a scheme of amalgamation of the wholly owned subsidiary namely, Fort Gloster Electric Limited with the holding company being the transferee company, namely, Jayshree Chemicals Limited was presented for approval before the Hon'ble Regional Director, Eastern Region, Ministry of Corporate Affairs, under the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferee company did not approve the scheme of amalgamation. The opposite party while construing and interpreting Section 233(1)(b) of the Companies Act, 2013 gave a restrictive interpretation to the said sub-section as if to contend that the approval of ninety percent of the members should have been ninety percent of the total members of the company and not ninety percent of the members present and voting on the date of the meeting. The intention of the legislature both contained in Section 230 and Section 233 of the Companies Act, 2013 has to be read harmoniously and not in a restricted manner as has been sought to be done by the opposite party which demonstrates that the opposite party has acted in a vindictive manner and also contrary to law. 13. The Complainant/opposite party herein has specified its case as follows in Para 10 of the petition of complaint:- "The aforesaid reply of the accused was examined by the office of Complainant and a report in this regard was forwarded to the Regional Director (Eastern Region), Ministry of Corporate Affairs, Government of India, Kolkata vide Letter No. ROC-WB/S-233/2019/182 dated 02.05.2019. In para-3 of the aforesaid report, the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso, it is not 90% of the members entitled to vote in the context of the total of the paid up share capital of the company, who are to approve the scheme but 90% of the members present at the annual general meeting. 18. The following rulings have been relied upon by the petitioner:- i) IDFC Limited vs The Regional Director, Southern Region, Chennai. ii) Andrew Yule & Company Ltd. & Anr. vs Hooghly Printing Company Ltd. iii) Apollo Hospitals Enterprise Limited (Transferee Company) sanctioned by Regional Director, Southern Region on 28th June, 2021. iv) Quess Corp Limited sanctioned by Regional Director, South East Region on 15th November, 2019. v) Sastasundar Venture Limited (Transferee Company) with Myjoy Tasty Food Private Limited and Myjoy Hospitality Private Limited sanctioned by Regional Director, Eastern Region on 9th January, 2018. vi) Health Care Global Enterprises Limited (Transferee Company) with HCG Pinnacle Oncology Private Limited sanctioned by Regional Director, South East Region on 30th January, 2018. vii) Narayana Hrudayalaya Limited (Transferee Company) with Newrise Healthcare Private Limited sanctioned by Regional Director, South East Region on 4th O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of this plea he relied on earlier decisions Regional Director of South and other jurisdictions. It was further argued that under Section 233 of the Companies Act, 2013 the Respondent has no power to reject the Scheme, it can only approach this Tribunal to get appropriate orders." 21. The further argument in Para 6 of the said judgment, that under Section 233 of the Companies Act, 2013, the respondent has no power to reject the scheme, it can only approach the tribunal to get appropriate orders also found support from the tribunal in the said case. 22. In Andrew Yule & Company Ltd. & Anr. (Supra), the tribunal clearly held:- "15. In the present case, we are in respectful agreement with a view of the larger bench of the Hon'ble Punjab & Haryana High Court in Swift Formulation Private Limited (supra). We also find merit in the contentions of Mr. Jishnu Chowdhury, Ld. Counsel for the petitioning companies that the literal and logical meaning of section 233(1)(d) can only be that the scheme should be approved by majority representing 9/10th in value of the creditors present in such meeting, and not 9/10th of the total value of debt." 23. This too supports the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merger files a declaration of solvency, in the prescribed form, with the Registrar or the place where the registered office of the company is situated; and (d) the scheme is approved by majority representing nine-tenths in value of the creditors or class of creditors of respective companies indicated in a meeting convened by the company by giving a notice of twenty-one days along with the scheme to its creditors for the purpose or otherwise approved in writing" iv) Section 233(1)(b) of the Act requires that the scheme is approved by the respective members or class of members at a general meeting holding at least 90% of the total number of shares. Section 233(1)(d) of the Act requires that the scheme is approved by majority representing nine-tenths in value of the creditors or class of creditors in a meeting convened by the company. v) Therefore, for the purpose of fast track approval of merger or implementation, the approval of the scheme is required from at least 90% of the total number of shares and also from a majority representing nine-tenth in value of the creditors or class of creditors. vi) Therefore, for the purpose of fast track approval of merger or implementatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in value of total creditors or class of creditors is required and not of ninety percent of member or nine-tenth creditors present and voting." 26. Section 233(1)(b) of the Companies Act, 2013 is reproduced for convenience:- "233(1) Notwithstanding the provisions of Section 230 and Section 232, a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed, subject to the following namely:- (a) ……………….. (b) The objections and suggestions received are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at least ninety per cent of the total numbers of shares" 27. The relevant part of Section 233(1)(b) of the Act is "holding at least ninety percent of the total numbers of shares". 28. Thus it is clear that the petitioners herein do not have the required percentage as per the circular dated 24.08.2017 of Ministry of Corporate Affairs, New Delhi vide its letter No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 33. In the present case, it is clear that till the circular by the Ministry of Corporate Affairs, New Delhi vide its letter No. 2/31/2013-CAA- CL-V-Pt-2 dated 24.08.2017, there was an ambiguity in respect of Section 233(1)(b) of the Act. 34. Annexure "H" at page 82 of the revisional application is Form no. CAA-12. Confirmation order of scheme of amalgamation between M/s Fort Gloster Electric Limited with M/s Jayshree Chemicals Private Ltd., is as follows:- "Pursuant to the provision of Section 233 of the Companies Act, 2013, the Scheme of compromise, arrangement or merger for transfer of M/s Fort Gloster Electric Limited (Transferor Company) with M/s Jayshree Chemicals Limited (Transferee Company) approved by their respective members and creditors as required under Section 233(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use or matter presented before it so as to decide whether there is any basis for initiating proceedings and determination of the cause or matter judicially". 10. Section 200 Cr. P.C. contemplates a Magistrate taking cognizance of an offence on complaint to examine the complaint and examine upon oath the complainant and the witnesses present, if any. Then normally three courses are available to the Magistrate. The Magistrate can either issue summons to the accused or order an inquiry under Section 202 Cr. P.C. or dismiss the complaint under Section 203 Cr. P.C. Upon consideration of the statement of complainant and the material adduced at that stage if the Magistrate is satisfied that there are sufficient grounds to proceed, he can proceed to issue process under Section 204 Cr. P.C. Section 202 Cr. P.C. contemplates 'postponement of issue of process'. It provides that the Magistrate on receipt of a complaint of an offence of which he is authorised to take cognizance may, if he thinks fit, postpones the issue of process for compelling the attendance of the person complained against, and either inquire into the case himself, or have an inquiry made by any Magistrate subordinate to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Court in the case of R.R. Chari vs. State of Uttar Pradesh, 1951 SCR 312, while considering what the phrase 'taking cognizance' mean, approved the decision of Calcutta High Court in Superintendent and Remembrancer of Legal Affairs, West Bengal vs. Abani Kumar Banerjee, AIR 1950 Cal. 437, wherein it was observed that: "…What is "taking cognizance" has not been defined in the Criminal Procedure Code and I have no desire now to attempt to define it. It seems to me clear, however, that before it can be said that any Magistrate has taken cognizance of any offence under S. 190(1)(a), Criminal P.C., he must not only have applied his mind to the contents of the petition, but he must have done so for the purpose of proceeding in a particular way as indicated in the subsequent provisions of this Chapter,- proceeding under S. 200, and thereafter sending it for enquiry and report under S. 202. When the Magistrate applies his mind not for the purpose of proceeding under the subsequent sections of this Chapter, but for taking action of some other kind, e.g., ordering investigation under Section 156(3), or issuing a search warrant for the purpose of the investigation, he cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement and need to balance the law enforcement power and protection of citizens from injustice and harassment must be maintained. Earlier in M/s. Hindustan Steel Ltd. v. State of Orrisa, 1969 (2) SCC 627, this Court threw light on the aspect of invocation of penalty provisions in a mechanical manner by authorities to observe: "8. Under the Act penalty may be imposed for failure to register as a dealer -- Section 9(1) read with Section 25(1)(a) of the Act. But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is the duty and responsibility of the public officer to proceed responsibly and ascertain the true and correct facts. Execution of law without appropriate acquaintance with legal provisions and comprehensive sense of their application may result in an innocent being prosecuted. 32. Equally, it is the court's duty not to issue summons in a mechanical and routine manner. If done so, the entire purpose of laying down a detailed procedure under Chapter XV of the 1973 Code gets frustrated. Under the proviso (a) to Section 200 of the 1973 Code, there may lie an exemption from recording presummoning evidence when a private complaint is filed by a public servant in discharge of his official duties; however, it is the duty of the Magistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking cognizance and summoning the accused is made out or not. This Court explained the reasoning behind this exemption in National Small Industries Corporation Limited v. State (NCT of Delhi) and Others, (2009) 1 SCC 407: "12. The object of Section 200 of the Code requiring the complainant and the witnesses to be examined, is to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. It is this report against which the present proceeding has been initiated. 48. In paragraph 5 of the petition of complaint the complainant has stated as follows:- "That the transferee company M/s Jayshree Chemicals Limited through its Company Secretary has filed the notice of approval of the scheme of merger in the prescribed Form CAA-11 dated 24.08.2018 with the Central Government as required under Section 233(2) of the Companies Act, 2013 read with Rule 25(4) of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016." 49. It is thus clear that the petitioner has been made an accused for acting in discharge of duties of the company. 50. The Supreme Court in Shiv Kumar Jatia vs. State of NCT of Delhi, AIR 2019 SC 4463, Criminal Appeal nos. 1263, 1264 and 1265-1267 of 2019, decided on 23 August, 2019, held:- "27. The liability of the Directors/the controlling authorities of company, in a corporate criminal liability is elaborately considered by this Court in the case of Sunil Bharti Mittal. In the aforesaid case, while considering the circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court has held that when the allegations made against the Managing Director are vague in nature, same can be the ground for quashing the proceedings under Section 482 of Cr. P.C. In the case on hand principally the allegations are made against the first accused-company which runs Hotel Hyatt Regency. At the same time, the Managing Director of such company who is accused no.2 is a party by making vague allegations that he was attending all the meetings of the company and various decisions were being taken under his signatures. Applying the ratio laid down in the aforesaid cases, it is clear that principally the allegations are made only against the company and other staff members who are incharge of day to day affairs of the company. In absence of specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned." 51. In Dayle De' Souza vs Government of India Through Deputy Chief Labour Commissioner (C) and Anr., in Criminal Appeal No. …. of 2021 (arising out of SLP (CRL.) No. 3913 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge is erroneous. 7. The first submission on behalf of the appellant is no longer res integra. A decision of a three-Judge Bench of this Court in Aneeta Hada v. Godfather Travels & Tours (P) Ltd. governs the area of dispute. The issue which fell for consideration was whether an authorised signatory of a company would be liable for prosecution under Section 138 of the Negotiable Instruments Act, 1881 without the company being arraigned as an accused. The three-Judge Bench held thus: (SCC p. 688, para 58) "58. Applying the doctrine of strict construction, we are of the considered opinion that commission of offence by the company is an express condition precedent to attract the vicarious liability of others. Thus, the words "as well as the company" appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial court, we find that the finding of the High Court to revisit the judgment will be unfair to the appellant-nominated person who has been facing trial for more than last 30 years. Therefore, the order of remand to the trial court to fill up the lacuna is not a fair option exercised by the High Court as the failure of the trial court to convict the Company renders the entire conviction of the nominated person as unsustainable." 27. In terms of the ratio above, a company being a juristic person cannot be imprisoned, but it can be subjected to a fine, which in itself is a punishment. Every punishment has adverse consequences, and therefore, prosecution of the company is mandatory. The exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well." 52. In Sunil Bharti Mittal Vs Central Bureau of Investigation, (2015) 4 SCC 609, decided on January 9, 2015, the Supreme Court held:- "43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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