2002 (7) TMI 565 - SC - Companies Law

Supreme Court upholds decision on Companies Act offenses, affirms jurisdiction over accused

AV Mohan Rao Versus M. Kishan Rao

The Supreme Court dismissed the appeal and upheld the High Court's decision not to quash the complaint and proceedings. The Court found that the ... Whether on the facts and circumstances emerging from the averments in the complaint petition and the materials filed with it a case for quashing the complaint filed under section 482 of the Code of Criminal Procedure, 1973 (Cr PC) is made out or not? Held that:- Appeal dismissed. The High Court was right in declining to quash the complaint petition and the proceedings initiated on its basis. Reading of the complaint petition and the materials produced by the complainant with it in the light of provisions in the aforementioned sections it cannot be said that the allegations made in the complaint taken in entirety do not make out, even prima facie, any of the offences alleged in the complaint petition. We refrain from discussing the merits of the case further since any observation in that regard may affect one party or the other. The allegations made are serious in nature and relate to the power company registered under the Act having its head office in this country. Whether the appellants were or were not citizens of India at the time of commission of the offences alleged and whether the offences alleged were or were not committed in this country, are questions to be considered on the basis of the evidence to be placed before the Court at the trial of the case. The questions raised are of involved nature, determination of which requires enquiry into facts. Such questions cannot be considered at the preliminary stage for the purpose of quashing the complaint and the proceeding initiated on its basis. Issues Involved:1. Whether a case for quashing the complaint filed under section 482 of the Code of Criminal Procedure, 1973 (CrPC) is made out.2. Whether the allegations in the complaint make out the offences under sections 60, 63, 68, and 68A read with section 621 of the Companies Act, 1956.3. Whether the jurisdiction of Indian courts extends to the accused who are claimed to be citizens of the U.S.A.4. Whether the High Court was correct in declining to quash the complaint and proceedings.Issue-wise Detailed Analysis:1. Quashing of Complaint under Section 482 CrPC:The appellants sought to quash the proceedings in C.C. No. 24 of 1999, arguing that the complaint did not make out any of the alleged offences and was thus bad in law. The High Court, however, observed that the power under section 482 should be exercised sparingly and only in rare cases. It noted that the allegations in the complaint and the materials filed prima facie made out a case for the offences alleged. The Supreme Court reiterated that the power of quashing a criminal complaint should not be exercised unless the allegations set out in the complaint do not constitute any offence in law. The Court cited precedents such as State of Bihar v. Murad Ali Khan and State of Haryana v. Bhajan Lal to emphasize the limited scope of section 482.2. Allegations Constituting Offences under Companies Act:The complaint alleged that the accused made false, deceptive, and misleading statements, suppressed relevant facts, and induced various persons to invest in shares of the power company, thereby committing fraud. The specific offences alleged were under sections 60, 63, 68, and 68A of the Companies Act. Section 60 pertains to the issuance of a prospectus, section 63 deals with misstatements in the prospectus, section 68 involves fraudulently inducing persons to invest money, and section 68A addresses personation for the acquisition of shares. The Court found that the allegations in the complaint, taken in entirety, prima facie made out the offences alleged, and thus, the complaint could not be quashed at the preliminary stage.3. Jurisdiction of Indian Courts:The appellants argued that they were citizens of the U.S.A. and that the alleged offences were committed outside India, thus questioning the jurisdiction of Indian courts. The High Court noted that the determination of whether the offences were committed outside India and whether the accused were citizens of the U.S.A. required an inquiry into facts, which could only be done at trial. The Supreme Court referred to sections 4 and 188 of the CrPC, which extend the jurisdiction of Indian courts to offences committed by Indian citizens outside India. The Court cited cases like Mobarik Ali Ahmed v. State of Bombay and Ajay Aggarwal v. Union of India to support this view.4. High Court's Decision to Decline Quashing:The High Court, after considering the allegations and the materials on record, declined to quash the complaint and the proceedings initiated on its basis. The Supreme Court upheld this decision, noting that the allegations were serious and related to a company registered under the Companies Act with its head office in India. The Court emphasized that the questions raised by the appellants required a detailed inquiry and could not be resolved at the preliminary stage. The Supreme Court concluded that the High Court was correct in its decision, and thus, the appeal was dismissed.Conclusion:The Supreme Court dismissed the appeal, affirming the High Court's decision to decline quashing the complaint and proceedings. The Court held that the allegations in the complaint, taken in entirety, prima facie made out the offences under sections 60, 63, 68, and 68A of the Companies Act. The Court also upheld the jurisdiction of Indian courts over the accused, emphasizing that the determination of their citizenship and the location of the offences required a trial. The power under section 482 CrPC to quash proceedings should be exercised sparingly and only in rare cases where the allegations do not constitute any offence in law.