2019 (1) TMI 1255 - HC - Companies Law

High Court restores ACMM's summoning order, directs additional summoning for offences under Sections 408/447 IPC

The High Court set aside the revisional court's order and restored the ACMM's summoning order, directing the additional summoning of the respondent for ... Validity of summoning order - Scope of revisional jurisdiction and limits on factual reappraisal - Penalty for wrongful withholding of company property and scope of 'officer' under Section 630 of the Companies Act - Criminal breach of trust and criminal trespass under the Indian Penal Code in relation to a director's continued possession of company property - Use of Registrar of Companies' communication as conclusive evidence at revisional stageScope of revisional jurisdiction and limits on factual reappraisal - Use of Registrar of Companies' communication as conclusive evidence at revisional stage - The revisional court erred in relying on the ROC communication and making tentative factual findings to set aside the summoning order. - HELD THAT: - The revisional court treated a notice dated 04.08.2015 issued by the Registrar of Companies (seeking explanation) as a public document that went to the root of the controversy and, on that basis, concluded that the company lacked the minimum number of directors and that the board resolution authorising the complaint was invalid. The High Court found this approach impermissible in revisional scrutiny: a requisition for explanation by ROC is not unimpeachable evidence constituting the last word on whether a resignation was effective or whether the company had the requisite directors when the complaint was filed. Questions of fact such as the effectiveness of a director's resignation require proper inquiry or trial; revisional jurisdiction cannot be used to draw tentative impressions from such documents and convert them into definitive factual findings. The revisional court's reliance on such material and its tentative conclusions thereby amounted to an overreach, rendering the impugned order wholly erroneous. [Paras 14, 15]Impugned revisional order setting aside the summoning order is erroneous and is set aside.Penalty for wrongful withholding of company property and scope of 'officer' under Section 630 of the Companies Act - Criminal breach of trust and criminal trespass under the Indian Penal Code in relation to a director's continued possession of company property - Validity of summoning order - The ACMM's summoning order insofar as it proceeded under Section 630 was sustainable; additionally, the complaint should have been summoned for offences under Sections 408 and 447 IPC. - HELD THAT: - The Court held that a director falls within the definition of 'officer' and therefore can be prosecuted under the penal provision for wrongful withholding of company property; the revisional court's observation that an employer-employee relationship was necessary to attract Section 630 was incorrect. The record prima facie established that the premises and moveable property belonged to the complainant company and that the erstwhile director had continued dominion over them after resignation, making his continued possession unlawful and prima facie attracting criminal liability. There is no bar on invoking penal provisions of the IPC in addition to Section 630 of the Companies Act. Further, the ACMM's order declining to summon for criminal breach of trust and criminal trespass did not set out adequate reasons and was vitiated. Consequently, the summoning order is restored with modification to include summons on accusations under Sections 408 and 447 IPC. [Paras 17, 18, 19, 20, 21]The ACMM's summoning order is restored and modified to additionally summon the respondent for offences punishable under Sections 408 and 447 IPC.Final Conclusion: The revisional court's order dated 02.04.2016 is vacated; the ACMM's summoning order dated 15.09.2015 stands restored with modification to summon the respondent also for offences under Sections 408 and 447 IPC, and the matter is remitted to the ACMM for further proceedings on the specified date. Issues Involved:1. Validity of the Board Resolution authorizing the complaint.2. Competency of the complainant company under Section 252 of the Companies Act, 1956.3. Employer-employee relationship under Section 630 of the Companies Act, 1956.4. Summoning order for offences under Sections 408/447 IPC.Detailed Analysis:1. Validity of the Board Resolution Authorizing the Complaint:The revisional court questioned the validity of the Board Resolution dated 02.04.2012, which authorized the first petitioner to file the complaint on behalf of the complainant company. The court concluded that the resolution 'appeared' to be 'invalid and non est' based on a document suggesting that one of the directors had resigned in 2003, leaving the company with only two directors. This, according to the revisional court, violated Section 252 of the Companies Act, 1956, which requires a minimum of three directors for a company to be functional. However, the High Court found this approach erroneous, stating that whether the resignation was effective required proper inquiry or trial, and the mere issuance of a notice seeking explanation could not be treated as the final word on the matter.2. Competency of the Complainant Company Under Section 252 of the Companies Act, 1956:The revisional court relied on a letter dated 04.08.2015 from the Assistant Registrar of Companies, which indicated that the complainant company did not comply with Section 252 due to the resignation of a director in 2003. The High Court criticized this reliance, noting that the letter merely solicited an explanation and did not constitute definitive evidence. The court emphasized that questions of fact should not be addressed in revisional jurisdiction unless supported by unimpeachable evidence of sterling quality.3. Employer-Employee Relationship Under Section 630 of the Companies Act, 1956:The revisional court observed that the relationship between the complainants and the first respondent did not 'appear to be of such nature' to attract the penal clause in Section 630. The High Court clarified that Section 630 is not restricted to wrongful withholding of company property by its 'employee' but also includes 'officers' of the company, as defined in Section 2(30) of the Companies Act, 1956. The court concluded that the first accused, being a director, would be covered under the description 'officer' and is accountable to return the company's property.4. Summoning Order for Offences Under Sections 408/447 IPC:The High Court found that the ACMM's order dated 15.09.2015, which restricted the initiation of criminal action to the offence under Section 630 of the Companies Act, 1956, was deficient. The court noted that there was sufficient material presented in the pre-summoning inquiry to justify summoning for offences of criminal breach of trust (Section 408 IPC) and criminal trespass (Section 447 IPC). The High Court held that there is no legal inhibition preventing the company from invoking penal provisions under the Indian Penal Code in addition to the Companies Act.Conclusion:The High Court set aside the revisional court's order dated 02.04.2016 and restored the ACMM's summoning order with modifications. The court directed that the respondent Kamlesh Kumar Goel be additionally summoned for offences under Sections 408/447 IPC. The complaint case was scheduled to be taken up by the ACMM on 18.02.2019 for further proceedings in accordance with the law.