2019 (7) TMI 1133 - HC - Companies Law

Magistrate's Order Quashed Due to Statutory Process; Defamation Not Found

Ratan N. Tata, Ajay Gopikishan Piramal, Amit Ranbir Chandra, Ishaat Hussain, Nitin Nohria, Ranendra Sen, Vijay Singh, Venu Srinivasan, Ralf Speth, N. Chandrasekaran, F.N. Subedar Versus State of Maharashtra and Nusli Neville Wadia

The court quashed the Magistrate's order issuing process against the petitioners, finding that the statements in the Special Notices were part of a ... Removal of Director - Offence of defamation - damage of reputation - offences punishable under Section 500 read with 34 of the Indian Penal Code - HELD THAT:- There is no prima facie case of defamation in the present case as there was no intent on the part of the petitioners to cause harm to the reputation of the respondent as contemplated by Section 499 of the IPC nor can we discern any actual harm caused to his reputation, since the element of mens rea being absent and since the publication was only limited to the Board of Directors of the holding Company and the respective shareholders of these Companies, it could not be said that it was circulated widely over a section of general public. Publication of the news about a resolution being passed by a well acclaimed business house happened to be a business news for the media and both the petitioner no.1 and respondent no.2 being well­known business personalities, they drew the attention of the media and the allegations/imputations and the story of removal of the respondent no.2, no wonder, happened to be a hot topic for media. The allegations of the respondent no.2 in respect of disparaging remarks/comments being widely circulated is also not correct since it was only circulated to the shareholders and they had a right to know the background of the resolution on which they were supposed to vote. The Magistrate before issuing the process, has failed to take into consideration the conspectus of the matter and though it is the duty cast upon him to be satisfied before issuance of a process, he had concluded without any material being placed before him that the statement is defamatory. The object of investigation under Section 202 Cr.P.C. is “for the purpose of deciding whether or not there is sufficient ground for proceeding”. The enquiry under Section 202 Cr.P.C. is to ascertain the fact whether the complaint has any valid foundation calling for issuance of process to the person complained against or whether it is a baseless one on which no action need be taken. The law imposes a serious responsibility on the Magistrate to decide if there is sufficient ground for proceeding against the accused - Under the amended sub­section (1) to Section 202 Cr.P.C., it is obligatory upon the Magistrate that before summoning the accused residing beyond its jurisdiction, he shall enquire into the case himself or direct the investigation to be made by a police officer or by such other person as he thinks fit for finding out whether or not there is sufficient ground for proceeding against the accused. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. The application of mind has to be indicated by disclosure of mind on the satisfaction. The impugned order passed by the Magistrate looked at from this angle also suffers from non-­application of mind but we would not deliberate on the issue further since we have already formed an opinion that the Magistrate has failed to take into consideration the very genesis of exercise of his power about being satisfied that the allegations in the complaint constitute an offence of defamation and there is no indication in the impugned order demonstrating his satisfaction based on the material placed before him. The order passed by the Magistrate is without application of mind and cannot be sustained - petition allowed. Issues Involved:1. Defamation Allegations: Whether the statements in the Special Notices issued by Tata Sons Ltd. were defamatory towards the respondent.2. Jurisdiction and Procedure: Whether the Magistrate followed the correct procedure and had jurisdiction to issue the process.3. Statutory Power and Good Faith: Whether the issuance of the Special Notices was a statutory act done in good faith under the Companies Act.4. Role of Mens Rea: Whether there was an intention to harm (mens rea) in issuing the Special Notices.Detailed Analysis:1. Defamation Allegations:The core issue revolves around whether the statements in the Special Notices issued by Tata Sons Ltd. were defamatory towards the respondent. The Special Notices, dated 10.11.2016, contained statements about the respondent acting against the interests of Tata Chemicals and its principal shareholder by galvanizing independent directors and mobilizing opinion, which allegedly put the company in jeopardy. The respondent claimed these statements were baseless, false, defamatory, and libelous, intended to harm his reputation.The court examined the statutory framework under Section 169 of the Companies Act, which allows a company to remove a director through an ordinary resolution after giving reasonable opportunity to be heard. The Special Notices were part of the statutory process for the removal of a director and included a brief background to assist the board in deliberating the request for the respondent's removal. The court found that the statements were part of a legal process and not intended to defame but to inform shareholders, thus not constituting 'per se defamatory' content.2. Jurisdiction and Procedure:The petitioners argued that the Magistrate failed to conduct an inquiry or investigation under Section 202 of the Cr.P.C., which is mandatory when the accused resides beyond the jurisdiction of the Magistrate. The court noted that the Magistrate issued the process without conducting the necessary inquiry, reflecting non-application of mind. The court emphasized that the issuance of process is a serious matter affecting one's dignity and reputation, requiring careful judicial determination. The Magistrate's failure to follow the procedural requirements under Section 202 rendered the issuance of process improper.3. Statutory Power and Good Faith:The petitioners argued that the Special Notices were issued in exercise of statutory powers under the Companies Act and were necessary for the removal of the respondent as a director. The court agreed, noting that the Special Notices were part of the statutory process and contained material facts to enable shareholders to make informed decisions. The court found that the petitioners acted within the legal framework and in good faith, without any intention to harm the respondent's reputation.4. Role of Mens Rea:The court examined whether there was any intention (mens rea) to harm the respondent's reputation. The court concluded that the petitioners' actions were directed towards the removal of the respondent as a director and were not intended to defame him. The statutory process under Section 169 of the Companies Act required the inclusion of material facts, and the petitioners' compliance with this requirement did not indicate any malice or intent to harm. The absence of mens rea meant that the offence of defamation under Section 499 of the IPC was not made out.Conclusion:The court quashed the Magistrate's order issuing process against the petitioners, finding that the statements in the Special Notices were part of a statutory process and not defamatory. The Magistrate's failure to conduct an inquiry under Section 202 of the Cr.P.C. and the absence of mens rea further supported the decision to set aside the impugned order. The writ petition was allowed, and the order was quashed with no costs.