2022 (8) TMI 884 - HC - Companies Law

Petitioner's Summoning under Companies Act Section 630 Quashed as Abuse of Legal Process

The court held that the summoning of the petitioner under Section 630 of the Companies Act was erroneous. Due to complex civil disputes and unclear ... Summon Order - Wrongfully withholding the companies’ property - non-application of judicial mind - dispute between the parties is with respect to ownership of the property - HELD THAT:- The Hon’ble Supreme Court in the matter of M/S. PEPSI FOODS LTD. & ANR VERSUS SPECIAL JUDICIAL MAGISTRATE & ORS [1997 (11) TMI 518 - SUPREME COURT] while considering the scope of the High Court’s power to quash criminal proceedings in exercise of power under Articles 226/227 of the Constitution of India or of Section 482 of Cr.P.C., has held that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. 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 - It is also a settled law that if the High Court finds that invoking a criminal jurisdiction is an abuse of the process of law, the High Court should not hesitate to exercise its power under Section 482 of Cr.P.C. or 226 of the Constitution of India. A perusal of the provisions of Section 630 of the Companies Act would show that the same is a summary procedure. The concerned criminal court cannot determine the dispute as to the title of the property under dispute. Obviously, such questions are to be decided by the competent civil court - It is thus seen that Section 630 of the Companies Act can be invoked when there is no dispute or in any event, no bonafide dispute with respect to the property in question exists. If there is any dispute involving title to the property, the same would be adjudicated by the concerned civil court and not by Magistrate under Section 630 of the Companies Act. A perusal of the overall facts of the case would clearly demonstrate that there are serious disputes pending between the parties with respect to the property in dispute. The said dispute goes to the very entitlement of the complainant as to whether the same would fall within its share or as to whether the petitioner would be entitled for title and ownership of the property in dispute - In the instant case, the MoU clearly stipulates which company would go to which group. The company itself, in the present case, falls into the share of the rival group of the present petitioner. The MoU was entered on 24.01.1989. Much before the MoU, the Agreement to Sell the property in dispute was entered into on 04.02.1984. There have been various cases between the parties on account of their differences. This court finds that the learned Magistrate has committed a palpable error while summoning the petitioner for offence punishable under Section 630 of the Companies Act. A perusal of the impugned order dated 19.10.2012 does not reflect any application of mind with respect to the facts as stated in paragraph 19 of the complaint regarding the pendency of the civil suit between the parties - As it can be seen from the facts that the fate of the property in dispute is not yet determined, the rival parties are claiming rights over the property in dispute on the basis of the MoU. Till date, neither the petitioner nor the respondent/complainant has the clear title or ownership over the subject property. There is no sale deed in their favour. The suit for specific performance of contract filed by them against original vendee is still pending. This court is, therefore, of the considered opinion that the order of summoning of the petitioner, at this stage, is illegal and the same deserves to be quashed - Petition allowed. Issues Involved:1. Whether the offence under Section 630 of the Companies Act is made out.2. Whether the impugned order of summoning is legally and factually valid.3. Whether the dispute is of a civil nature and being given a criminal color.4. Applicability of Section 482 of Cr.P.C. and the test laid down in State Of Haryana v. Ch. Bhajan Lal.5. Locus standi of the petitioner to challenge the proceedings.6. Whether Section 630 of the Companies Act is a special remedy and a complete code.7. The impact of the pending civil disputes on the criminal proceedings.8. Whether the complaint under Section 630 of the Companies Act is barred by limitation.Detailed Analysis:1. Offence under Section 630 of the Companies Act:The petitioner argued that the complainant is not the owner of the property and the ingredients of Section 630 are not satisfied. The court noted that Section 630 can be invoked when there is no bona fide dispute regarding the property. If there is a dispute involving the title, it should be adjudicated by a civil court and not under Section 630.2. Validity of the Summoning Order:The petitioner contended that the summoning order was passed without a legal or factual basis. The court found that the learned Magistrate did not apply judicial mind to the facts, particularly the pending civil disputes. The order merely reiterated the complainant's statements without considering the implications of the MoU and ongoing civil litigations.3. Nature of the Dispute:The petitioner argued that the dispute is essentially civil and is being given a criminal color. The court agreed, noting that the property dispute involves complex civil issues, including the interpretation of the MoU and the pending civil suits. The criminal proceedings under Section 630 were found to be an abuse of the process of law.4. Applicability of Section 482 of Cr.P.C.:The court cited the Supreme Court's decision in Pepsi Foods Ltd., emphasizing that summoning an accused in a criminal case is a serious matter. The High Court should exercise its power under Section 482 of Cr.P.C. to quash proceedings if invoking criminal jurisdiction is an abuse of the process of law.5. Locus Standi of the Petitioner:The respondent argued that the petitioner has no locus to challenge the proceedings as the complainant is the superior lessor. The court did not find this argument sufficient to deny the petitioner's right to challenge the summoning order, especially given the complex civil disputes involved.6. Section 630 as a Special Remedy:The respondent claimed that Section 630 is a special remedy and a complete code. The court acknowledged this but emphasized that it cannot be used to bypass civil remedies, particularly when there are bona fide disputes about the property.7. Impact of Pending Civil Disputes:The court noted multiple pending civil suits involving the property, including suits for specific performance and injunctions. The existence of these disputes indicated that the issue is not straightforward and should be resolved through civil litigation rather than criminal proceedings.8. Limitation:The respondent argued that the offence under Section 630 is a continuing offence and not barred by limitation. The court did not address this issue in detail, focusing instead on the broader context of the civil disputes and the misuse of criminal proceedings.Conclusion:The court found that the learned Magistrate erred in summoning the petitioner under Section 630 of the Companies Act. Given the complex civil disputes and the lack of clear title or ownership over the property, the criminal proceedings were deemed an abuse of the process of law. Consequently, the complaint case, the summoning order dated 19.10.2012, and all proceedings emanating therefrom were quashed. The petition was allowed and disposed of accordingly.