2023 (7) TMI 443 - HC - Companies Law

Court quashes complaint due to lack of criminality and procedural compliance.

The court allowed the Criminal Original Petition, quashing the complaint in Spl. C.C. No. 2 of 2021 pending before the XVI Additional City Civil Court, ... Allegation of committing fraud and caused loss to the respondent company by incorporating and joining a company which had a similar name and operating pattern as that of the respondent company and diverted the business of management of the vessels of Daitoh - Offences under Sections 447 and 452 of the Companies Act, 2013 - HELD THAT:- This Court finds that the allegation with regard to the offence under Section 452 of the Act is that the petitioner had retained the laptop. This offence is quasi criminal in nature. It is well settled that the said offence has been incorporated only to provide a speedy remedy for the company to retrieve its property. Admittedly, the petitioner sent the laptop on 24.08.2021 by courier - this Court is of the view that the petitioner cannot be prosecuted for the offence under section 452 of the Act. As regards the offence under Section 447 of the Act, this Court finds that the procedure prescribed for investigating the said offence is provided in Chapter XIV of the Act. A detailed mechanism is provided under the Act. It deals with the power of the Registrar of Companies to conduct an enquiry and submit a report to the Central Government. The Central Government may, on such report or on a report of any inspector appointed by the Central Government may, direct an investigation by SFIO. The Central Government may also direct such an investigation, suo motu, if it is in the public interest. Section 212 of the Act provides for an investigation by SFIO. As regards the offence under Section 415 of the Indian Penal Code, there is no deception at the inception. It may at best amount to a breach of promise. Hence, cheating is not made out since the petitioner was admittedly working in the company for two years. Further, the offences under Sections 378, 403, 405, 408, 120 and 425 of the Indian Penal Code are not made out. This Court finds that the allegations that the confidential information and certain technical know-how were taken away by the petitioner are vague. The allegation of misuse of information and making personal gain with the said information would, at best, make the petitioner liable civilly to the respondent. It may amount to a breach of trust as understood commonly and would not amount to a criminal breach of trust. In order to attract the said offence, the nature of the property entrusted and as to how it was misappropriated must be clearly spelt out. Vague allegations that confidential information and technical know-how were misused are insufficient. Even assuming that this offence is made out the complainant ought to have resorted to the remedy under the Act. This Court also finds that the complaint stems out from the grievance of the complainant that the petitioner had started a rival company and had diverted the business of the complainant. Such issues cannot be the subject matter of criminal prosecution in the absence of the necessary ingredients to constitute the offence alleged. The petitioner has other remedies available in law. Since the allegations do not attract the offences, this Court is inclined to quash the complaint. This Court finds that the complaint, besides being unsustainable in law, does not disclose the alleged offences, and hence the continuation of the impugned proceedings would be an abuse of process of law. The non-interference of this Court would lead to a miscarriage of justice - Petition allowed. Issues Involved:1. Quashing of the complaint under Sections 447 and 452 of the Companies Act, 2013.2. Alleged offences under Sections 415, 403, 405, 408, 425, 378, and 120 of the Indian Penal Code.3. Jurisdiction and procedural compliance under the Companies Act, 2013.4. Applicability of Section 482 of the Criminal Procedure Code.Summary:Issue 1: Quashing of the complaint under Sections 447 and 452 of the Companies Act, 2013The petitioner sought to quash the complaint alleging offences under Sections 447 and 452 of the Companies Act, 2013. The court found that the offence under Section 452, which is quasi-criminal, was intended to provide a speedy remedy for retrieving company property. Since the petitioner had returned the laptop on 24.08.2021, the court held that prosecution under Section 452 was not maintainable. Regarding Section 447, the court noted that the prescribed procedure under Chapter XIV of the Act, involving the Registrar of Companies and the Serious Fraud Investigation Office (SFIO), was not followed. Specifically, Section 212(6)(ii) mandates that the Special Court shall not take cognizance of the offence except on a complaint by the Director of SFIO or an authorized officer of the Central Government. Since this procedure was not adhered to, the complaint under Section 447 was also deemed not maintainable.Issue 2: Alleged offences under Sections 415, 403, 405, 408, 425, 378, and 120 of the Indian Penal CodeThe court found that the allegations did not constitute the offences under the Indian Penal Code. For instance, there was no deception at the inception to attract Section 415 (cheating). The allegations of theft, criminal breach of trust, and misappropriation were deemed vague. The court emphasized that to allege theft, it must be shown that the complainant was deprived of the property, which was not the case here as the confidential information was intangible and still available with the complainant. The court concluded that the allegations, at best, could make the petitioner civilly liable but did not constitute criminal offences.Issue 3: Jurisdiction and procedural compliance under the Companies Act, 2013The court highlighted the detailed mechanism provided under Chapter XIV of the Companies Act for investigating offences, which involves the Registrar of Companies and the SFIO. The court reiterated that the Special Court could not take cognizance of the offence under Section 447 without a complaint from the Director of SFIO or an authorized officer. The non-compliance with this statutory procedure rendered the complaint unsustainable.Issue 4: Applicability of Section 482 of the Criminal Procedure CodeThe court acknowledged the wide powers under Section 482 of the Criminal Procedure Code to quash proceedings to prevent abuse of process and miscarriage of justice. The court noted that the complaint did not disclose the alleged offences and that continuing the proceedings would be an abuse of process. Consequently, the court exercised its inherent powers to quash the complaint.Conclusion:The Criminal Original Petition was allowed, and the complaint in Spl. C.C. No. 2 of 2021, pending before the XVI Additional City Civil Court, Chennai, was quashed. The connected Miscellaneous Petition was also closed.