Criminal proceedings under Section 448 Companies Act set aside for improper cognizance and lack of prima facie findings

The Calcutta HC set aside criminal proceedings under Section 448 of the Companies Act, 2013 for alleged violation of Section 233 regarding the ninety percent shareholding requirement for amalgamation scheme approval. The court found the trial judge took cognizance without judicial application of mind, making it a mere formality without prima facie findings. The prosecution was deemed bad in law as the company and persons responsible for day-to-day affairs were not made parties, while only the petitioner acting on behalf of the company was prosecuted. The court noted companies could reconvene meetings to comply with Section 233(1)(b) provisions and that the petitioner had alternative legal recourse available, making fraud allegations baseless.

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Issues Involved:
1. Quashing of complaint and proceedings u/s 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013.
2. Interpretation of Section 233(1)(b) of the Companies Act, 2013.
3. Validity of cognizance taken by the trial court.
4. Vicarious liability of the petitioner as Company Secretary.

Summary:

Issue 1: Quashing of Complaint and Proceedings:
The petitioner sought to quash the complaint (No. 35/2019) pending before the 2nd Special Court, Calcutta, filed u/s 448 of the Companies Act, 2013, for alleged violation of Section 233 of the Companies Act, 2013. The complaint alleged that the petitioner, as Company Secretary, provided a false declaration regarding the approval of a scheme of amalgamation by the requisite majority of shareholders.

Issue 2: Interpretation of Section 233(1)(b) of the Companies Act, 2013:
The petitioner argued that the declaration made in Form CAA-11 was based on the reasonable interpretation of Section 233(1)(b), which requires approval by 90% of the members present and voting at the general meeting, not 90% of the total members. The opposite party contended that the approval required was from 90% of the total number of shares, as clarified by the Ministry of Corporate Affairs' letter dated 24.08.2017.

Issue 3: Validity of Cognizance Taken by the Trial Court:
The court found that the trial judge had taken cognizance without applying judicial mind, making the cognizance prima facie bad in law. The Supreme Court's precedents emphasized the necessity for judicial application of mind at the time of taking cognizance.

Issue 4: Vicarious Liability of the Petitioner as Company Secretary:
The petitioner, acting in his capacity as Company Secretary, was made an accused without the company or the persons responsible for its day-to-day affairs being made parties. The court held that the prosecution of the petitioner alone, without implicating the company and its responsible officers, was bad in law and an abuse of the process of law. The Supreme Court's rulings in similar cases were cited to support this conclusion.

Conclusion:
The proceedings in Case No. Comp. 35/2019 were found to be bad in law and were quashed. The court allowed CRR 2769 of 2019, quashing the complaint and proceedings against the petitioner. All connected applications were disposed of, and no order as to costs was made. The interim order, if any, was vacated, and a copy of the judgment was directed to be sent to the learned Trial Court for compliance.

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