1970 (4) TMI 78 - HC - Companies Law

High Court Upholds Decision on Criminal Complaint Against Company Directors

The High Court upheld the lower courts' decisions, dismissing the petitioners' application to quash a criminal complaint under sections of the Indian ... Winding up – Suits stayed on winding-up order Issues:1. Criminal complaint against the petitioners under various sections of the Indian Penal Code and Companies Act.2. Objection raised by the accused regarding the quashing of the complaint.3. Interpretation of section 446 of the Companies Act in relation to criminal proceedings against directors and employees of a dissolved company.Analysis:The judgment pertains to a revision petition challenging the order of the Sessions Judge upholding the order of the Judicial Magistrate in a criminal complaint case. The complaint alleged offenses under sections 406, 418, 420, 467, and 471 of the Indian Penal Code, along with sections 628 and 629 of the Companies Act. The accused, managing director and an employee of the company, were accused of fraudulent activities related to the operation of Alliance Finance Ltd., inducing the complainant to purchase shares under false pretenses and misappropriating funds. The accused objected to the proceedings, seeking to quash the complaint, but their application was dismissed at the lower courts, leading to the revision petition before the High Court.The main argument raised by the petitioners was based on section 446 of the Companies Act, contending that as the company had been dissolved following a winding-up order, no proceedings could be initiated against the directors and employees. However, the court dismissed this argument, emphasizing that section 446 only bars proceedings against the company itself after winding-up, not against individuals for criminal offenses. The court clarified that criminal proceedings for offenses like cheating can be pursued against the employees or directors of a company without requiring leave of the court, as such proceedings are directed at the individuals and not the dissolved company. The judgment underscores the distinction between actions against a company and actions against its officers for criminal acts, highlighting that the company cannot be held liable for criminal offenses like cheating due to the absence of the necessary intent.This detailed analysis of the judgment showcases the court's interpretation of the legal provisions concerning criminal proceedings against individuals associated with a dissolved company, providing clarity on the scope of liability and the applicability of relevant statutory provisions in such cases.