TaxTMI 
TaxTMI 
2022 (1) TMI 23
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....or setting aside/quashing of the FIR as well as the CID Case, the petitioner's counsel contends that the CID has no jurisdiction to investigate into an offence under the Companies Act, 2013 (hereinafter referred to as 'the Act'), as the same are to be investigated by the Serious Fraud Investigation Office, established under the provisions of the Act, as it is well settled that the extent of special law shall prevail over the general laws. Resultantly the G.R. Case No.4396/2020, arising out of the FIR, which was registered as CID P.S. Case No.03/2020, is liable to be quashed and set aside. 3. The case of the petitioner is that she was originally appointed as the Accounts Executive of a Private Limited Company, incorporated under the provisions of the Companies Act, 1956, by the name and style of M/s. L.B. Mediservices Private Ltd., on 01.12.2015. Thereafter the petitioner was promoted to the rank of Deputy Chief Executive Officer (Dy. CEO) and Chief Financial Officer (CFO), in the year 2018. M/s. L.B. Medi Services Private Ltd. is a constituent of a group of companies under the name and style of "L.B. Group of Companies" and the management and ownership of the said group is al....
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.... 2020, it was found that there were cash withdrawals aggregating to Rs. 94,97,809/- from the company's Bank accounts and cash amount of Rs. 19,07,610/- was received from other sources, totaling Rs. 1,14,05,419/-. But on scrutiny it was found that out of the said amount, Rs. 71,29,514/- was apparently transferred to petty cashier to meet the petty cash expenditure. The balance amount of Rs. 42,75,905/- was retained in main cash books. But the petty cash disbursal register for the period 01.04.2019 to 31.01.2020 shows that out of the above mentioned Rs. 71,29,514/-, an amount of Rs. 48,89,578/- is shown to be expended in the cash disbursal register for various purposes. However the authenticity and genuineness of these expenditures was found to be doubtful and there is no whisper in the register against the balance amount of Rs. 22,39,936/-, which establishes misappropriation of the same. (3) On scrutiny of petty cash disbursal register during the period June, 2016 to December, 2019, the accused petitioner had withdrawn an amount of Rs. 11,74,420/- in an unauthorized manner. Thus, a total amount of Rs. 35,50,583/ was found to be misappropriated from petty cash sources, in th....
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.... against such offences. 12. Moreover, the jurisdiction of the SFIO can be invoked by following the procedure provided in Section 212 of the Act. An investigation into the affairs of the Company by the SFIO can be invoked only when the Central Government is of the opinion that it is necessary for the SFIO to investigate. But the jurisdiction of the SFIO can be invoked only when the Registrar or Inspector, upon scrutiny of any document, filed by a company or any information received by him is of the opinion that further information, explanation or document is required by him, based upon which the report under Section 208 of the Act would be made. But in the instant case, as the FIR relates to certain criminal misdeeds of an employee of the company and there is no allegation of any illegal act on the part of the company as a whole, there is no reason for invoking the provisions under the Companies Act, 2013, and also to investigate the matter through the SFIO. Accordingly the respondent No.2/informant prayed for dismissal of the criminal petition. 13. Opposing the contents made in the affidavit-in-reply by the respondent No.2/informant, the petitioner filed her affidavit. Referr....
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....ffairs of the Company is to be carried by SFIO and Section 211 of the Act provides for establishment of SFIO. For the purpose of determination of the issues raised before this Court, let us discuss the relevant provisions of the Act, which is reproduced below. "210. Investigation into affairs of company.- (1) Where the Central Government is of the opinion, that it is necessary to investigate into the affairs of a company,- (a) on the receipt of a report of the Registrar or inspector under section 208; (b) on intimation of a special resolution passed by a company that the affairs of the company ought to be investigated; or (c) in public interest, it may order an investigation into the affairs of the company. 211. Establishment of Serious Fraud Investigation Office.- (1) The Central Government shall, by notification, establish an office to be called the Serious Fraud Investigation Office to investigate frauds relating to a company: Provided that until the Serious Fraud Investigation Office is established under subsection (1), the Serious Fraud Investigation Office set-up by the Central Government in terms of the Government of Indi....
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.... (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 1 [offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs: Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by- (i) the Director, Serious Fraud Investigation Office; or (ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government. xxx xxx xxx xxx 18. So....
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....that she, hatching conspiracy with other employee committed embezzlement of fund, falsification of accounts, forgery of documents, will come within the domain of Indian Penal Code, 1860, and the definition of fraud under the Act, will not cover any of the offence alleged. In this regard, Section 212 (6) of the Act has been referred, which prescribes the offences under the Act, which will amount to fraud under Section 447 of the Act. For ready reference, the provision is quoted below:- "Section 212 (6): Notwithstanding anything contained in the Code of CrPC (2 of 1974), 49(Offences covered under Section 447 of this Act) shall be cognizable and no person accused of an offence under those Section shall be released on bail or on his own bond, unless- (i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and (ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail: Provided that a person, who, is under the age of sixteen years or is a....
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....placed before the Court, obtained from the office of SFIO, Government of India, which reveals as below: - 3. xxx xxx xxx a) The SFIO is expected to be a multi-disciplinary organisation consisting of experts in the field of accountancy, forensic auditing, law, information technology, investigation, company law, capital market and taxation for detecting and prosecuting or recommending for prosecution white collar crimes/frauds. b) The SFIO will normally take up for investigation only such cases, which are characterized by - i) complexity and having inter-departmental and multi- disciplinary ramifications; ii) substantial involvement of public interest to be judged by size, either in terms of monetary iii) the possibility of investigation leading to or contributing towards a clear improvement in systems, laws or procedures. c) The SFIO shall investigate serious cases of fraud received from Department of Company Affairs. SFIO may also take up cases on its own, subject to para (d) below. The SFIO would make investigations under the provisions of the Companies Act, 1956 and would also forward the investigated reports on viola....
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....the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of subsection (1) shall each be liable for action under Section 447 . 34. Criminal liability for mis-statements in prospectus.- Where a prospectus, issued, circulated or distributed under this Chapter, includes any statement which is untrue or misleading in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorises the issue of such prospectus shall be liable under section 447: Provided that nothing in this section shall apply to a person if he proves that such statement or omission was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission was necessary. 36. Punishment for fraudulently inducing persons to invest money. - Any person who, either knowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to en....
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....s satisfied that the auditor of a company has, whether directly or indirectly, acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or its directors or officers, it may, by order, direct the company to change its auditors: Provided that if the application is made by the Central Government and the Tribunal is satisfied that any change of the auditor is required, it shall within fifteen days of receipt of such application, make an order that he shall not function as an auditor and the Central Government may appoint another auditor in his place: 92 Provided further that an auditor, whether individual or firm, against whom final order has been passed by the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for a period of five years from the date of passing of the order and the auditor shall also be liable for action under section 447. 206 (4) If the Registrar is satisfied on the basis of information available with or furnished to him or on a representation made to him by any person that the business of a company is being carried on for a fraudulent or unlawful purpose or not in complia....
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....other director, or the manager, of the company, order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of the company ought to be investigated by an inspector or inspectors appointed by the Central Government and where such an order is passed, the Central Government shall appoint one or more competent persons as inspectors to investigate into the affairs of the company in respect of such matters and to report thereupon to it in such manner as the Central Government may direct: Provided that if after investigation it is proved that- 134 (i) the business of the company is being conducted with intent to defraud its creditors, members or any other persons or otherwise for a fraudulent or unlawful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447.....
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....nd parallel investigation by Police, in respect of commission of cognizable offence, and that the provision of Section 482 CrPC, for quashing the FIR and the investigation cannot be permitted, the learned Senior Counsel, Mr D Saikia, for the respondent No. 2 has placed his reliance upon the decision of S P Gupta & Others -Vs-The State (NCT) Delhi & Ors.; (2005) 61 SCL 121 (Delhi), wherein it has been held that police investigation into cognizable offence cannot be ruled out in view of Section 235, 242 of the Act, as observed by Hon'ble Apex Court in Ram Das Motor Transport Ltd. & Ors. -Vs- Tadi Adhinarayana Reddy & Ors.; reported in (1997) 5 SCC 446. The provision of Section 235 to 242 of the Act do not create bar against the investigation by Police Officer, if cognizable offence punishable under IPC is committed in the affairs of the Company. It was further held that power under Section 482 CrPC is to be exercised sparingly, but not to minutely examine the veracity/truthfulness of the evidence and while the investigation is in progress, the same cannot be liable to be quashed. The Hon'ble Court further observed that Police is obliged to carry out the investigation, either on compl....