TaxTMI 
TaxTMI 
2022 (1) TMI 23
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....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 almost same, as that of M/s. L.B. Medi Services Pri....
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....any'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On scrutiny of petty cash disbursal register during the period June, 2016 to December, 2019, the accused petitioner had withdrawn an amount of Rs. 11,74,420/- in an unauthorized manner.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 the ongoing scrutiny. (4) The petitioner embezzled a sum of Rs. 63,284/- in the name of travel expenditu....
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.... 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. Referring to the various Sections of the Companies Act, 2013, e.g. Section 447 and Section 211 of the said Act, the petitioner cont....
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....ination 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 India Resolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious Fraud Investigation Office for the purpose of this section. (2) The Serious Fr....
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....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 far as regards the Section 435, 436 and 437 of the Act, it provides that the offences punishable under this Act, shall be triable by the Special Court established by the Central Government and such Special Court has the jurisdiction to try offences under the Act and can also try any offence other than the offence mentioned in the Act. 19. Section 447 of the Act provides for punishment f....
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.... 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 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 subsection except upon a complaint in writing made by- (iii) the Director, Serious Fraud Investigation Office; or (iv) 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 ....
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....uch 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 violations of the provisions of other acts to the concerned agencies for prosecution/appropriate action. d) Whether or not an investigation should be taken up by the SFIO would be decided by the Director, SFIO who will be expected to record the reasons in writing. These decisions will be further subject to review by a coordination committee. 4. xxx xxx xxx 5. As per the Companies Act, 2013 , Serious Fraud Investigation Office (SFIO) has been established through the Government of India vide Notification NO. S.O.2005(E) dated 21.07.2015. It....
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....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 enter into,- (a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting securities; or (b) any agreement, the purpose or the pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities; or (c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution, shall be liable for action under section 447. 38. Punishment for personation for acquisition, etc., of securities.-(1) Any person who- (a) makes or abets making of an application in a ....
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....rm, 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 compliance with the provisions of this Act or if the grievances of investors are not being addressed, the Registrar may, after informing the company of the allegations made against it by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order within such time as he may specify therein and carry out such inquiry as he deems fit after providing the company a reasonable opportunity of being heard: Provided that the Central Government may, if it is satisfied that the circumstances so warrant, direct the Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this subs....
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....ditors, 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. 229. Penalty for furnishing false statement, mutilation, destruction of documents.- Where a person who is required to provide an explanation or make a statement during the course of inspection, inquiry or investigation, or an officer or other employee of a company or other body corporate which is also under investigation,- (a) destroys, mutilates or falsifies, or conceals or tampers or unauthorisedly removes, or is a party to the destruction, mutilation or falsification or concealment or tampering or unauthorised removal of, documents relating to the property, assets or affairs of the company or the body corporate; (b) makes, or is a party to the making of, a ....
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.... 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 complaint of any citizen or under orders from the Court and to register a case. 26. The learned Senior Counsel, Mr D Saikia also placed reliance upon the decision of Bombay High Court, in Manish Rangari & Ors. -Vs- Union of India & Ors.; 2020 SCC Online Bom 226, wherein in para - 7 (b), it has been held that:- "7 (b) As per Section 212(2) of the 2013 Act, prima facie it is seen that the SFIO has jurisdiction to investigate offence under the said Act only. Hence, the SFIO's investigation and subsequent complaint for offences under the Penal Code, 1860 and under the 1956 Act, prima facie appears to be without jurisdiction. A contrary interpretation would permit the SFIO to encroach upon investiga....