TaxTMI 
TaxTMI 
2022 (7) TMI 206
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....dent No.2. The respondent No.1, through his General Power of Attorney Holder, lodged a private complaint against her and the respondent No.2 before the VIII Additional Metropolitan Sessions Judge-cum-Special Judge for Economic Offences, City Criminal Courts at Nampally, Hyderabad, for the offences under Sections 447, 448 and 451 of the Companies Act 2013, and Sections 628 and 629A of the Companies Act 1956 and Sections 405, 415, 420, 425, 464, 468, 471 and 120(B) of the Indian Penal Code. 2.1 As per the complaint, the complainant i.e. respondent No.1 and his brother late Mr. Jakka Venkatram Reddy incorporated a Company under the name and style of M/s Peregrine Agro Private Ltd., on 17.01.1997 under the provisions of the Companies Act. At the time of incorporation, the Company had an authorized share capital of Rs.10,00,000/- divided into 1,00,000 shares of Rs.10/- each. The complainant and his brother late Mr. Jakka Venkatram Reddy were promoters/directors and each of them held 99% equity shares of the Company. On 13.03.1997, a huge tract of land was purchased in the name of the Company at Bonthavaripalli revenue village through three registered sale deeds. The complainant and his....
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....No.1 never worked out and totally broke down irreparably. Since 2014, the complainant and accused No.1 were living separately. The complainant on observing that original title deeds of his properties at Bangalore were missing, filed a police complaint before the Police Station Jubilee Hills, Hyderabad, on 03.01.2015 and got a public notice published in the Newspapers dated 05.01.2015. The accused No.1, the brother of accused No.1 Mr. Nekkanti Madhukar and three others made an illegal attempt to trespass into the property of the complainant at Bangalore on 01.04.2015. As such, the complainant filed a complaint vide Crime No.121 of 2015 for criminal trespass on 01.04.2015. The complainant filed a civil suit for injunction vide O.S. No.499 of 2015 before the III Additional Civil Judge, Bangalore Rural, against accused No.1, her brother and three others. Accused No.1 in her written statement claimed that the original documents of title pertaining to the complainant's property were in her custody. The complainant came to know that accused No.1 had intentionally stolen the important documents from the custody of the complainant. For the purpose of building up sports career of his daughte....
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....by accused No.1. The complainant was not even sent a notice with regard to the said meetings. Accused Nos. 1 and 2 falsified records and played fraud not only with the complainant but also with the Registrar of the Companies. They were involved in various irregularities and violated statutory provisions and committed the offences of cheating, forgery, criminal breach of trust, criminal misappropriation, fraud using forged documents as genuine etc. The entire exercise was undertaken by accused Nos. 1 and 2 to usurp the property. 2.6 The petitioner in Criminal Petition No.8025 of 2021 filed a complaint which was registered as Crime No.488 of 2020 in Police Station, Jubilee Hills, against the respondent No.1 for the offences under Sections 498-A and 506 IPC, SectionSs4 and 6 of Dowry Prohibition Act 1961, and Section 30 of Arms Act alleging that the respondent No.1 had threatened her with a gun. She further contended that the complaint against her would amount to an abuse of the process of the Court, which was evident from the multiple proceedings initiated by respondent No.1 before multiple forums for the same cause of action. She contended that the respondent No.1 filed O.S. No. 49....
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.... a case against the petitioners and prayed to quash the proceedings in C.C.No. 31 of 2021 on the file of VIII Additional Metropolitan Sessions Judge-cum-Special Judge for Economic Offences, City Criminal Courts at Nampally, Hyderabad. 4. The respondent No.1 filed counter affidavit contending that the petitioner had concealed the fact that the cognizance of the complaint was taken as per the orders of this Court in Criminal Petition No.222 of 2021 though it was well within his knowledge as the copy of the order was served on the advocate on record on 22.10.2021, which was on record. The doctrine of comity or amity of Courts would demand that Courts would take a consistent and uniform approach towards administration of justice by taking adequate care to ensure elimination of conflicting orders. He contended that as per Section 439(2) of the Companies Act 2013, the complaint could be made by the Registrar, a shareholder (or a member) of the Company, or of a person authorized by the Central Government. The complaint was made by the respondent No.1 in the capacity of a shareholder as per the Companies (Amendment) Act 2017, which came into force vide Gazette Notification dated 03.01.201....
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....1 further contended that the petitioner illegally and dishonestly misused the blank signed papers obtained by her from him and his late brother to show that she had bought 63,000 shares of the Company in the year 2000 in an alleged Board Meeting on 01.03.2000. The petitioner got created an agreement of sale dated 14.08.2004 as executed between M/s. Peregrine Aids Remedies Private Ltd., and M/s. Tanushree Enterprises Private Ltd., (the petitioner and her former husband Mr. Srinivas Paruchuri were Directors of the said Company) pertaining to purchase of property admeasuring Ac.186.46 cents of dry land owned by M/s Peregrine Agro Private Ltd., for a sum of Rs.3,74,00,000/-. Indeed if the petitioner had become 99% shareholder in M/s Peregrine Agro Private Ltd., on 01.03.2000, there was no reason or occasion to purchase the same land in which she was Director, which would expose falsity of her claim. The said transaction was subject of Crime No.143 of 2006 dated 06.10.2006 at Police Station, Central Crime Station, Hyderabad, lodged by Mr. Srinivas Paruchuri (former husband of the petitioner) for the offences under Sections 409, 420, 506, 120-B IPC. The police after investigation filed ....
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....oes not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to fifty lakh rupees or with both." Section 448 of the Companies Act, 2013 is punishment for false statement. It reads as follows: "448. Punishment for false statement:- Save as otherwise provided in this Act, if in any return, report, certificate, financial statement , prospectus , statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement,- (a) which is false in any material particulars, knowing it to be false; or (b) which omits any material fact, knowing it to be material, he shall be liable under section 447." Likewise Section 451 of the Companies Act, 2013 deals with punishment in case of repeated default. It reads as follows: "Section 451. Punishment in case of repeated default: If a company or an officer of a company commits an offence punishable either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasions within a period of three years....
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....hat behalf by that Government. The Economic Offences Court took cognizance of the complaint even though it was not made by the categories of persons prescribed under Section 212 (6) of the Companies Act, 2013 hence, the same was not maintainable. 11. The contention of the learned counsel for the respondent No.1 was that Section 212 of the Companies Act, 2013 was applicable only to the investigation into the affairs of the company by SFIO and the assignment of the same by the Central Government. Under Section 439 of the Companies Act, 2013, the Court could take cognizance of any offence including Section 447 so long as the SFIO had not been assigned the investigation by the Central Government under Section 212 of the Companies Act, 2013. 12. In view of the rival contentions of the learned counsel for both the parties, it is considered necessary to extract the provisions under Section 212 and 439 of the Companies Act, 2013. 13. Section 212 of the Companies Act, 2013 reads as under: "Section 212: Investigation into affairs of Company by Serious Fraud Investigation Office:- (1) Without prejudice to the provisions of section 210, where the Central Government is of the o....
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.... 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. (7) The limitation on granting of bail specified in subsection (6) is in addition to the limitations under the Code of Criminal Procedure, 1973 or any other law for the time being in force on granting of bail. (8) If any officer not below the rank of Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material ....
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.... the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability. (15) Notwithstanding anything contained in this Act or in any other law for the time being in force, the investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973. (16) Notwithstanding anything contained in this Act, any investigation or other action taken or initiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 shall continue to be proceeded with under that Act as if this Act had not been passed. (17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with....
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....nd 436 of the Companies Act, 2013. The act gives a comprehensive procedure as to who has to conduct the investigation and how the investigation has to be conducted and deal with the procedure, powers as well as form. A specialized Investigating Agency is established which is empowered to investigate the offences. The offences under Companies Act, 2013 are deemed to be cognizable, except the offences covered under Section 447 (punishment for fraud). The complainants under the Companies Act are restricted to include only Registrar of Companies, a shareholder/member of the company or any person authorized by the Central Government or any person authorized by the Securities and Exchange Board of India. The Special Court shall take cognizance only on the complaint of persons/authorities mentioned under Section 439 of the Companies Act, 2013. 16. As seen from Section 212 (6) of the Companies Act, 2013, it provides a safeguard against frivolous complaints and ensures that a prosecution for fraud can only be launched after due investigation. Learned counsel for the respondent No.1 contended that the respondent No.1 was entitled to file complaint as a shareholder of the company under Secti....
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....ct material sufficient to prosecute then it would file charge sheet after taking necessary sanctions from the Central Government. If the contention of the complainant that any shareholder can file a complaint for fraud is accepted, it would open flood gates for any person commencing criminal proceedings merely by filing a complaint. There were several companies with millions of shareholders. The condition prescribed under Section 212(6) of the Act is a safeguard against frivolous criminal complaints. As such, I do not find any merit in the contention of the learned counsel for the respondent No.1 that a private complaint for fraud is maintainable before the Special Court. 17. The learned counsel for the petitioner contended that in similar circumstances, where cognizance would require a prior procedure in the form of a complaint in writing from the Government or the Court, the Hon'ble Apex Court held that: "Such a procedure was mandatory and if the Court takes cognizance without following the procedure, it would be without jurisdiction." 18. He further contended that a similar procedure was prescribed under Section 195 Cr.P.C., which would require that certain offences under IP....
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....ction 451 of the Companies Act, 2013 would not apply. 23. Thus, the petitioner could not be prosecuted for the offences under Sections 447, 448 and 451 of the Companies Act, 2013 due to bar of cognizance under Section 212(6) of the Companies Act, when a complaint was not given in writing by the Director, SFIO or any Officer of the Central Government authorized in that behalf by the said Government. 24. The learned counsel for the petitioner contended that the Economic Offences Court would not have jurisdiction to take cognizance of the complaint if the offences under the Companies Act were not made out and relied upon Section 436(2) of the Companies Act. Section 436(2) of the Companies Act, 2013 reads as follows: "436: Offences triable by Special Courts:-- (1) xxxx (2) When trying an offence under this Act, a Special Court may also try an offence other than an offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 be charged at the same trial." 25. Section 436 (2) of the Act begins with the phrase "when trying an offence under this Act". It would show that if no offence under the Act was made out, the Economic Offences Court would not....
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....is made with the company, the company being a legal entity, unless and until the company is made as co-accused, the complaint is not maintainable." 29. The contention of the learned counsel for the respondent No.1 was that the accused were arrayed in their individual capacity and not in their representative capacity. Only in cases wherein individuals were arrayed in the representative capacity, the company was made as an accused and during the course of enquiry or trial, if it appears from the evidence that the company had committed offences, the Special Court had power under Section 319 Cr.P.C. to proceed against it. 30. However, considering the allegations made by the complainant-respondent No.1 about the annual reports of the company being uploaded in the Registrar of Companies website by fabricating the documents and the allegations that about 63,000 shares of PARPL were issued illegally to render the respondent No.1 a minority shareholder, to usurp the management of PARPL, it is considered that the Company is a necessary party to the proceedings and there is no merit in the contention of the learned counsel for the respondent No.1 in the said regard. 31. The learned Counsel....
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....sel for the petitioner contended that the allegations in the present complaint would reveal that it was civil dispute being cloaked as a criminal offence only to abuse the process of Court and relied upon the judgments of the Hon'ble Apex Court in R.K. Vijayasarathy v. Sudha Seetharam 2019 (16) SCC 739 and Indian Oil Corporation v. NEPC India Ltd. 2006 (6) SCC 736. 34. In R.K. Vijayasarathy's case (6 supra) it was held that: "The jurisdiction under Section 482 of the Code of Criminal Procedure has to be exercised with care. In the exercise of its jurisdiction, a High Court can examine whether a matter which is essentially of a civil nature has been given a cloak of a criminal offence. Where the ingredients required to constitute a criminal offence are not made out from a bare reading of the complaint, the continuation of the criminal proceeding will constitute an abuse of the process of the court." 35. In Indian Oil Corporation's case (7 supra), the Hon'ble Apex Court held that: "While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impress....
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.... on behalf of the accused. Criminal complaints cannot be quashed only on the ground that the allegations made therein appear to be of a civil nature. If the ingredients of the offence alleged against the accused are prima facie made out in the complaint, the criminal proceeding shall not be interdicted." 37. Learned counsel for the petitioner also contended that there was no application of judicial mind by the Economic Offences Court while taking cognizance of the offences under Section 447 of the Companies Act, 2013 despite the bar under Section 212 (6) of the Act. The cognizance order did not provide any reasons for taking cognizance of the impugned complaint and relied upon the judgments of the Hon'ble Apex Court in Mehmood Ul Rehman v. Khazir Mohammad Tunda 20015 (12) SCC 420, wherein it was held that: "23. Having gone through the order passed by the Magistrate, we are satisfied that there is no indication of the application of mind by the learned Magistrate in taking cognizance and issuing process to the appellants. The contention that the application of mind has to be inferred cannot be appreciated. The further contention that without application of mind, the process will ....
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....1992 AIR 604 had enunciated the principles for use of the extraordinary power under Article 226 of the Constitution of India or the inherent powers under Section 482 Cr.P.C. and gave a list of myriad kinds of cases wherein such power should be exercised: "(1) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused; (2) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code; (3) where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused; (4) where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police office....