TaxTMI 
TaxTMI 
TaxTMI 
2022 (10) TMI 963
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....to as 'Company') 3. The petitioner is stated to be owning 55% of the share capital and the respondent is holding 45% of the share capital in the Company. There are various allegations that have been made as regards the petitioner having defrauded both the Company and the complainant and it is in that background that the aforesaid private complaint, was filed. 4. The factual aspects may not be relevant for being discussed in the present matter since what arises is only a point of law after reference to the arguments advanced by both the learned counsel. 5. The Learned Magistrate, after recording the sworn statement, had issued the process after registering the complaint in Register-III. 6. Sri. V.Lakshminarayana, learned Senior Counsel appearing for the petitioner, would submit that: 6.1. The allegations which have been made against the petitioner are for an alleged offence under Section 447 of the Companies Act, 2013 (for short, 'the Act'). 6.2. Section 447 of the Act is reproduced hereunder for easy reference: 447. Punishment for fraud:- Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, a....
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....ding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), where the complainant under subsection (2) is the Registrar or a person authorised by the Central Government, the presence of such officer before the Court trying the offences shall not be necessary unless the court requires his personal attendance at the trial. (4) The provisions of sub-section (2) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters in Chapter XX or in any other provision of this Act relating to winding up of companies. Explanation.-The liquidator of a company shall not be deemed to be an officer of the company within the meaning of sub-section (2). 6.4. By referring to Sub-Section (6) of Section 212 of the Act, he submits that the offence under Section 447 of the Act has been made cognizable and, therefore, the said offence went out of the purview of Section 439 of the Act and as such, it is the procedure under Section 212 of the Act which is required to be followed, and a private complaint cannot be filed by a shareholder or a director. Section 212 of the Act is reproduced hereu....
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....n 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. (7) The limitation on granting of bail specified in sub-section (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 gra....
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....ompany and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, 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 an....
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.... rendered therein that the petitioner has committed fraud to the extent of Rs.1,42,84,389/- (One Crore Forty-Two Lakhs Eighty-Four Thousand Three Hundred and Eighty-Nine only). The said finding having been rendered, and fraud has been established. The contentions now urged by the petitioner cannot be looked into by this Court, and the proceedings before the Magistrate are required to go on. 8. In re-joinder, Sri. V. Lakshminarayan, learned Senior Counsel for the petitioner, would submit that: 8.1. the finding of the National Company Law Tribunal (NCLT) has been challenged before the National Company Law Appellate Tribunal (NCLAT) in an appeal, there is no finality which has been arrived at in respect of the said finding. 8.2. Be that as it may, the complainant not having the locus to file the complaint and the Court being barred by the second proviso under Subsection 6 of Section 212 of the Act, that finding would not have any bearing. 9. Heard Sri. V. Lakshminarayana, learned Senior Counsel appearing for the petitioner and Sri. K.V.Sathish, learned counsel for the respondent and perused papers. 10. The points that would arise for determination of this Court are: 1. W....
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....h would apply. 12.4. Therefore, I answer Point No.1 by holding that a shareholder, minority or otherwise cannot initiate proceedings before the Magistrate by himself or herself for an alleged offence under Section 447 of the Act. 13. Answer to Point No.2: Whether the offence under Section 447 of the Companies Act, 2013 is a cognizable offence or a non-cognizable offence? 13.1. Sub-Section (6) of Section 212 of the Act is clear that an offence under Section 447 of the Act is cognizable and the method of taking cognizance is also provided. Thus, I answer Point No.2 by holding that an offence under Section 447 of the Act is a cognizable offence. 14. Answer to Point No.3: What is the remedy available to a shareholder in the event of the shareholder alleging fraud requiring the initiation of proceedings under Section 447 of the Companies Act, 2013? 14.1. In answer to Point No.1, I have held that a shareholder cannot file any proceedings before the Magistrate for an offence under Section 447 of the Act. However, such a shareholder is not remediless. 14.2. Section 213 of the Companies Act reads as under:- 213. Investigation into company's affairs in other cases.- The Tribun....
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....ud, 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. 14.3. A perusal of the above provision would indicate that on an application being made by not less than one hundred members or members holding not less than one-tenth of the total voting power in the case of a company having a share capital to the Tribunal, the Tribunal if satisfied that there are circumstances suggesting that the business of the company being conducted with intent to defraud its creditors, members or any other person or otherwise for a fraudulent unlawful purpose, if in the formation of the Company, the persons forming a Company are guilty of fraud, misfeasance or other misconduct, etc. 14.4. The Tribunal after giving a reasonable opportunity of being heard to the parties concerned, if being of the opinion that the same is required to be investigated by an Inspector or Inspectors appointed by the Central Government, direct the Central Government to carry out such investigation by the Inspector and the Central Government would ....