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2024 (4) TMI 871
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....to as the 'Company'), and appointed in terms of Section 203 of the Act, and has been associated with Company since 9th February, 2016. 3. The Company is a widely held public limited company incorporated on 17th April, 1962 and is engaged in the business of Wind Power and Electric. 4. The petitioner has been arrayed as accused person in complaint no. 35/2019 pending before the Learned 2nd Special Court, Calcutta which was initiated on the basis of a complaint filed by the opposite party under Sections 447 and 448 of the Companies Act, 2013 for alleged violation of Section 233(1)(b) of the Companies Act, 2013. 5. The allegations contained in the said complaint are reproduced below:- "It is observed from the applications and other documents that total number of shares of the company (M/s Jayshree Chemicals Limited) on cut-off date (14.08.2018) for the general meeting was 2,93,26,457 while for 1,35,90,589 shares votes were given favoring the Scheme. Therefore, in respect of less than 90% of total shares votes were cast in favour of the Scheme. But the Company Secretary Shri Santosh Kumar Lahoti gave false declaration to get the Application under Section 233 of the Com....
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.... the transferee company. 10. That form CAA-11 along with its attachments were filed by Shri Atul Kumar Labh, Company Secretary as the authorized representatives of the transferee company in terms of Section 233(2) of the Companies Act, 2013 read with Rule 25 of the Companies (Compromises, Arrangements and Amalgamations) Rules 2016. 11. The said Form CAA-11 had contained a declaration of the petitioner who is also the Company Secretary of the transferee company to the extent that the scheme was approved by requisite majority of shareholders in accordance with Section 233(1)(b) of the 2013 Act. Such declaration was given by the petitioner on the basis of the reasonable interpretation with respect to the provisions of Section 233(1)(b) of the Companies Act, 2013. Section 230(6) which also provides for the compromise or arrangement between members and creditors which requires the consideration of the Hon'ble National Company Law Tribunal postulates that majority of persons representing three fourth in value of the members and creditors as the case may be should have agreed to the compromise and arrangement. Further upon giving a reasonable interpretation of sub-section (2) of Sec....
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....r Section 233 of the Companies Act, 2013 approved, and therefore the statement made by the accused is a false statement within the meaning of Section 448 of the Companies Act, 2013, for which he is liable under Section 447 the Companies Act, 2013." 14. Written notes of Argument has been filed by the petitioner stating therein that:- i) No objection/suggestion was received from the ROC or the OL [Rule 25(5) of Compromise Rules, 2016]. Thereafter, RD by an order dated 25th October, 2018 in Form CAA. 12 confirmed the scheme. ii) In other words, the Form No. CAA. 11 filled up and signed by the petitioner was scrutinized by the ROC, OL as well as the RD and none of them had any objection with regard to any statement made therein. iii) The Deputy ROC after 5(five) months issued the impugned show cause notice dated 25th March, 2019 for an alleged false declaration by the petitioner in Form No. CAA. 11. 15. It is stated by the petitioner that the essential ingredients of making a complaint under Section 447 for violation of Section 448 read with Section 233(1)(b) are as follows:- a) There has to be a statement which is false; b) Person mak....
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...."11. In the Additional Report dated 27.12.2022 of the Regional director it was expressed as follows:- ".............. 3) It is submitted that the Petitioner/Transferee Company has filed the above petition before this Hon'ble Tribunal under Sec. 233(6) against the order of rejection of the Scheme by the Regional Director (Southern Region). The Regional Director is of the view that the Petition may be considered in terms of Sec. 230(6) of the Companies Act, 2013 on merits, as there is approval of the scheme by the majority of members of the Transferee Company in the Extraordinary General Meeting held on 09.12.2020 and the Transferee Company being the holding company of the Transferor Company - 1 and Transferor Company - 2, has also given its consent by way of affidavits and also submitted that the majority of the Creditors of the Transferor Companies and the Transferee Company, who have attended the meetings have also given their consent approving the scheme of amalgamation. 4) It is submitted that the undersigned has no objection, if the scheme is approved by this Hon'ble NCLT, Chennai under Sec. 230(6) of the Companies Act, 2013 and prays for pass....
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....2/31/2013-CAA-CL-V-Pt-2 dated 24.08.2017 (Annexure-G of the application) has stated as under:- "sanctioning of scheme of merger or amalgamation under Section 233 of the Companies Act, 2013 by the Central Government, approval of members or class of members at a general meeting holding at least ninety percent of total number of shares and also of majority representing nine- tenth in value of total creditors or class of creditors is required and not of ninety percent of member or nine-tenth creditors present and voting." ii) It is submitted that the RD is of the opinion that the present scheme of amalgamation is not in the interest of creditors and members as the present scheme is not approved by the requisite majority in terms of Section 233(1)(b) and (d) of the Act. It is stated that the Tribunal may consider the present application under Section 232 of the Act on merits and/or may pass such necessary orders as the Tribunal may deem fit. iii) We have carefully considered the submissions of the learned counsel for the Transferor and Transferee Companies and have also perused the record. The provisions of Section 233(1) of the Act are as follows:- (....
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.... vii) The voting details have already been extracted above and clearly show that the requirements of Section 233(1)(b) and (d) of the Act are not complied with, since the scheme is not approved by the required percentage of the total number of shares and also by majority representing nine-tenths in value of the secured and unsecured creditors. viii) The learned counsel for the applicant companies has pleaded that under Section 233(5) of the Act, the Central Government/RD can file an application before the Tribunal stating its objections only if the scheme is not in public interest or in the interest of creditors. In the present case, the scheme cannot be said to be in the interest of the creditors since the approval of the requisite majority representing nine-tenths in value of the secured creditors and unsecured creditors was not obtained in the meetings convened. ix) As per Section 233(5) of the Act, the RD may request the Tribunal to consider the scheme under Section 232 of the Act. The learned counsel for the applicant companies has also requested that the meetings of the shareholders, secured creditors and unsecured creditors be convened once again. ....
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....ion 232, of the Companies Act, 2013. 30. The next contention is as to whether the petitioner is liable for offence punishable under Section 447 and Section 448 of the Companies Act. 31. Section 447 of the Companies Act, 2013, lays down:- "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, any person who is found to be guilty of fraud [involving an amount of at least ten lakh rupees or one per cent of the turnover of the company, whichever is lower], shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud: Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years: [Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent of the turnover of the company, whichever is lower, and does not involve public interest, ....
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....ective from the date of this confirmation. A copy of the approved scheme is attached to this order. Sd/- Regional Director (ER)" 35. The said order has been issued by the Regional Director. 36. Next is the order taking cognizance by the Judge, 2nd Special Court, Calcutta. The relevant portion of order is reproduced here:- "..........Perused the documents on record. It appears that the complainant has a prima facie case against the accused persons. Cognizance is taken.......... Sd/- Judge Cal. 2nd Special Court Calcutta" 37. In S.R. Sukumar Vs S. Sunaad Raghuram, AIR 2015 SC 2757, decided on 2 July, 2015, the Supreme Court held:- "8. Section 200 Cr. P.C. provides for the procedure for Magistrate taking cognizance of an offence on complaint. The Magistrate is not bound to take cognizance of an offence merely because a complaint has been filed before him when in fact the complaint does not disclose a cause of action. The language in Section 200 Cr. P.C. "a Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any..." clearly ....
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....icer, or by some other person for the purpose of deciding whether or not there is sufficient ground for proceeding. If the Magistrate finds no sufficient ground for proceeding, he can dismiss the complaint by recording briefly the reasons for doing so as contemplated under Section 203 Cr. P.C. A Magistrate takes cognizance of an offence when he decides to proceed against the person accused of having committed that offence and not at the time when the Magistrate is just informed either by complainant by filing the complaint or by the police report about the commission of an offence. 11. "Cognizance" therefore has a reference to the application of judicial mind by the Magistrate in connection with the commission of an offence and not merely to a Magistrate learning that some offence had been committed. Only upon examination of the complainant, the Magistrate will proceed to apply the judicial mind whether to take cognizance of the offence or not. Under Section 200 Cr. P.C., when the complainant is examined, the Magistrate cannot be said to have ipso facto taken the cognizance, when the Magistrate was merely gathering the material on the basis of which he will decide whether ....
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....e taken cognizance of the offence..." (Underlining added) The same view was reiterated by this Court in Jamuna Singh & Ors. vs. Bhadai Sah, (1964) 5 SCR 37 and Nirmaljit Singh Hoon vs. State of West Bengal & Anr., (1973) 3 SCC 753. 14. Elaborating upon the words expression "taking cognizance" of an offence by a Magistrate within the contemplation of Section 190 Cr. P.C., in Devarapally Lakshminarayana Reddy & Ors. vs. V. Narayana Reddy & Ors., AIR 1976 SC 1672, this Court held as under:- "...But from the scheme of the Code, the content and marginal heading of Section 190 and the caption of Chapter XIV under which Sections 190 to 199 occur, it is clear that a case can be said to be instituted in a court only when the court takes cognizance of the offence alleged therein. The ways in which such cognizance can be taken are set out in clauses (a), (b) and (c) of Section 190(1). Whether the Magistrate has or has not taken cognizance of the offence will depend on the circumstances of the particular case including the mode in which the case is sought to be instituted, and the nature of the preliminary action, if any, taken by the Magistrate. Broadly speaking, when on rec....
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....imum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out." Almost every statute confer operational power to enforce and penalise, which power is to be exercised consistently from case to case, but adapted to facts of an individual case. The passage from Hindustan Steel Ltd. (supra) highlights the rule that the discretion that vests with the prosecuting agencies is paired with the duty to be thoughtful in cases of technical, venial breaches and genuine and honest belief, and be firmly unforgiving in cases of deceitful and mendacious conduct. Sometimes legal provisions are worded in great detail to give an expansive reach given the variables and complexities involved, and also to a....
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....witnesses to be examined, is to find out whether there are sufficient grounds for proceeding against the accused and to prevent issue of process on complaints which are false or vexatious or intended to harass the persons arrayed as accused. (See Nirmaljit Singh Hoon v. State of W.B.) Where the complainant is a public servant or court, clause (a) of the proviso to Section 200 of the Code raises an implied statutory presumption that the complaint has been made responsibly and bona fide and not falsely or vexatiously. On account of such implied presumption, where the complainant is a public servant, the statute exempts examination of the complainant and the witnesses, before issuing process." The issue of process resulting in summons is a judicial process that carries with it a sanctity and a promise of legal propriety. 33. Resultantly, and for the reasons stated above, we would allow the present appeal and quash the summoning order and the proceedings against the present appellant." 39. It is thus mandatory that at the time of taking cognizance the judge has to apply his Judicial mind and if required can have an enquiry conducted or conduct an enquiry himself. ....
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....charge of the affairs of the company can also be prosecuted, when the company is an accused person, this Court has held, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. At the same time it is observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the Statute specifically provides for. It is further held by this Court, an individual who has perpetrated the commission of an offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Further it is also held that an individual can be implicated in those cases where statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 29. By applying the ratio laid down by this Court in the case of Sunil Bharti Mittal it is clear that an individual either as a Director or a Managing Director or C....
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....mmissioner (C) and Anr., in Criminal Appeal No. .... of 2021 (arising out of SLP (CRL.) No. 3913 of 2020), decided on October 29, 2021, the Supreme Court held:- "24. In Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781 this Court observed that:- "11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against it even where vicarious liability is fastened under certain statutes. It has been so held by a three-Judge Bench in Aneeta Hada v. Godfather Travels and Tours (P) Ltd. in the context of the Negotiable Instruments Act, 1881. xx xx xx 13. When the company has not been arraigned as an accused, such an order could not have been passed. We have said so for the sake of completeness. In the ultimate analysis, we are o....
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....f the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted." In similar terms, the Court further held: (SCC p. 688, para 59) "59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself." xx xx xx 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. 13. In the absence of the company being arraig....
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....ureau of Investigation, (2015) 4 SCC 609, decided on January 9, 2015, the Supreme Court held:- "43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241], the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of sta....