TaxTMI 
TaxTMI 
2025 (6) TMI 1897
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.... Court for quashing of complaint case Nos. SC/10/2021, SC/3/2021 and SC/12/2021 (Now numbered as SC/31/2024 upon transfer from Gwalior to Special Court, PMLA, Bhopal) filed by the respondent, Registrar of Companies under Section 447 of the Companies Act, 2013 (hereinafter referred as 'Act of 2013'). However, for the sake of convenience, facts of M.Cr.C. No. 2350/2025 are being taken for consideration to resolve the controversy involved in these cases. 3. Learned counsel for the petitioners has submitted that this Court has already decided one case involving similar facts and issues, therefore, these cases may also be decided in the same manner. 4. Shri Naman Nagrath, learned Senior Advocate appearing for the intervener has submitted that the petition is liable to be dismissed as not maintainable in view of the order dated 03.11.2023 passed by the Gwalior Bench of this Court in M.Cr.C. No. 41956 of 2023 (M/s. Peoples General Hospital Pvt. Ltd. vs. Union of India and others) dismissing the said petition filed under Section 482 of Code of Criminal Procedure giving finding that Section 447 of the Act of 2013 prima facie attracts because transactions were spread out in years toget....
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....iolated Section 447 of the Act of 2013 and have granted loan at the rate of interest lower than the prevailing yield. The allegation was confined to the assessment period i.e. FY 2006-2007 to FY 2013-2014 but according to the petitioners, offence under Section 447 of the Act of 2013 is not made out. In the petition, it is also submitted by the petitioners that the provision of loan and investment by the Company is governed by Section 186 of the Act of 2013 and Section 186 (7) laid down that no loan shall be given under Section 186 at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the loan tenor and if any loan is given then it will be governed by Section 186 of the Act of 2013 and this section itself laid down that in case any loan is given lesser than the threshold limit, the company shall be punishable with fine which shall not be less than twenty five thousand rupees but it may extend upto five lakh rupees and every officer of the company who is in default, shall be punishable with imprisonment for a term which may extend upto two years with fine which shall not be less than twenty five thousand ru....
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....the grounds that on the basis of complaint and allegations made therein, an offence has been registered against the petitioner under Section 447 of the Companies Act, 2013 [in short 'the Act of 2013'] and that the allegations made against the petitioner in the complaint clearly reveal that the alleged offence was committed during the period from year 2006 and as such, offence could have been registered under the provision i.e. Section 186 (7) and the petitioner can be punished under Section 186(13) of the Act of 2013. The provision of Section 447 of the Act of 2013 was inserted in the Act itself by way of amendment made in the year 2013 and to the offence which was committed prior to enforcement of said provision, the same cannot be applied and the petitioner cannot be tried under the said offence because it is a settled principle of law that the provisions cannot be made applicable retrospectively and it has only prospective effect. He submits that even otherwise, if the allegations made in the complaint are considered to be true at their face value, the offence alleged to have been committed by the petitioner falls within the ambit of Section 185 of the Act of 2013, therefore, no....
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....ent, nothing wrong has been committed by the authority. He submits that looking to the facts and circumstances of the case, it is for the trial Court to see whether fraud has been committed or not and offence of Section 447 is applicable or not, but at this stage, this Court cannot consider this aspect and the same should be left for the trial Court and petition under Section 482 of Cr.P.C. seeking quashment of complaint, is not maintainable. He further submits that as per the allegations made against the present petitioner, it is not only a violation of the provisions of Sub section-7 of Section 186, but the conduct of the petitioner moves beyond the said provision and it is nothing but a fraud as has been specified and prescribed under Section 447 of the Act of 2013, therefore, nothing wrong has been committed while registering the offence under Section 447 of the Act of 2013. He submits that when the Supreme Court, while dismissing the SLP, has already observed that the petitioner is at liberty to raise the objections before the trial Court, then there is no reason for filing the present petition and the petitioner can raise all these grounds before the trial Court. 4. ....
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....n preferred by the appellant under Section 482, Cr.P.C. to quash the summons issued in complaint case no. 3403/1/2015 was dismissed by the High Court opining that since the earlier Crl. M.C. No. 877 of 2005 for the same relief had already been dismissed, the second application was not maintainable." 7. To answer the aforesaid question, Hon'ble Supreme Court observed as under :- "3. The appellant then preferred a fresh application under Section 482 giving rise to the present proceedings. The High Court noticing the reliance on Form 32 issued by the Registrar of Companies, under the Companies Act, 1956, in proof of resignation by the appellant prior to the issuance of the cheques, issued notice, leading to the impugned order of dismissal subsequently. 4. Learned counsel for the appellant submitted that there was no bar to the maintainability of a second application under Section 482, Cr.P.C. in the peculiar facts and circumstances of the case, relying on Superintendent and Remembrancer of Legal Affairs, West Bengal vs. Mohan Singh and Ors., AIR 1975 SC 1002. 5. Learned counsel for respondent no. 2 relied upon order dated 06.05.2019 of this Court in....
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....under Section 561A of the CrPC to quash the proceeding and the High Court rejected it on the ground that the evidence was yet to be led and it was not desirable to interfere with the proceeding at that stage. But, thereafter, the criminal case dragged on for a period of about one and half years without any progress at all and it was in these circumstances that respondents Nos. 1 and 2 were constrained to make a fresh application to the High Court under Section 561-A to quash the proceeding. It is difficult to see how in these circumstances it could ever be contended that what the High Court was being asked to do by making the subsequent application was to review or revise the Order made by it on the earlier application. Section 561-A preserves the inherent power of the High Court to make such Orders as it deems fit to prevent abuse of the process of the Court or to secure the ends of justice and the High Court must, therefore, exercise its inherent powers having regard to the situation prevailing at the particular point of time when its inherent jurisdiction is sought to be invoked. The High Court was in the circumstances entitled to entertain the subsequent application of Responde....
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.... 10. ...... 11. The Company, of which the appellant was a Director, is a party respondent in the complaint. The interests of the complainant are therefore adequately protected. In the entirety of the facts and circumstances of the case, we are unable to hold that the second application for quashing of the complaint was not maintainable merely because of the dismissal of the earlier application. 8. Further reliance has been placed by learned counsel for the petitioner on a decision of Supreme Court reported in (1975) 3 SCC 706, Superintendent and Remembrancer of Legal Affairs, West Bengal vs. Mohan Singh and others wherein the Supreme Court has considered the issue of entertaining the second application in a changed set of circumstances under Section 482 of Cr.P.C. and observed as under :- "2. The main question debated before us was whether the High Court had jurisdiction to make the order dated April 7, 1970 quashing the proceeding against Respondents 1, 2 and 3 when on an earlier application made by the first respondent, the High Court had by its order dated December 12, 1968 refused to quash the proceeding. Mr Chatterjee on behalf of the State st....
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....nd ambit of the inherent power of the High Court under Section 561-A vis-a-vis an earlier order made by it was, therefore, not concluded by this decision and the matter was res integra so far as this Court is concerned. Mr Mukherjee cited in support of this contention three decisions, namely, Raj Narain v. State [AIR 1959 All 315 : 1959 Cri LJ 543 : 1959 All LJ 56], Lal Singh v. State [AIR 1970 Punj 32 : 1970 Cri LJ 267 : ILR (1970) 1 Punj 177] and Ramvallabh Jha v. State of Bihar [AIR 1962 Pat 417 : (1962) 2 Cri LJ 625 : 1962 BLJR 553]. It is, however, not necessary for us to examine the true effect of these observations as they have no application because the present case is not one where the High Court was invited to revise or review an earlier order made by it in exercise of its revisional jurisdiction finally disposing of a criminal proceeding. Here, the situation is wholly different. The earlier application which was rejected by the High Court was an application under Section 561-A of the Code of Criminal Procedure to quash the proceeding and the High Court rejected it on the ground that the evidence was yet to be led and it was not desirable to interfere with the pr....
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....Petition(s) (Criminal) No(s). 255/2021 relying upon the decision of Superintendent and Remembrancer of Legal Affairs (supra) has observed as under :- "The law on point as held by this Court in "Superintendent and Remembrancer of Legal Affairs, West Bengal Vs. Mohan Singh & Ors." reported in SCC (1975) 3 706 is clear that dismissal of an earlier 482 petition does not bar filing of subsequent petition under Section 482, in case the facts so justify. Needless to say that as and when any appropriate application under the Code is preferred by the petitioner, the same shall be dealt with purely on its own merits without being influenced by the dismissal of the instant writ petition." 10. Thus, considering the submissions made by learned counsel for the petitioner in response to the objection raised by learned counsel for the respondent and looking to the legal position as has been enumerated above and also on perusal of earlier order of High Court, it is clear that the present petitioner was not a party in the said petition and he was not the petitioner in the same. 11.From the order and the facts considered therein, it is clear that the quashing of the complai....
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.... 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 officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to p....
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.... to Sarvajanik Jankalyan Parmarthik Nyas, a trust registered under The M.P. Public Trust Act, 1951 are at the interest rates 1% to 3% during 2003-04 to 2017-18 whereas prevailing market rates at that time was around 6% to 8%. Further, the loans given to related parties namely P.G.H. International Pvt. Ltd. were Interest free. In this manner, company has given wrongful gain to the other related party which includes the management of the company and wrongful loss to the shareholders/company which tantamount to fraud. Thus, there appears violation of Section 447 of the Companies Act, 2013." 15. From the aforesaid alleged irregularities, it is clear that the provision of Section 185 of Act of 2013 is available under which it is permissible to give loan to the directors. Section 185 of Act of 2013 reads as under :- "185. Loans to directors, etc. - (1) No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,- (a) any director of company, or of a company which is its holding company or any partner or relative of any such direct....
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....e given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or (d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company: Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company for its principal business activities. (4) If any loan is advanced or a guarantee or security is given or provided or utilised in contravention of the provisions of this section,- (i) the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; (ii) every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees; and (iii) the director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonmen....
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.... security proposed to be made or given by the Board, exceed the limits specified under sub-section (2), no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting: Provided that where a loan or guarantee is given or where a security has been provided by a company to its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holding company, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiary company, the requirement of this sub-section shall not apply: Provided further that the company shall disclose the details of such loans or guarantee or security or acquisition in the financial statement as provided under sub-section (4).] (4) The company shall disclose to the members in the financial statement the full particulars of the loans given, investment made or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security. (5) No investment shall ....
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....except sub-section (1), shall apply- (a) to any loan made, any guarantee given or any security provided or any investment made by a banking company, or an insurance company, or a housing finance company in the ordinary course of its business, or a company established with the object of and engaged in the business of financing industrial enterprises, or of providing infrastructural facilities; (b) to any investment- (i) made by an investment company; (ii) made in shares allotted in pursuance of clause (a) of sub-section (1) of Section 62 or in shares allotted in pursuance of rights issues made by a body corporate; (iii) made, in respect of investment or lending activities, by a non-banking financial company registered under Chapter III-B of the Reserve Bank of India Act, 1934 (2 of 1934) and whose principal business is acquisition of securities.] (12) The Central Government may make rules for the purposes of this section. (13) If a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees ....
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....any by a [resolution]: Provided further that no member of the company shall vote on such 295[resolution], to approve any contract or arrangement which may be entered into by the company, if such member is a related party: [Provided also that nothing contained in the second proviso shall apply to a company in which ninety per cent or more members, in number, are relatives of promoters or are related parties:] Provided also that nothing in this sub-section shall apply to any transactions entered into by the company in its ordinary course of business other than transactions which are not on an arm's length basis: [Provided also that the requirement of passing the resolution under first proviso shall not be applicable for transactions entered into between a holding company and its wholly owned subsidiary whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.] Explanation.- In this sub-section,- (a) the expression "office or place of profit" means any office or place- (i) where such office or place is held by a director, if the director holding it....
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.... penalty of five lakh rupees]." 18. As per learned counsel for the petitioner, Section 447 has been introduced by way of amendment in the Act of 2013 and in earlier Act, there was no such provision like Section 447. Therefore, it is apt to reproduce Section 447, which reads as under :- "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, 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, any person guilty of such fraud shall be punishable with impriso....
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....ged offences were purportedly committed during the period when the Companies Act of 1956 was in effect. The initiation of legal proceedings under Section 36, in conjunction with Sections 447 and 448 of the 2013 Act, lacks legal authority. The petitioners cannot be prosecuted for actions that were not deemed punishable under the provisions of the 1956 Act. This purported action violates Article 20, Sub Clause 1 of the Constitution of India, which safeguards against retrospective criminalization." The Court also observed that Article 20(1) of the Constitution of India provides so and prescribes as under :- "20. Protection in respect of conviction for offences.- (1) No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence, nor be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence." 22. Notably, the pyramid of submissions made on behalf of the respondent is based on three pillars. Primarily about the maintainability of the petition; secondarily, about the applicability of Section 447....
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....ion "continuing offence" has not been defined in CrPC because it is one of those expressions which does not have a fixed connotation, and therefore, the formula of universal application cannot be formulated in this respect. 24. In Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan [AIR 1959 SC 798] AIR p. 807, para 31 this Court dealt with the aforementioned issue, and observed that a continuing offence is an act which creates a continuing source of injury, and renders the doer of the act responsible and liable for the continuation of the said injury. In case a wrongful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the said act may continue. If the wrongful act is of such character that the injury caused by it itself continues, then the said act constitutes a continuing wrong. The distinction between the two wrongs therefore depends upon the effect of the injury. In the said case, the Court dealt with a case of a wrongful act of forcible ouster, and held that the resulting injury caused was complete at the date of the ouster itself, and therefore there was no scope for the application of S....
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....d (2015) 1 SCC 1 dealing with the provisions of Income Tax Act, has observed as under :- "General principles concerning retrospectivity 27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-à-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. 28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is pres....