TaxTMI 
TaxTMI 
2026 (1) TMI 434
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....er Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as "CrPC") of the Appellants - accused was dismissed. The prayer in the said petition was to quash the criminal proceedings in complaint case bearing C.C. No. 58 of 2022 filed by Respondent No. 2 - Complainant against the Appellants where the Special Court for Economic Offences at Hyderabad (hereinafter referred to as "Special Court") has taken cognizance of offences under Sections 448 & 451 of the Companies Act, 2013 (hereinafter referred to as "Companies Act") and Sections 420, 406, 426, 468, 470, 471 & 120B of the Indian Penal Code, 1860 (hereinafter referred to as "IPC"). FACTS 3. The genesis of the dispute lies in the affairs of a private limited company, namely M/s Shreemukh Namitha Homes Private Limited (hereinafter referred to as "Company"), which was incorporated on 19.08.2015 under the provisions of the Companies Act by the Complainant and his wife, Namitha. At the time of incorporation, they were the promoters, first Directors and majority shareholders of the Company. Accused No. 1, i.e., Appellant in the Criminal Appeal arising out of SLP (Crl.) No. 11530/2024 was inducted as a Directo....
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....re-appointment of the Accused were placed. The said resolutions failed as the Complainant and his wife, holding majority shareholding, voted against them. As such, the accused ceased to be Directors of the Company with effect from 30.11.2021. 8. Such removal was challenged by Accused No. 1 before the National Company Law Tribunal at Hyderabad (hereinafter referred to as "NCLT") by filing Company Petition No. 10 of 2022, which is pending adjudication. 9. Subsequent to such challenge, on 19.05.2022, the Complainant filed a private complaint before the Special Court alleging that Accused No. 1 illegally convened an EOGM on 01.12.2021 without authority, appointed third parties as Directors in the Company, fabricated the Board and shareholders' resolutions, and uploaded statutory filings along with other forged and false documents on the website of the Ministry of Corporate Affairs. In parallel, two civil suits were also instituted by the Appellants before the competent civil courts seeking a permanent injunction against the Company and the Complainant from violating the terms and conditions of MoU dated 17.08.2016 and a declaration that the agreements to sell executed by the Comp....
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....nt authorised by an order in writing in that behalf. 13. It is further submitted that a bare reading of Section 448 makes it clear that any person who makes a false statement as specified therein "shall be liable under Section 447". In other words, the liability for an offence under Section 448 is directly linked to Section 447, which prescribes the punishment for fraud. Therefore, the legal bar imposed by the second proviso to Section 212(6) of the Companies Act, as applicable to Section 447, is squarely applicable to offences alleged under Section 448 of the Act, hence, the Special Court is precluded from taking cognizance of such offences on filing of a private complaint by the Complainant. 14. It is also submitted that the cognizance by the Special Court was without jurisdiction as the procedure mandated under Section 206 of the Companies Act was not followed. Section 206 provides that the Registrar of Companies, on receiving information, shall seek explanation and conduct enquiry. On being satisfied about violation of the Companies Act in running the affairs of the company, the Registrar may conduct enquiry and can then report to the Central Government for conducting fur....
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.... 447 of the Act. It is submitted that the present complaint has been filed for the offence under Sections 448 and 451 of the Companies Act, and not under Section 447. In view of the amendment made to Section 212(6), there is no bar on the Special Court from taking cognizance of offences under Section 448 of the Act on the basis of a private complaint. The bar is applicable only for offences under Section 447. 18. It is also submitted that the Appellants had surreptitiously conducted an EGOM on 01.12.2021 without the requisite quorum and illegally appointed two Directors in an attempt to usurp managing control over the Company from Respondent No. 2. The Appellants fraudulently submitted FORM DIR-12 to the Ministry of Corporate Affairs, declaring the aforesaid appointments, despite being well aware of the fact that they no longer held the position of Director after 30.11.2021. 19. It is submitted that the Appellants have played fraud on the members of the Company and have falsified the records of the Company. The Appellants, with an intention to deceive the shareholders and other Directors of the Company and with an intent to usurp the management of the Company, passed resoluti....
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....terial 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." 22. Section 451 of the Companies Act punishes repeated commission of an offence punishable either with fine or with imprisonment within three years by a company or an officer of the company. Section 451 is also relevant, and is therefore quoted:- "451. Punishment for 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, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence." 23. Section 448 of the Companies Act, in turn, makes a reference to Section 447 of the Companies Act, which prescribes the punishment for fraud. The said Section is integral to Section 448 therefore reproduced as under:- "447. Punishment for fraud. - Without prejudice to any liability including repayment of any ....
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....ation Office. - (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), offence covered under section 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, maybe 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 - (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." 25. Making a ref....
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.... the interplay has been brought by the legislature under Section 212(6) of the Companies Act. The said section is in two parts - (I) the 'offence covered under section 447' shall be cognizable and (II) no person accused of any offence under those sections shall be released on bail, subject to twin conditions as mentioned therein. The first proviso to Section 212(6) provides a relaxation to children below 16 years of age, women, sick or infirm in the matter of releasing on bail. The second proviso relates to taking cognizance and makes a reference to first part of Section 212(6) whereby the Special Court has been permitted to take cognizance only on a complaint in writing by the Director, SFIO or any officer of the Central Government authorised by general or special order in writing in this behalf by the government. The said special provision has been enacted because as per Section 439 (1) and (2) of the Companies Act the other offences of the Companies Act were made non-cognizable. 31. In addition to Section 447 of the Companies Act, the provision under Section 448 of the Companies Act also has relevance, it criminalizes a statement made by any person in any return, report, cert....
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....y punishment for its contravention, it simply lays down the ingredients of the offence of making a false statement and provides that in case such a false statement is made, the 'person(s)' shall be liable under Section 447 of the Companies Act. That is to say, even if, after trial, an offence under Section 448 is proved to have been committed by a 'person', it is only with the aid of Section 447 of the Companies Act that the punishment for the said offence may be imposed. Section 448 of the Companies Act, therefore, cannot be read in isolation and must be read along with Section 447 of the Companies Act. Therefore, the offence under Section 448 is an offence 'covered under Section 447' of the Companies Act mentioned in Section 212(6), since the offence under Section 448 is inextricably linked to the punishment for 'fraud' as mentioned in Section 447 and as such, the second proviso to Section 212(6) of the Companies Act is attracted. 34. If the intention of the legislature were to bar the Special Court from taking cognizance of only the offence under Section 447 of the Companies Act, there would be no need to mention offences 'covered under' Section 447 in Section 212(6) of the C....
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....on 447 of the said Act. The contention of the learned counsel for the respondent No. 1 was that under Section 439 of the Companies Act, 2013, the Court can take cognizance of any offence including Section 447 of the Act so long as the SFIO had not been assigned investigation by the Central Government under Section 212 of the Act. But the heading of Section 439 of the Act itself would read as "offences to be non-cognizable". Hence, cognizance of the offence under Section 447 of the Act could not have been taken by the trial Court on a private complaint, as it is a cognizable offence. 17. Under Section 206 of the Companies Act, 2013, the Registrar of Companies based on the information received by him, seek for explanation, call for production of document and conduct enquiry. If the Registrar is satisfied on the basis of information available with him, or furnished to him or on a representation made to him by any person that the business of a company is being carried out not in compliance with the provisions of the Act, he can proceed with enquiry. If the enquiry conducted by the Registrar discloses material for further investigation, he, under Section 210 of the Companies Ac....
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....ld have noticed its earlier judgment and, if so required, referred the matter to a larger bench. 38. The Madras High Court in Sivananda Rajaram v. M/s New Shipping Kaisha Ship Management Pvt. Ltd. Criminal Petition (OP) No. 19154/2021. quashed a complaint case under Section 447 in light of the bar against taking cognizance under Section 212(6) of the Companies Act. 39. The Karnataka High Court has taken a similar view in M. Gopal v. Ganga Reddy 2022:KHC:35824 and quashed the order of the Magistrate taking cognizance under Section 447 of the Companies Act on a private complaint filed by a shareholder. The Court held that the shareholder can go through the procedure under Section 213 of the Act in order to make a complaint which may eventually result in prosecution under Section 447 of the Companies Act. 40. The Delhi High Court in Yogesh Chander Goyal and Ors. Vs. State and Anr. 2024 SCC OnLine Del 3197 has referred to the judgments of the Madras High Court and Karnataka High Court and held that the order taking cognizance under Section 447 of the Companies Act on a private complaint cannot be sustained in law. Application of principles to the facts of the present case ....
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....fence covered under Section 447' as mentioned in Section 212(6) of the Companies Act and therefore, the bar against taking cognizance under the second proviso of Section 212(6) of the Companies Act, unless specific conditions are met, is attracted in the present case. Cognizance, therefore, in such a case, cannot be taken merely by filing of a private complaint by the Complainant. However, it is not to say that the Complainant is left absolutely remediless. The right recourse for a person, who makes an allegation of fraud in the affairs of a company is to file an application under Section 213 of the Companies Act before the NCLT upon satisfying the eligibility under Section 213(a) and 213(b) of the Companies Act. 46. The offence under Section 451 of the Companies Act is for punishment in case of repeated default. Since we are finding that cognizance cannot be taken for Section 448 of the Companies Act without following the requirements under the second proviso to Section 212(6) of the Companies Act, cognizance of 'repeated default' under Section 451 of the Companies Act is not made out. 47. As an upshot of the above discussion, the inescapable conclusion reached is that the c....
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....ted 13-3-1981 which empowers such Special Courts to try offences under specified enactments such as the Companies Act, 1956the Income Tax Act, 1961, the Wealth Tax Act, 1957, etc., which reads as follows: "... even if such cases include offences punishable under the Penal Code, 1860 and any other enactments, if such offences form part of the same transaction...." (vide Notification reproduced in Supt. of Customs v. Kannur Abdul Kader Mohammed Haneefa [2014 SCC OnLine Hyd 622 : (2014) 310 ELT 49]), SCC OnLine Hyd para 15. Thus, even if a number of persons are accused of offences under a special enactment such as "the Companies Act and as also the IPC" in respect of the same transaction or facts and even if some could not be tried under the special enactment, it is the Special Court alone which would have jurisdiction to try all the offences based on the same transaction to avoid multiplicity of proceedings. We make this observation because at some stage in the hearing the learned counsel addressed us on this point. We make it clear that in the present case all the accused are liable to be tried by the Special Court in respect of the offences under IPC as w....
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....re quashed, it is the Court of appropriate territorial jurisdiction which would have jurisdiction to try the private complaint filed by the Respondent No. 2 against the Appellants. The learned Judge of the Special Court where the C.C. No. 58 of 2022 is pending shall take steps, in consultation with the Principal District Judge of the district to transfer the complaint case to the appropriate court having territorial jurisdiction to try the complaint case. 55. Arguments have also been made by the Appellants about the propriety and legality of continuance of the proceedings in respect of offences under the IPC and it has been submitted by the Appellants that the complaint case insofar as it relates to offences under the IPC, is abuse of process of law since there are two civil suits and one company petition pending between the parties. However, we are not convinced by this argument. It is trite law that mere institution or pendency of civil proceedings between the parties cannot be a ground to quash the criminal proceedings instituted by the Respondent No. 2 by filing a complaint case or to conclude that the dispute is purely civil in nature. 56. The Respondent No. 2 and the Ap....