Summary
The Court held that an offence under Section 448 of the Companies Act, 2013, which is punishable only through Section 447, is an 'offence covered under section 447', so the Special Court cannot take cognizance of it on a private complaint without a complaint by the SFIO Director or an authorised Central Government officer. It quashed the Companies Act part of the complaint but sent the IPC offences to the court of territorial jurisdiction.
Issues
- Whether cognizance of offences under Sections 448 and 451 of the Companies Act could be taken on a private complaint in view of the second proviso to Section 212(6).
- Whether, once the Companies Act offences are quashed, the Special Court can still try the IPC offences under Section 436(2).
- Whether the IPC proceedings should be quashed as an abuse of process because civil and company proceedings were pending between the parties.
Provisions considered
- Section 212(6), second proviso, Companies Act, 2013Held that the bar on the Special Court taking cognizance except on a written complaint by the SFIO Director or an authorised Central Government officer applies to any 'offence covered under section 447', including offences such as Section 448 punishable under Section 447. (¶¶ 24, 26, 27, 28, 29, 30, 33, 34, 35, 45, 59)
- Section 447, Companies Act, 2013Treated as the general punishment provision for fraud, attracted by many sections that make a person 'liable under' or 'liable for action under' Section 447. (¶¶ 23, 31, 32, 33)
- Section 448, Companies Act, 2013Held that the section defines the offence of a false statement but prescribes no punishment of its own, so it must be read with Section 447 and attracts the Section 212(6) bar; cognizance on a private complaint was quashed. (¶¶ 21, 33, 42, 43, 44, 45, 47)
- Section 451, Companies Act, 2013Held that since cognizance under Section 448 was barred, cognizance of repeated default under Section 451 was not made out. (¶¶ 22, 46, 47)
- Section 436(2), Companies Act, 2013Held that a Special Court may try non-Companies Act offences only while trying an offence under the Act; once those offences were quashed, the IPC offences had to go to the court of territorial jurisdiction. (¶¶ 49, 50, 53, 54)
- Section 213, Companies Act, 2013Identified an application to the NCLT under this section, on meeting its eligibility conditions, as the proper remedy for a person alleging fraud in a company's affairs. (¶ 45)
- Section 482, Code of Criminal Procedure, 1973Exercised to quash the Companies Act part of the proceedings, but declined to quash the IPC offences merely because civil suits and a company petition were pending. (¶¶ 41, 55, 56, 57)
Held
- Section 448 lays down the ingredients of a false statement but no punishment, which is imposed only through Section 447; the two are inextricably linked, so an offence under Section 448 is an 'offence covered under section 447' within Section 212(6) and attracts the bar in its second proviso. (¶¶ 33, 42, 45)
- The 2015 amendment substituted 'offence covered under section 447' for a list of sections attracting the fraud punishment, intending to confine the twin bail conditions to Section 447 cases; had only Section 447 itself been meant, the words 'covered under' would be unnecessary. The cognizance bar is a safeguard against frivolous complaints by disgruntled shareholders or rivals. (¶¶ 27, 28, 29, 34, 35)
- What cannot be done directly cannot be done indirectly: a Special Court cannot avoid the Section 212(6) bar by taking cognizance under Section 448 on a private complaint while omitting Section 447. Where a court takes cognizance of a Companies Act offence that makes a person 'liable under' or 'liable for action under' Section 447, it must invoke Section 447 and comply with the bar. (¶¶ 43, 44, 59)
- A complainant alleging fraud in a company's affairs is not remediless; the proper course is an application to the NCLT under Section 213 on satisfying its eligibility conditions. (¶ 45)
- The High Court erred in not noticing its own earlier decision on the identical question; judicial comity and stare decisis required it to follow that decision or refer the matter to a larger bench. (¶¶ 37, 41)
- Section 436(2) does not contain a 'same transaction' test; it permits the Special Court to try other offences only when it is trying an offence under the Companies Act. Once the Companies Act offences were quashed, the IPC offences had to be tried by the court of appropriate territorial jurisdiction. (¶¶ 53, 54)
- Pendency of civil suits and a company petition between the parties is not by itself a ground to quash criminal proceedings or to treat the dispute as purely civil; the IPC offences were not quashed, without any view on their merits. (¶¶ 55, 56, 57)
Result
Appeals partly allowed; High Court judgment set aside; complaint, the cognizance order dated 10.10.2022 and consequential proceedings quashed only as regards Sections 448 and 451 of the Companies Act; Special Court to transfer the complaint within 4 weeks, in consultation with the Principal District Judge, to the court of territorial jurisdiction for trial of the IPC offences on merits; no costs.