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Kerala High Court · body

2000 DIGILAW 289 (KER)

V. Sugandha Lal v. Boby Varghese

2000-06-06

G.SASIDHARAN

body2000
Judgment :- Can the High Court take cognizance of all the offences under the Companies Act and try those offences is the question which arises for consideration. A petition is filed by the petitioner in the winding up petition C.P. No. 18 of 1999 praying that this Court may take cognizance of the offence alleged to have been committed by the Managing Director under Section 629 of the Companies Act (hereinafter referred to as "the Act"). There is a further prayer in the petition to conduct an enquiry as envisaged under Section 340 Cr.P.C. about the alleged commission of the offence under Section 193 read with Sections 191, 199 and 51 IPC and also to direct an officer of this Court to make a complaint to a Magistrate having Jurisdiction. 2. According to the petitioner, the Managing Director of the company filed affidavits and counter affidavits in the case containing false statement made with the intention of subverting justice. In the affidavit filed in support of the petition, certain statements contained in the affidavits and counter affidavits are mentioned which according to the petitioner are false statements. The respondent filed a counter affidavit denying the allegations made against him by way of filing the petition. 3. One of the prayers in the petition being to take cognizance of the offence punishable under Section 629 of the Act, the question which arises for consideration is whether this Court can take cognizance of the offence, punishable under the above section, alleged to have been committed by the respondent. Incidentally, the question whether the Company Court can try the offence punishable under Section 629 of the Act also arises for consideration since if it is found that this Court can take cognizance of the offence, the trial of the case in which the allegation is that the respondent committed offence punishable under Section 629 of the Act also has to be conducted in this Court. 4. According to the learned counsel appearing for the petitioner, the Company Court can take cognizance of the offence punishable under Section 629 of the Act and also conduct trial of the case. 4. According to the learned counsel appearing for the petitioner, the Company Court can take cognizance of the offence punishable under Section 629 of the Act and also conduct trial of the case. It is maintained by the learned counsel that since Section 446 of the Act gives powers to the High Court to entertain of dispose of any suit or proceedings by or against the company, this Court can entertain criminal proceedings by or against the company, In support of the above stand taken by the petitioner, a decision of the Punjab and Haryana High Court in Khosla Fans (India) P. Ltd., (in Liquidation), In re v. Ramesh Khosla, (1983) 53 Com Cas 858 : (1981 Tax LR 244) was cited in which it was held that Section 446 of the Act is a special provision which has vested the High Court with jurisdiction to entertain or dispose of any suit or proceedings by or against the company and that the prosecution sought to be launched by the Official Liquidator on behalf of the company is a proceeding by the company against the acts of the office bearers. On making the above observation, the High Court of Punjab and Haryana held that the High Court can exercise jurisdiction in suits and proceedings including criminal proceedings in appropriate cases by or against the company filed by the Official Liquidator. A reading of the judgment of the above High Court would indicate that the Court held the view that criminal proceedings also can be had in the Company Court on the basis of what is stated in Section 446 of the Act. 5. In the above case which came up for consideration before the High Court of Punjab and Haryana, it was contended that the words "in suit or proceedings by or against the company" are wide enough to include criminal proceedings launched by way of a complaint at the instance of the Official Liquidator. The Court considered the question whether the provisions of Section 446(2) of the Act do not vest any special jurisdiction in the Company Court to entertain or dispose of complaints which are filed for violation of the provisions and for the offences committed under the Act. The Court considered the question whether the provisions of Section 446(2) of the Act do not vest any special jurisdiction in the Company Court to entertain or dispose of complaints which are filed for violation of the provisions and for the offences committed under the Act. In rendering the above decision, the Court observed that the prosecution sought to be launched by the Official Liquidator on behalf of the company is a proceeding by the Company against the acts of the office bearers and hence the High Courts can exercise jurisdiction in suits and proceedings including criminal proceedings. 6. Section 4 of the Code of Criminal Procedure provides for trial of offences under the Indian Penal Code and other laws. Section 4(1) Cr.P.C. says that all offences under the Indian Penal Code shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions contained in the Code. It is in sub-section (2) of Section 4 Cr.P.C. that provision is made regarding trial of offences under other laws. That sub-section enjoins that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions in the Code, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences. 7. A reading of Section 4 Cr.P.C. would indicate that the general law is that all offences under the Indian Penal Code and any other law shall be investigated, inquired into, tried and otherwise dealt with according to the provisions of the Code. But in cases in which there are specific provisions in any enactment in respect of investigation, inquiry or trial, those matters will be governed by those provisions under the Act and not by the provisions of the Code. 8. In this context, it is pertinent to refer to the definition of "offence" contained in Section 2(n) Cr.P.C. which reads as follows : "offence" means any act or omission made punishable by any law for the time being in force and includes any act in respect of which a complaint may be made under Section 20 of the Cattle Trespass Act, 1871 (1 of 1982)". So, the offence made mention of in various provisions of the Code of Criminal Procedure means any act or omission made punishable by any law for the time being in force. The definition of offence takes in any act or omission made punishable by the provisions in the Indian Penal Code as well as by the provisions in any other law for the time being in force. 9. The term "offence" is defined in Section 40 of the Indian Penal Code and as per the above definition, the word "offence" denotes a thing made punishable by the IPC. It is also mentioned in Section 40 IPC that in respect of certain sections mentioned therein, the word "offence" denotes a thing punishable under the IPC or under any special or local law. In Section 3(38) of the General Clauses Act, the word "offence" is defined as follows : "Offence" shall mean any act or omission made punishable by any law for the time being in force." 10. What has to be understood from the above provisions in the different statutes is that the offence made mention of in the Code of Criminal Procedure will take in the offences made punishable by the provisions of any other law. Offence under any law has to be tried as per the provisions of the Cr.P.C. unless and until a different procedure is envisaged under the provisions of the Act which contains penal provisions. 11. Coming to sub-section (2) of Section 4 Cr.P.C., in case a complete procedure is provided in any enactment for the trial of an offence under a special or local law, that procedure will have to be followed for the trial of the offence. Trial of the offence under such a statute need not be conducted as per the provisions of the Code of Criminal Procedure. There may be cases in which a special or local law provides special procedure only for some matters. In such cases with regard to those matters alone, special procedure mentioned in the statute have to be followed and in regard to other matters in respect of which no provision is made in the special statute, the provisions contained in the Code of Criminal Procedure will have to be followed. In such cases with regard to those matters alone, special procedure mentioned in the statute have to be followed and in regard to other matters in respect of which no provision is made in the special statute, the provisions contained in the Code of Criminal Procedure will have to be followed. That being the position of law, the question to be considered is whether there is any special procedure made mention of in the Companies Act for trial of the offences mentioned in that Act. If any special procedure is mentioned in the Act in respect of certain matters, then that special procedure has to be observed or followed only in respect of those matters and in respect of the other matters trial of the offence will have to be conducted as per the provisions of the Code of Criminal Procedure. In case complete procedure is provided under the Act, trial of the offence will have to be conducted as per that procedure made mention of in the Act. 12. Section 621 of the Act says that no Court shall take cognizance of any offence against that Act (other than an offence with respect to which proceedings are instituted under Section 545) which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf. Section 622 of the Act provides that no Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against the Act. Section 624 of the Act says that notwithstanding anything in the Code of Criminal Procedure, 1898, every offence against this Act shall be deemed to be non-cognizable within the meaning of the said Code. 13. Special procedure is provided in the Act for the trial or offences under Section 454 of the Act. Section 624 of the Act says that notwithstanding anything in the Code of Criminal Procedure, 1898, every offence against this Act shall be deemed to be non-cognizable within the meaning of the said Code. 13. Special procedure is provided in the Act for the trial or offences under Section 454 of the Act. Section 454(5) provides that if any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred rupees for every day during which the default continues, or with both, Section 454(5-A) provides that the Court by which the winding up order is made or the provisional liquidator is appointed, may take cognizance of an offence under sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure for the trial of summons cases by Magistrates. That is a special provision which says about the procedure to be followed in the trial of an offence punishable under Section 454(5) of the Act. There also, the provision is that the Court by which the winding up order is made can take cognizance of the offence and also try the offence. Trial of the offence has to be made in accordance with the procedure laid down in the Code of Criminal Procedure for trial of summons cases by the Magistrate. So there is no ambiguity regarding the procedure to be followed for the trial of the offence punishable under Section 454(5) of the Act. 14. There is no special procedure provided for in the Act for the trial of offences. The only provision which says regarding trial of offence is Section 622 of the Act which provides that no Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against the Act. The above provision is Section 622 of the Act would indicate that the trial of offence will have to be in the Criminal Court. The above provision is Section 622 of the Act would indicate that the trial of offence will have to be in the Criminal Court. if the intention of the legislature were to have trial of the offence in the Company Court, there would have been no necessity for making a provision which says that no Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against the Act. Trial of offence under the Companies Act, no doubt, will have to be conducted in accordance with the provisions of the Code of Criminal Procedure subject to the condition that no Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against the Act. 15. Since there is no special procedure made mention of in the Act for trial of offences under that Act, as provided in Section 4 Cr.P.C., the offences under the Act have to be tried as per the provisions of the Code. Regarding taking cognizance of the offence, Section 621 of the Act says that cognizance of the offence can be taken only on a complaint in writing of the Registrar, or of a shareholder of the company or of a person authorised by the Central Government in that behalf. In respect of the offences mentioned in the Indian Penal Code, provision is made in Schedule I Cr.P.C. regarding the Court which can try the offence. In Column (6) of Schedule I, mention is made about the Court which can try the various offences mentioned in the IPC. Schedule II Cr.P.C. deals with classification of offences against other laws. As per Schedule II, offences against other laws if punishable with death, imprisonment for life or imprisonment for more than seven years have to be tried by the Court of Session. If the offence is punishable with imprisonment for three years and upwards, but not more than seven years, the offence is triable by a Magistrate of the first class and if the offence is punishable with imprisonment for less than three years or with fine only, it is triable by any Magistrate. If the offence is punishable with imprisonment for three years and upwards, but not more than seven years, the offence is triable by a Magistrate of the first class and if the offence is punishable with imprisonment for less than three years or with fine only, it is triable by any Magistrate. The last provision in Schedule II of the Code of Criminal Procedure is not applicable in respect of offences under the Companies Act for the reason that in Section 622 of the Act it is stated that no Court inferior to that of a Presidency Magistrate or a Magistrate of the first class shall try any offence against this Act. Classification of offences as mentioned in Schedule II Cr.P.C. is applicable to offences under the Act subject to the rider that no Court inferior to that of a Presidency Magistrate or Magistrate of a first class shall try any offence against that Act. 16. When a person is sentenced to undergo imprisonment, there is deprivation of his personal liberty. Article 21 of the Constitution of India provides that no person shall be deprived of his life or personal liberty except according to procedure established by law. The object of Article 21 is to prevent encroachment upon personal liberty of a person save in accordance with law and in conformity with the provisions thereof. So, Article 21 of the Constitution has to be understood as a provision which says how the personal liberty of a person can be deprived. It can be done only as per the procedure established by law. Any procedure followed for depriving the personal liberty of a person strictly in accordance with the provisions of natural justice cannot be said to be done in accordance with the procedure established by law. Law has to be made by the legislature providing the procedure to be followed for depriving a person of his personal liberty. If there are provisions in an Act which provide for the procedure to be followed for trial of offences under that Act, then it can be said that the trial of offence conducted as per the procedure provided for in the Act and the conviction of the person against whom trial is conducted and the sentence awarded to him by which his personal liberty is curtailed, is made in accordance with the procedure established by law. In so far as there is no procedure mentioned in the Act, trial of offence, conviction of the offender and sentencing him to undergo imprisonment can be made only in accordance with the procedure established by law for the trial of offences under the Indian Penal Code as well as other laws is the Code of Criminal Procedure and hence trial of offences mentioned in the Act except the offence for which special procedure has been provided for in the Act, will have to be as provided in the Code of Criminal Procedure. As regards the Court which can try the offence under the Act except the offence mentioned in Section 454 of the Act, has to be decided on the basis of the provisions in the Code. There is no provision in the Act or in the Code which says that offences under the Act can be tried by the Company Court. 17. The High Court of Punjab and Haryana rendered the decision in Khosla Fans (India) P. Ltd. (in liquidation) In re v. Ramesh Khosla, (1983) 53 Comp Cas 858 : (1981 Tax LR 244) without taking into account the above provisions in the Act as well as in the Cr.P.C. The decision of the above High Court was that the term 'proceeding' used in Section 446(2) of the Act would take in criminal proceedings also. What is stated in Section 446(2) is that the Court which is winding up the Company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain or dispose of any suit or proceeding by or against the company. There has term 'proceeding' can only mean proceeding similar to a suit and in the light of the provisions in the Act and the Code of Criminal Procedure, which had already been referred to, the term 'proceeding' mentioned in Section 446(2) of the Act cannot mean criminal proceedings. The Company Court cannot take cognizance of an offence punishable under Section 629 of the Act. So, the prayer in the petition that this Court has to take cognizance of the offence under Section 629 of the Act, alleged to have been committed by the Managing Director cannot be allowed. 18. The Company Court cannot take cognizance of an offence punishable under Section 629 of the Act. So, the prayer in the petition that this Court has to take cognizance of the offence under Section 629 of the Act, alleged to have been committed by the Managing Director cannot be allowed. 18. There is also request in the petition that this Court may record the finding that it is expedient in the interest of justice to hold an inquiry into the offence alleged to have been committed by the Managing Director of the Company under Section 193 read with Section 191, 199 and 51 IPC and also to direct an officer of this Court to make a complaint under Section 340 Cr.P.C. Since this Court is not in a position to take cognizance of the offence alleged to have been committed by the Managing Director of the Company under Section 629 of the Act. The petition has to be dismissed without prejudice to the right of the petitioner herein to file a separate petition alleging commission of offence in respect of which inquiry can be conducted for filing a complaint under Section 340 Cr.P.C. The application is according dismissed without prejudice to the right of the petitioner herein to file a separate petition alleging commission of offence in respect of which which inquiry can be conducted for filing a complaint under Section 340 of the Code of Criminal Procedure. Application dismissed.