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2017 DIGILAW 109 (ORI)

Seashore Securities Limited v. State of Odisha

2017-01-25

B.R.SARANGI, VINEET SARAN

body2017
JUDGMENT VINEET SARAN, C.J. - The petitioner, Seashore Securities Limited (a company registered under the Companies Act, 1956) has, though filed this application assailing vires of the provisions of the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011 (for short ‘Act, 2011’) and the Odisha Protection of Interests of Depositors (in Financial Establishments) Rules, 2013 (for short ‘Rules, 2013’), but is in fact aggrieved by proceedings initiated against its seven directors, under the provisions of Act, 2011 and Rules, 2013. 2. The factual matrix of the case is that, on the basis of various petitions and information received, an enquiry was entrusted to the Superintendent of Police, Criminal Investigation Department (CID), Crime Branch (CB), Economic Offence Wing (EOW), Odisha, Bhubaneswar to verify the allegations that Seashore Group of Companies (out of which the petitioner company is one) are collecting public deposits to the tune of crores of rupees from members of general public by alluring them with high interest rate, etc. and promising to pay them heavy return. The company, after collecting huge amount of deposits from the members of general public, suddenly closed down their branches and their directors disappeared. After hue and cry, as well as protest from the public, the company settled some of the amount due to the depositors, but still large number of deposits were not returned to the depositors and misappropriated by the company. Consequentially, the company cheated many members of the general public. 3. It is alleged further that the company was accepting deposits and issuing preference shares with guaranteed monthly dividend of 2% for a period of six years, along with one life insurance policy from Tata AIG Life and one accidental insurance from Oriental Insurance Company, etc. But, the said company is not a listed company with Reserve Bank of India in any manner as a Non-Banking Financial Company (NBFC). Therefore, on 18.07.2012 an FIR bearing no.39 of 2012 was registered by the CID, CB (EOW), Odisha under Sections 420 and 120(B) of the Indian Penal Code and Sections 4, 5 and 6 of Prize, Chits and Money Circulation Schemes (Banning) Act, 1978, on the basis of which, on 19.07.2012 an amount of Rs.19,89,444/- was seized by the CID, CB, Odisha, and also seizure was made in respect of various movable and improvable properties of the directors of the company on different dates up to 28.06.2013. 4. 4. At this point of time, the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011 was brought into force on 17.08.2013 with the object of protecting the deposits made by the public in financial establishments. Subsequently, Odisha Protection of Interests of Depositors (in Financial Establishments) Rules, 2013 came into force on 24.09.2013. The Government of Odisha appointed Additional District Magistrate as the competent authority by virtue of notification no.31732 dated 10.10.2013. The Government of Odisha, on 02.12.2013, passed an ad interim order of attachment of the properties of the directors of the petitioner company and transferred the control over the properties to the competent authority, namely, Additional District Magistrate, Cuttack. The competent authority, on 28.12.2013, filed an application before the Designated Court, Cuttack with a prayer to make the ad interim order of attachment absolute and direct the competent authority to sell the attached property by public auction. Then, on 22.03.2014, CID, CB (EOW), Odisha submitted charge-sheet in connection with FIR No.39 of 2012. Accordingly, summonses were issued by the Designated Court on 23.04.2014 to the accused persons, pursuant to which the accused persons, who were directors of the company, appeared before the Designated Court on 09.05.2014. 5. When the matter was thus stood, the Supreme Court directed transfer of investigation of the case to the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) vide judgment and order dated 09.05.2014 passed in W.P.(Civil) No.401 of 2013. Pursuant to the same, the CBI took up investigation and submitted charge-sheet on 07.03.2015 against accused persons under Sections 120B, 420 and 409 of Indian Penal Code, etc. in the Court of learned Special Chief Judicial Magistrate, Bhubaneswar. 6. It is of relevance to note that the petitioner company, challenging vires of the provisions of the Act, 2011 and Rules, 2013 made thereunder, had earlier approached this Court in W.P.(C) No.17852 of 2014. But, by order dated 22.01.2016, the said writ petition was dismissed for nonprosecution granting liberty to the petitioner to file a fresh petition in case the petitioner had any continuing or fresh cause of action. The petitioner, as it seems, has filed this writ application in view of such liberty. 7. But, by order dated 22.01.2016, the said writ petition was dismissed for nonprosecution granting liberty to the petitioner to file a fresh petition in case the petitioner had any continuing or fresh cause of action. The petitioner, as it seems, has filed this writ application in view of such liberty. 7. A perusal of FIR No.39 (EOW) dated 18.07.2012 (Annexure-2 series) would show that it was lodged by the Deputy Superintendent of Police, EOW, CID, CB, Bhubaneswar against seven accused persons, namely, (1) Sri Prasant Kumar Dash; (2) Sri Pravat Kumar Dash; (3) Smt. Jyotirani Sarangi; (4) Smt. Shantipriya Dash; (5) Smt. Prativa Dash; (6) Sri Suratha Das and (7) Sri Manoj Kumar Natha. Accordingly, on 22.03.2014, final form was submitted against the accused persons named in the FIR. In pursuance of the direction given by the Supreme Court in judgment and order dated 09.05.2014 passed in W.P.(Civil) No.401 of 2013, the case, which had been registered by the CID, CB (EOW), Odisha on FIR No.39 of 2012, stood transferred to the CBI and ED, which, as already stated, submitted final form on 07.03.2015 against the very same accused persons. Those accused persons may be Managing Director or Directors or Agents of the company, but the criminal cases have been lodged against them individually. Accordingly, the application under Section 4(3) of the Act, 2011 and Rules, 2013 made thereunder has been filed before the Designated Court, i.e., the Court of 1st Addl. District Judge-cum-Designated Court, Cuttack vide Application No.1 of 2014, wherein the petitioner company, which has filed this application assailing the vires of the provisions of the Act, 2011 and the Rules, 2013, is not shown as an accused and the accused persons are the directors of the Seashore Group of companies. 8. District Judge-cum-Designated Court, Cuttack vide Application No.1 of 2014, wherein the petitioner company, which has filed this application assailing the vires of the provisions of the Act, 2011 and the Rules, 2013, is not shown as an accused and the accused persons are the directors of the Seashore Group of companies. 8. The petitioner, while challenging the vires of the certain provisions of the Act, 2011 and Rules, 2013 made thereunder, is said to be basically affected by the proceedings of Application No. 1 of 2014, titled as State of Odisha v. Prasanta Kumar Dash and others, pending before the 1st Additional District Judge-cum-Designated Court, Cuttack, which is under the provisions of the Act, 2011 and Rules, 2013, as would be clear from the prayer made in the application for interim relief, which is reproduced hereunder: “It is, therefore, respectfully prayed that this Hon’ble Court may be pleased to: a) grant ad-interim ex-parte stay of the proceedings bearing case No 01 of 2014 titled as “State of Odisha represented through Additional District Magistrate-cum-Competent Authority, Cuttack Versus Prasanta Kumar Dash and others” pending before the learned Addl. District Judge Cum Designated Court, Cuttack: b) pass such order(s) or further orders(s) as may be deemed fit and proper.” 9. A perusal of the array of the parties of the said case (Application No. 1 of 2014) would make it clear that it is filed by the State of Odisha against seven opposite parties, who are all individuals. The individuals, who are the opposite parties in the said case, may be Directors, or associated with some of the Seashore Group of Companies, but this petition has been filed by Seashore Securities Limited. In the description, some of the opposite parties before the Designated Court are not even connected with Seashore Securities Ltd., just as opposite party no.6 therein, Satyajit Mohanty, is connected with Seashore Agricultural Promotion Company Pvt. Ltd. and is not described as to be connected with Seashore Securities Ltd. Just like that, some other opposite parties before the Designated Court are connected with Seashore Foundation or Seashore Courier and Cargo Pvt. Ltd. etc. 10. 10. By the earlier order dated 02.12.2013 passed under the said Act, provisionally attaching certain properties, what is noteworthy is that the name and address of the owner of the properties sought to be attached, which have been given in the scheduled of properties, are that of all individuals, and are those of seven opposite parties before the Designated Court and not any property of the Company. 11. The Seashore Group of Companies may consist of more than two dozen separate companies, but the properties which have been attached, or the properties which are affected, are the properties of the individuals, who alone could be affected parties and the Seashore Securities Ltd, which is the petitioner in this case, cannot be said to be a person (juristic person) which is affected and would have a locus to file this writ petition. 12. In Heavy Engineering Mazdoor Union v. State of Bihar, AIR 1970 SC 82 : (1969) 1 SCC 765 , the apex Court described the essential characteristics of a company as follows: “A company has several essential characteristics which include: (a) A company must be incorporated or registered under the prevalent Act. (b) A company is an artificial legal person who has rights and duties at law. (c) The juristic personality of a company is quite distinct from the individual persons forming the company. It has the right to own and transfer property and it can sue and be sued by its members and non-members. (d) A company can only be created by law and dissolved by law and so it has a perpetual existence. (e) A company acts through natural persons but uses the common seal as its signature. The law recognizes an incorporated company as a juristic person separate and distinct from its members. The new personality of an incorporated company emerges from the moment of its incorporation and its rights and obligations are different from those of its shareholders. The company in holding its property and carrying on its business is not the agent of its shareholders.” 13. In Commissioner of Income Tax, Madras v. Shri Meenakshi Mills, AIR 1967 SC 819 , the apex Court held as follows: “From juristic point of view, a company is a legal personality entirely distinct from its members. The company in holding its property and carrying on its business is not the agent of its shareholders.” 13. In Commissioner of Income Tax, Madras v. Shri Meenakshi Mills, AIR 1967 SC 819 , the apex Court held as follows: “From juristic point of view, a company is a legal personality entirely distinct from its members. A company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members.” 14. In Lalita Jalan v. Bombay Gas Co. Ltd., (2003) 6 SCC 107 , the apex Court held as follows: “The Companies Act, 1956 is entirely different from those statutes which basically deal with offences and punishment like the Indian Penal Code, TADA, etc.” 15. The above being the position, this writ petition, which is primarily challenging the proceedings under the provisions of the Odisha Protection of Interests of Depositors (in Financial Establishments) Act, 2011 and Rules, 2013 made thereunder (Orissa Act 21 of 2013), under the garb of challenging the vires of certain provisions, would thus not be maintainable at the instance of the present petitioner, which is Seashore Security Ltd. 16. This petition is, thus, dismissed. Petition dismissed.