Madras High Court
The Official Liquidator vs R.Vijayakumar on 1 March, 2013
Author: K.K.Sasidharan
Bench: R.Banumathi, K.K.Sasidharan
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:01.03.2013 CORAM: THE HONOURABLE MRS.JUSTICE R.BANUMATHI AND THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN O.S.A.Nos.463, 464/2012 and 61/2013 and M.P.(MD)Nos.1,1/2012 and 1/2013 O.S.A.No.463/2012: ----------------- 1.The Official Liquidator , High Court, Madras, As Official Liquidator for Anubhav Plantations Limited (in liquidation) 2.M.Ravindran, Senior Advocate, Administrator, Anubhav Group of Companies, (in liquidation) : Appellants Vs. 1.R.Vijayakumar 2.State represented by The Superintendent of Police, CBCID, Sterling Complex, Guindy, Chennai. : Respondents O.S.A.No.464/2012: ----------------- 1.The Official Liquidator , High Court, Madras, As Official Liquidator for Anubhav Plantations Limited (in liquidation) 2.M.Ravindran, Senior Advocate, Administrator, Anubhav Group of Companies, (in liquidation) : Appellants Vs. R.Vijayakumar : Respondent O.S.A.No.61/2013: ---------------- State represented by The Superintendent of Police, CBCID, Sterling Complex, Guindy, Chennai-600 032. : Appellant Vs. 1.R.Vijayakumar 2.Anubhav Plantations Limited, (in Liquidation), Rep. by the Official Liquidator, Rajaj Salai, Chennai-600 001. 3.M.Ravindran, Administrator, M/s.Anubhav Plantations Limited, Madras Bar Association, Chennai-600 104. : Respondents PRAYER in O.S.A.Nos.463 and 464/2012: Original Side Appeals are filed under Order XXXVI Rule 9 of OS Rules and Under Section 483 of Companies Act, 1956 r/w Clause 15 of the Letters Patent against the orders dated 06.01.2011 and 03.03.2005 made in C.A.Nos.1701 of 2010 and 1450 of 2002, respectively, in C.P.No.130 of 1999 passed by this Court. PRAYER in O.S.A.No.61/2013: Original Side Appeal is filed under Order 36 Rule 1 of the O.S. Rules, 1994 read with Clause 15 of the Letters Patent praying to set aside the order dated 06.01.2011 passed by this Court in Company Application No.1701 of 2010 in Comp.Petition No.130 of 1999. -------------------------------------------------------- For Appellants in O.S.A. : Mr.Ravindran, Nos.463 and 464 of 2012 Senior Counsel and For Respondents 2 and 3 in O.S.A.No.61 of 2013 -------------------------------------------------------- For Respondent No.1 in : Mr.R.Thiagarajan O.S.A.Nos.463 of 2012 and 61 of 2013 and For Respondent in O.S.A.No.464 of 2012 -------------------------------------------------------- For Appellant in O.S.A.No. : Mr.Venugopal 61 of 2013 and For Respondent No.2 in O.S.A.No.463 of 2012 -------------------------------------------------------- ********* COMMON JUDGMENT
********** K.K.SASIDHARAN, J.
The official liquidator and the Superintendent of Police, CBCID, are aggrieved by the order passed by the Company Court in its exercise of inherent jurisdiction to quash the criminal proceedings pending against the first respondent in O.S.A.Nos.463 of 2012 and 61 of 2013 before the XI Metropolitan Magistrate Court, Saidapet, Chennai, in C.C.No.6535 of 2002 (after examining 44 witnesses and marking 85 documents on the side of the prosecution) initiated on the basis of the order passed by the Company Court earlier and confirmed by the Division Bench.
BACKGROUND FACTS:
2. M/s.Anubhav Plantations Limited (in liquidation) represented through its Director Mr.C.Natesan, entered into an agreement with Thiru.Vijayakumar (hereinafter referred to as the 'respondent') for purchasing larger extent of property. We are now concerned only with respect to the property in Survey Nos.6/1, 8/1, 19/2C, 19/2D, 20, 27/1 and 27/2 in Kazhipattur Village. The respondent, pursuant to the agreement entered into by him with C.Natesan, representing Anubhav Plantations Limited, agreed to assign 12.32 1/2 acres of land at Kazhipattur Village. Though the respondent registered the document conveying the property, it was made out subsequently that he was not having valid title to convey 6.81 acres of land. The respondent proved his title only with respect to 5.51 = acres of land. He received a total consideration of Rs.1 Crore and 53 lakhs. After adjusting the value of 5.51 = acres of land, viz., Rs.62,04,375/-, he has to refund a sum of Rs.90,95,625/-. In the meantime, liquidation proceedings were initiated by the Company Court. The Division Bench of this Court, as per order dated 02.11.1999 in O.S.A.No.305 of 2011, appointed Thiru.M.Ravindran, Senior Advocate, as Administrator to look after the affairs of Anubhav Group of Companies. The official liquidator was appointed as the Provisional Liquidator. The Administrator and his team took possession of records and documents belonging to the company in liquidation. The Administrator, on verification of records, found that the respondent conveyed 4.45 acres of Government land out of the total extent of 12.32 = acres registered earlier. The Administrator also found that there were 250 huts in the said land. This resulted in filing a report by the Administrator before the Company Court on 09.11.2001. The respondent filed objection to the memo and submitted that he has received only part payment from Thiru.C.Natesan and he never claimed the ownership of the land in Survey No.20 of Kazhipattur Village. The respondent maintained that the patta of the property in question was cancelled by the Sub-Collector only after the execution of sale deeds and as such, he was no way responsible for the subsequent events.
3. The learned Single Judge, on a perusal of the report, submitted by the Administrator, and the objection raised by the respondent, prima facie found that the records were fabricated to claim ownership over Government land and opined that investigation by the police is absolutely necessary. The learned Judge was of the view that the Government officials were also involved in fabrication of records and as such, comprehensive investigation is required. The learned Judge directed the Crime Branch CID, to investigate the matter. The State was directed to nominate an officer not below the rank of Superintendent of Police to investigate the case.
4. The order passed by the Company Court dated 18 January, 2001, reads thus:
"1. In the memo dated 16.08.2000 filed by the Administrator, it is state that an agreement was entered into an 24.01.1994 by Anubhav Group of Companies with one R.Vijayakumar wherein Vijayakumar has agreed to sell lands of an extent of 5.42 acres in Survey No.20 of Kazhipattu Village. The said Vijayakumar executed the sale agreement dated .01.1994 on the basis of the power of attorneys dated 14.2.1989 executed in his favour by several persons who at that point of time, had only certificates called "Manai Urimai Chandrithazh". Xerox copies of the certificates were produced before this Court. Since no patta had been issued in favour of these persons at the time of execution of the agreement dated 24.01.1994, probably another agreement was entered into on 9.5.1996 between Vijayakumar and Natesan on behalf of Anubhav Group of Companies and the second agreement was entered into on the basis of the rough pattas issued in favour of the persons who had executed power of attorney in favour of Vijayakumar and the total sale consideration was lands at Rs.1,91,25,000/-. It is further stated that Vijayakumar executed several sale deeds in favour of the Natesan between 30.11.1996 and 25.6.1997 conveying lands of an extent of 7 acres 42 cents. It is stated that Vijayakumar also executed 14 sale deeds in respect of lands of an extent of 4 acres 45 cents and these sale deeds remain unregistered. It is also stated that Vijayakumar has received from Anubhav Group of Companies a sum of Rs.1,53,00,000/- towards sale consideration.
2. In the memo, it is also stated that Vijayakumar has sold properties under 39 sale deeds of which 25 sale deeds were registered and 14 remain unregistered. It is stated that in so far as the lands at Kazhipattur village are concerned, out of 12.32 1/2 acres and for the rest of the lands, he did not have title and according to the Administrator, unless Vijayakumar establishes his titles in respect of 6.81 acres in survey Nos.6/1, 8/1, 19/2C, 19/2D,20, 27/1 and 27/2 of Kazhipattur Village, Vijayakumar is liable to refund a sum of Rs.90,95,625/-. It is stated that Vijayakumar has retained one acre land in Kazhipattur and 50 cents of land in muttukadu for which he has a valid title.
3. Notice was ordered to R.Vijayakumar and also to the Government of Tamil Nadu. I heard Mr.T.R.Rajagopalan, learned Additional Advocate General and also the learned counsel appearing for Vijayakumar. Before deciding the lands involved, I feel a detailed investigation is necessary as the following points-on what basis the certificates called "Manai Urimai Chandrithazh" were issued in favour of several persons and who had issued the said certificates and these matters were all required to be thoroughly investigated. Since in the power of attorney deeds it is stated that persons/executors became the owners of the lands even in 1987, the question on what basis the said statement has been made is required to be examined. The question who issued the rough pattas and what was the basis for the issue of the rough patta is also required to be examined. While examining the questions, the investigating officer is directed to keep in mind the fact that the sale agreement was entered into between Vijayakumar and Natesan on 24.1.1994 and rough patta was issued in the year 1995 in favour of the persons who executed the power of attorneys in favour of Vijayakumar, and the investigating officer is also directed to keep in mind the subsequent events that happened in the year 1995 when rough pattas were issued in favour of several persons. The investigating officer is also directed to examine the persons who were holding the post of Tahsildar at the relevant point of time and also the relevant revenue records the investigating officer is directed to examine Natesan, Vijayakumar and also the persons who had issued power of attorney in favour of Vijayakumar and also the persons who had issued power of attorneys in favour of Vijayakumar in connection with the sale of the lands in favour of Anubhav Group of Companies.
4. Since the interest of large number of depositors of Anubhav Group of Companies is involved, I am of the view, the investigation should be conducted by C.B., C.I.D. of the state of Tamil Nadu and the investigation should be done by a higher officers in C.B., C.I.D not lower in rank than that of Superintendent of Police, because the points required to be investigated involve the question regarding issuance of the certificates called "Manai Urimai Chandrithazh" as well as rough pattas in favour of several persons on the basis of which Anubhav Group of Companies had paid the huge funds.
5. The Investigating officer is directed to file the report within a period of one month from the date of receipt of a copy of this order.
6. The Secretary to the Government, Revenue Department, Government of Tamil Nadu is directed to render all assistance to the investigating officer for conducting proper investigation in this matter."
5. The Crime Branch, CID, on the strength of the order passed by the Company Court, dated 18 January, 2001, in Company Petition No.130 of 1999, registered a case in Crime No.1 of 2001, under Sections 467, 468, 471 and 420 of Indian Penal Code against the respondent and others including the then Deputy Tahsildar, Village Administrative Officer, Special Tahsildar (Natham Settlement), Surveyors and Thiru.C.Natesan, Director of Anubhav Group Companies. The First Information Report was registered on 08 March, 2001. The Investigating Officer examined 44 witnesses and recorded statements. The police submitted a preliminary report before the Company Court. The Company Court, on a perusal of records, passed the following order on 04 December, 2001:
"1. That, the Superintendent of Police, Crime Branch II, C.B.C.I.D., Chennai-2, be and is directed to proceed further to prosecute the accused persons named in the report, file a charge sheet, substantiate the charges and proceed further according to law.
2. That, the Police may file a report once in six months setting out the progress of the Criminal prosecution, and if they require any further direction, it is open to them to move this Court.
3. That, the concerned Magistrate Court where the charge sheet is filed, be and is hereby directed to take up this case out of turn, try and dispose of the case as expeditiously as possible.
4. That, the prosecution shall file a memo before the concerned court and bring this direction to the attention of the said court."
6. The Investigating Officer seized 85 documents and after completion of investigation, charge sheet was filed before the XI Metropolitan Magistrate Court, Saidapet, Chennai. The learned Metropolitan Magistrate took the charge sheet on file and registered the case in C.C.No.6535 of 2002.
7. The order passed by the Company Court directing the police to file the charge sheet was challenged by the respondent before the Division Bench in O.S.A.No.401 of 2001.
8. The Division Bench scanned the materials and observed that the learned Single Judge was perfectly justified in directing the registration of case and investigation of the matter. The Division Bench further observed that mere direction to prosecute would not amount to an order imposing punishment. Accordingly, the original side appeal was dismissed.
9. While the prosecution was pending, the Company Court took up the report field by the Administrator making a claim for a sum of Rs.47 lakhs against the respondent. Before the learned Judge, the respondent submitted that the Administrator, during the course of the proceedings, sold an extent of 7.87 1/2 acres of land at the rate of Rs.6.70 lakhs per acre. Though the value of the remaining extent of 4.20 acres of land would come to Rs.27 lakhs, if the valuation was taken at Rs.6.70 lakhs, on the basis of the rate fetched at the subsequent auction, the respondent agreed to pay a sum of Rs.20 lakhs in full and final satisfaction of the claim. The learned Judge accepted the said offer. Accordingly, the respondent paid a sum of Rs.20 lakhs in full satisfaction of the claim. The said order dated 03 March, 2005 is challenged in O.S.A.No.464 of 2012, at the instance of the Official Liquidator and Administrator.
10. While the matters stood thus, the learned Metropolitan Magistrate took the criminal case for trial. The prosecution examined as many as 44 witnesses and marked 85 documents. It was only at the fag end of the trial, the respondent filed an application before the Company Court in Company Application No.1701 of 2010 to quash the criminal proceedings against him on account of the payment of a sum of Rs.20 lakhs in full quit. The learned Judge was of the view that the prosecution against the respondent should have been concluded on account of the payment of a sum of Rs.20 lakhs in full and final satisfaction of the claim made by the Administrator. The learned Judge, without issuing notice to the police, quashed the criminal proceedings against the respondent. The said order dated 06 January, 2011, is the subject matter of challenge in O.S.A.No.463 of 2012, at the instance of the Official Liquidator and Administrator. The very same order is under challenge in O.S.A.No.61 of 2013, at the instance of the police.
SUMMARY OF SUBMISSIONS:
11. The learned Administrator made the following submissions:
(i) The learned Single Judge, having found that the respondent was bound to refund a sum of Rs.90,95,625/- originally, should not have accepted Rs.20 lakhs in full and final satisfaction of the claim made by the Administrator.
(ii) The Company Court was expected to protect the interest of the depositors. The respondent was bound to refund the amount by calculating the total value on the basis of the rate at which he received the consideration from the company. The distress sale amount cannot be the basis for payment by a person who has received more amount.
(iii) Even as per the learned Judge, the value of the property at the rate of Rs.6.70 lakhs would come to Rs.27 lakhs. Even then, the matter was settled for a sum of Rs.20 lakhs.
(iv) The learned Company Court Judge by quashing the criminal proceedings against the respondent virtually sat in appeal over the decision taken by the Division Bench in O.S.A.No.401 of 2001.
(v) The learned Company Court Judge was fully aware that the direction issued by the learned Single Judge earlier for police investigation was confirmed by the Division Bench in O.S.A.No.401 of 2001. The Division Bench directed the respondent to face the trial. Under such circumstances, the Company Court was not justified in quashing the criminal proceedings.
(vi) The order passed by the Company Court earlier on 03 March, 2005 was not for the purpose of quashing the criminal proceedings. In case payment of Rs.20 lakhs was for the purpose of absolving the respondent from criminal proceedings, the Company Court would have passed such a specific order. However, the order dated 03 March, 2005 does not contain any such direction. The said fact was overlooked by the learned Single Judge while passing the order quashing the criminal proceedings.
(vii) There were number of proceedings between the parties which went upto the Supreme Court. Under such circumstances, a valid prosecution initiated by the police, on the strength of the direction given by the Company Court, should not have been quashed, at a later point of time by the successor Judge and that too, by invoking the inherent power.
(viii) The inherent power given to the Company Court was only for the purpose of doing justice to the parties. It was not intended as a jurisdiction to upset the orders passed earlier or to quash the criminal prosecution.
12. The learned Additional Government Pleader appearing on behalf of the appellant in O.S.A.No.61 of 2013 would contend:
(i) The police registered a case and conducted detailed investigation, pursuant to the order passed by the learned Single Judge. The police collected materials and proved the association of the respondent in the act of cheating and forgery of Government records.
(ii) The investigation revealed that the respondent in association with the Government officials fabricated records to appear as if his vendors have absolute right in respect of the property. The Government officials are also accused in the matter. While quashing the proceedings against the respondent, the learned Judge has not considered the gravity of the charges framed against the accused.
(iii) The learned Magistrate has already examined 44 witnesses and marked 85 documents. In spite of having a clear knowledge about the advanced stage of the criminal case, the learned Company Court Judge quashed the proceedings against the respondent.
(iv) The Company Court has no inherent power to upset the criminal proceedings.
(v) In case the respondent was aggrieved, he should have filed a petition to quash the criminal proceedings under Section 482 of the Code of Criminal Procedure or to discharge him from the case by approaching the Magistrate.
13. The learned counsel for the respondent made extensive submissions both on fact and law. He would submit:
(i) The respondent has entered into an agreement with C.Natesan in his individual capacity. The company in liquidation was not in the picture. Therefore, it cannot be said that the respondent has committed an offence with reference to the company in liquidation.
(ii) The respondent made a reasonable offer to refund the amount calculated on the basis of the rate fetched in a subsequent sale made by the Administrator. The Administrator accepted the amount. The amount is still with him. The Administrator was not correct in filing an appeal without refunding the amount of Rs.20 lakhs paid by the respondent.
(iii) The prosecution was initiated on the basis of the order passed by the learned Single Judge. Therefore, the Company Court was fully justified, at a later point of time, to withdraw the prosecution against the respondent.
(iv) The Company Court was given inherent power to do complete justice. The Company Court, having found that the respondent has paid the amount in full and final satisfaction of the claim, rightly absolved him from criminal liability.
(v) The primary charge against the respondent was under section 420 of the Indian Penal Code. The order passed by the learned Single Judge absolving the accused has to be treated as an order compounding the offence.
(vi) The Administrator, by accepting the amount, waived his right to challenge the order.
THE ISSUES:
14. Two substantial questions arise for our consideration in these appeals. They are:
(A) Whether the learned Judge was correct in directing the Administrator to accept a lesser amount, notwithstanding the fact that the respondent has received much more amount from the company towards sale consideration?
(B) Whether the learned Judge was correct in quashing the criminal proceedings at the fag end of the trial, notwithstanding the earlier order passed by the very same Court directing registration of criminal case and the confirmation of the said order by the Division Bench?
ANALYSIS - FACTS:
15. There is no dispute that the respondent has agreed to sell various items of properties to the Director of Anubhav Plantations Limited. According to the respondent, Thiru.C.Natesan, Director of Anubhav Plantations entered into the agreement in his personal capacity and the Company was not in the picture at all. The report filed by the Administrator before the Division Bench and the related records indicate that the amounts were paid only out of the funds of Anubhav Group of Companies. Therefore, it cannot be said that Thiru.C.Natesan, the Former Director of Anubhav Group of Companies entered into the agreement in his personal capacity without the association of the company in liquidation.
16. While considering the legality of the order passed by the Company Court by exercising the inherent jurisdiction to quash the criminal proceedings, the nature of the earlier order passed by the Company Court, directing registration of case and investigation by the police also requires due consideration.
17. The report submitted by the Administrator was carefully considered by the Company Court. The Court found that the Government officials in connivance with real estate promoters fabricated records and a deliberate attempt was made to grab the Government land. The Court formulated certain questions and a specific direction was given to the police to investigate in that line. The investigating officer was directed to conduct the investigation, in the light of the sale agreement entered into between the respondent and Thiru.Natesan on 24 January, 1994 and the patta issued, thereafter, in favour of the persons, who executed the power of attorney in favour of the respondent during the year 1995. The investigating officer was specifically directed to keep in mind all the subsequent events, which includes the execution of sale agreement by the respondent and the sale deed registered thereafter. The order passed by the learned Single Judge dated 18 January, 2001 clearly indicates that a comprehensive investigation was ordered by the Company Court.
18. The investigation, as per order dated 18 January, 2001, was not confined to the agreement executed by the respondent in favour of Natesan. It was a comprehensive investigation to unearth the part played by the Government officials with all concerned, falsification of records and forgery to claim ownership over the Government land. It was only on the basis of the said direction for comprehensive investigation, the police registered a case against the Government officials and the respondent. The investigation proceeded in a right direction. The preliminary report submitted by the Superintendent of Police, Crime Branch was perused by the Company Court and a direction was issued to file the charge sheet as early as possible. The order directing criminal prosecution was challenged by the respondent before the Division Bench. The Division Bench, after hearing both sides, dismissed the appeal as per judgment dated 26 February, 2002 in O.S.A.No.401 of 2001. Therefore, the order directing investigation by the police has become final. In fact, even before passing the order on 04 December, 2001, directing the police to submit the charge sheet, the respondent was made an accused. It was only with a full knowledge about the background facts, the Division Bench confirmed the order passed by the learned Single Judge directing the police to file a charge sheet before the concerned Court. The learned Judge directed the police to file a report once in six months setting out the progress of the criminal prosecution. Liberty was given to the police to seek appropriate directions.
19. The respondent wanted to settle the civil liability. It was only with the said idea, he made a statement before the Company Court about his willingness to pay the land value at the rate at which the land was sold by the Administrator. Even though, a sum of Rs.47 lakhs was due from the respondent, the learned Judge permitted the respondent to pay a sum of Rs.20 lakhs in full quit. Even as per the calculation made by the respondent, he was liable to pay a sum of Rs.27 lakhs. However, the learned Judge accepted the proposal made by the respondent to pay a sum of Rs.20 lakhs in full and final satisfaction of the claim and directed the Administrator to accept the said payment.
20. The Company Court is primarily concerned with the creditors. It is a matter of record that the promoters of Anubhav Plantations Limited cheated several depositors and they lost their hard earned money. The Administrator was appointed by the Division Bench primarily for the purpose of realising the amount by selling the property and to collect the amount from those who were in arrears to the company. Such being the case, the Company Court should have directed the respondent to pay the entire amount due from the respondent, instead of accepting a sum of Rs.20 lakhs in full quit. The respondent is not a man of no means. He has taken the money and executed documents in respect of various items of property which were later found to be the property owned by Government. The respondent should have been directed to pay the entire amount instead of agreeing to his terms to accept a part of the total amount due. We do see considerable force in the argument of the Administrator that the interest of the creditors were sacrificed by accepting a sum of Rs.20 lakhs from the respondent and absolving him from civil liability. Therefore, we are constrained to set aside the order passed by the learned Single Judge dated 03 March, 2005, which is impugned in O.S.A.No.464 of 2012.
21. The next issue is as to whether the Company Court was correct in quashing the criminal proceedings launched against the respondent.
22. While making an offer to settle the matter by paying a sum of Rs.20 lakhs, the respondent has not made it conditional. The respondent wanted to settle the civil liability and it was only for the said purpose, he offered a sum of Rs.20 lakhs in full and final settlement. His prayer before the learned Single Judge was not to absolve him from criminal liability by paying the said amount of Rs.20 lakhs. Therefore, the learned Judge confined the relief by directing the Administrator to receive a sum of Rs.20 lakhs in full and final satisfaction of his claim against the respondent.
23. The respondent earlier moved this Court and obtained anticipatory bail on certain conditions. Thereafter, application was filed to settle the claim.
24. The respondent, after obtaining an order to pay a sum of Rs.20 lakhs in full quit, and subjecting himself to the jurisdiction of the Criminal Court, by cross-examining the witnesses, invented a novel device to quash the proceedings by invoking the inherent jurisdiction of the Company Court.
25. The respondent filed Company Application No.1701 of 2010, to direct the Administrator as well as the official liquidator to file appropriate applications before the XI Metropolitan Magistrate Court, Saidapet, Chennai, to compound the offence. The respondent prayed for an alternative relief of dropping further proceedings or a declaration, declaring the criminal proceedings as abated, on account of the settlement.
26. The Administrator filed a report with reference to the application filed by the respondent in Company Application No.1701 of 2010. The Administrator, in his report, submitted that the trial was over and the petition was filed belatedly after a period of five years.
27. The learned Judge, without considering the background facts, including the order passed by the Division Bench confirming the order directing prosecution against the respondent, quashed the criminal proceedings against the respondent. Even though the official liquidator, in his report, very clearly stated that the trial is over meaning thereby the criminal case is in the final stage, quashed the prosecution against the respondent, without even issuing notice to the police.
28. The learned Single Judge invoked the inherent jurisdiction under Rule 9 of the Companies (Court) Rules, 1959 to quash the prosecution initiated against the respondent. Before us, the Administrator contended that while quashing the proceedings, the learned Single Judge virtually overruled the judgment of the Division Bench confirming the order directing registration of crime and conducting investigation against all accused including the respondent.
29. The inherent jurisdiction given to the Court is only for the purpose of doing justice. In case there are substantive provisions dealing with a particular matter, necessarily the parties should invoke such provisions.
30. The proceedings were conducted before the Magistrate Court in accordance with the provisions of the Criminal Procedure Code. The Magistrate has taken cognizance of the matter and the case was taken on file as a calendar case. The Magistrate, after giving due opportunity to the accused, framed charges against all the accused including the respondent. Nothing prevented the respondent from filing a petition for discharge or a revision petition against the order framing charges. The respondent suddenly woke up from slumber and filed an application before the Company Court, on the basis of the earlier order accepting a sum of Rs.20 lakhs in full quit. It is to be mentioned here that the order accepting a sum of Rs.20 lakhs was made on 03 March, 2005. It was only thereafter the trial commenced and several witnesses were examined before the criminal Court. The respondent actively participated in all those proceedings. It was only long thereafter, he has come up with the company application to quash the criminal proceedings. The application was filed on 23 October, 2010 virtually after a period of five years from the earlier order dated 03 March, 2005, accepting a sum of Rs.20 lakhs from him in full and final satisfaction of the claim. The fact that the respondent has not made a request to accept a sum of Rs.20 lakhs as a condition precedent for absolving him from criminal proceeding clearly shows his modus operandi. He wanted the Court to accept his offer without knowing the hidden agenda and thereafter, to come up with a belated application to absolve him from liability.
31. The learned counsel for the respondent contended that the official liquidator accepted the money and as such, he was not justified in filing appeal against the order quashing the criminal proceedings against the respondent. We are not in a position to agree to the said contention for more than one reason. The order accepting the suggestion made by the respondent to settle the matter by receiving a sum of Rs.20 lakhs was made on 03 March, 2005. The official liquidator, at that point of time, was not aware that by making use of the said order, the respondent would come, at a later point of time, to quash the criminal proceedings lodged against him. The fact that the Administrator accepted the amount, pursuant to the order passed by this Court, would not go to show that he has agreed to relieve the respondent from criminal liability.
32. The civil liability in a matter of this nature is entirely different from the criminal liability. The settlement was only in respect of the civil liability. The criminal case launched on the basis of the order passed by the Company Court was in relation to certain offences against the State. The charge sheet filed by the police before the learned Magistrate shows that the prosecution alleged that the respondent in collusion with the Government officials fabricated the Government records and attempted to grab the Government land. The offence is, therefore, primarily against the State. Even if the Administrator wanted to help the respondent, still it was not possible for him to compound the offences, for the simple reason that the investigation ordered by the Court was a comprehensive investigation covering larger aspects of the matter. The transaction with the company in liquidation was only a part of the investigation. The Company Court earlier found that there was a deliberate attempt made to fabricate the revenue records and to make unlawful gain. This only prompted the learned Judge to frame certain points and direct the police to investigate the matter under various heads including the head regarding conspiracy. This aspect was overlooked by the learned Single Judge, while absolving the respondent from criminal liability.
33. The background facts also shows that there were several proceedings between the official liquidator and the respondent earlier and some of the matters were taken to the Supreme Court. In fact, while considering a related appeal filed by the respondent in O.S.A.129 of 2008, the Division Bench found that the respondent suppressed the material fact that out of the total lands, he sold some of the Government lands and that charge sheet has been served against him. The said finding recorded against the respondent was confirmed by the Supreme Court in S.L.P.No.27454 of 2008. Such being the case, the application filed by the respondent at the fag end of the trial to quash the proceedings launched against him should have been rejected summarily. We are, therefore, of the clear view that the learned Single Judge was not correct in exercising the inherent jurisdiction under Rule 9 of the Companies (Court) Rules, 1959 to quash the criminal prosecution initiated by the police, on the basis of the direction given by the learned Single Judge and confirmed by the Division Bench, at a later point of time.
34. The learned counsel for the respondent contended that even the criminal Court can compound the offence and as such, the learned Judge was fully justified in absolving the accused from criminal liability and the said order should be treated as an order compounding the offence.
35. The Superintendent of Police in his appeal in O.S.A.61 of 2013 contended that charges were framed against the respondent under Sections 467, 468, 471, 120(b) and 109 IPC and as such, there was no question of compounding the offence.
36. The order passed by the learned Judge does not contain any reference about the details of the charges framed against the respondent. The police made a specific charge against the petitioner under section 120(b) of the Indian Penal Code, which relates to criminal conspiracy. The gravity of the offence was not taken note of, while absolving the respondent from criminal prosecution. We do see considerable force in the submission made on behalf of the police that the investigating officer should have been heard before passing the order to quash the proceedings.
37. We have been referred to a large number of authorities by the learned counsel for the respondent in support of his contention that a valid decree, based on compromise, cannot be challenged later and to demonstrate that the inherent jurisdiction is wide enough to render complete justice.
(A) The decision of Supreme Court in Byram Pestonji Gariwala v. Union Bank of India [1992(1) SCC 31] was cited to contend that if not vitiated by fraud, or misrepresentation, compromise decree is binding on parties and operates as res judicata between the parties.
(B) The judgment in Rama Narang v. Ramesh Narang [2006(11) SCC 114] was relied on to explain the position that a consent decree is composed of both a command and a contract, and as such, is a decree passed on adjudication, executable under the Code of Civil Procedure.
(C) The decision of Supreme Court in Ranganayakamma v. K.S.Prakash [2008(15) SCC 673] was relied on to urge the point that the Court will uphold the settlement between the parties, if it is not violative of any statutory provision or public policy envisaged under Section 23 of Contract Act.
(D) The judgment of Supreme Court in Deepa Bhargava v. Mahesh Bhargava [2009(2) SCC 294] was referred to canvass the point that in case the party to the compromise decree had acted upon and taken advantage of a part of decree, it was impermissible to resile thereafter.
(E) The decision of the Supreme Court in Gian Singh v. State of Punjab [2012(5) CTC 526] was cited to canvass the point that if continuation of criminal proceedings would tantamount to abuse of process of law despite settlement and compromise, High Court will be within its jurisdiction to quash the criminal proceedings.
38. There is no dispute that a compromise decree is binding on parties and that the Courts have inherent jurisdiction to render justice. The order passed by the Company Court on 03.03.2005 cannot be characterized as a compromise decree. The order passed by the Court earlier was not to put an end to the criminal proceedings. The decisions on the applicability of compromise decree has no application to the facts of this case.
LEGAL POSITION:
39. There are express provisions in various legislations to redress the specific grievances of litigants. The parties must invoke those provisions to get relief from Courts. The difficulty would arise only in cases there are no such specific provisions governing the matter. It was only to tide over such situations, inherent power is given to the Courts. Every Court must, in the absence of an express provision in the concerned procedure code, be deemed to possess all such powers, as are necessary to do complete justice. Such powers are inherent in all Courts. Inherent power cannot be exercised, in case there are specific provisions governing the field. The inherent power is intended to be used in very exceptional circumstances. Since these powers are inherent in all Courts, its exercise should be self-regulated. It cannot be used in a routine manner to upset orders passed under specific provisions. In case there is a remedy available to the party, the question of exercising the inherent power does not arise. The powers inherent in Courts are not substantive powers. Those are essentially procedural in nature. The exercise of inherent powers, therefore, must be to promote justice and not to conflict with the express powers conferred by the statute.
40. Section 151 of the Code of Civil Procedure confers inherent power on the Court to meet the ends of justice or to prevent abuse of the process of Court. Similarly, under Section 482 of the Code of Criminal Procedure, the High Court has inherent powers to make such orders as may be necessary to give effect to any order under the Code or to prevent the abuse of process of any Court or otherwise to secure the ends of justice. Rule 9 of the Companies (Court) Rules, 1959 saves the inherent power of the Company Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.
THE AUTHORITIES:
41. INHERENT POWER UNDER THE CRIMINAL PROCEDURE CODE:
(i) The Supreme Court in Central Bureau of Investigation v. A.Ravishankar Prasad [2009(6) SCC 351], observed that the Indian Courts have largely inherited provisions of inherent powers from English jurisprudence, which says that the Court has inherent power to protect its process from abuse. The Supreme Court said:
"17. Undoubtedly, the High Court possesses inherent powers under Section 482 of the Code of Criminal Procedure. These inherent powers of the High Court are meant to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to prevent abuse of the process of the court.
18. Inherent powers under Section 482 CrPC can be exercised in the following category of cases:
(i) to give effect to an order under the Code;
(ii) to prevent abuse of the process of court; and
(iii) to otherwise secure the ends of justice."
(ii) The Supreme Court in Renu Kumari vs. Sanjay Kumar [2008(4) Scale 294], scanned the earlier decisions on the scope of inherent power and held:
"6. Exercise of power under Section 482 CrPC in a case of this nature is the exception and not the rule. The section does not confer any new powers on the High Court. It only saves the inherent power which the Court possessed before the enactment of CrPC. It envisages three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under CrPC, (ii) to prevent abuse of the process of court, and (iii) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction. No legislative enactment dealing with procedure can provide for all cases that may possibly arise. The courts, therefore, have inherent powers apart from express provisions of law which are necessary for proper discharge of functions and duties imposed upon them by law. That is the doctrine which finds expression in the section which merely recognises and preserves inherent powers of the High Courts. All courts, whether civil or criminal possess, in the absence of any express provision, as inherent in their constitution, all such powers as are necessary to do the right and to undo a wrong in the course of administration of justice on the principle of quando lex aliquid alicui concedit, concedere videtur et id sine quo res ipsae esse non potest (when the law gives a person anything, it gives him that without which it cannot exist). While exercising the powers under the section, the court does not function as a court of appeal or revision. Inherent jurisdiction under the section, though wide, has to be exercised sparingly, carefully and with caution and only when such exercise is justified by the tests specifically laid down in the section itself. It is to be exercised ex debito justitiae to do real and substantial justice for the administration of which alone the courts exist. Authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has the power to prevent abuse. It would be an abuse of process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers the court would be justified to quash any proceeding if it finds that initiation/continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the report, the court may examine the question of fact. When a report is sought to be quashed, it is permissible to look into the materials to assess what the report has alleged and whether any offence is made out even if the allegations are accepted in toto."
(iii) The Supreme Court in M.A.A.Annamalai vs. State of Karnataka [2010(8) Scale 176], indicated the scope of inherent powers in the following words:
"42. The inherent power should not be exercised to stifle the legitimate prosecution but at the same time no person be compelled to face criminal prosecution if basic ingredients of the offence alleged against him are altogether absent."
(iv) The Supreme Court in State of Maharashtra vs. Arun Gulab Gawali [2010 (8) Scale 542] indicated that the inherent power is to do real and substantial justice and the jurisdiction is discretionary. The Supreme Court said:
"12. The power of quashing criminal proceedings has to be exercised very sparingly and with circumspection and that too in the rarest of rare cases and the Court cannot be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of allegations made in the FIR/complaint, unless the allegations are so patently absurd and inherently improbable so that no prudent person can ever reach such a conclusion. The extraordinary and inherent powers of the Court do not confer an arbitrary jurisdiction on the Court to act according to its whims or caprice. However, the Court, under its inherent powers, can neither intervene at an uncalled for stage nor can it soft-pedal the course of justice at a crucial stage of investigation/proceedings. The provisions of Articles 226, 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973 (hereinafter called as CrPC) are a device to advance justice and not to frustrate it. The power of judicial review is discretionary, however, it must be exercised to prevent the miscarriage of justice and for correcting some grave errors and to ensure that esteem of administration of justice remains clean and pure. However, there are no limits of power of the Court, but the more the power, the more due care and caution is to be exercised in invoking these powers."
(v) The Supreme Court in State of Maharashtra's case cited supra, sounded a note of caution that the Court must exercise care before quashing a prosecution in respect of an offence affecting the Society at large. The Supreme Court observed:
"25.......................................... Thus, while exercising such power the Court has to act cautiously before proceeding to quash a prosecution in respect of an offence which hits and affects the society at large. It should be a case where no other view is possible nor any investigation or inquiry is further required. There cannot be a general proposition of law, so as to fit in as a straitjacket formula for the exercise of such power. Each case will have to be judged on its own merit and the facts warranting exercise of such power."
(vi) The Supreme Court in Dr.Monica Kumar vs. State of U.P. [2008(9) Scale 166] observed that mala fides would be of no ground for quashing the prosecution by exercising the inherent power under Section 482 of the Code of Criminal Procedure. The Supreme Court said:
"31..................................... If the complaint which is made is correct and offence has been committed which will have to be established in a court of law, it is of no significance that the complainant is a person who is inimical or that he is guilty of mala fides. If the ingredients which establish the commission of the offence or misconduct exist, then the prosecution cannot fail merely because there was an animus of the complainant or the prosecution against the accused. Allegations of mala fides may be relevant while judging the correctness of the allegations or while examining the evidence. But the mere fact that the complainant is guilty of mala fides, would be no ground for quashing the proceedings."
(vii) The Supreme Court in Som Mittal v. Govt. of Karnataka [2008(3) SCC 753], deprecated the practice of invoking jurisdiction under Section 482 of the Code of Criminal Procedure as a routine measure. The Supreme Court said:
"18.We may observe here that despite this Court consistently having held in a catena of decisions that inherent power of the High Court should not be exercised according to whims and caprice and it has to be exercised sparingly, with circumspection and in the rarest of rare cases, we often come across the High Court exercising the inherent power under Section 482 of the Code of Criminal Procedure in a routine manner at its whims and caprice setting at naught the cognizance taken and the FIR lodged at the threshold committing grave miscarriage of justice. While it is true that so long as the inherent power of Section 482 is in the statute book, exercise of such power is not impermissible but it must be noted that such power has to be exercised sparingly with circumspection and in the rarest of rare cases, the sole aim of which is to secure the ends of justice. The power under Section 482 is not intended to scuttle justice at the threshold."
42. INHERENT POWER UNDER CIVIL PROCEDURE CODE:
(i) The Supreme Court in K.K. Velusamy v. N. Palanisamy [2011(11) SCC 275], held that power under Section 151 of the Code of Civil Procedure can be exercised to deal with any procedural aspect which is not provided expressly or impliedly in the Civil Procedure Code. The Supreme Court summarised the legal position thus:
"12...................................................
(a) Section 151 is not a substantive provision which creates or confers any power or jurisdiction on courts. It merely recognises the discretionary power inherent in every court as a necessary corollary for rendering justice in accordance with law, to do what is right and undo what is wrong, that is, to do all things necessary to secure the ends of justice and prevent abuse of its process.
(b) As the provisions of the Code are not exhaustive, Section 151 recognises and confirms that if the Code does not expressly or impliedly cover any particular procedural aspect, the inherent power can be used to deal with such situation or aspect, if the ends of justice warrant it. The breadth of such power is coextensive with the need to exercise such power on the facts and circumstances.
(c) A court has no power to do that which is prohibited by law or the Code, by purported exercise of its inherent powers. If the Code contains provisions dealing with a particular topic or aspect, and such provisions either expressly or by necessary implication exhaust the scope of the power of the court or the jurisdiction that may be exercised in relation to that matter, the inherent power cannot be invoked in order to cut across the powers conferred by the Code or in a manner inconsistent with such provisions. In other words the court cannot make use of the special provisions of Section 151 of the Code, where the remedy or procedure is provided in the Code.
(d) The inherent powers of the court being complementary to the powers specifically conferred, a court is free to exercise them for the purposes mentioned in Section 151 of the Code when the matter is not covered by any specific provision in the Code and the exercise of those powers would not in any way be in conflict with what has been expressly provided in the Code or be against the intention of the legislature.
(e) While exercising the inherent power, the court will be doubly cautious, as there is no legislative guidance to deal with the procedural situation and the exercise of power depends upon the discretion and wisdom of the court, and in the facts and circumstances of the case. The absence of an express provision in the Code and the recognition and saving of the inherent power of a court, should not however be treated as a carte blanche to grant any relief.
(f) The power under Section 151 will have to be used with circumspection and care, only where it is absolutely necessary, when there is no provision in the Code governing the matter, when the bona fides of the applicant cannot be doubted, when such exercise is to meet the ends of justice and to prevent abuse of process of court."
(ii) In Manohar Lal Chopra v. Seth Hiralal [AIR 1962 SC 527], the Supreme Court explained the scope of inherent power. The Supreme Court said:
"21............................................These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in Section 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the legislature. This restriction, for practical purposes, on the exercise of those powers is not because those powers are controlled by the provisions of the Code but because it should be persumed that the procedure specifically provided by the legislature for orders in certain circumstances is dictated by the interests of justice."
(iii) The Supreme Court in Padam Sen v. State of U.P., [AIR 1961 SC 218], observed that powers saved by Section 151 of the Code of Civil Procedure are not powers over substantive rights, which a litigant possesses. The Supreme Court said:
"8..................The inherent powers of the Court are in addition to the powers specifically conferred on the Court by the Code. They are complementary to those powers and therefore it must be held that the Court is free to exercise them for the purposes mentioned in Section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature. It is also well recognized that the inherent power is not to be exercised in a manner which will be contrary to or different from the procedure expressly provided in the Code."
(iv) In N.S.Mills v. Union of India [AIR 1976 SC 1152], the Supreme Court observed that the inherent power has its roots in necessity and its breadth is co-extensive with the necessity.
(v) The Supreme Court in Vinod Seth v. Devinder Bajaj [2010(6) Scale 241], observed that inherent power cannot be exercised in conflict with the general scheme and intent of the Code. The Supreme Court said:
"13.............................As the provisions of the Code are not exhaustive, Section 151 is intended to apply where the Code does not cover any particular procedural aspect, and interests of justice require the exercise of power to cover a particular situation. Section 151 is not a provision of law conferring power to grant any kind of substantive relief. It is a procedural provision saving the inherent power of the court to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the court. It cannot be invoked with reference to a matter which is covered by a specific provision in the Code. It cannot be exercised in conflict with the general scheme and intent of the Code. It cannot be used either to create or recognise rights, or to create liabilities and obligations not contemplated by any law."
(vi) The Supreme Court in State of Haryana v. Babu Singh [2007(13) Scale 552], observed that the power under Section 151 has to be exercised in accordance with law. The Supreme Court said:
"17.......................................It is well settled that the relief granted by the courts must be seen to be logical and tenable within the framework of the law and should not incur and justify the criticism that the jurisdiction of the courts tends to degenerate into misplaced sympathy, generosity and private benevolence. It is essential to maintain the integrity of the legal reasoning and the legitimacy of the conclusions. The possession of powers under Section 151 CPC by the courts itself is not sufficient, it has to be exercised in accordance with law. The orders of the courts must emanate logically from legal findings and the judicial results must be seen to be principled and supportable on those findings."
(vii) The Supreme Court in Arjan Singh v. Punit Ahluwalia [2008(8) SCC 348], observed that Section 151 can be resorted to even for the purpose of preserving status quo ante. The Supreme Court said:
"19.We must also take notice of the fact that even a court in exercise of its inherent jurisdiction under Section 151 of the Code of Civil Procedure, in the event of coming to the conclusion that a breach to an order of restraint had taken place, may bring back the parties to the same position as if the order of injunction has not been violated."
(viii) The Supreme Court in Nain Singh v. Koonwarjee [1970(1) SCC 732], held that in case the party has an alternative remedy elsewhere, inherent power cannot be invoked. The Supreme Court observed:
"4.................................Under the inherent power of courts recognised by Section 151 of the Civil Procedure Code, a court has no power to do that which is prohibited by the Code. Inherent jurisdiction of the court must be exercised subject to the Rule that if the Code does contain specific provisions which would meet the necessities of the case, such provisions should be followed and inherent jurisdiction should not be invoked. In other words the court cannot make use of the special provisions of Section 151 of the Code where a party had his remedy provided elsewhere in the Code and he neglected to avail himself of the same. Further the power under Section 151 of the Code cannot be exercised as an appellate power."
(ix) The Supreme Court in Vinod Seth v. Devinder Bajaj [2010(8) SCC 1] observed that Section 151 is not a provision of law conferring power to grant any kind of substantive relief. The Supreme Court said:
"28. As the provisions of the Code are not exhaustive, Section 151 is intended to apply where the Code does not cover any particular procedural aspect, and interests of justice require the exercise of power to cover a particular situation. Section 151 is not a provision of law conferring power to grant any kind of substantive relief. It is a procedural provision saving the inherent power of the court to make such orders as may be necessary for the ends of justice and to prevent abuse of the process of the court. It cannot be invoked with reference to a matter which is covered by a specific provision in the Code. It cannot be exercised in conflict with the general scheme and intent of the Code. It cannot be used either to create or recognise rights, or to create liabilities and obligations not contemplated by any law."
(x) The Supreme Court in Vinod Seth's case cited supra, held that the inherent power is in addition to and complementary to the powers expressly conferred under the Code. The Supreme Court observed thus:
"31. In Ram Chand and Sons Sugar Mills (P) Ltd. v. Kanhayalal Bhargava5 this Court reiterated that the inherent power of the court is in addition to and complementary to the powers expressly conferred under the Code but that power will not be exercised if its exercise is inconsistent with, or comes into conflict with any of the powers expressly or by necessary implication conferred by the other provisions of the Code. Section 151 however is not intended to create a new procedure or any new right or obligation."
43. INHERENT JURISDICTION UNDER THE COMPANIES ACT:
The Supreme Court in NGEF Ltd. v. Chandra Developers (P) Ltd., [2005(8) SCC 219] considered the inherent power of the Company Court under Rule 9 of the Companies (Court) Rules, 1959 and indicated that the inherent power cannot be exercised, in case there is a specific provision contained in another statute to give a relief.
CONCLUSION:
44. The inherent jurisdiction given to the Company Court under Rule 9 of the Companies (Court) Rules, 1959, cannot be used to stifle a valid prosecution launched against the accused. Even though the respondent took anticipatory bail as early as on 29.04.2002 and obtained an order to settle the claim made by the Administrator on 03 March, 2005, he took several years to file petition to absolve him from criminal prosecution. By the time, he filed the petition, the trial was in the final stage. The respondent, without disclosing the material facts, obtained an order absolving him from criminal liability. We are, therefore, of the opinion that the order quashing the prosecution against the respondent is liable to be set aside.
RESULT:
45. In the result, the orders dated 03 March, 2005 and 06 January, 2011 in C.A.Nos.1450 of 2002 and 1701 of 2010 are set aside. The Original Side Appeals are allowed. No costs. Consequently, the connected miscellaneous petitions are closed.
SML To The Superintendent of Police, CBCID, Sterling Complex, Guindy Chennai 600 032