Telangana High Court
Mr. S. Gopalakrishnan, vs The State Of Telangana, on 11 March, 2022
Author: G. Radha Rani
Bench: G. Radha Rani
THE HONOURABLE Dr. JUSTICE G. RADHA RANI
CRIMINAL PETITION No.17276 OF 2016
ORDER:
This petition is filed by the petitioner - A4 under Section 482 of Cr.P.C. to quash the proceedings in C.C. No.127 of 2013 on the file of the Special Judge for Economic Offences-Cum-Additional Metropolitan Sessions Judge, Nampally, Hyderabad.
2. The case of the petitioner, in brief, was that the respondent No.2 filed a complaint under Section 621 of the Companies Act, 1956 (for short 'the Act') alleging that in pursuance of investigation under Section 235(1) of the Companies Act, 1956 into the affairs of M/s.Global Trust Bank, it was found that the promoters of the company namely, accused Nos.1 to 3 had concealed material facts and committed various irregularities. The petitioner (A4) during the relevant period i.e. 2000-2001, being the statutory auditor of M/s.Global Trust Bank falsified the accounts and failed to fulfill his statutory duty as per the Act. The petitioner was the signatory to the balance-sheet for the relevant financial year i.e. 1999-2000 and was liable for penal action under Section 233 and Section 628 of the Act. On the above allegations, a complaint was filed against the petitioner and others under Section 621 of the Act for the offence under Section 628 of the Act for filing false and wrong balance-sheet. 2
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3. Heard the learned counsel for the petitioner and the learned counsel representing the Assistant Solicitor General for the respondents.
4. Learned counsel for the petitioner submitted that there was no authority for the Assistant Director of the Serious Fraud Investigation Office to file the complaint. Authorization order dated 08.08.2012 would only authorize the complainant to file complaint against the Company Global Trust Bank Limited (GTBL) and its Directors. There was no authorization to file the complaint against the petitioner as he was admittedly not the Director of the company. No complaint could have been filed against him by the complainant. The criminal proceedings initiated against the petitioner were without the authority of law and no cognizance could have been taken by the Court and the entire proceedings against the petitioner were illegal and required to be quashed. He further contended that the allegation against the petitioner was that he was the signatory to the balance sheet for the relevant financial year when the company committed various irregularities and the auditors' report was silent on the said issue. Section 227 of the Act would state the powers and duties of the auditors. Section 211 of the Act would deal with "Form and contents of balance sheet and profit and loss account". Proviso to both Sections 3 Dr.GRR,J Crl.P.No.17276 of 2016 211(1) and 211(2) would clearly state "Provided nothing contained in this Sub-Section shall apply to any insurance or banking company". Thus, it was clear that Section 211 was not applicable to the company, which was admittedly a banking company. As such, there was no violation of Section 227 read with Section 233 by the petitioner and hence, penalty under Section 628 of the Companies Act would not arise. He further contended that the complaint was barred by limitation. The complaint alleged violation of Section 628 of the Companies Act which prescribed punishment of imprisonment for a term which may extend to two years read with Section 468 of Cr.P.C., the present complaint should have been filed within a period of three years from the date of alleged offence. The complaint filed by the de- facto complainant would relate to the offence alleged to have been committed by the petitioner in respect of balance sheet of the company for the year ended by March, 2001. The returns/certificates were filed by the company to the Registrar of Companies (ROC) within the succeeding year i.e. 2001-2002. That was to say, the offences were alleged to have been committed by the petitioner in 2002, by way of filing false balance sheet, information, etc. Basing on those returns, the authorities were in the knowledge of alleged wrong doings in the matter of the company and alleged offences committed by various persons including the petitioner for the year 2002. Therefore, the 4 Dr.GRR,J Crl.P.No.17276 of 2016 complaint was barred by limitation. Calendar Case No.127 of 2013, filed against the petitioner was an abuse of process of law and prayed to quash the proceedings against the petitioner in the said Calendar Case.
5. Learned counsel representing the Assistant Solicitor General submitted that Sri D.A.Sampath, Assistant Director was authorized to file complaint for the offences committed under the Companies Act, 1956. Powers were drawn from the Ministry of Corporate Affairs vide letter dated 08.08.2012 and also Government Gazette Notification dated 06.07.2012 under Section 621 (1) of the Companies Act, 1956. Section 211 of the Companies Act, 1956 was not relevant to the facts of the present case. They were confined to Section 277 of the Companies Act, 1956. The whole complaint was according to Sections 277, 233 and 628 of the Companies Act, 1956. The complaint was filed under Section 277 and 628 of the Companies Act, 1956 for "penalty for false statement". The complaint was not related to Section 468 of Cr.P.C. Filing of calendar case was never an abuse of process of law and prayed to dismiss the petition.
6. Perused the record.
7. Learned counsel for the petitioner relied upon the judgment of this Court in Criminal Petition Nos.8618 and 8835 of 2013 in 5 Dr.GRR,J Crl.P.No.17276 of 2016 Shri Kersi H.Vachha and another v. State of Andhra Pradesh, represented by the Public Prosecutor, High Court of A.P., Hyderabad and another1. It was also a matter pertaining to Global Trust Bank (e-GTB) and charge-sheet was filed by the Serious Fraud Investigation Office against A1 to A6 in C.C.Nos.124 and 125 of 2013 and the petition was filed by A6 and A3, who were also stated to be the auditors of the company and signatories to the balance sheet at the relevant point of time pertaining to the years 2002-2003 and 1998 to 2002. On similar allegations against the petitioners therein and on the similar contentions raised in the said petition, this Court observed that the proviso to Section 211 of the Companies Act, 1956 exempted banking company from the application of Sub-Section (1) of Section
211. Hence, if the balance sheet did not disclose true and fair facts of the state of affairs of the company, the banking company could not be prosecuted for the offences committed and there was no counter argument to the said submission made by the petitioners' counsel.
8. With regard to the objections on the ground that there was no authorization for the complainant to file complaint against the petitioners, who were auditors, it was held that:
"18. The counsel for R2 contends that the authorization is given not only to prosecute the company and its Directors but also others, as the word etc is used in the said authorization. No doubt, the 1 2017 SCC OnLine Hyd. 498 6 Dr.GRR,J Crl.P.No.17276 of 2016 authorization, in the prologue mentions the word, etc. But while authorizing one D.A. Sampath, who is the complainant herein, it did not specify that apart from Company and Directors, others also should be prosecuted. Hence, the word, etc cannot be understood to mean that prosecution against others was also intended by virtue of the said authorization. Nothing prevents the authorization to clearly specify the persons, against whom complaint is directed to be filed. However, this court was hesitant to allow the petition with regard to the offence under Section 227 of the Act simply on the ground that the authorization was not there, with a doubt that the said error can be rectified subsequently by obtaining proper authorization to prosecute the auditors also. No support could be drawn by either side in support of their respective contentions. The contention of the petitioners, being that since the very basis of the complaint is the authorization, the prosecution gets vitiated in the absence of any authorization, the contention of the respondent is that the lack of authorization does not vitiate the prosecution. But however, a ruling of this court could be picked up by me, which is rendered in Satish & Co., v. S.R.Traders and Ors. , wherein with a reasoning, which is satisfactory to this court, it was held that the lack of authorization at the time of filing of the complaint cannot be rectified subsequently. The Court posed to itself the question whether even in cases where proper authorization letter or power of attorney was not filed, along with the complaint, whether the company can ratify such actions later or whether such authorization letter can be filed later so as to regularize the irregular proceedings. By observing that the object of law in all such cases, that the complaint or suit shall be filed by a person duly authorized, is that, such proceedings will definitely have financial consequences on the company so as to bind the company for the actions of such persons, held that even subsequent authorization would not regularize the irregularity which was there at the time of filing the complaint. Here, in this case, though such interest is not involved in the complainant department, as is involved in case of a company, there should be proper authority to file the complaint. When so much of exercise goes into the decision of 7 Dr.GRR,J Crl.P.No.17276 of 2016 prosecuting a person, as has gone in this case, a complaint cannot be filed casually against a person, without there being any authorization. The complainant in this case is not acting individually and he is acting on behalf of the department, which has authorized him only to do a certain thing. The complainant cannot go beyond the authorization and file the complaint against those persons, in respect of whom he is not authorized. Hence, though, the matter dealt with by this High Court related to a Company, on an analogical plane, it can be applied to this case".
9. In the above case, in the order authorizing the complainant to conduct prosecution, the word "etc.," was used to prosecute the company and the Directors of Global Trust Bank Limited. But in the present case, in the order of authorization, the word "etc.," is also not used. As observed by the Court, in the above case, nothing prevented in the authorization to clearly specify the persons against whom complaint was directed to be filed. The further observations that when so much of exercise went into the decision of prosecution of a person, as had gone in this case, a complaint could not be filed casually against a person, without there being any authorization, the complainant was not acting individually and he was acting on behalf of the department, which authorized him only to do a certain thing and the complainant could not go beyond the authorization and file the complaint against those persons in respect of whom he was not authorized, are valid and also applicable to the facts of this case. 8
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10. Hence, without going into the issue of limitation, it is considered fit to allow the petition quashing the proceedings against the petitioner in C.C. No.127 of 2013 on the file of the Special Judge for Economic Offences-Cum-Additional Metropolitan Sessions Judge, Nampally, Hyderabad, as continuation of proceedings would be a futile exercise and an abuse of process of law.
11. In the result, this Criminal Petition is allowed quashing the proceedings in C.C. No.127 of 2013 on the file of the Special Judge for Economic Offences-Cum-Additional Metropolitan Sessions Judge, Nampally, Hyderabad against the petitioner - A4.
________________________ Dr. G. RADHA RANI, J Date: 11.03.2022 Abb.