Madras High Court
Mr.Sivananda Rajaram vs M/S.New Shipping Kaisha Ship ... on 3 July, 2023
Crl OP No. 19154 / 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 26.06.2023
PRONOUNCED ON : 03.07.2023
CORAM :
THE HONOURABLE MR. JUSTICE SUNDER MOHAN
Criminal Original Petition No. 19154 of 2021
and
Crl.M.P. No. 10473 of 2021
Mr.Sivananda Rajaram,
Director NSK Ship Management Pvt.Ltd.,
3rd Floor, Khivraj Complex,
477-482 Anna salai
Nandanam, Chennai – 600 035.
Having residence address at
B-23, Chaitanya Nest,
9, Ratnanagar Main Road,
Teynampet, Chennai – 600018. ... Petitioner
Versus
M/s.New Shipping Kaisha Ship Management Pvt.Ltd.,
Represented by its Director,
Mr.Anitha Nanda
Having its registered office at
No.103, First Floor, Sigma Wing,
Raheja Towers, Anna Salai,
Chennai – 600002.
Also at
Ground Floor No.31/A69,
Crystal Court, 11th Street,
A-Block, Anna Nagar East,
https://www.mhc.tn.gov.in/judis
1/19
Crl OP No. 19154 / 2021
Chennai 600012. ... Respondent
PRAYER : Criminal Original Petition filed under Section 482 of the
Criminal Procedure Code seeking to call for the records in Spl.C.C. No.
2 of 2021 pending before the XVI Additional City Civil Court, Chennai
and quash the same against the petitioner herein.
For Petitioner : Mr. K.M. Aasim Shehzad for
M/s. B.F.S. Legal.
For Respondent : Mr. A.R. Ramanathan.
ORDER
The petition is to quash the complaint filed for the alleged offences under Sections 447 and 452 of the Companies Act, 2013 [hereinafter referred to as 'the Act' for the sake of convenience] read with Section 415, 403, 405, 408, 425, 378 and 120 of the Indian Penal Code.
2.It is alleged in the complaint that the petitioner was appointed as Marine Manager in the respondent's company on 09.05.2018; that ever since the appointment, he was incharge of the business operation of the respondent company and he operated the bank account; that he was handed over the laptop along with software and he was aware of all the confidential business information; that the respondent through its parent https://www.mhc.tn.gov.in/judis 2/19 Crl OP No. 19154 / 2021 company in Singapore had an agreement with the company by name 'Daitoh Trading Company Limited, Japan' [hereinafter referred to as 'Daitoh' for the sake of convenience] for management of ships; that around June 2020, the petitioner connived and colluded with its customer Daitoh and made them terminate their agreement with the respondent's parent company for ship management; that on 12.06.2020, the said Daitoh had issued a termination notice; that even while he was working with the respondent without the knowledge of the respondent incorporated a separate company as early as in June 2020 by the name 'NSK Ship Management Pvt. Ltd.,' which had an identical name and operating pattern as that of the respondent's company; that on 15.07.2020, the petitioner was appointed as Director in the said company although he was in employment with the respondent company; that thereafter the respondent came to know that Daitoh had entered into an agreement for the management of the vessels with the company which was incorporated by the petitioner; that the petitioner who was aware of the technical know-how, operational intellect, systems and contracts, entire business planning material and other software has committed theft of the same; that he had also lured the other employees and had given jobs to them in the new company; that he had also not returned the https://www.mhc.tn.gov.in/judis 3/19 Crl OP No. 19154 / 2021 laptops handed over to him; that because of the wrongful act committed by the petitioner, the respondent suffered a loss of Rs.1,00,00,000/- (Rupees one crore only) to the company; and that the complaint was filed before the Special Court constituted under the Act since the Special Court had jurisdiction to try the offences.
3. (a)The learned counsel for the petitioner submitted that the main allegation against the petitioner is that he had committed fraud and caused loss to the respondent company by incorporating and joining a company which had a similar name and operating pattern as that of the respondent company and diverted the business of management of the vessels of Daitoh. The allegations, even if accepted to be true, would not attract any of the offences alleged. The petitioner has a fundamental right to pursue his profession. Merely because Daitoh had terminated the agreement with the respondent's company and had entered into an agreement with the company in which the petitioner joined as Director, it cannot be said that the offences are made out. That apart, even assuming that there is a fraud and wrongful loss caused to the company, which is punishable under Section 447 of the Act, the procedure under the Act ought to be followed. The procedure is provided in Chapter XIV of the https://www.mhc.tn.gov.in/judis 4/19 Crl OP No. 19154 / 2021 Act. The respondent can give a complaint to the Registrar of Companies, and if the Central Government is of the view, on receipt of the report from the Registrar, that the case has to be investigated by the Serious Fraud Investigation Office [hereinafter referred to as 'SFIO' for the sake of convenience], the same can be referred to SFIO. However, no such procedure has been followed. That apart, Section 212(6)(ii) of the Act states that the Special Court shall not take cognizance of any offence under Section 447 of the Act except on a complaint by the Director of SFIO or by any officer of the Central Government. Hence, the cognizance taken by the learned Magistrate on the complaint given by the respondent is not maintainable.
(b) The learned counsel further submitted that the other offences of the Indian Penal Code are not made out and in any event, it can also be investigated by the SFIO.
(c)Further, the learned counsel also submitted that the petitioner had sent the laptop by courier on 24.08.2021. Since the offence under Section 452 of the Act is quasi-criminal in nature and is only meant to provide a speedy mechanism for the recovery of property, the fact that https://www.mhc.tn.gov.in/judis 5/19 Crl OP No. 19154 / 2021 the petitioner had returned the property would absolve him from the offence under Section 452 of the Act. The learned counsel relied upon the following Judgments in support of his submissions;
(i)Judgment of the Honourable Supreme Court in Abhilash Vinodkumar Jain Vs. Cox & Kings (India) Ltd., & Ors. reported in (1995) 3 SCC 732;
(ii)Judgment of the Honourable Supreme Court in Lalita Jalan & Anr. Vs. Bombay Gas Co.Ltd. & Ors reported in (2003) 6 SCC 107;
(iii)Judgment of the Honourable Supreme Court in Shubh Shanti Services Ltd. Vs. Manjula S. Agarwalla & Ors. reported in (2005) 5 SCC 30;
(iv)Judgment of this Court in Doraisamy & Ors. Vs. The state rep. by the Inspector of Police & Anr. in Crl.O.P.No. 10969 of 2017 dated 25.04.2019;
(v)Judgment of this Court in Upendra Hosdrug Sundar Kamath & Ors. Vs. K.G.Inian in Crl.O.P.No. 18951 of 2017 dated 12.01.2022; https://www.mhc.tn.gov.in/judis 6/19 Crl OP No. 19154 / 2021
(vi)Judgment of the High Court of Karnataka at Bengaluru in M.Gopal Vs. Sri Ganga Reddy in Criminal Petition No. 3550 of 2017 dated 21.10.2022;
Further, the learned counsel relied upon the following Judgments in support of his submissions that the powers of this Court under Section 482 of the Criminal Procedure Code are wide and have to be exercised in cases of this nature.
(vii)Judgment of the Honourable Supreme Court in Pepsi Foods Ltd., & Anr. Vs. Special Judicial Magistrate & Anr. reported in (1998) 5 SCC 749;
(viii)Judgment of the Honourable Supreme Court in S.M.S.Pharmaceuticals Ltd. Vs. Neeta Bhalla & Anr. reported in (2005) 8 SCC 89;
(ix)Judgment of the Honourable Supreme Court in Maksud Saiyed Vs. State of Gujarat & Anr. reported in (2008) 5 SCC 668;
4. Per contra, Mr. A.R. Ramanathan, learned counsel for the respondent submitted that the wrongful loss had been caused to the https://www.mhc.tn.gov.in/judis 7/19 Crl OP No. 19154 / 2021 respondent company, which is defined under Section 447 of the Act; that in view of the loss suffered by the respondent, the offence of fraud defined under Section 447 of the Act is made out; that the respondent was entitled to file a private complaint and the allegations have to be adjudicated only before the trial Court and this Court in the exercise of the powers under Section 482 of the Criminal Procedure Code should not conduct a mini-trial to ascertain whether the complainant's version is true or not. The learned counsel further submitted that the petitioner, even during the employment with the respondent, had conspired to start a company and used the technical details, know-how and other confidential information of the respondent company to gain unlawfully by incorporating a new company which had a similar name and same operating pattern. The new company had taken away the business of the respondent's parent company and thus had caused huge loss. Therefore, the learned counsel submitted that the impugned complaint cannot be quashed at the initial stage and the matter has to be adjudicated only before the trial Court. The learned counsel relied upon the following Judgments in support of his submission that this Court while exercising the inherent powers has to be cautious and should exercise only in the rarest of rare cases and not adjudicate disputed facts. https://www.mhc.tn.gov.in/judis 8/19 Crl OP No. 19154 / 2021
(i)Judgment of the Honourable Supreme Court in Vinod Raghuvanshi Vs. Ajay Arora and Others reported in (2013) 10 SCC 581;
(ii)Judgment of the Honourable Supreme Court in State of Karnataka Vs. M.Devendrappa and another reported in (2002) 3 SCC 89;
(iii)Judgment of the Honourable Supreme Court in Rajeshbhai Mujilibhai Patel and Others Vs.State of Gujarat and another reported in (2020) 3 SCC 794;
(iv)Judgment of the Honourable Supreme Court in Sampelly Satyanarayana Rao Vs. Indian Renewable Energy Development Agency Limited reported in (2016) 10 SCC 458;
(v)Judgment of the Honourable Supreme Court in Neeharika Infrastructure Pvt.Ltd., Vs. State of Maharashtra and Others reported in (2021) SCC Online SC 315;
(vi)Judgment of the Honourable Supreme Court in State Vs. M.Maridoss and Another reported in (2023) 4 SCC 338;
(vii)Judgment of the Honourable Supreme Court in State of Maharashtra Trhu Cbi Vs. Vikram Anantrai Doshi reported in (2014) https://www.mhc.tn.gov.in/judis 9/19 Crl OP No. 19154 / 2021 15 SCC 29;
5. This Court finds that the allegation with regard to the offence under Section 452 of the Act is that the petitioner had retained the laptop. This offence is quasi criminal in nature. It is well settled that the said offence has been incorporated only to provide a speedy remedy for the company to retrieve its property. Admittedly, the petitioner sent the laptop on 24.08.2021 by courier. In a connected quash petition in Crl.O.P. No. 5103 of 2021 filed by the other employees of the respondent company, following the Judgment of the Honourable Supreme Court, this Court had held as follows;
“5. This Court finds that it is well settled that the offence under Section 452 of the Act which is pari materia with Section 630 of the Companies Act, 1956 is quasi criminal. It is also well settled that the provision is intended to provide a speedy mechanism for recovery of any property belonging to the company withheld wrongfully by any person. The Act provides that the Court trying an offence may order an employee to deliver the wrongfully withheld property and the failure to comply with the said order is punishable with an imprisonment and fine. In the https://www.mhc.tn.gov.in/judis 10/19 Crl OP No. 19154 / 2021 instant case, the petitioners admittedly have delivered the property said to have been withheld by them. The respondent cannot refute the communications and the receipt of the laptops. The Honourable Supreme Court in Lalita Jalan and Another Vs. Bombay Gas Co.Ltd., and Others reported in (2003) 6 Supreme Court Cases 107 has held as follows;
“17.....Having regard to the purpose for which Section 630 has been enacted viz. to retrieve the property of the company and the salient features of the statute (Companies Act) it is not possible to hold it as a penal provision as the normal attributes of crime and punishment are not present here. It cannot be said to be an offence against the society at large nor is the object of awarding sentence preventive or reformative. In such circumstances the principle of interpretation relating to criminal statutes that the same should be strictly construed will not be applicable.” Therefore, this Court is of the view that the petitioner cannot be prosecuted for the offence under section 452 of the Act.
6. As regards the offence under Section 447 of the Act, this Court finds that the procedure prescribed for investigating the said offence is https://www.mhc.tn.gov.in/judis 11/19 Crl OP No. 19154 / 2021 provided in Chapter XIV of the Act. A detailed mechanism is provided under the Act. It deals with the power of the Registrar of Companies to conduct an enquiry and submit a report to the Central Government. The Central Government may, on such report or on a report of any inspector appointed by the Central Government may, direct an investigation by SFIO. The Central Government may also direct such an investigation, suo motu, if it is in the public interest. Section 212 of the Act provides for an investigation by SFIO. What is relevant for the purpose of discussion in the instant case is Section 212(6)(ii) of the Act, which is extracted hereunder for better appreciation;
“212. Investigation into affairs of Company by Serious Fraud Investigation Office.— (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 1[offence covered under section 447] of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless—
(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and
(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of https://www.mhc.tn.gov.in/judis 12/19 Crl OP No. 19154 / 2021 such offence and that he is not likely to commit any offence while on bail:
Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs:
Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by—
(i) the Director, Serious Fraud Investigation Office; or
(ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.” The above extracted provision would show that the offence under Section 447 of the Act is cognizable. However, the Special Court shall not take cognizance of the said offence except on a complaint in writing made by the Director, SFIO or any officer authorised by the Central Government. In the instant case, the said procedure has not been complied with. The learned Magistrate ought not to have taken cognizance of the complaint filed by the respondent, which is in violation of the proviso to Section 212(6)(ii) of the Act.
7. This Court in Upendra Hosdrug Sundar Kamath's case (cited https://www.mhc.tn.gov.in/judis 13/19 Crl OP No. 19154 / 2021 supra), had held that in view of the proviso to Section 212(6)(ii) of the Act, a complaint ought to be filed only by the SFIO or by an authorised officer. The relevant observations read as follows;
“ Legislature in their wisdom have included Section 447 in sub Clause 6 of Section 212 to take cognizance by the Court, specifically on the complaint either by the Director, Serious Fraud Investigation Office or any Officer of the Central Government authorized by a general or special order in writing by them. Therefore, merely because the shareholder is given a right to proceed against noncognizable offence, he cannot be permitted to file complaint for cognizable offence in view of specific bar under section 212 [6] of the Companies Act on the basis of certain inferences and assumptions, without any enquiry or investigation or by inspection.” Further, reference is made to an earlier Judgment of this Court in Doraisamy's case (cited supra), which had taken the same view. Therefore, this Court is of the view that the complaint filed for the said offence under Section 447 of the Act is not maintainable.
8. As regards the offence under Section 415 of the Indian Penal https://www.mhc.tn.gov.in/judis 14/19 Crl OP No. 19154 / 2021 Code, there is no deception at the inception. It may at best amount to a breach of promise. Hence, cheating is not made out since the petitioner was admittedly working in the company for two years. Further, the offences under Sections 378, 403, 405, 408, 120 and 425 of the Indian Penal Code are not made out. This Court finds that the allegations that the confidential information and certain technical know-how were taken away by the petitioner are vague. That apart, in order to allege theft of the property, it must be shown that the complainant was deprived of the said property. Assuming that the confidential information and other intellectual property were taken by the petitioner, it cannot be said to be theft because in order to attract the offence of theft, the complainant must be deprived of the property. In the instant case, the nature of the property is intangible, and in such circumstances, it cannot be said that the complainant was deprived of the said property since the alleged confidential information is still available with the complainant. The allegation of misuse of information and making personal gain with the said information would, at best, make the petitioner liable civilly to the respondent. It may amount to a breach of trust as understood commonly and would not amount to a criminal breach of trust. In order to attract the said offence, the nature of the property entrusted and as to how it was https://www.mhc.tn.gov.in/judis 15/19 Crl OP No. 19154 / 2021 misappropriated must be clearly spelt out. Vague allegations that confidential information and technical know-how were misused are insufficient. Even assuming that this offence is made out the complainant ought to have resorted to the remedy under the Act. This Court also finds that the complaint stems out from the grievance of the complainant that the petitioner had started a rival company and had diverted the business of the complainant. Such issues cannot be the subject matter of criminal prosecution in the absence of the necessary ingredients to constitute the offence alleged. The petitioner has other remedies available in law. Since the allegations do not attract the offences, this Court is inclined to quash the complaint.
9. The learned counsel for the respondent relied upon the Judgments of the Honourable Apex Court and this Court to impress upon this Court that the power under Section 482 of the Criminal Procedure Code has to be exercised in rare cases, and this Court cannot conduct a mini trial. However, this Court finds that the complaint, besides being unsustainable in law, does not disclose the alleged offences, and hence the continuation of the impugned proceedings would be an abuse of process of law. The non-interference of this Court would lead to a https://www.mhc.tn.gov.in/judis 16/19 Crl OP No. 19154 / 2021 miscarriage of justice.
10. Accordingly, this Criminal Original Petition is allowed by quashing the complaint in Spl. C.C. No. 2 of 2021, pending before the XVI Additional City Civil Court, Chennai. Consequently, the connected Miscellaneous Petition is closed.
03.07.2023 (2/2) ay Index: Yes/No Speaking Order / Non-Speaking Order Neutral Citation: Yes / No To The XVI Additional City Civil Court, Chennai.
https://www.mhc.tn.gov.in/judis 17/19 Crl OP No. 19154 / 2021 SUNDER MOHAN, J ay Crl.O.P. No. 19154 of 2021 and Crl.M.P. No. 10473 of 2021 https://www.mhc.tn.gov.in/judis 18/19 Crl OP No. 19154 / 2021 Dated: 03.07.2023 (2/2) https://www.mhc.tn.gov.in/judis 19/19