Patna High Court - Orders
Md. Ehsanul Haque @ Md. M.E. Haque vs The State Of Bihar on 7 September, 2022
Author: Ashwani Kumar Singh
Bench: Ashwani Kumar Singh, Anshuman
IN THE HIGH COURT OF JUDICATURE AT PATNA
CRIMINAL MISCELLANEOUS No.75981 of 2019
Arising Out of PS. Case No.-51 Year-2008 Thana- SAHARSA SADAR District- Saharsa
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1. Md. Ehsanul Haque @ Md. M.E. Haque, Son of Late Md. Ganimat Hussain,
Director, the Central Bank Employees, Saving and Credit Self Support
Society Ltd., Supaul; presently assistant Manager, Bank of India, Bihariganj,
District- Madhepura, Resident of Ganimat Hussain Path, Ward No. 22, P.S.-
Supaul, District- Supaul
2. Md. Jamalludin, Son of Late Ganimat Hussain, Resident of Ganimat
Hussain Path, Ward No. 22, P.S.- Supaul, District- Supaul
3. Arbind Kumar Vishwakarma @ Arbind Vishwakarma, Son of Harinandan
Sharma, Board of Director, the Central Bank Employee, Saving and Credit
Self Support Society Ltd., Supaul, Branch- Saharsa, Resident of Mohalla -
Rajhat, P.S.- Baubarhi, District- Purnea
4. Chandra Mohan Thakur, Son of Late Raghunandan Thakur, the Central Bank
Employees, Saving and Credit Self Support Society Ltd., Supaul, Branch,
Saharsa, Resident of Post Office Road, P.S.-Khagaria, District- Khagaria
5. Vijay Khan @ Vijay Kumar Khan, Son of Indra Mohan Khan, Member,
Board of Directors, the Central Bank Employee, Saving and Credit Self
Support Society Ltd., Supaul, Branch-Saharsa, Resident of Village-
Bangaon, P.S.- Bangaon, District- Saharsa
... ... Petitioners
Versus
1. The State of Bihar
2. Sanjay Kumar, son of Late Kaleshwar Prasad Sharma, Resident of Gandhi
Path, P.S.- Saharsa, District- Saharsa
... ... Opposite Parties
======================================================
With
CRIMINAL MISCELLANEOUS No. 77469 of 2019
Arising Out of PS. Case No.-67 Year-2007 Thana- SAHARSA SADAR District- Saharsa
======================================================
1. Md. Ehsanul Haque @ Md. M.E. Haque, Son of Late Md. Ganimat Hussain,
the then Member, Board of Directors, the Central Bank Employees, Saving
and Credit Self Support Society Ltd. Supaul; presently assistant Manager,
Bank of India, Bihariganj, Distt.- Madhepura, Resident of Ganimat Hussain
Path, Ward No.22, P.S.- Supaul, Dist.- Supaul.
2. Md. Jamalludin, Son of Late Md. Ganimat Hussain, Resident of Ganimat
Hussain Path, Ward No.22, P.S.-Supaul, Dist.-Supaul, the then Office
Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022
2/33
Superintendent, the Central Bank Employees, Savings and Credit Self
Support Society Ltd. Supaul.
3. Arbind Kumar Vishwakarma @ Arbind Vishwakarma, S/o Harinandan
Sharma the then Member of Board of Directors, the Central Bank Employee,
Saving and Credit Self Support Society Ltd. Supaul, Branch-Saharsa,
Resident of Mohalla -Rajhat P.S.- Baubarhi, Dist.- Purnea.
4. Chandra Mohan Thakur, Son of Late Raghunandan Thakur, the then
Member of Board of Directors, the Central Bank Employee, Saving and
Credit Self Support Society Ltd. Supaul, Branch Saharsa, Resident of Post
Office Road, P.S.- Khagaria, Dist.- Khagaria.
5. Vijay Khan @ Vijay Kumar Khan, Son of Indra Mohan Khan, the then
Member, Board of Directors, the Central Bank Employee, Saving and Credit
Self Support Society Ltd. Supaul, Branch-Saharsa, Resident of Village-
Bangaon, P.S.- Bangaon, Dist.- Saharsa.
... ... Petitioners
Versus
1. The State of Bihar
2. Manoj Kumar Swarnkar, Son of Ganesh Prasad Swarnkar, Resident of Ward
No.10, Village - Sarahi, P.S.- Saharsa, Dist.- Saharsa.
... ... Opposite Parties
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Appearance :
(In CRIMINAL MISCELLANEOUS No. 75981 of 2019)
For the Petitioners : Mr. Ashhar Mustafa, Adv.
Mr. Tarique Shamim, Adv.
Mr. Ashish Kumar Ranjan, Adv.
Md. Murad Ashraf, Adv.
For the Opposite Party : Mr. Ramchandra Singh, APP
(In CRIMINAL MISCELLANEOUS No. 77469 of 2019)
For the Petitioners : Mr. Ashhar Mustafa, Adv.
For the Opposite Party : Mr. Ramchandra Singh, APP
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CORAM: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH
and
HONOURABLE MR. JUSTICE DR. ANSHUMAN
CAV ORDER
(Per: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH)
9 07-09-2022Criminal Miscellaneous No. 75981 of 2019 filed under Section 482 of the Code of Criminal Procedure (for short 'the Cr.P.C.') has been listed before us in view of a reference Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 3/33 made by a learned single Judge vide his order dated 06.01.2020 wherein he has doubted the correctness of the order passed by another learned single Judge in Criminal Miscellaneous No. 14884 of 2014 (The Central Bank Employees Savings and Credit Self Supported Co-operative Society Ltd. vs. The State of Bihar and Others).
2. In Criminal Miscellaneous No. 75981 of 2019, the petitioners have sought quashing of the First Information Report (for short 'FIR') of Saharsa Sadar P.S. Case No. 51 of 2008 dated 08.02.2008 registered under Sections 406, 420, 409, 120B and 504 of the Indian Penal Code.
3. In the said case, the Opposite Party No. 2 presented a complaint bearing Complaint Case No. 584C of 2007 in the court of Chief Judicial Magistrate against sixteen named accused persons including the petitioners. It was stated therein that the Opposite Party No. 2 had an account bearing Account No. 11698 at the Saharsa Branch of the The Central Bank Employees Savings and Credit Self Supported Co-operative Society Ltd. (for short the 'Co-operative Society') with its principal office at Supaul bearing registration no. BR-05-00-00 O.T.H. 001-2000. The passbook of the aforesaid Account Number was issued to the Opposite Party No. 2 on 09.05.2005. Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 4/33 It was further stated that in the aforesaid Account, Rs.60,300/- was deposited by the petitioner. Further, the witnesses, namely, Shambhu Kumar and Awadhesh Kumar had also deposited Rs.9,890/- and Rs.52,000/- in their Account bearing No. 11684 and 11592 respectively opened in the Co-operative Society. On maturity of the aforesaid deposits, when Opposite Party No. 2 visited Saharsa Branch on 09.05.2006 along with the witnesses, he found that all the employees had run away and the Branch was closed. Thereafter, he visited his agent Lalan Kumar, who used to collect the amount to be deposited in the Account from him daily. He stated that all the officers and employees of the Branch had run away after closing the Branch. He disclosed the name of the officers who were involved in the offence. The accused Dhiraj Kumar Verma was the agent of Account No. 11684 and the accused Durgesh Kumar Singh was the agent of Account No. 11592. It was further stated that on enquiry, he came to know that the accused persons named in the complaint had hired certain persons to allure investors with an intention to cheat them and after getting money deposited by them, they closed the Branch and run away. It was alleged that after opening Branch offices and collecting money from the customers, the accused persons have fled away with sum of Rs. Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 5/33 5 crore approximately.
4. The aforesaid complaint was forwarded by the learned Jurisdictional Magistrate under Section 156(3) of the Cr.P.C. for investigation, pursuant to which, Saharsa Sadar P.S. Case No. 51 of 2008 dated 08.02.2008 was registered under Sections 406, 420, 409, 120B and 504 of the Indian Penal Code and investigation was taken up.
5. Being aggrieved by the institution of the FIR, the petitioners, who claim themselves to be the members of the Co- operative Society, have preferred the present application under Section 482 of the Cr.P.C. for quashing of the FIR.
6. When the matter was taken up before the learned single Judge, it was argued by the petitioners that the Members of the Board of Directors and Chief Executive officer of the Society have no role in managing of the accounts and it is the role of the local branch headed by the Branch Manager to manage the accounts of the Co-operative Society. It was further argued that once the Co-operative Society had gone in liquidation and a liquidator had been appointed, in view of Section 50(2) of the Bihar Self Supporting Co-operative Societies Act 1996 (for short 'the Act of 1996'), no criminal proceeding could have been maintained against these Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 6/33 petitioners. In support of his submission, learned counsel for the petitioners relied upon a judgment passed by a learned single Judge in Criminal Miscellaneous No. 14884 of 2014 (The Central Bank Employees Savings and Credit Self Supported Co-operative Society Ltd. vs. State of Bihar and Others) and its analogues case being Criminal Miscellaneous No. 6586 of 2017 (Md. Ehsanul Haque vs. The State of Bihar and Another), wherein he has quashed the entire criminal proceedings in connection with K. Hat (Sahayak) P.S. Case No. 204 of 2007 arising out of Complaint Case No. 919 of 2007 and Complaint Case No. 1848 of 2006 after coming to the conclusion as under:
"11. From the aforesaid, it is clear that the terms "other legal proceedings" referred in Section 50(2) of the Act shall cover criminal proceedings also. Further, while defining the power of the liquidator in Section 47, sub sections (2) and (3) of the same give him the power to proceed against any person for concealing, withholding or misappropriating any property of the Society. Moreover, Section 47(1)(b) also confers on the liquidator the power to bring, defend or take part in any civil, criminal or administrative action or proceeding in the name and on behalf of the Co- operative Society. This clearly provides that if any criminal conduct is found attributable to any Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 7/33 person connected with the affairs of the Society, the liquidator has the power to institute criminal proceedings also. In that view of the matter also, the present complaint case is not fit to continue."
7. However, the learned single Judge before whom the instant case was placed did not agree with the view taken by the learned single Judge in Criminal Miscellaneous No. 14884 of 2014 and analogous case. As regards the true scope and ambit of sub-section (2) of Section 50 of the Act of 1996, he referred the issue to be decided by a Division Bench of this Court.
8. In order to bring clarity to the matter, we deem it appropriate to extract the operative part of the order dated 06.01.2020 passed by the learned single Judge in the present matter herein under:
"27. To this Court, therefore, it appears that the following question may be referred to the Hon'ble Division Bench of this Court for consideration:-
(1) Whether sub-section (2) of Section 50 of the Bihar Self Supporting Co-operative Societies Act, 1996 may be interpreted to mean and understand that the words "other legal proceedings" occurring thereunder create a bar in lodgment of a first information report against the co-operative society registered under the said Act, its Director(s), Officer(s), Manager(s) or a Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 8/33 member of the society and that it would also cover "the criminal proceeding" against them?"
9. Since the aforesaid reference was desired to be resolved by a Division Bench, the same has come up for consideration before us under the orders of Hon'ble The Chief Justice.
10. A similar question was involved in Criminal Miscellaneous No. 77469 of 2019 (Md. Ehsanul Haque @ Md. M.E. Haque & Ors. vs. The State of Bihar & Anr.), wherein a prayer has been made for quashing the FIR of Saharsa Sadar P.S. Case No. 67 of 2007 dated 18.02.2007 registered under Sections 406, 420, 409, 120B and 504 of the Indian Penal Code. When the said application was placed before another learned single Judge, he also referred the matter to the Division Bench vide order dated 25.02.2020, which reads as under:-
"In pursuance of the office note, let this matter also be placed before Division Bench after taking necessary permission from Hon'ble the Chief Justice so that the hearing of the present application can be done along with Cr. Misc.No. 75981 of 2019."
11. In view of the aforesaid order, Cr. Misc. No. 77469 of 2019 has also been listed before us along with Cr. Misc. No. Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 9/33 75981 of 2019
12. Mr. Ashhar Mustafa, learned counsel appearing for the petitioners in these two applications submitted that the accused persons including the petitioners of these two applications are members /officials of the Co-operative Society in question. He contended that no criminal proceeding could have been maintained in view of Section 50(2) of the Act of 1996 on account of the Co-operative Society being under liquidation. He further contended that by Section 46 of the Act duties of liquidator and by Section 47 of the Act powers of the liquidators have been provided. Thus, the depositors of the Co- operative Society would get return and realize the deposited amount from the liquidator, who would settle all claims of depositors accordingly. He contended that after clearance of debts and liabilities of the Co-operative Society the liquidator would finalize the accounts of the Society and would take approval of the said final account from the Registrars in terms of Section 48 of the Act of 1996. He argued that in view of the specific bar under Section 50(2) of the Act of 1996, no suit or other legal proceedings could be maintained in law and continuation of any such criminal proceeding against the Co- operative Society and its members/officials without leave of the Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 10/33 Registrar is nothing but an abuse of the process of law.
13. According to Mr. Ashhar Mustafa, learned counsel for the petitioners, the power to initiate appropriate proceedings in the court of law for misappropriation of any property of the Co-operative Society vests only with the liquidator in view of the powers conferred upon him in sub-clause (3) of Section 47 of the Act of 1996 and, therefore, any legal proceedings against the Members of the Society initiated at the instance of anyone but liquidator is bad in law and has to be struck down.
14. On the other hand, Mr. Ramchandra Singh, learned Additional Public Prosecutor for the State submitted that in the case of State of Bihar v. P.P. Sharma and Another since reported in (1992) Suppl. (1) SCC 222, the Hon'ble Supreme Court observed that the proceedings in a criminal case commences only after the learned Magistrate takes cognizance of the offences upon consideration of the materials so placed before him. Thus, only because an FIR has been lodged, it cannot be said to be initiation of a criminal proceeding. He contended that in order to arrive at a just and proper conclusion as to the meaning of the words "other legal proceedings" this Court would be required to look into the Act of 1996 and compare it with the provisions of Section 446 of the Companies Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 11/33 Act, 1956. He further contended that in a similar circumstance, in D. K. Kapur vs. Reserve Bank of India and Others since reported in (2001) ILR 1 Delhi 35 which was cited before the learned single Judge in Criminal Miscellaneous No.14884 of 2014 and an analogous case, the Delhi High Court observed that the expression "other legal proceedings" or "proceedings" under Section 446(1) of the Indian Companies Act, 1956 cannot be extended to income tax proceedings as these cannot appropriately be dealt with by the Company Court. He contended that if viewed in the light of object of the Act of 1996 which may be discerned from the preamble and the proviso to sub-section (4) of Section 42 of the Act of 1996, it would be evident that the criminal proceedings, which do not have nexus to the object with which the Co-operative Society is formed under the Act of 1996 are not required to be stayed or quashed. He further contended that the public interests demand that the criminal justice should be swift and sure so that the guilty should be punished while the events are still fresh in the public mind and that innocent should be absolved as early as possible with a fair and impartial trial. He contended that "other legal proceedings" should be read Ejusdem Generis with the preceding word 'suit' as it constitutes a genus. The expression Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 12/33 "criminal proceeding" would not fall within the expression "other legal proceedings".
15. We have heard learned counsel for the parties.
16. Before dealing with the contentions raised before us, it would be important to set out, some of the relevant statutory provisions of the Act of 1996.
The Bihar Self-Supporting Co-operative Societies Act, 1996 Section 42. Offences and Penalties It shall be an offence under this act, if a Cooperative Society:
(a) fails to give a notice, send a return or document or fails to do or allows to be done any act which a Cooperative Society is by this Act or under its bye-laws required to give, send, do or allow to be done;
(b) willfully neglects or refuses to do an act or to furnish information required for the purposes of this Act or does an act forbidden by this Act, or the bye-laws;
(c) makes a return, or willfully furnishes information in any respect false or insufficient;
(d) indulges infraudulent activities concerning the constitution, management and business of the Cooperative Society;
(e) misuses the funds and property of the Cooperative Society; or (f) indulges in the conduct of elections to the Board in "corrupt Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 13/33 practices" as defined under section 123 of the Representation of People Act, 1951. (2) It shall be an offence under this Act, if any person or Cooperative Society contravenes the provisions of this Act or the bye-laws of the Cooperative Society.
(3) An offence by a Cooperative Society shall be deemed to have been also committed by each office-bearer of the Cooperative Society bound by the bye-laws thereof to fulfil the duties whereof the breach is an offence, or if there is no such office-bearer then by each of the directors, unless the office-bearer or director, as the case may be, proves to have attempted to prevent the commission of the offence.
(4) An offence under this section shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to Rs. 2000 (Rupees two thousand), or with both:
Provided that where a person is guilty of misappropriation, fraud, breach of trust, cheating or any other act involving moral turpitude, resulting in a loss to the Cooperative Society, he shall also be punishable under the relevant provisions of the Indian Penal Code, 1860.
45. Appointment of liquidator Where a Co-operative Society is to be liquidated and dissolved and no liquidator is appointed by Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 14/33 the general body or the Tribunal, the Registrar may
(a) appoint any person as a liquidator to wind up the affairs of the Cooperative Society, or
(b) where he is satisfied that the Co-operative Society has no assets and liabilities, issue a certificate of dissolution.
46. Duties of liquidator On his appointment, a liquidator shall
(a) immediately give notice of his appointment-
(i) in the case of a liquidator not appointed by the Registrar, to the Registrar, and
(ii) to each claimant and creditor known to the liquidator.
(b) immediately publish notice of his appointment once a week for two consecutive weeks in a newspaper published or distributed in the place where the Co-operative Society has its registered office and take reasonable steps to give notice of the liquidation in every jurisdiction where the Co-
operative Society carries on business;
(c) place in the notice mentioned in clauses (a) and
(b) a provision requiring any person,
(i) indebted to the Co-operative Society, to render an account and pay to the liquidator at the time and place specified any amount owing,
(ii) possessing property of the Co-operative Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 15/33 Society to deliver it to the liquidator at the time and place specified, and
(iii) having a claim against the Co-operative Society, whether liquidated, unliquidated, future or contingent, to present particulars of the claim in writing to the liquidator not later than two months after the first publication of the notice.
(d) take into custody and control the property of the Co-operative Society;
(e) open and maintain a trust account for the moneys of the Co-operative Society;
(f) keep accounts of the moneys of the Co-
operative Society received and paid out by him;
(g) maintain a separate list of members, creditors and other persons having claims against the Co- operative Society;
(h) where at any time he determines that the Co- operative Society is unable to pay or adequately provide for the discharge of its obligations apply to the Registrar for directions; and
(i) deliver to the Registrar, periodically as the Registrar may require, financial statements of the Co-operative Society in any form that the liquidator considers proper or that the Registrar may require.
47. Powers of liquidator (1)The liquidator may Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 16/33
(a) retain lawyers, accountants, engineers, appraisers and other professional advisors;
(b) bring, defend or take part in any civil, criminal or administrative action or proceeding in the name and on behalf of the Co-operative Society;
(c) carry on the business of the Co-operative Society as required for an orderly liquidation;
(d) sell by public auction any property of the Co-operative Society;
(e) do all acts and execute any documents in the name and on behalf of the Co-operative Society;
(f) borrow money on the security of the property of the Co-operative Society;
(g) settle or compromise any claims by or against the Co-operative Society; and
(h) take all other steps that he considers necessary for the liquidation of the Co-operative Society and distribution of its properties and funds.
(2) Where a liquidator has reason to believe that any person has in his possession or under his control, has concealed, withheld or misappropriated any property of the Co-
operative Society he may apply to the court for proceeding into the matter in accordance with law.
Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 17/33 (3) Where the proceeding under sub-section (2) discloses that a person has concealed, withheld or misappropriated property of the Co-operative Society, the Court may order that person to restore the property or pay compensation to the liquidator on behalf of the Co-operative Society. (4) No liquidator or his relatives shall purchase, directly or indirectly any part of the stock-in- trade, debts or assets of the Co-operative Society.
48. Final Account (1) A liquidator shall pay the costs of liquidation out of the property of the Co-operative Society and shall pay or make adequate provision for all claims against the Co-operative Society. (2) After paying or making adequate provision for all claims against the Co-operative Society, the liquidator shall apply to the Registrar for approval of his final accounts and for permission to distribute in money or in kind the remaining property of the Co-operative Society in accordance with the bye-laws.
(3) Where the Registrar approves the final accounts rendered by a liquidator in pursuance of sub-section (2), he shall-
(a) issue directions with respect to the custody or disposal of the documents and records of the Co- operative Society; and Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 18/33
(b) discharge the liquidator.
(4) Where the Registrar discharges a liquidator pursuant to sub-section (3), he shall issue a certificate of dissolution.
(5) The Co-operative Society ceases to exist on the date shown in the certificate of dissolution, which shall not be later than twenty-four months after appointment of the liquidator.
50. Bar of Jurisdiction of Court.
(1) Save as otherwise expressly provided in this Act, no Civil or Revenue Court shall have any jurisdiction in respect of any dispute required by Section 40 to be referred to the Co-operative Tribunal, or recovery proceedings under Section 41 or dissolution under Sections 43 and 44. (2) While a Co-operative Society is in liquidation under Section 45, no suit or other legal proceedings shall be proceeded with or instituted against the liquidator as much (sic) or against the Co-operative Society or any member thereof on any matter touching the affairs of the Co-operative Society, except by leave of the Registrar and subject to such terms as he may impose.
(emphasis supplied)
17. The object of the Act of 1996 may be discerned from its preamble which reads as under:
Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 19/33 "The Act to provide for the voluntary formation of Co-operative Societies as accountable, competitive, self-reliant business enterprises, based on thrift, self-help and mutual aid and owned, managed and controlled by members for their economic and social betterment and for the matters connected therewith or incidental thereto."
18. The first thing that can be noticed from the preamble of the Act of 1996 is that the same has been enacted to provide for the voluntary formation of Co-operative Societies as accountable, competitive, self-reliant business enterprises, based on thrift, self help and mutual aid by Members for their economic and social betterment. Insofar as the offences and penalties under the Act of 1996 are concerned.
19. The offences enumerated under sub-section (1) to (3) of Section 42 of the Act of 1996 have been made punishable with imprisonment for a term which may extend to one year or with fine which may extend to Rs.2,000 or with both under sub- section (4) of Section 42. However, the proviso to sub-section (4) of Section 42 of the Act of 1996 clearly provides that where a person is guilty of misappropriation, fraud, breach of trust, cheating or any other act involving moral turpitude, resulting in a loss to the Co-operative Society, he shall also be punishable Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 20/33 under the relevant provisions of the Indian Penal Code, 1860.
20. Thus, it would be evident that so far as the offences as mentioned under Section 42 of the Act of 1996 are concerned, they may be dealt with in terms of the provisions of the Act of 1996 but insofar as the offences of misappropriation, fraud, breach of trust, cheating or any other act involving moral turpitude, resulting in a loss to the Co-operative Society is concerned, any person held responsible for that may be proceeded against under the provisions of the Indian Penal Code, 1960 separately.
21. Section 4 of the Cr.PC. provides that all offences under the Indian Penal Code shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions contained in the said Cr.P.C. Sub-section (2) of Section 4 of the Cr.PC. provides that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences.
22. Section 5 of the Cr.PC. provides that nothing contained in this Code shall, in the absence of a specific Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 21/33 provision to the contrary, affect any special or local law for the time being in force, or any special jurisdiction or power conferred, or any special form of procedure prescribed, by any other law for the time being in force.
23. Thus, a conjoint effect of Section 4(2) read with Section 5 of the Cr.PC. is that all offences, whether under the Indian Penal Code or under any other law have to be investigated, inquired into, tried, or otherwise dealt with according to the provisions of the Cr.PC, unless there be an enactment regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences, in which case and enactment will prevail over those of Cr.PC. The jurisdiction under Section 4 of the Cr.PC. is comprehensive and to the extent that till no valid machinery is set up under any Act for investigation or trial, the jurisdiction of the machinery provided under the Cr.PC., cannot be said to have been excluded.
24. At this stage, it must be kept in mind that the allegations made by the complainant in the case in hand is of misappropriation, fraud, breach of trust and cheating. Hence, under the Act of 1996 it has clearly been provided that such Act shall separately be punishable under the relevant provisions of Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 22/33 the Indian Penal Code, which would mean that for such acts either a complaint under Sections 190 and 200 of the Cr.PC. or an FIR under Section 154 of the Cr.PC. can separately be instituted, inquired into and investigated in accordance with law and the persons responsible for committing the offence may be dealt with in terms of the other provisions of the Cr.PC. and may be convicted and sentenced if the Court comes to the conclusion of guilt against them on appreciation of evidence.
25. Section 45 of the Act of 1996 provides for appointment of liquidator. It states that where a co-operative society is to be liquidated and dissolved and no liquidator is appointed by the general body or the Tribunal, the Registrar may appoint any person as a liquidator to wind up the affairs of the Co-operative Society or where it satisfied that the Co-operative-Society has no assets and liabilities, issue a certificate of dissolution.
26. Section 46 of the Act of 1996 provides for duties of the liquidator whereas Section 47 deals with powers of the liquidator.
27. Sub-section (2) of Section 47 of the Act of 1996 provides that where a liquidator has reason to believe that any person has in his possession or under his control, has concealed, Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 23/33 withheld or misappropriated any property of the Co-operative Society he may apply to the court for proceeding into the matter in accordance with law.
28. Sub-section (3) of Section 47 of the Act of 1996 provides that where the proceeding under sub-section (2) discloses that a person has concealed, withheld or misappropriated property of the Co-operative Society, the Court may order that person to restore the property or pay compensation to the liquidator on behalf of the Co-operative Society.
29. Insofar as Section 50 of the Act of 1996 is concerned, sub-section (1) provides that save as otherwise expressly provided in this Act, no Civil or Revenue Court shall have any jurisdiction in respect of any dispute required by Section 40 to be referred to the Co-operative Tribunal, or recovery proceedings under Section 41 or dissolution under Sections 43 and 44. Sub-section (2) of Section 50 of the Act of 1996 provides that while a Co-operative Society is in liquidation, no suit or other legal proceedings shall be proceeded with or instituted against the liquidator or against the Co- operative Society or any member thereof on any matter touching the affairs of the Co-operative Society, except by leave of the Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 24/33 Registrar and subject to such terms as he may impose.
30. The argument advanced on behalf of the petitioner is that the power to initiate an appropriate proceeding in the court of law for misappropriation of any property of the Co- operative Society vests only with the liquidator in view of the powers conferred upon him under sub-section (3) of Section 47 of the Act of 1996 and, therefore, any legal proceedings against the members of the Co-operative Society initiated at the instance of anyone but liquidator is bad in law and has to be struck down is misconceived.
31. The issue involved in the present case is the competence of a private person to launch a criminal prosecution against the members of the society for the act involving misappropriation, fraud, breach of trust, cheating and moral turpitude resulting in the loss to the Co-operative Society.
32. Sub-section (3) of Section 47 of the Act of 1996 only provides for the remedy of restoration of property or payment of compensation to the liquidator on behalf of the Co- operative Society. It does not deal with the penal provisions prescribed under the Indian Penal Code for punishing a person guilty of committing the act of misappropriation, fraud, breach of trust, cheating etc. Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 25/33
33. It is reiterated that the proviso to sub-section (4) of Section 42 of the Act of 1996 specifically provides in unequivocal term that the action against a person guilty of the aforesaid offences resulting in loss to the Co-operative Society shall also be punishable under the relevant provisions of the Indian Penal Code.
34. Thus, the Act of 1996 does not bar the prosecution of any member of the Co-operative Society for the offences under the Indian Penal Code mentioned under the proviso to sub-section (4) of Section 42 of the Act of 1996.
35. The contention advanced on behalf of the petitioner is that the expression "legal proceedings" in sub-section (2) of Section 50 of the Act of 1996 would include criminal proceedings also. His whole thrust of argument is that in view of the expression "other legal proceedings" used in sub-section (2) of Section 50 of the Act of 1996, the prosecution of the petitioners who are members of the Co-operative Society in respect of touching the affairs of the Co-operative Society, no complain under Sections 190 and 200 or FIR under Section 154 of the Cr.PC. would be permissible.
36. The expression "legal proceedings" finds place in several statutes.
Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 26/33
37. In The Governor General In Council vs. Shiromani Sugar Mills Limited (In liquidation), since reported in (1946) 8 Federal Court Reports 40, the issue before Federal Court was whether the leave of the company Court/winding up Court was necessary to be obtained by the Income-tax Officer under Section 171 of the Indian Companies Act, 1913 for initiating recovery proceedings under sub-section (2) of Section 46 of the Indian Income-tax Act, 1922.
38. Section 171 of the Indian Companies Act, 1913 provided for preventing litigation against a company in the process of being wound up, which reads as under:-
"Section 171. When a winding up order has been made or a provisional liquidator has been appointed, no suit or other legal proceedings shall be proceeded with or commenced against the company except by the leave of the court and subject to such other terms as the court may impose."
39. In the said case, the Federal Court held that the term "other legal proceedings" in Section 171 of the Indian Companies Act, 1913 comprise any proceedings by the revenue authorities under Section 46(2) of the Indian Income-tax Act and, accordingly, before forwarding requisite certificate under Section 46(2) to the Collector, which could put the machinery Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 27/33 for collection of the arrears of the income tax as arrears of land revenue into motion, the Income-tax Officer should have applied under Section 171 of the Indian Companies Act for leave of the winding-up Court.
40. The judgment of the Federal Court in Shiromani Sugar Mills (supra) was distinguished by a Constitution Bench of the Supreme Court in S.V. Kondaskar vs V.M. Deshpande and Anrs, since reported in (1972) 1 SCC 438 wherein the issue for consideration before the Apex Court was the scope and meaning of expressions "other legal proceedings" or "proceedings" under Section 446 (1) of the Indian Companies Act which reads as under:-
"446. Suits stayed on winding up order.
(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose."
41. In S.V. Kondaskar (supra) the question which required consideration was whether it was necessary for the Income-tax Officer to obtain leave of the liquidation Court Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 28/33 under Section 446 of the Indian Companies Act, 1956 in order to re-assess a company for escaped income in respect of past years. After hearing the parties, the Apex Court distinguished Shiromani Sugar Mills Limited (supra) on the ground of the proceedings initiated by the Income-tax Department were recovery proceedings after the company had been wound up, whereas in the present case, before it, the Court was dealing with assessment proceedings. It held that the expression "other legal proceedings cover distress and execution proceedings but the expression was not held to cover assessment proceedings"
under the Income-tax Act, 1961 and, therefore, the ratio decided in Shirmonani Sugar Mills Limited (supra) would not apply. It further held that the Income-tax Officer does not perform the functions of a Court as contemplated by Section 446 (2) of the Companies Act and since the Income-tax Act is a complete code, assessment proceedings under Section 446 of the Companies Act could not be held to be "other legal proceedings" and, therefore, the leave of the liquidating Court was not required.
42. The Apex Court further held that the liquidation Court, cannot perform the functions of Income-tax Officers while assessing the amount of tax payable by the assessees even Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 29/33 if the assessee be the company which is being wound up by the court. It held that the orders passed by the Income-tax Officer in the course of assessment or re-assessment proceedings are subject to appeal to the higher hierarchy under the Income-tax Act. There are also provisions for reference to the High Court and for appeals from the decisions of the High Court to the Supreme Court and then there are provisions for revision by the Commissioner of Income-tax.
43. Thus, the Apex Court held that it would lead to anomalous consequences if the winding up court were to be held empowered to transfer the assessment proceedings to itself and assess the company to income-tax.
44. In Assistant Collector of Central Excise, Guntur vs. Ramdev Tobacco Company, since reported in (1991) 2 SCC 119, once again, the Apex Court considered the scope and meaning of the expression "other legal proceedings" occuring in Section 40(2) of the Central Excise and Salt Act as it stood prior to its amendment in in 1973 which reads as under:-
"Section 40(2). No suit, prosecution or other legal proceeding shall be instituted for anything done or ordered to be done under the Act after the expiration of six months from the accrual of the cause of action or from the date of the act or order complained of".
Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 30/33 The issue before the Apex Court was whether the issuance of a show cause notice and the initiation of the consequential adjudication could be described as "other legal proceedings" within the meaning of sub-section (2) of section 40 of the Central Excise and Salt Act?
45. Applying the principle of ejusdem generis, the Apex Court held that there can be no doubt that "suit" or "prosecution" are those judicial or legal proceedings which are lodged in a court of law and not before any executive authority, even if it were statutory one. It further held that wide expression "other legal proceeding" must be read ejusdem generis with the preceding words "suit" and "prosecution" as they constitute a genus.
46. Thus, ultimately, the Apex Court held that penalty and adjudication proceedings did not fall within the expression "other legal proceedings".
47. In view of the ratio laid down by the Apex Court in Kondaskar (supra), it can safely be said that a complaint or an FIR lauched against members of the Co-operative Society under different provisions of the Indian Penal Code cannot be appropriately dealt with under the Act of 1996. the orders passed by the criminal court are subject to revision and appeal Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 31/33 under the Cr.PC. and the liquidator or the Registrar or the Tribunal under the Act fo 1996 is not empowered to deal with such criminal proceedings.
48. Furthermore, in view of the ratio laid down by the Supreme Court in Assistant Collector of Central Excise, Guntur vs Ramdev Tobacco Company (supra), it can safely be held that the expression "other legal proceedings" as described within the meaning of sub-section (2) of Section 50 of the Act of 1996 must be read ejusdem generis with the preceding word "suit", which would mean that the expression would apply only to the civil proceedings and not criminal proceedings. In case, the legislature would have intended to bar jurisdiction of a criminal court when a Co-operative Society is in liquidation under Section 45 of the Act of 1996, it would also have used the word "prosecution" after the words "suit or" and before the word "other legal proceeding" in sub-section (2) of Section 50 of the Act of 1996 before the expression "other legal proceeding".
49. In absence of the word "prosecution" before the expression "other legal proceedings" in sub-section (2) of Section 50, it cannot be said that the expression "other legal proceeding" would include criminal proceedings also. Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 32/33
50. Accordingly, the reference made by the learned single Judge in Cr. Misc. No.75981 of 2019 is answered as under:-
"Sub-section (2) of Section 50 of the Act of 1996 cannot be interpreted to mean and understand that the expression "other legal proceedings" occurring thereunder create a bar in lodgement for a first information report against the Co-operative Society registered under the Act of 1996, its Director(s), Officer(s), Manager(s) or a member of the Co-operative Society."
51. In other words, we are of the opinion that while a Co-operative Society is in liquidation under Section 45 of the Act of 1996, the Director(s), Officer(s), Manager(s) or a member of the Co-operative Society, who is/are guilty of misappropriation, fraud, breach of trust, cheating or any other act involving moral turpitude, resulting in a loss to the Co- operative Society may be prosecuted under the relevant provisions of the Indian Penal Code in accordance with law even without the leave of the Registrar.
52. Since the question referred to the Division Bench has already been answered by us, registry is directed to place these two applications before the learned single Judge for Patna High Court CR. MISC. No.75981 of 2019(9) dt.07-09-2022 33/33 further consideration and adjudication.
(Ashwani Kumar Singh, J.) (Dr. Anshuman, J.) rohit/sanjeet-
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