Gujarat High Court
Ashok J Shah vs State Of Gujarat on 28 February, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/5521/1999 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION NO. 5521 of 1999
In
CRIMINAL MISC.APPLICATION NO. 5521 of 1999
With
CRIMINAL MISC.APPLICATION NO. 5508 of 1999
In
CRIMINAL MISC.APPLICATION NO. 5530 of 1999
with
CRIMINAL MISC.APPLICATION NO. 5332 of 1999
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE J.B.PARDIWALA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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ASHOK J SHAH
Versus
STATE OF GUJARAT
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Appearance:
MR NAVIN K PAHWA for the PETITIONER(s) No. 1,2,3,4
M/S RJ RAWAL ASSOC. for the RESPONDENT(s) No. 2
MR MAULIN R RAVAL for the RESPONDENT(s) No. 2
MR PR NANAVATI for the RESPONDENT(s) No. 2
PUBLIC PROSECUTOR for the RESPONDENT(s) No. 1
RULE NOT RECD BACK for the RESPONDENT(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 28/02/2018
Page 1 of 40
R/CR.MA/5521/1999 JUDGMENT
COMMON ORAL JUDGMENT
1. As the issues involved in all the captioned petitions are the same and interconnected, those were heard analogously and are being disposed of by this common judgment and order.
2. I propose to first look into the Criminal Misc. Application No.5521 of 1999 and Criminal Misc. Application No.5508 of 1999 as both are interconnected.
3. By these two applications under section 482 of the Cr.P.C, 1973, the applicants-original accused Nos. 1,2,4,5,6 and 7 respectively seek to invoke the inherent powers of this Court praying for quashing of the proceedings of the Criminal Case No.3905 of 1999 in the court of the learned Metropolitan Magistrate, Court No.9 at Ahmedabad arising from a complaint lodged by the respondent No.2 for the offence punishable under sections 420, 465, 468, 471 and 34 of the Indian Penal Code.
4. The complaint lodged by the respondent No.2 is extracted hereunder;
"The humble complaint of the above named complainant most respectfully sheweth:-
(1) That, the complainant herein is a limited company, registered under the Companies Act, having its office at 5/2, Siddh Chakra Apartment, Opp. Bank of India, Usmanpura, Ahmedabad.
(2) The accused No.1 is also a limited company registered under the Companies Act, having its office at Page 2 of 40 R/CR.MA/5521/1999 JUDGMENT 259, New Cloth Market, Ahmedabad.
(3) The accused No.2 is the Managing Director, No.3 is Chairman of Nutan Nagrik Sahkari Bank Ltd., No.4 is the Chartered Accountant, Nos.5,6 and 7 are the directors and No.8 is Manager of the company. All the aforesaid accused persons are the responsible officers of the accused company and are managing the day to day affairs of the Santram Spinners Limited, accused No.1 herein.
(4) That, the complainant herein do state and submit that the accused company, namely Santaram Spinners Ltd., had declared/announced the public issue, which was to open on Monday, 16th October, 1995, for 35,00,000 equity shares of Rs.10 each at a premium of Rs.10 per share, aggregating to Rs.7 crores.
(5) That, the complainant herein being highly impressed by the declaration made in the prospectus of the accused company was lured to purchase the shares of the accused company. For the aforesaid purpose, the complainant herein ordered Vrushti Finance Ltd. to procure 6,86,500 shares of the accused company for the present complainant. As per the order placed by the present complainant the shares were procured but as there was some difference in the signature of one Mr. R.A. Jamal, who was the transferor the Magnum Finance Ltd. who was the official Registrar of the accused company refused to transfer the said shares in the name of the present complainant.
(6) In view of the above mentioned facts and circumstances the present complainant made necessary enquiries with the responsible officers of the accused company but they did not give satisfactory reply for the same. Therefore, the present complainant investigated and inquired the whole matter of his own and was shocked to learn that the accused company has committed fraud and forgery with the sole intention to cheat the public at large.
(7) The present complainant after reading the prospectus of the accused company come to know that there are many misstatements/intentional false statements made therein with the sole view of receiving Page 3 of 40 R/CR.MA/5521/1999 JUDGMENT large amounts from the public by committing fraud and forgery. It is mentioned in the prospectus that the company has already received commitments for subscription to 5,00,000 equity shares of Rs.10/- each at a premium of Rs.10/- each in cash from the N.R.I/O.C.Hs/F.I.I.S. It is further mentioned that the equity shares reserved on firm allotment basis to N.R.I,s/O.C.Bs/F.I.I.S if not subscribed in full, before issue the balance unsubscribed portion will be subscribed by the promoters and the same shall be locked in for a period of three years from the date of allotment in the present issue or from the date of commencement of commercial production as declared in the offered document ,whichever is later."
(8) The complainant herein further states and submits that the accused company had also promised in its prospectus at page-4 that "the contribution in respect of firm allotments will be received at least one day in advance to issue opening date." It is further informed that for the unsubscribed portion of the NRI quota the promoters are liable to make necessary arrangement on the shares as per the declaration made in the prospectus.
(9) That, the complainant herein most respectfully submits that after necessary inquiry and investigation the complainant was shocked and surprised to learn that the cheque issued by one Willowood Corporation towards the procurement or the shares of NRI quota was returned dishonoured by the bankers, and therefore, the amount was not received a day in advance as per the strict condition mentioned in the prospectus.
(10) The complainant further states and submits that as the NRI fund was not received a day in advance which was one of the most important conditions mentioned in the prospectus of the accused company the promoters were bound to purchase the shares of the NRI quota and the said shares would automatically fall in the lock-in period for three years as per the terms and conditions of the prospectus. The said shares, therefore, are non- transferable and non-tradable for a period of three years, and therefore, cannot be sold in the open market to the public at large.
Page 4 of 40R/CR.MA/5521/1999 JUDGMENT (11) The complainant further informs that after necessary inquiries and investigation it is learnt that one Mr. R.A. Jamai who is so-called N.R.I., issued a cheque against the purchase of 1,51,000 shares of the NRI quota of the accused company. The amount for the same was also not received by the accused company a day in advance as they have mentioned in the prospectus. The complainant herein would a step further to state and submit that from the reliable sources it is learnt that Mr.R.A. Jamai is not existing and he has not entered into any commitment with the accused company and he was never present in India on the date of the said transaction.
(12) The complainant herein further begs to submit that accused No.4 herein who is a Chartered Accountant had intentionally issued a false certificate certifying the fact that the accused company has collected the necessary NRI fund as per the terms and conditions mentioned in the prospectus. Being a Chartered Accountant it was his duty to public at large to verify the fact of receipt of the NRI fund in the account of the accused company before the opening of the public issue. From this it is crystal clear that in the capacity of a chartered accountant he has misused and has abused the position and helped the accused company with the sole intention of committing fraud and forgery by misguiding the public at large compelling them to make huge losses.
(13) The complainant further begs to state and submit that from the above facts it is prima facie made out that all the accused persons have in furtherance of their common intention committed the offences of fraud, forgery, cheating making huge losses to the public at large.
(14) That the complainant further states and submits that the accused company and all its directors have intentionally published false statements of fact in the prospectus and had announced the public issue only with the purpose of collecting huge amount of money from the public by way of cheating.
(15) In view of these facts and circumstances, the complainant herein prays as under:-
Page 5 of 40 R/CR.MA/5521/1999 JUDGMENT
(A) Be pleased to admit the present complaint;
(B) Be pleased to direct the investigation/inquiry U/s 156(3) of the Code of Criminal Procedure or under any provision of the Code of Criminal Procedure regarding the offences committed by the accused persons;
(C ) Be pleased to pass any other further order/s as may be deemed fit in the facts and circumstances of the present case."
5. The Metropolitan Magistrate, Ahmedabad recorded the verification of the complainant on oath and issued process to the accused persons of the offences enumerated above.
6. Being dissatisfied with the order of process issued by the court below, the applicants are here before this court with a prayer that the complaint and the order of process be quashed.
7. Mr. Desai, the learned senior counsel appearing for the applicants submitted that the court below committed a serious error in taking cognizance upon the complaint and the issue of process to the accused-applicants. The learned senior counsel would submit that even if the entire case put up by the complainant is believed or accepted to be true, none of the ingredients to constitute the offence of cheating or forgery are spelt out. It is submitted that the litigation has something to do with the provisions of the Companies Act and, therefore, the prosecution has to be under the Companies Act, i.e., for the offence under the Companies Act and not for the offence under the IPC. It is submitted that the Companies Act is a Special Act and would prevail over the General Law, i.e., the Indian Penal Code. It is submitted that the complainant could be said to have abused the process of law by filing a frivolous Page 6 of 40 R/CR.MA/5521/1999 JUDGMENT complaint. It is pointed out that the complainant is not a subscriber of the shares of the Company, namely, Santaram Spinners Pvt. Ltd., and in such circumstances, he cannot maintain a complaint under the Companies Act nor for the offence under the IPC. It is pointed out that so far as the applicant No.1 is concerned, he resigned as a Director of the Company on 01.11.1994. The applicant No.2 is a Chartered Accountant and the applicants Nos.3 and 4 were taken up as the Directors of the Company on 01.11.1994. The applicant No.3 resigned as a Director on 26.03.1996, whereas the applicant No.4 resigned on 21.01.1997. In such circumstances, referred to above, no liability can be fastened on any of the applicants of any nature, and the complaint and order of process be quashed.
8. On the other hand, this application has been vehemently opposed by Mr. Maulin Raval, the learned counsel appearing for the respondent No.2-original complainant. Mr. Raval would submit that more than a prima facie case is made out against the applicants on bare reading of the complaint. Mr. Raval would submit that the case is one of fraud and cheating by a Company. Mr. Raval invited the attention of the Court to the fact that in the past, two cognate matters were heard by a Coordinate Bench, and in both the matters, the Coordinate Bench declined to interfere and grant any relief to the accused persons. Mr. Raval invited the attention of the Court to the following averments made in the affidavit-in-reply filed by the complainant dated 23.12.2016. The affidavit is extracted hereunder;
"1. The present affidavit is filed for the limited purpose Page 7 of 40 R/CR.MA/5521/1999 JUDGMENT and I reserve my right to file further affidavit as and when required. None of the contentions and allegations as made in the application accepted. The present applicants with malicious intention continuing with the present application when admittedly the another Criminal Misc Application No. 5331 of 1999 came to be dismissed on 26.3.2014 by the reasoned order against the criminal case no. 663 of 1999 filed before Additional Chief Metropolitan Magistrate at Ahmedabad under special law. The said complaint came to be filed by the same complainant against the various accused including the accused/applicants herein for the various offenses under the provisions of the Companies Act, 1956. The present Criminal Misc Application is filed against the criminal case no. 3905 of 1999 filed before the Ld Metropolitan Magistrate Court at Ahmedabad for various offenses under Indian Penal Code. A copy of the judgement dated 26.3.2014 is marked as Annexure - "R1" to the present affidavit. The applicant has preferred criminal appeal before the Hon'ble Supreme Court of India and with immense respect no stay is granted by the Hon'ble Supreme Court. The applicants deliberately and intentionally concealed the facts and misleading the Hon'ble Court.
2, It is further respectfully submitted that, the present applicant has consciously hide the fact that, this Hon'ble Court also rejected Criminal Misc. Application No. 590 of 1997 with Criminal Misc Application No. 201 of 1997 vide order and judgement dated 24.7.2007. A copy of the order and judgement dated 24.7.2007 is marked as Annexure-R2" to the present affidavit. The various accused filed different quashing petitions and such quashing petitions came to be rejected.
3- The common cause arises for filing various complaints by various persons and investors who are systematically duped and cheated by the Company issuing prospectus and erring directors and such other persons who acted in concert and in conspiracy. The accuseds' filed separate application for quashing of the complaint and got the interim reliefs and said interim relief got continued till date of judgement passed rejecting such application. The present application is also required to be rejected with heavy exemplary costs. The applicants of the present Page 8 of 40 R/CR.MA/5521/1999 JUDGMENT application deliberately without disclosing the facts, misleading the Hon'ble Court and enjoying the interim relief against the criminal case filed since 1999.
4. At this juncture the accuseds of various complaints were relying upon one order passed by this Hon'ble Court in Criminal Misc Application No. 139 of 1997, exempting and quashing complaint against Sr. Advocate and hence the interim reliefs were earlier granted when the quashing application of such other accuseds' including the present accuseds/applicants were filed and since than such accused enjoying the interim reliefs. When the quashing petitions came up for hearing this Court passed the orders and judgement dismissing such applications by reasoned orders. The criminal case is filed against the Company as well as the directors and responsible officers, being brothers and relatives and friends and chartered accountant being expert and specific contentions made in the complaint and complaint is filed under section 420, 465, 468, 471 read with section 34 of the Indian Penal Code. The offenses are congnizable one and hence the present application is required to be dismissed with heavy exemplary costs.
5. The present case is covered by the decision of the Hon'ble Supreme Court of India reported in 2011(1)SCC 74 and many other judgments.
6. The interim relief as granted is required to be vacated in the overall interest of justice and with immense respect the interim relief if further extended shall be a travesty of justice. The offenses as made out in the complaint and hence present application is required to be rejected and further and with utmost respect considering the judgements passed by this Court in other application, this Hon'ble Court would be pleased to reject the application."
9. Mr. Raval, thereafter, invited the attention of this Court to a judgement and order passed by a Coordinate Bench dated 26.03.2014 in the Criminal Misc. Application No.5331 of 1999.
Page 9 of 40R/CR.MA/5521/1999 JUDGMENT The judgement is extracted hereunder;
"[1] Present application is filed by the applicants original accused Nos.3, 4, 5 and 6 of Criminal Case No.663 of 1999 pending in the Court of learned Additional Chief Metropolitan Magistrate at Ahmedabad under sec.482 of the Code of Criminal Procedure to quash and set aside the said complaint.
[2] A complaint being Criminal Case No.663 of 1999 came to be filed by the respondent No.2 herein original complainant namely Preksha Infrastructures Ltd. in the court of learned Additional Chief Metropolitan Magistrate at Ahmedabad against the applicants original accused for the offences under sections 63, 68, 628 of the Companies Act, 1956. It is alleged in the complaint that the original accused No.1 Santaram Spinners Ltd. is a Company registered under the provisions of Companies Act, 1956 and original accused Nos.2 is Managing Director and other accused are Directors of the said Company and all concerned in the said Company are responsible for the administration and transactions of It was further alleged in the complaint that accused company had announced public issue which was to open on 18.10.1998 for 35,00,000 equity shares of Rs.10/- each at a premium of Rs.10/- per share aggregating to Rs.7 crores. The complainant was high impressed by the declaration made in the prospectus of the company and wanted to purchase shares of the accused company. For the aforesaid purpose the complainant ordered Vrushthi Finance Limited to procure 6,86,500 shares of the accused company. As per the order placed by the complainant, shares were procured. But there was difference in the signature of the transferor of the accused company and official transferor of the accused company refused to transfer the said shares in the name of the complainant. Complainant made necessary inquires with responsible officers of the accused company but they did not give satisfactory reply for the same. Complainant after inquiry came to know that accused company has committed fraud and forgery with the sale intention to cheat the public at large. It is mentioned in the prospectus on the front page on the top that FIRM ALLOTMENT TO NIRS RS.1 CRORE. Complainant on investigation came to know that accused company Page 10 of 40 R/CR.MA/5521/1999 JUDGMENT has not given any detail regarding the commitment of the Firm allotment to the NRIs. It is further submitted in the complaint that firm allotment as per the terms and conditions of the prospectus were not subscribed by the promoters of the company. The said shares would automatically fell in lock in period for 3 years and therefore, these shares are non transferable and non tradable and therefore cannot be sold in the open market to the public. If this condition is not satisfied the company has to close the public issue and return the funds received from public. It is further stated that the accused company, Managing Director, Directors, Chartered Accountant, Company Secretary, Managers, Banks all have conspired and intentionally published false statement of facts in the prospectus and had announced public issue only with the purpose of collecting huge amount of money from the public by way of cheating.
[3] Learned advocate appearing on behalf of the respective applicants has vehemently submitted that the applicants have not committed any of the offences under sections 63, 68, 628 of the Companies Act, 1956. It is further submitted that there are no specific allegations against the respective applicants making out a case against them for the offences punishable under sections 63, 68, 628 of the Companies Act, 1956. It is further submitted by learned advocate for the applicants that the dispute is of a civil nature and the complaint filed by the respondent No.2 original complainant is nothing but abuse of process of law. It is further submitted by learned advocate for the applicant that the complaint does not disclose any offence nor does it alleges any specific allegation against the present applicants, save and except the vague allegations against all the accused and therefore, the complaint is required to be quashed and set aside. It is submitted by learned advocate for the applicants that as held by the Hon'ble Supreme Court in catena of judgements that if the complaint is of civil nature, High Court shall exercise inherent powers by quashing the complaint.
[4] Learned advocate for the applicants has relied upon the unreported decision of the learned Single Judge of this Court in the case of Sudhir Indravadan Nanavati Vs. Page 11 of 40 R/CR.MA/5521/1999 JUDGMENT State of Gujarat, rendered in the Criminal Misc.Application No.139 of 1997, whereby the learned Single Judge has quashed the impugned complaint qua original accused No.5 of the present complaint.
[5] The application is opposed by Ms.Krina Calla, learned Additional Public Prosecutor for the State. While opposing the application, it is submitted that specific allegations against each of the applicants are made in the complaint and prima facie case is made out against the accused persons for the offences alleged against them. She has relied on the decision of the Honble Supreme Court in the case of A.V.Mohan Ropa and another v/s. M.Krishna Roa and another reported in (2002) 6 SCC 174. Therefore, it is requested to dismiss the application.
[6] Heard the learned advocates for the respective parties. This Court has considered the impugned complaint in detail and has gone through the averments and allegations made in the complaint. This Court has also considered relevant provisions of the Companies At more particularly sections 63, 68 and 628 of the Companies Act. It is not in dispute that all the applicants original accused are signatories to the prospectus. There are specific allegations and averments against the respective applicants in the complaint. Now, in the backdrop of the above, all the submissions made on behalf of the respective applicants are defences which are required to be considered and dealt with by the trial court on leading proper evidence at the time of trial. What is required to be considered at this stage is whether there is prima facie case against the applicants which requires further trial or not and whether there are specific averments / allegations against the respective accused or not. At this stage, while considering the applications under sec.482 of the Code of Criminal Procedure, this Court is not required to consider in detail whether the accused persons are likely to be convicted or not. As held by the Hon'ble Supreme Court in the case of A.V. Mohan Rao (supra) power of quashing a criminal complaint and the proceedings initiated on its basis under sec.482 of the Code of Criminal Procedure is to be exercised very sparingly with circumspection that too in the rarest of rare cases. In the case before the Hon'ble Supreme Court the allegations against the accused persons were with regard to the commission of the Page 12 of 40 R/CR.MA/5521/1999 JUDGMENT offences under sections 60, 63, 68, 68A read with sec.621 of the Companies Act. Considering the decision of the Hon'ble Supreme Court in the case of A.V. Mohan Rao (supra) and averments and allegations in the complaint, the prayer of the applicants to quash the complaint cannot be accepted and the impugned complaint is not required to be quashed and set aside in exercise of the powers under sec.482 of the Code of Criminal Procedure.
[7] Now, so far as the reliance placed by the learned advocate for the applicants upon the unreported decision of the learned Single Judge by which the learned Single Judge has quashed the impugned complaint qua original accused No.5 is concerned, on going through the said judgement it is clear that in the said judgement, the learned Single Judge has specifically observed that the said decision is without entering into further details i.e. whether there is a civil dispute or not because other Criminal Misc. Applications (present applications) are pending in the court and if the court observes anything in the matter, it will affect the rights of the parties. Thus, the said decision will not be of any assistance to the applicants.
[8] Even otherwise, as stated above, there are specific allegations and averments against each of the applicants and whatever has been submitted on behalf of the applicants in support of their prayer to quash the complaint, all are defences which are required to be considered at the time of trial on leading proper evidence.
[9] It is to be noted that other accused persons had earlier preferred Criminal Misc. Application No.590 of 1997 and Criminal Misc. Application No.201 of 1997 before this Court for quashing of complaint being Criminal complaint No.173 of 1996 which was pending in the Court of learned Metropolitan Magistrate, Ahmedabad. Said applications were dismissed by this Court by order dated 24.07.2007.
[10] For the reasons stated above, no case is made out to quash the impugned complaint in exercise of the powers under sec.482 of the Code of Criminal Procedure and/or Page 13 of 40 R/CR.MA/5521/1999 JUDGMENT to quash and set aside the summons / process issued by the learned Additional Metropolitan Magistrate, Ahmedabad against the applicants and hence the application requires dismissal and is accordingly dismissed. Rule is discharged and interim relief granted earlier, if any stands vacated forthwith."
10. Mr. Raval invited the attention of this Court to one another judgement and order dated 24.07.2007 passed by a Coordinate Bench in the Criminal Misc. Application No.590 of 1997 and allier matter. The judgement is extracted hereunder;
"1. As both these applications are arising out of one criminal complaint, they are being disposed of by this common judgement and order.
2. Criminal Misc.Application No.590 of 1997 is filed by the applicants ? original accused Nos.3, 4 and 6 of Criminal Complaint No.173 of 1996, pending in the court of learned Additional Chief Metropolitan Magistrate at Ahmedabad under sec.482 of the Code of Criminal Procedure to quash and set aside the complaint as well as the summons/process issued by the said court.
3. Criminal Misc.Application No.201 of 1997 is filed by the applicants ? original accused No.7 of Criminal Complaint No.173 of 1996 pending in the court of learned Additional Chief Metropolitan Magistrate at Ahmedabad under sec.482 of the Code of Criminal Procedure to quash and set aside the complaint as well as the summons/process issued by the said court.
4. A complaint being Criminal Case No.173 of 1996 came to be filed by the respondent No.2 herein in each of the applications ? original complainant namely Niranjanaben M. Thakkar in the court of learned Additional Chief Metropolitan Magistrate at Ahmedabad against the respective applicants and others being Directors of the original accused No.1 ? Santram Spinners Limited for the offences under sections 63, 68, 628 of the Companies Act, 1956 and under sections 467, 471, 477A, 420, 34 and 120B of the Indian Penal Code inter-alia alleging that the original accused No.1 is a Company Page 14 of 40 R/CR.MA/5521/1999 JUDGMENT registered under the provisions of Companies Act, 1956, original accused Nos.2 to 6 are Directors of the said respondent No.1 - Company and all concerned in the said Company are responsible for the administration and transactions of the said Company. It is further alleged in the complaint that they have signed in the prospectus dtd.20/9/1995 for the public issue to be opened on 16/10/1995 and for all the statements and averments they are personally and jointly liable. That accused No.7 (applicant of Criminal Misc.Application No.201 of 1997) is the brother of the accused No.2 and he was Director in the accused No.1 Company till 1/11/1994 and was looking after the affairs of the Company.
5. It was further alleged in the complaint that the accused Nos.2 and 7 are also jointly functioning as Directors in the other Companies. It is further alleged in the complaint that an advertisement was issued by the accused No.1 Company for issue of Rs.35 equity share of Rs.10 each at a premium of Rs.10 each from the public for collection of Rs.7 Crores through the media of news papers and for this purpose a prospectus was published by the Company in which it was published that the issue for the same will open on 16/10/1995 and its directors were legally bound to give completely correct information in the said prospectus so that the general public can study the details mentioned therein, and if found necessary, can apply for such public issue and can purchase the shares. It is further alleged that necessary sufficient information regarding the financial capacity and its share capital is required to be given in the said prospectus. Accordingly, one prospectus was issued on 20/9/1995 by the accused No.1 Company and the accused Nos.2 to 6 have signed necessary declarations. It is further alleged in the complaint that on page No.4 of the prospectus, under the caption ?capital structure? it has been mentioned that the accused No.1 Company, out of the alleged revaluation reserve of Rs.96,40,000 on 1/4/1993, the Company has allotted 9,64,000 equity bonus shares. Moreover, at page No.22 of the prospectus, under the caption ?assets and liabilities?, in the audited report audited by the Company's auditor and Chartered Accountant, Dhirajlal Shah & Co. it has been mentioned in para 5(c) of the audit report that share capital include 9,64,000 equity shares of rupees 10 each allotted as fully paid up shares by the allotted capitalisation of Page 15 of 40 R/CR.MA/5521/1999 JUDGMENT revaluation reserve on 1/4/1993 by the accused No.1 Company. Moreover, at page No.5 of the same, it is also mentioned that accused No.1 company as on 8/4/1995 allotted 4,00,000 shares of Rs.40,00,000 as bonus shares. Thus, out of 4,00,000 shares total 3,33,000 shares have been allotted to the aforesaid shareholders. Thus, 12,97,000 shares of Rs.1,29,000 have been allotted to the relatives and directors of the accused No.1 Company. Thus, 12,97,000 shares of Rs.1,29,73,000 have been allotted to the relatives and the directors of the accused No.1 Company. It is further averred in the complaint that the aforesaid statements of the complainant is supported from the annual return as on 30/9/1993 filed by the accused before the Registrar of Companies and at page Nos.2 and 3 it is mentioned that the total number of equity shares of the Company is 1,92,800, meaning thereby that on 30/9/1993 the figure of company's equity share was 1,92,800. Now, if as mentioned in the prospectus, as per the statement of the accused, on / 4/1994, if 9,64,000 bonus shares have been issued, the total figure of equity shares of the company as on 30/9/1993 would have been shown 11,56,800. Thus, it becomes clear that the information given in the prospectus by the accused that on 4/4/1993, 9,64,000 bonus shares were issued, is incorrect. It is further averred that it has been very specifically mentioned on page No.22 of the prospectus issued by the Company that on 1/4/1994, 9,64,000 bonus shares were issued based on the revaluation of the reserves. It is further alleged that in the Form No.23 filed before the Registrar of Companies by the accused company on 27/4/1994 it has been clearly mentioned that on the basis of special resolution passed by the Company on 31/3/1994, Rs.96,40,000 which were in the company's balance-sheet in the Profit & Loss Account and the General Reserve Account, were decided to be capitalised and to issue five new equity shares against one equity share. Thus, the said bonus shares which have been issued have been issued by capitalising Rs.96,40,000 from the Profit & Loss Account and General Reserve Account of the company and not on the basis of revaluation reserved which has been stated by the accused in the prospectus. It is further averred that in the company's Profit & Loss Account and the General Reserve Account as on 31/3/1994, there was the credit of only Rs.53,37,000 and it was not possible to allot the bonus shares of Rs.96,40,000. Thus, it is alleged Page 16 of 40 R/CR.MA/5521/1999 JUDGMENT that the bonus share of accused No.1 Company were issued on 1/4/1994 and inspite of the necessary required forms having been filed by the accused before the Registrar of Companies and though the record of the Company is supporting these facts, false evidences have been created and the accused in collusion with each other, on 1/4/1993 the bonus shares of the company have been issued and they were fully aware that the facts regarding the bonus shares presented by them is false, it has been shown as true. It is further alleged that the resolution regarding bonus share though not having been made on 1/4/1993 or prior to that, such resolution have been passed and thus the accused have manipulated with the record of the company and though they were aware that the facts are false, they have presented the facts as true facts and thus, have presented wrong information on government records. It is further alleged that by showing false information in the prospectus public at large has been misguided. It is further averred that the accused have attempted to create false documentary evidence in order to succeed in creation of false documents for issuance of bonus shares on 1/4/1994 by the accused. Necessary particulars with regard regard to false documentary evidences and the information is mentioned in para 9 of the complaint. Necessary allegations against the accused Nos.3, 4, 5 and 7 (applicants herein) are mentioned in para 10 of the complaint. Thus, it is alleged that the accused have committed offences under sec.63 of the Companies Act by making intentionally false statements in the prospectus issued by them on 20/9/1995. It is further alleged that the accused have intentionally concealed true facts and by making false statements by misrepresenting public to invest in the public issue of accused No.1, committed an offence under sec.68 of the Companies Act so also the accused knowing fully well that the important facts in the company's balance-sheet and the prospectus and other documents are incorrect, the said facts have been shown as true, have committed offence under sec.628 of the Companies Act. It is further alleged in the complaint that the accused in collusion with each other by tampering with the records and accounts, by presenting false evidence and inspite of knowing that they are false evidences, have been used as true one and by preparing and getting prepared false accounts, and using and getting used them as correct Page 17 of 40 R/CR.MA/5521/1999 JUDGMENT accounts, public has paid a huge amount of Rs.12.97 Crores at Rs.20 per share and have profited to the extent of Rs.2.60 Crores and have committed the offences under sections 467, 468, 471, 477A, 420, 34 and 120B of the Indian Penal Code.
6. That the learned trial court issued summons / process against the respective applicants ? original accused on 7/12/1996. Being aggrieved by and dissatisfied with the same, the applicants have preferred both the applications for the aforesaid reliefs.
7. Mr.S.V. Raju, learned advocate appearing on behalf of the respective applicants has vehemently submitted that the applicants have not committed any of the offences under sections 63, 68, 628 of the Companies Act, 1956. It is further submitted by him that there are no specific allegations against the respective applicants making out a case against them for the offences punishable under sections 63, 68, 628 of the Companies Act, 1956 as well as under sections 467, 471, 477A, 420, 34 and 120B of the Indian Penal Code.
8. It is further submitted by Shri Raju that the dispute is of a civil nature and the complainant herself has resorted to civil remedy by filing a civil suit which is pending and therefore, the complaint filed by the respondent No.2 ? original complainant is nothing but abuse of process of law and is the result of malafide intention of the complainant, which is filed for the purpose of harassing the applicants.
9. It is further submitted by Shri Raju that the complaint does not disclose any offence nor does it alleges any specific allegation against the present applicants, save and except the vague allegations against all the accused and therefore, the complaint is required to be quashed and set aside and the impugned order of the learned Additional Metropolitan Magistrate, Ahmedabad issuing process / summons to the applicants vide order dtd.7/12/1996 is required to be quashed and set aside.
10. It is submitted by Mr.Raju, learned advocate for the applicants that as held by the Hon'ble Supreme Court in catena of judgements that if the complaint is of civil Page 18 of 40 R/CR.MA/5521/1999 JUDGMENT nature, High Court shall exercise inherent powers by quashing the complaint.
11. Mr.Raju, learned advocate has also relied upon the decision of this Court in the case of State of Gujarat Vs. Motibhai Jethabhai Makwana, reported in 1992 (2) GLH 306 submitting that the complaint against the applicants for the offences punishable under sections 467, 468, 471, 477A requires to be quashed and set aside.
12. Mr.Raju, learned advocate for the applicants has relied upon the unreported decision of the learned Single Judge of this Court in the case of Sudhir Indravadan Nanavati Vs. State of Gujarat, rendered in the Criminal Misc.Application No.139 of 1997, whereby the learned Single Judge has quashed the impugned complaint qua original accused No.5 of the present complaint.
13. Both these applications are opposed by Mr.R.C.Kodekar, learned Additional Public Prosecutor for the State and Ms.Megha Jani, learned advocate for the respondent No.2 ? original complainant. While opposing both the applications, it is submitted by the learned advocates for the respondents that specific allegations against each of the applicants are made in the complaint and prima facie case is made out against the accused persons for the offences alleged against them. It is further submitted by them that merely because the complainant has resorted to civil remedy, it cannot be said that the applicants / accused persons have not committed the offence under the Companies Act and/or Indian Penal Code. It is further submitted that even in the order passed below the notice of motion, in the suit filed by the respondent No.2, the civil court has specifically observed that there is a misstatement in the prospectus by the accused persons. The learned advocates appearing on behalf of the respondents have heavily relied upon the decisions of the Hon'ble Supreme Court in the case of A.V. Mohan Rao and another Vs. M.Kishan Rao and another, reported in (2002) 6 SCC 174 and relying upon the said decision, it is requested to dismiss both the applications.
14. Heard the learned advocates for the respective parties.Page 19 of 40
R/CR.MA/5521/1999 JUDGMENT
15. This Court has considered the impugned complaint in detail and has gone through the averments and allegations made in the complaint. This Court has also considered relevant provisions of the Companies At more particularly sections 63, 68 and 628 of the Companies Act. It is not in dispute that all the applicants original accused are signatories to the prospectus. There are specific allegations and averments against the respective applicants in the complaint, more particularly in para 10 of the complaint. Now, in the backdrop of the above, all the submissions made on behalf of the respective applicants are defences which are required to be considered and dealt with by the trial court on leading proper evidence at the time of trial. What is required to be considered at this stage is whether there is prima facie case against the applicants which requires further trial or not and whether there are specific averments / allegations against the respective accused or not. At this stage, while considering the applications under sec.482 of the Code of Criminal Procedure, this Court is not required to consider in detail whether the accused persons are likely to be convicted or not. As held by the Hon'ble Supreme Court in the case of A.V. Mohan Rao (supra) power of quashing a criminal complaint and the proceedings initiated on its basis under sec.482 of the Code of Criminal Procedure is to be exercised very sparingly with circumspection that too in the rarest of rare cases. In the case before the Hon'ble Supreme Court the allegations against the accused persons were with regard to the commission of the offences under sections 60, 63, 68, 68A read with sec.621 of the Companies Act.
Considering the decision of the Hon'ble Supreme Court in the case of A.V. Mohan Rao (supra) and averments and allegations in the complaint, the prayer of the applicants to quash the complaint cannot be accepted and the impugned complaint is not required to be quashed and set aside in exercise of the powers under sec.482 of the Code of Criminal Procedure.
16.The main contention on behalf of the applicants is that the dispute is of civil nature and as the complainant herself has filed Civil Suit, the criminal proceedings should be quashed and set aside. As held by the Hon'ble Supreme Court in the case of Trisuns Chemical Industry Vs. Rajesh Agrwal and another, reported in (1999) 8 SCC 686, criminal prosecution cannot be thwarted merely Page 20 of 40 R/CR.MA/5521/1999 JUDGMENT because civil proceedings are also maintainable. Under the circumstances, merely because the original complainant has resorted to civil remedy by filing a civil suit, the impugned complaint for the offences under the Companies Act and Indian Penal Code is not required to be quashed and set aside.
17. Now, so far as the reliance placed by the learned advocate for the applicants upon the unreported decision of the learned Single Judge by which the learned Single Judge has quashed the impugned complaint qua original accused No.5 is concerned, on going through the said judgement it is clear that in the said judgement, the learned Single Judge has specifically observed that the said decision is without entering into further details i.e. whether there is a civil dispute or not because other Criminal Misc. Applications (present applications) are pending in the court and if the court observes anything in the matter, it will affect the rights of the parties. Thus, the said decision will not be of any assistance to the applicants.
18. Even otherwise, as stated above, there are specific allegations and averments against each of the applicants and whatever has been submitted on behalf of the applicants in support of their prayer to quash the complaint, all are defences which are required to be considered at the time of trial on leading proper evidence.
19. For the reasons stated above, no case is made out to quash the impugned complaint in exercise of the powers under sec.482 of the Code of Criminal Procedure and/or to quash and set aside the summons / process issued by the learned Additional Metropolitan Magistrate, Ahmedabad against the applicants and hence both the applications required dismissal and are accordingly dismissed. Rule is discharged and interim relief granted earlier, if any stands vacated forthwith, in both the applications."
11. Mr. Raval also pointed out that against the judgement and order passed by a Coordinate Bench dated 24.07.2007, referred to above, a Special Leave to Appeal has been filed by Page 21 of 40 R/CR.MA/5521/1999 JUDGMENT the accused in the Supreme Court. Mr. Raval brought to my notice one order passed by the Supreme Court dated 02.05.2008 in this regard, which reads as under;
" A complaint has been filed under sections 63, 68 and 628 of the Companies Act, 1956 and sections 467, 471, 477(A), 420, 34 and 120B of the Indian Penal Code against the seven accused. The present petition has been filed by accused No.7 namely Ashok Jayantilal Shah. In para 1 of the complaint, complainant himself has stated that petitioner-accused No.7 was director till.01.11.1994. Thereafter, the company became a limited company and one prospectus dated 20.09.1995 was issued for public issue to be opened on 16.10.1995.
Learned senior counsel appearing for Ashokbhai Jayantilal Shah-accused No.7 contends that petitioner did not sign the prospectus nor he was shown as a director in the newly constituted limited company and petitioner is in no way concerned or associated with the newly constitution public limited company.
Issue notice.
Meanwhile, proceedings qua Ashokbhai Jayantilal Shah- accused No.7 shall remain stayed but the proceedings may go on so far as other accused are concerned."
12. Mr. Raval also brought to my notice that so far as the order passed by the Coordinate Bench dated 26.03.2014, as referred to above, is concerned, a Special Leave to Appeal No.19487 of 2015 has been filed in the Supreme Court and the Supreme Court vide its order dated 23.11.2015 has stayed the proceedings of the criminal case. Mr. Raval submitted that although two special leave to appeals are pending, as on date, in the Supreme Court, yet the same, by itself, may not be sufficient to adjourn the hearing of the present matters which are of the year 1999.
Page 22 of 40R/CR.MA/5521/1999 JUDGMENT
13. In such circumstances, referred to above, Mr. Raval prays that there being no merit in the two applications, those be rejected.
14. Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the complaint and the order of process issued to the applicants should be quashed.
15. Let me first deal with the question whether the court below was justified in issuing process so for as the offence of forgery is concerned. The entire case of the complainant, so far as the forgery is concerned, is based on one document which is at page 28 of the paper book dated 12.08.1995. This document is issued by the Punjab National Bank. The same is in Hindi. This document is in the nature of a communication between the lead manager to the issue PNB and the Registrar to the issue, Magnum Fincab Finance Ltd. The said letter merely certifies as being the final certificate of issue and depicts that the PNB had forwarded a schedule of a form of NRI for the amount of Rs.69,80,000/- and at the end, it certifies that all the applications with regard to the issue have been sent and nothing further remains to be done. Similarly, the document at page 20 is a form filled up by the Willowood Corporation through the power of attorney holder, namely, R.A. Jamal and the document at page-22 is yet one another application form in the name of R.A. Jamal himself. It is not the case of the complainant that the signatures of any person or authority on the documents, referred to above, are forged.
Page 23 of 40R/CR.MA/5521/1999 JUDGMENT
16. In my view, the document, referred to above, cannot be termed as a false document within the meaning of section 464 of the IPC. It is not the case of the complainant that the signature on the document has been forged. Assuming for the moment that the contents of the information contained in the document are false or may not be correct, but the same, by itself, will not make it a false document within section 464 of the IPC. There is no forgery in the document. In such circumstances, I am of the view that the court below was not justified in issuing process for the offence of forgery. In the aforesaid context, I must quote with profit the observations of the Supreme Court as contained in paras-18 and 19 in the decision titled Devendra & Ors. vs. State of Uttar Pradesh & Anr. (2009) 7 SCC 495.
17. It appears that the complainant was impressed by a declaration in the prospectus of the Company which was issued just before the public issue of equity share and his case is that thereby he was lured to purchase the shares of the accused-company. According to him, he ordered purchase of 6,86,500/- shares of the company. Later, as there was a difference in the signature of one R.A. Jamal, a transferor, Magnum Finance Fincab Ltd., the Registrar of the issue declined to transfer the shares in the name of the complainant. On inquiry by the complainant, it was revealed that R.A. Jamal was one of the NRI subscribers of the shares reserved for the allotment to the firm. The prospectus depicts that there would be a firm allotment of shares to an NRI to the tune of Rs.1 Crore. According to the complainant, an NRI was to be allotted Page 24 of 40 R/CR.MA/5521/1999 JUDGMENT shares on a firm allotment basis as per the promise made in the prospectus. According to the complainant, although a statement was made in the prospectus, yet the firm allotment of shares to the NRI, namely, R.A. Jamal was not made or nothing have been made one day before the closing of the subscription. It is the said statement, which according to the complainant was made with a dishonest intention to induce the investors like the complainant.
18. I am afraid, the above, by itself, would not amount to cheating.
19. Cheating' has been defined in Section 415 of the Indian Penal Code to mean:
"Cheating-- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so 9 deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to 'cheat'."
20. In V.Y. Jose v. State of Gujarat and Anr. [(2009) 3 SCC 78], this Court opined:
"An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:
i) deception of a person either by making a false or misleading representation or by other action or omission;
(ii) fraudulently or dishonestly inducing any person to deliver any property; or (iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.Page 25 of 40
R/CR.MA/5521/1999 JUDGMENT For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Indian Penal Code can be said to have been made out."
It is, therefore, evident that a misrepresentation from the very beginning is a sine qua non for constitution of an offence of cheating, although in some cases, an intention to cheat may develop at a later stage of formation of the contract.
21. In Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr. [(2000) 4 SCC 168], this Court held:
"14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show 11 that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a Page 26 of 40 R/CR.MA/5521/1999 JUDGMENT culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
[See also Indian Oil Corporation v. NEPC India Ltd. and Ors. (2006) 6 SCC 736, Veer Prakash Sharma v. Anil Kumar Agarwal and Anr. 2007 (9) SCALE 502, V.Y. Jose (supra) and Ravindra Kumar Madhanlal Goenka & Anr. v. M/s. Rugmini Ram Raghav Spinners & Anr. 2009 (6) SCALE 162]
22. In the aforesaid view of the matter, the Criminal Misc. Applications Nos.5521 and 5508 of 1999 respectively are hereby allowed. The complaint as well as the order of process is quashed. Rule is made absolute to the aforesaid extent.
Criminal Misc. Application No.5332 of 1999.
23. By this application under section 482 of the Code of Criminal Procedure, 1973, the applicants-original accused Nos.1 and 2 seek to invoke the inherent powers of this Court praying for quashing of the proceedings of the Criminal Case No.633 of 1999 in the court of the learned Addl. Chief Metropolitan Magistrate, Ahmedabad arising from a complaint lodged by the respondent No.2 herein for the offence punishable under sections 63, 68 and 621 of the Companies Act. The filing of the complaint by the respondent No.2 culminated in the Criminal Case No.633 of 1999. The Metropolitan Magistrate took cognizance upon the complaint and issued process to the accused persons for the offences enumerated above. The complaint is extracted hereunder;
"(1) That, the complainant herein is a limited company, registered under the Companies Act, having its office at 5/2, Siddh Chakra Apartment, Opp. Bank of India, Usmanpura, Ahmedabad. The complainant herein has Page 27 of 40 R/CR.MA/5521/1999 JUDGMENT authority to file the present complaint. The letter of authority is annexed with the present complaint.
(2) The accused No.1 is also a limited company registered under the Companies Act, having its office at 259, New Cloth Market, Ahmedabad.
(3) That the accused No.2 is the Managing Director and remaining accused are Directors and other responsible officers of the accused company M/s. Santaram Spinners Pvt. Ltd. and they are responsible for day to day affairs of the company.
(4) That, the complainant herein do state and submit that the accused company, namely Santram Spinners Ltd., had declared/announced the public issue, which was to open on Monday, 18th October, 1998, for 35,00,000/-
Equity Shares of Rs.10/- each at a premium of Rs.10/- per share, aggregating to Rs.7 Crores.
(5) That, the complainant herein being highly impressed by the declaration made in the prospectus of the accused company was lured to purchase the shares of the accused company. For the aforesaid purpose, the complainant herein ordered Vrushti Finance Ltd. to procure 6,86,500 shares of the accused company for the present complainant. As per the order placed by the present complainant the shares were procured but as there was some difference in the signature of one Mr. R.A. Jamal, who was the transferor, the Magnum Finance Ltd. who was the official Registrar of the accused company refused to transfer the said shares in the name of the present complainant.
(6) In view of the above mentioned facts and circumstances the present complainant made necessary inquiries with the responsible officers of the accused company but they did not give satisfactory reply for the same. Therefore, the present complainant investigated and inquired the whole matter of his own and was shocked to learn that the accused company has committed fraud and forgery with the sole intention to cheat the public at large.
(7) The present complainant after reading the prospectus of the company came to know that there are Page 28 of 40 R/CR.MA/5521/1999 JUDGMENT many misstatements/intentional false statements made therein with the sole view of collecting large amounts from the public.. It is mentioned in the prospectus on the front page on the top that FIRM ALLOTMNT TO NRIs Rs.1 CRORE . It is further mentioned on page 4 at para-5 that the company has already received commitments for subscription to 5,00,000 equity shares of Rs.10/- each at a premium of Rs.10/- each in cash from the N.R.Is/O.C.Bs/F.I.I.S. (8) The firm allotment to NRIs/DCBs/FIIS as stated in clause (1) shall not be subject to any lock-in-period. If the equity shares reserved on firm allotment basis to NRIs/DCBs/FIIs is not subscribed in full. The balance unsubscribed portion will be subscribed to promoters and the same shall be locked in for a period of three years from the date of allotment in the present issue or from the date of commencement of commercial production as declared in the offered document, whichever is later. Contribution in respect of firm allotment will be received at least one day in advance to issue opening data.
In view of above declaration in the prospectus, the complainant herein made necessary inquiries and investigations and was shocked and surprised to learn that the company has not given any detail regarding the commitment of the Firm Allotment to the NRIs, as such document is mentioned in the lists of documents at page 32 of the prospectus. It was further informed that the cheque issued by one Willowood Corporation towards the procurement of the shares of NRI quota was returned dishonoured by the bankers, and therefore, the amount was not received a day in advance as per the strict condition mentioned in the prospectus.
The complainant further states and submit that the firm allotment as per the terms and conditions of the prospectus was not subscribed fully to the NRIs. The same should be subscribed by the promoters of the company. The said shares would automatically fell in lock-in-period for 3 years and, therefore, these shares are non-transferable and non-tradable and, therefore, cannot be said in the open market to the public. If this condition is not satisfied the company has to close the public issue and return the funds received from the Public.
Page 29 of 40R/CR.MA/5521/1999 JUDGMENT (9) The complainant further informs that one Mr. R,.A. Jamal who is a so-called NRI is not existing and he has not entered into any commitment with the accused company and he was never present in India on the date of said transaction.
(10) It is further submitted that the accused No.1 who is a chartered accountant has intentionally issued a false certificate certifying the acts that the accused company has collected the necessary NRI fund as per the terms and conditions mentioned in the prospects thereby committed breach of the guidelines provided by SEBI and of the provision of the Companies Act. Being a Chartered Accountant it was his duty towards public at large to verify the fact of receipt of the NRI fund in the account of the accused company before the opening of the public issue. From this it is crystal clear that in the capacity of a chartered accountant he has intentionally issued false certificate misusing and abusing his position, helping the accused company in committing fraud and forgery of the large amount.
(11) That the complainant further states that the accused company, Managing Director, Directors, Chartered Accountant, Company Secretary, Lead Managers, Bankers all have conspired and intentionally published false statements of facts in the prospectus and had announced the public issue only with the purpose of collecting huge amount of money from the public by way of cheating.
(12) In view of these facts and circumstances, it is crystal clear all the accused persons have committed an offence under sections 63, 68 and 628 of the Companies Act, 1956, and, therefore, they are liable to be punished and prosecuted for the same.
(13) That the present complainant has oral as well as documentary evidence to prove the allegations levelled against the accused persons. The complainant would like to rely on the following witnesses;
(I) Complainant himself.
(II) Responsible officer of the Ahmedabad Stock
Exchange.
Page 30 of 40
R/CR.MA/5521/1999 JUDGMENT
(III) Responsible officers of the concerned banks.
(IV) Any other witnesses as and when required may be summoned.
(14) The complainant prays that:-
(A) Your Honour may be pleased to admit the present complaint.;
(B) Your Honour may be pleased to prosecute and punish the accused persons for the offences punishable under sections 63, 68 and 628 of the Companies Act, 1956.
(C ) Your Honour may be pleased to direct the accused company to return the money collected from the public at large by making intentional false statement in the prospectus.
(D) Your Honour may be pleased to grant such other and further relief/s or order/s as deemed fit, just and proper in the interest of justice."
24. Mr. Desai, the learned senior counsel appearing for Ms. Urvi H. Raval, the learned counsel appearing for the applicants submitted that the court below committed a serious error in taking cognizance upon the complaint for the offences under the Companies Act. It is submitted that the court below committed a serious error in taking cognizance considering section 621 of the Companies Act. It is submitted that the court below could have taken cognizance only if the complaint would have been filed by the Registrar or a shareholder of a company or a person authorized by the Central Government in that behalf. It is also submitted that indisputably the complainant is not a shareholder of the company and, therefore, in such circumstances, he could not have lodged a complaint for the offences under the Companies Act. In such Page 31 of 40 R/CR.MA/5521/1999 JUDGMENT circumstances, the learned counsel prays that, on this ground alone, the complaint and the order of process be quashed.
25. On the other hand, this application has been vehemently opposed by Mr. Raval, the learned counsel appearing for the respondent No.2-original complainant. Mr. Raval would submit that no error, not to speak of any error of law, could be said to have been committed by the court below in taking cognizance upon the complaint and issuing process to the accused- applicants for the offences under the Companies Act. Mr. Raval submitted that the bar of section 621 of the Companies Act will not apply in a case, in which, along with the offences under the Companies Act, offences under the IPC are also committed. He would submit that, in fact, his client could have filed one composite complaint for the offences under the Companies Act as well as under the IPC. However, his client, at the relevant point of time, thought fit to file two complaints, one for the offence under the IPC and another for the offence under the Companies Act, but the subject matter remains the same. He would submit that along with the offences under the Companies Act, if a case of cheating and criminal conspiracy is made out, then, in such circumstances, the restrictions as imposed in section 621 of the Companies Act would not apply. Mr. Raval, in support of his submissions, placed reliance on the following decisions;
(I) A.R. Antulay vs. Ramdas Shrinivas Nayak, 1984 (2) SCC 500;
(II) S. Satyanarayana vs. Energo Masch Power Engineering & Consulting Private Ltd., 2015 (13) SCC 1; (III) A.V. Mohan Rao vs. M. Krishan Rao, 2002 (6) SCC Page 32 of 40 R/CR.MA/5521/1999 JUDGMENT 174;
26. As against the above, Mr. Desai, the learned senior counsel appearing for the applicants placed reliance on one decision of this Court rendered by a learned Single Judge in the case of V.M. Modi vs. State of Gujarat, 1997 (88) C.C. 871.
27. Before I go to section 621 of the Companies Act, let me look into sections 63, 68 and 628 of the Companies Act. Section 63 is extracted hereunder;
"63. Criminal liability for mis- statements in prospectus.
(1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorised the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to five thousand rupees, or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did, up to the time of the issue of the prospectus believe, that the statement was true.
(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given-
(a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or
(b) the consent required by sub- section (3) of section
60."
28. Section 68 is extracted hereunder;
"68. Penalty for fraudulently inducing persons to invest money:- Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any Page 33 of 40 R/CR.MA/5521/1999 JUDGMENT dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into-
(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or
(b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures; shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to ten thousand rupees, or with both.
29. Section 628 is extracted hereunder;
"628. Penalty for false statements:- If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement-
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material;
he shall, save as otherwise expressly provided in this Act, be punish- able with imprisonment for a term which may extend to two years, and shall also be liable to fine."
30. Section 621 is extracted hereunder;
"621. Offences against Act to be cognizable only on complaint by Registrar, shareholder or Government.
(1) No court shall take congnizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint Page 34 of 40 R/CR.MA/5521/1999 JUDGMENT in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf:
Provided that nothing in this sub- section shall apply to a prosecution by a company of any of its officers.
(Provided further that the Court may take cognizance of offence relating to issue and transfer of securities and non-payment of dividend on a complaint in writing by a person authorized by the Securities Exchange Board of India.) (1A) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 , (5 of 1898 ) where the complainant under sub- section (1) is the Registrar or a person authorised by the Central Government, the personal attendance of the complainant before the Court trying the offence shall not be necessary unless the Court for reasons to be recorded in writing requires his personal attendance at the trial.] (2) Sub- section (1) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections 425 to 560) or in any other provision of this Act relating to the winding up of companies.
(3) A liquidator of a company shall not be deemed to be an officer of the company, within the meaning of sub-
section (1)."
31. Section 621 of the Companies Act provides that no court shall take cognizance of any offence under the Companies Act, which is alleged to have been committed by any Company or any officer thereof except on the complaint in writing of the Registrar or of a shareholder of the Company or of a person authorized by the Central Government in that behalf. In the complaint, the complainant has nowhere averred that he is a shareholder of Santaram Spinners Pvt. Ltd. In fact, the same Page 35 of 40 R/CR.MA/5521/1999 JUDGMENT has been conceded by the learned counsel appearing for the complainant. The complaint has not been filed by the Registrar nor by a person authorized by the Central Government in that behalf. Under the Companies Act, protection is given to the Companies from frivolous and malicious prosecution at the instance of any person who has no locus standi to file a complaint. In case any person is aggrieved by any act of the company and he is not a shareholder of the Company, then the only remedy open to him is to approach the Registrar of the Companies, who shall file the complaint in the Court of law, if any offence was committed by the Company. The only exception to section 621 of the Companies Act is when the prosecution of the offence happens to be under section 545 of the Act. In that case, the person, filing the complaint, need not be a shareholder or a person duly authorized by the Central Government.
32. In the aforesaid context, I must look into the decision of the Supreme Court in the case of S. Satyanarayana (supra). The following observations of the Supreme Court do support or rather fortify the submission of Mr. Desai as regards the power of the Court to take cognizance upon the complaint filed neither by the Registrar or shareholder of the Company or a person authorized in that behalf for the offences under the Companies Act.
33. Against the complaint, the following accused-namely A4 Company; its Directors A5 and A6; A9 the manager of the IREDA; and A10 the private person approached the High Court under Section 482 of the Cr.P.C.. The High Court took the view Page 36 of 40 R/CR.MA/5521/1999 JUDGMENT that the Special Judge could not have taken cognizance of the offences under Sections 120B and 420 of the IPC unless he could also try the accused under Section 621 of the Companies Act. As regards the accused Company A4 and its Directors A5 and A6, the High Court held that no cognizance could be taken against the said accused because the complainant did not belong to any of the categories or persons who were entitled to file a complaint under Section 621 of the Companies Act[1] i.e. to say the complainant was neither (a) the Registrar, (b) a shareholder of the company, or (c) a person authorized in that behalf. Thus, the High Court held that taking of cognizance by the Special Court in so far as accused nos. A4, A5 and A6 is without jurisdiction. This finding is sought to be supported by the provisions of Section 621(1) of the Companies Act. However, without giving any special reasons as regards accused Nos. A9 and A10 the High Court quashed the taking of cognizance. In fact A9 is the manager of IREDA a financing agency and A10 is a private person and are prima facie not a company or officers of a Company vide Section 621. The High Court has not committed any error in reading Section 621 of the Companies Act and observing an accused cannot be prosecuted under Section 621 of the Companies Act because the complainant is not a share holder in the accused Company. However, it is obvious from the complaint that there was no allegation that the accused Nos. A4, A5, A6 and A9 have committed an offence under Section 628 of the Companies Act. Such an allegation of commission of an offence under Section 628 of the Companies Act was only against the accused A10 (vide para 19 and 20 of the complaint). It may be recalled that the allegation as regards Section 628[2] of the Companies Act is said to have been committed by the accused Page 37 of 40 R/CR.MA/5521/1999 JUDGMENT A1 to A3 by making a false declaration with regard to the record that is maintained in accordance with Section 193 of the Companies Act by filing an extract of the Board resolution of the company before the Andhra Bank, Sowcarpet Branch, Chennai in order to open a bank account 'the said Board resolution being a false declaration,' since a bank account in the said bank was already opened even before A1 had obtained consent of the complainant to open the said account and further since the said Board resolution is signed by Hari Sesha Reddy - A3 who was not even a Director in the company as on the date of the opening of the bank account. The offence alleged against A10 was that she had drawn huge amounts through self cheques in the capacity of the authorized signatory of the company. It is surprising to see that the High Court has quashed the complaint against the accused persons on the ground of legal defects though no allegation containing such defects were made against the said accused persons.
34. As can be seen from the complaint the allegations are that the accused conspired with each other to cheat the complainant and a series of transactions gave rise to offence under Section 120B read with Section 420 of the Indian Penal Code as also Section 628 of the Companies Act. It is, therefore, clear that if the Special Court has jurisdiction to try offences under both the aforesaid Acts then the trial can certainly continue in respect of the offences which do not require the complainant to belong to the categories specified under Section 621 of the Companies Act. Thus the trial could certainly continue against those accused under the IPC.
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35. I am of the view that a complaint can be lodged for the offences under both the enactments, i.e, under the Companies Act as well as under the IPC. To put it in other words, the complainant could have filed one composite complaint for the offences under the Companies Act as well as for the offences under the IPC. It is possible that while committing the offences under the Companies Act, the accused might even commit offences under the IPC. The offences under the IPC, at times, may be directly related to the acts complained, constituting the offences under the Companies Act. I was inclined to take the view that even though there are two separate complaints, one for the offence under the Companies Act and another for the offence under the IPC, yet, as all the offences are alleged to have been committed as a part of one integral transaction, the bar of section 621 of the Companies Act, probably, may not apply for the purpose of maintainability of the complaint. However, as I have taken the view that no offence worth the name could be said to have been committed so far as the offences under the IPC is concerned, it is now very difficult to come out of section 621 of the Companies Act. In such circumstances, the complaint for the offence under the Companies Act, which culminated in the Criminal Case No.633 of 1999 will have to be quashed along with the order of process.
36. In V.M. Modi (supra), a learned Single Judge of this Court observed;
"8. Section 621 of the Companies Act provides that no court shall take cognizance of any offence under this Act which is alleged to have been committed by any Page 39 of 40 R/CR.MA/5521/1999 JUDGMENT company or any officer thereof except on the complaint in writing of the Registrar or of a shareholder of the company or of a person authorised by the Central Government in that behalf. In the complaint, the respondent has nowhere averred that he is a shareholder of Atul Products Ltd. The complaint has not been filed by the Registrar nor by a person authorised by the Central Government in that behalf. In view of the bar created by section 621 of the Companies Act, 1956, the learned magistrate was not justified in taking cognizance of the offence alleged to have been committed by the petitioner in the complaint. Therefore, the relief prayed for in the petition deserved to be granted, as the complaint suffers from a fundamental legal defect, namely, absence of complaint by legally competent authority or person."
37. The other decisions relied upon by Mr. Raval, the learned counsel appearing for the complainant, referred to above, are not helpful, in any manner, to come out of section 621 of the Companies Act. In the two orders passed by a coordinate bench of this court, there is no discussion or finding as regards section 621 of the Companies Act and the maintainability of the complaint.
38. In the result, the Criminal Misc. Application No.5332 of 1999 is allowed. The proceedings of the Criminal Case No.633 of 1999 pending in the court of the learned Addl. Chief Metropolitan Magistrate, Ahmedabad are hereby quashed.
39 Rule is made absolute to the aforesaid extent.
Direct service is permitted.
(J.B.PARDIWALA,J) Vahid Page 40 of 40