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TMI Blog1996 (4) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... 94. Ever since then, it is alleged that he has been filing false and frivolous suits, writ petitions, criminal complaints, against the stock exchange and he is trying to destroy the stock exchange, its directors as well as its members. It is further alleged by the petitioners that the respondent herein in furtherance of his evil designs to destroy the stock exchange, coerced some of the members into signing a notice calling for an extraordinary general meeting of the stock exchange for removal of the president and treasurer of the stock exchange. Thereafter, some of the members realising that it is not in the interest of the stock exchange as well as its members, to requisition any such an extraordinary general meeting, withdrew the requisition. The notice given by the requisitionists was considered by the board of the stock exchange, but by that time the number of members supporting the requisition had fallen short of the mandatory requirement of section 169 of the Companies Act, 1956 (hereinafter referred to as "the Act"). In view of the same, the board of directors of the stock exchange refused to call the extraordinary general meeting, in respect of which the respondent along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, etc. In that complaint, the complainant has specifically stated that the plaintiff therein made false statements to the effect that due to various misdeeds committed by him the members of the stock exchange removed him from the office of the director of the stock exchange. He is trying to destroy the stock exchange by various methods. He has failed to abide by the decision of the council of management. Defendant No. 1 in furtherance of his design to destroy the stock exchange has coerced and forced some of the members to sign the notice for passing an extraordinary general meeting. The defendant in furtherance of his evil designs to destroy the stock exchange has coerced and forced some of the members to sign a notice to call the extraordinary general meeting. Certain members whose signatures were obtained by coercion or misrepresentation withdrew. The Registrar of Companies who is the administrative authority on the administration of the company law in the State of Karnataka came to the definite conclusion that there is no valid requisition under law. Though the requisition initially contained 15 signatures, admittedly certain signatures were obtained under force or misrepresen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1995. Crl. P. No. 1241 of 1995 was preferred by K.E.C. Raj Kumar who is one of the directors of the Bangalore Stock Exchange against the order passed by the Magistrate directing to issue process to the accused petitioner. The respondent has filed a complaint under section 200 of the Criminal Procedure Code, against the accused, K.E.C. Raj Kumar, and 11 others in PCR. No. 227 of 1995 now pending in C.C. No. 935 of 1995 alleging that the accused persons being directors of the stock exchange failed to convene a meeting as requisitioned by the shareholders and their failure to call the extraordinary general meeting under section 169(1) amounts to contravention of the provisions of section 169. Hence, all of them committed an offence under section 629A of the Act. After recording the sworn statement, the Magistrate has taken cognizance of the case and directed to issue process to the accused persons. That order has been questioned by this petitioner, K.E.C. Raj Kumar. Crl. P. No. 1379 of 1995 was filed by all the six directors, viz. , K. Ishwara Bhat, F. Mahaveerkumar, Venkatesh N. Murthy, S. Jayaraman, S.S. Naganand and V. Sreenivas Rao, against the order passed by the learned Mag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cure the ends of justice. However, power should be exercised sparingly and that too in the rarest of rare cases. (1)Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2)Where the allegations in the first information report and other materials, if any, accompanying the first information report do not disclose a cognizable offence, justifying an investigation by police officers under section 156(1) of the Code, except under an order of a Magistrate within the purview of section 155(2) of the Code. (3)Where the uncontroverted allegations made in the first information report or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4)Where the allegations in the first information report do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under section 155(2) of the Code. (5)Where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 482 of the Criminal Procedure Code. Emphasising these arguments, he submitted that if the complaint is taken as a whole, no offence has been made out either under section 628, 629 or 629A of the Act. With these broad principles in mind, it is necessary to consider the cases on hand. It may also be mentioned that out of these six cases Crl. Ps. Nos. 2254 of 1995, 2255 of 1995 and 1703 of 1995 arise out of civil suits, reference to which I have already made above. It is advisable to bring these three cases into one group as they are arising out of the civil suits filed by them before the court. According to the complainant, the petitioner committed offences under section 629 of the Act which reads : "If any person intentionally gives false evidence- (a)upon any examination upon oath or solemn affirmation, authorised under this Act ; or (b)in any affidavit, deposition or solemn affirmation, in or about the winding up of any company under this Act, or otherwise in or about any matter arising under this Act ; he shall be punishable with imprisonment for a term which may extend to seven years and shall also be liable to fine." However, repelling the arguments of the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be prosecuted. Under these circumstances it is clear that the offence is not made out. The respondent has vehemently argued that section 629 of the Act is a non-cognizable one as per section 624 and hence cannot be a matter of investigation by the police under section 156(3) of the Criminal Procedure Code, and in support of it, he also placed reliance on a decision in D.K. Raju v. K.V. Desinga Raju [1972] 42 Comp Cas 143 (Mad). As far as this position of law is concerned, there is absolutely no quarrel and it is also true that the offences alleged against the petitioners are only non-cognizable offences and the magistrate has rightly not referred it to the police. He also submitted that was between the civil and criminal proceedings, the criminal matter should be given precedence and no hard and fast rule can be applied and in support of this contention, he also placed reliance on a decision in M.S. Sheriff v. State of Madras, AIR 1954 SC 397, wherein it is held by their Lordships of the Supreme Court that as between civil and criminal proceedings, the criminal matters should be given precedence. No hard and fast rule can be laid down but the possibility of a conflict of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary and to protect persons from prosecutions when public interest cannot be served ; (iii) to protect persons from prosecutions on insufficient grounds and to ensure prosecution only when the court after due consideration is satisfied that there is a proper case to put a party on trial. The respondent further claims that the main issue in the civil suit is based on the facts that the signatures of the signatories to the requisitions were coerced. He further contended that the petitioners have no locus standi to file the suit as they were not signatories. According to him, the persons who had withdrawn the signatures might have filed the suit and not these petitioners. Therefore, he contends that the suit itself is a false suit filed by the petitioners. This court cannot give a finding as to who should have filed the suit or whether the suits filed by the petitioners are maintainable or not. In these petitions, the court is concerned only with the allegations made in the complaint by the respondents. It cannot go into the question as to whether the civil suits are maintainable or not. He also contended that the documents produced in the civil court do not prove that the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted an offence by not convening the extraordinary general meeting as per the three requisitions deposited by the signatories thereby committing an offence punishable under section 169 and section 629 of the Act. According to section 169 of the Act, it is clear that on the requisition of such number of members of the company as is specified in sub-section (4), the board of directors shall forthwith proceed duly to call an extraordinary general meeting of the company. In this case, admittedly the complainant and others deposited three requisitions to convene the meeting of the board of directors. According to section 169, they should call for the meeting within 21 days from the date of deposit of a valid requisition. The petitioners contended that even 14 days from the date of deposit of requisitions, some requisitionists withdrew their signatures and hence the requisitions failed as the number of persons required to call an extraordinary general meeting fell short and the board of directors could not convene the extraordinary general meeting as requisitioned. Therefore, they submitted that no offence has been made out as against the directors of the company. Per contra, the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as represent not less than one-tenth of the total voting power of all the members of the company referred to in clause (b) of sub-section (4). Explanation.-For the purposes of this sub-section, the board shall, in the case of a meeting at which a resolution is to be proposed as a special resolution, be deemed not to have duly convened the meeting if they do not give such notice thereof as is required by sub-section (2) of section 189." From this it is clear that in the event of failure of the board of directors to convene the meeting, an alternative and efficacious remedy is provided under section 169(6) of the Act. In actual fact, the respondent and his fellow men had given a notice to call the meeting as contemplated under section 169 of the Act. Some of the directors filed suits to restrain the respondent and other persons from convening the meeting. Those suits are pending in the civil court. In those circumstances, it cannot now be said by this court as to whether the refusal of the board of directors to convene the meeting on the ground stated above is valid or not as it is for the civil court to decide. From the entire reading of section 169 of the Act, nowhere is it sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those suits is as to whether the notice issued by the respondents and others to convene the meeting is valid or not and that question is dependent on the failure on the part of the directors to convene the meeting as requisitioned by the requisitionists as contemplated under section 169(1). These are all interconnected. Such being the case, the criminal court cannot give any finding on that aspect as the civil court is seized of the matter. In this case, as stated earlier, the basic question involved is as to whether the directors have committed an offence punishable under section 629A for violation of section 169 of the Act in not convening the meeting, etc. Therefore, the finding of the civil court will go to the root of the criminal case. Such being the position, it cannot be said that the criminal court can proceed with the matter. However, as observed supra, there is nothing to indicate that violation of section 169 contemplates a criminal offence. Learned counsel for the petitioners further argued that K.E.C. Raj Kumar and others were inducted by the directors as Government servants. Therefore, to prosecute them, sanction is necessary under section 169. It is an undisputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the accused persons should be applied. For the foregoing reasons, I hold that these petitions deserve to be allowed and the impugned order is liable to be quashed. Next it is necessary to consider Criminal Petition No. 2556 of 1995. This case slightly varies from other cases. But all the general observations made above are applicable to the facts of this case also. In this case, the respondent has given a complaint to the stock exchange with regard to certain irregularities committed by some persons. The board of directors thought it fit to refer to the committee consisting of two directors. They are also called Arbitration Committee. This committee is in the nature of a judge. They gave a report and on the basis of their report, a complaint came to be filed alleging that they have not properly conducted the enquiry. Thus, they have committed an offence punishable under section 628 of the Act. In view of this contention, it is necessary to refer to section 628 of the Act which reads : "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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only the articles of association which provide for the same. Article 62(a) of the articles of association reads : "In addition to the committees of the council of management, if any, referred to in the above clause, the council of management shall every year and as early as convenient after every annual general meeting appoint the following committees namely : (i)Arbitration Committee (ii)Defaults Committee (iii)Disciplinary Committee Provided that the constitution of such committees should be in the proportion of 40 : 60 between member brokers and non-members respectively, with the prior approval of SEBI (amended at extraordinary general meeting June 26, 1993)". Therefore, it is clear that the Arbitration Committee is constituted by article 62. Here also there is nothing to show that the directors have either accepted the report or they found that the report submitted by the committee is false. There is nothing to indicate that the report submitted by the Arbitration Committee is a false one or it leads to misrepresentation, etc. On the other hand, it appears that the respondent had written a letter to one P.K. Rungta on June 20, 1995. In that letter he has stated that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... areholders under sections 257 and 284 of the Act. All the decisions referred to by the respondent would only indicate the above principles. As far as the principles enunciated by these decisions are not in dispute, these decisions would in no way help the respondent in substantiating his case. Therefore, for the foregoing reasons and viewed from any angle, it is clear that these complaints came to be filed by the respondent without any basis and the complaints if taken as a whole would not constitute any offence under the Act much less under sections 628, 629 or 629A of the Act. In the normal course, this court would have directed the petitioners to approach the magistrate to put forth their argument before him without interfering with the order passed by the learned magistrate taking cognizance of the case. But as stated earlier, following the guidelines issued by the Hon'ble Supreme Court and also taking into consideration the fact that this court while admitting these petitions granted stay and the matter is pending in this court since a long time, if these matters are remanded once again to the Magistrate, it would consume time and cause inconvenience to the parties. Under tho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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