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TMI Blog2002 (7) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... Hyderabad. The proceeding was instituted on the complaint petition filed by respondent No. 1. The appellants and respondent No. 1 are stated to be directors of a company, Spectrum Power Generation Ltd. ('the power company') incor- porated under the Companies Act, 1956 ('the Act'), having its registered office at Secunderabad, in the State of Andhra Pradesh. Respondent No. 1 filed the complaint alleging offences under sections 60, 63, 68, 68A read with section 621 of the Act, against the appellants, alleging, inter alia, that the accused persons by making false, deceptive and misleading statements and by suppressing relevant facts induced various persons to pay them money for purchase of shares of the power company; raised millions of dollars from non-resident Indians (NRIs); siphoned off those funds into bogus companies exclusively owned by them in off-shore companies and purchased shares of the power company in India in the names of bogus off-shore companies owned/controlled by them. The matter came to the notice of the complainant when some of the prospective NRI investors made correspondence with the power company demanding share certificates for which they had paid substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground floor investment opportunity, which would normally be sold at a premium. However, this project is being offered to you with the same high investment returns as the promoters. For the financial security of the capital and the investment income and for tax beneficial treatment, we have formed an 'off-shore' entity, 'Spectrum Infrastructures Ltd.' to execute and direct our investment in the power project. This entity will be the investment vehicle through which investors will be participating in this venture. I will be in touch with you in the next few weeks to discuss your investment commitment. The initial investment funds will have to be made available by October 20, 1994. In the meantime, if you have any questions, please call 382 0056 or 382 1727. Sincerely yours, (Sd.). . ." 4. The complainant further alleged that the managing director of the power company received a letter dated 26-6-1997, said to have been sent in the name of Spectrum NRI Investors the substance of which is that the NRIs are anxiously waiting for the Indian company's share offer and public issue. The said letter was received by some persons claiming to be NRI investors of the power company. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholder but is the vice-chairman and managing director of the power company is in no way aggrieved by any of the alleged acts by the petitioner, and, therefore, the complaint has been filed with an oblique motive. The further ground taken by the petitioners was that section 60 is not at all attracted because the section requires registration of the prospectus before it is issued by the existing company or an intended company. In view of the fact that the companies involved herein are not companies coming within the purview of the Act and as there has been no prospectus issued by them as defined in section 60, the section has no applicability to the facts of the case on hand. 6. In the counter-affidavit filed on behalf of the complainant-respondent No. 1 herein, the allegation and averments made in the petition filed under section 482 of the Code of Criminal Procedure were denied. It was contended that in view of the specific allegations made in the complaint petition a clear prima facie case under sections 60, 68, 68A read with section 621 of the Companies Act has been made out. It was further contended by the complainant that the questions raised by the accused persons in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the participation by way of equity, in view of the judgment of the Supreme Court in Mobarik Ali Ahmed v. State of Bombay AIR 1957 SC 857, wherein their Lordships have held that the corporeal presence of the accused in the country is not essential to assert the criminal jurisdiction." (p. 736) On the submissions made on behalf of the accused persons that even accepting the allegations contained in the complaint to be true the averments did not constitute the offences alleged therein, the High Court observed : "...Unless all the documents relied upon by the complainant are examined, which can only be done after appropriate proof of those documents, it may not be possible for the court to come to any conclusion whether the offences alleged in the complaint are made out. Apart from that in exercise of the jurisdiction under section 482 of the Code of Criminal Procedure, this Court would not go into the aspect of appreciation of evidence or sufficiency of evidence." (p. 736) On the discussions and the findings noted above, the High Court declined to quash the complaint petition and to drop the case against the accused persons. The said order is under challenge in this appeal. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th circumspection. In exercising that jurisdiction the High Court should not embark upon an enquiry whether the allegations in the complaint are likely to be established by evidence or not. That is the function of the trial Magistrate when the evidence comes before him. Though it is neither possible nor advisable to lay down any inflexible rules to regulate that jurisdiction, one thing, however, appears clear and it is that when the High Court is called upon to exercise this jurisdiction to quash a proceeding at the stage of the Magistrate taking cognisance of an offence, the High Court is guided by the allegations, whether those allegations, set out in the complaint or the charge-sheet, do not in law constitute or spell out any offence and that resort to criminal proceedings would, in the circumstances, amount to an abuse of the process of the court or not." (p. 662) 13. A similar view was taken by this Court in the case of State of Haryana v. Bhajan Lal [1992] (Suppl.) 1 SCC 335, 379 wherein it was observed thus: "We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was true." 18. Section 68 makes provision regarding penalty for fraudulently inducing persons to invest money. It is laid down therein that : "Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any 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 one lakh rupees, or with both." 19. Section 68A of the Act deals with personation for acquisition, etc., of shares and the action of any person who makes in a fictitious name an application to a company for acquiring, or subscribing for, any shares therein, or otherwise induces a company to allot, or register any transfer of, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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