TMI Blog2021 (1) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... he request of both the counsels on 22.12.2020, the rejoinder having been filed on 11.12.2020 - the filing of the rejoinder and production of documents would not cause any abuse of process of the court. Whether Section 439(2) of Act of 2013 and Section 19(1) of Prevention of Corruption Act are in pari materia with each other? - HELD THAT:- The requirement of prior sanction under the Prevention of Corruption Act is to protect an officer against unnecessary prosecution during the time that he was discharging his function as an officer of the State, in such situation it is mandated that prior sanction from the concerned authority has to be obtained which authority would apply its mind to the facts and come to a conclusion as to whether the proceedings are to be initiated or not - the same cannot be equated to authorised person under Section 439. There is a specific prohibition to the Court to take cognizance except upon a complaint in writing by the registrar, a shareholder of the company or a person authorised by the Central Government in that behalf. Admittedly, the respondent is neither the Registrar nor a shareholder nor has he obtained any authorisation from the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate writ or order setting aside the order dated 3.07.2020 passed by the LVIII Addl. City civil and Sessions Judge, Bangalore city in Criminal Revision Petition No.749/2017 on his file setting aside the order dated 03.07.2017 passed by the Special Court, Economic Offences, Bangalore city in PCR No.06/2017 and to further, directing the trial Court to restore PCR No.6/2017 to file and to issue notice to the complainant i.e. the respondent herein by fixing the date for its appearance and to proceed with the matter further, which order is produced as ANNEXURE-A; b) Issue such other writ, order or direction as deemed fit in the circumstances of the case, in the interest of justice and equity. 2. The petitioners in W.P.No.10142/2020 are before this Court seeking for the following reliefs: a) Issue an order, direction or writ in the nature of certiorari or any other appropriate writ or order setting aside the order dated 3.07.2020 passed by the LVIII Addl. City civil and Sessions Judge, Bangalore City in Criminal Revision Petition No.750/2017 on his file setting aside the order dated 03.07.2017 passed by the Special Court, Economic Offences, Bangalore city in PCR No.12/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 punishable under Section 448 of Act of 2013 and in this regard, prosecution was sought to be initiated against the petitioners. W.P.No.10142/2020: 3.8. Petitioners in these petitions are the same as in WP No. 10140 of 2020. 3.9. The respondent filed a private complaint in PCR No. 12/2017 against the Petitioners before the Special Court for Economic offences, Bangalore alleging that petitioners are required to be prosecuted under Section 447 of the Companies Act for offences under Section 409 r/w 120-B of the IPC on the ground that petitioners No.1 to 3 were directors in Vidya Investment and Trading company Pvt. Ltd. (VITC), Regal Investment and Trading Company Pvt. Ltd. (Regal) and Napean Trading and Investment Company Pvt. Ltd. (Napean). 3.10. It is alleged that in the said three companies, there is no other shareholder other than the three companies themselves which were holding equity shares of the said companies, each of the companies holding shares in the other. Since all the shares in the companies were owned by the companies themselves, there is no other owner of the said companies and when they were wound up, there being no shareholder, the entire assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and non- payment of dividend, on a complaint in writing, by a person authorised by the Securities and Exchange Board of India: Provided further that nothing in this sub- section shall apply to a prosecution by a company of any of its officers. 3.13. The court held that the complainant was neither the Registrar of companies nor a shareholder of the company or a person authorized by the Central Government to file the complaint, and on that ground dismissed the complaint. Crl.Revision Petitions No.749/2017 and 750/2017 3.14. Aggrieved by the orders passed in aforesaid PCR Nos.6/2017 and 7/2017, the complainant filed Crl.Revision Petitions No.749/2017 and 750/2017, respectively before the 58th Addl. City Civil and Sessions Judge, Bangalore which came to be disposed by separate orders dated 3.7.2020 allowing the said Revision Petitions. While doing so the revisional court held that the accused, the petitioners herein do not come within the definition of Officer defined under Section 2(59) of the Companies Act. Hence, the bar to take cognizance under Section 439(2) of Companies Act was not applicable and therefore, held that the order dated 3.07.2017 passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Director has cancelled the licence directing the respondent not to use the word 'private limited', hence the respondent can no longer claim to be a Section 8 company, it ought to use the words Private Limited in its name. 6.5. The said order continues to be in operation though challenged by respondent. 6.6. The directors of respondent are disqualified to be directors under Section 164(2) of the Companies Act and as such, they could not have filed the present complaint. 6.7. There are disputes between one Mr.R.Subramanian and Hasham Trading as regards the investment made by the petitioner Group in Companies belonging to said Sri.R.Subramanian. There is a proceeding filed against the said Sri.R.Subramanian and Subhiksha Trading Services Limited of which he is a director for dishonor of cheques, as also several other proceedings had been filed by the petitioner group, it is due to the same that the said R.Subramanian has sought to wreck vengeance on the petitioner group and has been filing one false complaint after another. 6.8. Several allegations have been made against the said R.Subramanian and his involvement in several offences which may not be germane to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, which is part of petitioner's group, holding 10% equity shares in Subhiksha Trading Services limited had raised objections to the amalgamation of said Subhiksha trading Services Limited with Blue Green constructions and Investments Limited and on the matter coming up before the Madras High Court, Madras High Court held that the Scheme of amalgamation is not just, fair or reasonable. 9.5. In view of the said proceedings initiated by Zash, various proceedings were commenced between the petitioner group and the group of Sri.R.Subramanian. 9.6. After going through all these factors and taking into consideration that there are serious allegations against Subhiksha group and said Sri.R.Subramanian, who is representing and or a part of the respondent, as also taking into consideration none of the objects of the respondent have been satisfied though a period of six years had been elapsed from the date of incorporation, the licence dated 22.6.2012 issued by the Registrar of Companies to the respondent was revoked. 9.7. The said respondent has been filing numerous matters against the petitioner and their group of companies making false allegations. 9.8. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent themselves. 53. Being concerned by the arbitrary stipulation under provisions of Sec 439(2) of the Act barring non shareholders from prosecuting offences for violation of the Act, such stipulation being unreasonable and arbitrary and in violation of the fundamental rights guaranteed under the constitution including under Article 14, the Petitioner seeks to challenge the vires of the provisions of Sec 439(2) of the Act and have them declared illegal and void and ultra vires in respect of offences arising out violations of the Act on the following amongst other grounds which are taken in the alternative and without prejudice to one another. And the prayer sought for therein is as under: (a) Issue a writ of declaration that the provision of Section 439(2) of the Companies Act 2013 barring courts of law from taking cognisance of any complaint in respect of the Act from persons other than shareholders is unconstitutional oppressive excessive illegal and ultra vires and hence void. (b) Issue rule nisi in terms of prayers (a) above; (c) pass such other and further order/orders as this Hon'ble Court may deem fit and proper in the facts and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed on the assumption that a Special Judge can take cognizance of offences he is competent to try on a private complaint. Section 6 creates a bar to the court from taking cognizance of offences therein enumerated except with the previous sanction of the authority set out in clauses (a), (b) and (c) of sub-section (1). The object underlying such provision was to save the public servant from the harassment of frivolous or unsubstantiated allegations. The policy underlying Section 6 and similar sections, is that there should not be unnecessary harassment of public servant. (See C.R. Bansi v. State of Maharashtra [(1970) 3 SCC 537 : 1971 SCC (Cri) 143 : AIR 1971 SC 786 : (1971) 3 SCR 236] .) Existence thus of a valid sanction is a prerequisite to the taking of cognizance of the enumerated offences alleged to have been committed by a public servant. The bar is to the taking of cognizance of offence by the court. Therefore, when the court is called upon to take cognizance of such offences, it must enquire whether there is a valid sanction to prosecute the public servant for the offence alleged to have been committed by him as public servant. Undoubtedly, the accused must be a public serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... still a public servant removable from his office by a competent authority before the provisions of Section 6 can apply. In the present appeals, admittedly, the appellants had ceased to be public servants at the time the court took cognizance of the offences alleged to have been committed by them as public servants. Accordingly, the provisions of Section 6 of the Act did not apply and the prosecution against them was not vitiated by the lack of a previous sanction by a competent authority. And this view has been consistently followed in C.R. Bansi case [(1970) 3 SCC 537 : 1971 SCC (Cri) 143 : AIR 1971 SC 786 : (1971) 3 SCR 236] and K.S. Dharmadatan v. Central Government [(1979) 4 SCC 204 : 1979 SCC (Cri) 958 : (1979) 3 SCR 832 : 1979 Cri LJ 1127] . It therefore appears well-settled that the relevant date with reference to which a valid sanction is sine qua non for taking cognizance of an offence committed by a public servant as required by Section 6 is the date on which the court is called upon to take cognizance of the offence of which he is accused. 10.6. Kalicharan Mahapatra v. State of Orissa, (1998) 6 SCC 411 [para 7 and 14) 7. There is no indication anywhere in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authority competent to remove him from his office. (2) Where for any reason whatsoever any doubt arises whether the previous sanction as required under sub-section (1) should be given by the Central or State Government or any other authority, such sanction shall be given by that Government or authority which would have been competent to remove the public servant from his office at the time when the offence was alleged to have been committed. 9. It seems to us that the person must be employed in connection with the affairs of the Union in sub-clause (a) and with the affairs of the State in sub-clause (b). The case of the appellant would be covered in sub-clause (a) because he had been employed in connection with the affairs of the Union. But the sub- section contemplates that the person must be employed in connection with the affairs of the Union and not that he was employed with the affairs of the Union. The policy underlying Section 6 and similar sections, is that there should not be unnecessary harassment of public servants. But if a person ceases to be a public servant the question of harassment does not arise. The fact that an appeal is pending does not make h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is being answered. 13.2. In the said application, the respondent has raised the contention as above indicating that the contents of the rejoinder are unnecessary for the matter, the said averments have been made only to prejudice this Court, to brow beat the counsel for the respondent and also to defame the counsel appearing for the respondent. Apart therefrom there are various allegations made in the said application against the counsel for the petitioner. 13.3. It is rather sad that there are allegations made as regards the Senior Counsel who is appearing in the matter. From the documents produced along with the petition and rejoinder it is seen that the Respondent is given to making allegations against whosoever appears against the respondent and /or passes an order against the Respondent. The Respondent has infact filed a criminal complaint against the officer who passed the orders under Section 8 of the Act of 2013, which was against the respondent. 13.4. Virtually the entire rejoinder viz., para 10, 17 to 37 are sought to be deleted and almost all the documents produced along with the rejoinder are requested to be ignored. The rejoinder consists of 37 paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced therein cannot be said to prejudice or delay the matter inasmuch as the above petition having been filed on 4.08.2020, the respondent having entered appearance and filed its objections on 3.10.2020, the above matter was taken up on 20.11.2020, 2.12.2020, 14.12.2020, 17.12.2020, 18.12.2020, when it did not reach on account of paucity of time, it was however taken up for hearing on 22.12.2020 at the request of both the counsels. Thus, there cannot be said to be any delay on account of the rejoinder the matter was taken up for final disposal at the request of both the counsels on 22.12.2020, the rejoinder having been filed on 11.12.2020. 13.14. The contents of the rejoinder may be said to cause embarrassment to the respondent, but that cannot be the only reason for striking out of pleadings as also documents. 13.15. Further I am of the considered view that the filing of the rejoinder and production of documents would not cause any abuse of process of the court. 13.16. The averments made and the documents produced are in reply to the detailed objections filed by the respondents and these averments and documents would be required to be considered by this Court. 13.17. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the powers of revision in relation to any interlocutory order passed in any inquiry, trial, appeal or other proceedings. (4) In determining under sub-section (3) whether the absence of, or any error, omission or irregularity in, such sanction has occasioned or resulted in a failure of justice the court shall have regard to the fact whether the objection could and should have been raised at any earlier stage in the proceedings. Explanation.--For the purposes of this section,-- (a) error includes competency of the authority to grant sanction; (b) a sanction required for prosecution includes reference to any requirement that the prosecution shall be at the instance of a specified authority or with the sanction of a specified person or any requirement of a similar nature. 14.2. Section 439 of Companies Act is reproduced herein for easy reference: 439. Offences to be non-cognizable.-- (1) Notwithstanding anything in the Code of Criminal Procedure, 1973 (2 of 1974), every offence under this Act except the offences referred to in sub-section (6) of section 212 shall be deemed to be non-cognizable within the meaning of the said Code. (2) No court shall take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent would not in my considered opinion have any locus to initiate penal proceedings under Section 439 of the Act of 2013 or even if he initiates any action, the court dealing with such a matter cannot take cognizance of such a complaint. 14.8. I Answer Point No.2 by holding that Act of 2013 being a Special enactment containing a specific embargo, the embargo is required to be given complete effect to by this Court. This Court cannot travel beyond the intention of the legislature and water down the requirements of Section 439. In view thereof, I am of the considered opinion that the finding of the Special Economic Court in its order dated 3.7.2017 was proper and correct. Section 19 of the Prevention of Corruption Act and Section 439 of Act of 2013 are not pari materia with each other. 15. ANSWER TO POINT NO.3: Whether any person can file a proceeding against the directors of a company and/or the company under Section 439(2) of the Act of 2013 ? 15.1. In view of the above finding in respect of point No.2, it is but required that to initiate proceeding under Section 439(2) and/or if before the Court taking cognizance such matter arises than the court can take cognisanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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