TMI Blog2015 (11) TMI 1889X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners have violated the provisions under Section 205 of the Act of 1956 then also offence under Section 447 of the Act of 2013, cannot be brought home for the sole reason, that fraud is not to be seen from the alleged act. The learned Magistrate while taking cognizance of the matter except epitomizing the complaint averments has not given independent application of his mind. As per Maksud Saiyed [ 2007 (9) TMI 400 - SUPREME COURT] , the Magistrate has to carefully scrutinize the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused. Thus, it is fairly well settled that this Court under the extraordinary jurisdiction under Section 482 of Cr.P.C. quashing on going investigations/complaint or other proceedings to prevent abuse of process of law - petition allowed. - Criminal Petition Nos. 718/2015 and 7836/2013 - - - Dated:- 26-11-2015 - Hon'ble Judges Rathnakala, J. For the Appellant : K.G. Raghavan, Sr. Advocate for Rajesh D.M., Adv. For the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uivalent provision quoted by the complainant to the Section 123 of the Act of 2013 is Section 205(1) of the Act of 1956. The complaint averments lack specification as to the company not having made profit during the previous financial year as per annual accounts of 2012-13. Opening balance of profit loss of the Company is Rs. 363.18 Crores; Amount transferred to the General Reserves for the year ended 2012-13 is Rs. 36.32 Crores; the proposed dividend of Rs. 10.41 Crores is declared from out of the profit for the previous year not transferred to reserve; after the dividend was declared the balance amount was transferred to the General Reserve. Declaration of the dividend is by the shareholders of the AGM as per Article 125 of the Articles of Association and the Directors of the Company cannot be fastened with liability of the declaration of dividends. There is no criminal intent on the part of the petitioners to commit fraud by declaring dividend. Neither Section 205-A(3) of the Act of 1956, nor companies (Declaration of dividend out of Reserves) Rules, 1975, is violated. It is not the case of the complainant that the company suffered losses successively over the previous years p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld absorb Rs. 12.18 Crores including payment of tax on dividend. As per Section 205 of the Act of 1956, the dividend to be paid only out of profits. As per Section 205A (3) of the Act of 1956, when company declares dividend out of the accumulated profits earned by the company in previous years and transferred by it to the reserves, such declaration of dividend shall not be made except in accordance with such rules as may be made by the Central Government in this behalf, if the declaration is not in accordance with such rules, such declaration shall not be made except with the previous approval of the Central Government. In view of the judgment of the Apex Court reported in 1998 Crl.L.J. 2826 (SC), in the case of Mohd. Hadi Raja v. State of Bihar, sanction under Section 197 of Cr.P.C. is not a pre-requisite to prosecute a company and its directors though it is owned by Government. Hence, the protection under Section 197 of Cr.P.C. is not applicable to the accused persons. Accused Nos. 2 to 5 and 7 to 15 attended the Board Meeting and have signed the minutes of the meeting dated 29.05.2013. Accused Nos. 16 and 17 are the signatories to the dividend warrant, because of their direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the resolution. By way of affidavit filed by the Company Secretary, it is shown that the accused 7 to 14 are the part time non-official directors, 2nd accused is the Chairman/Managing Director, Mining and Constructions, accused No. 3 is Ex-director-General, accused No. 16 is the Director (Finance) and they are appointed by the Hon'ble President of India and they cannot be removed except by order of the President of India. Another interesting feature of the complaint is, action is sought in respect of violation of Section 123 of the Act of 2013 which provision is given effect to from 01.04.2014 whereas allegation pertains to the resolution of the meeting dated 29.05.2013. If section 123 of the Act of 2013 is given up what remains for consideration is Section 205 of the Act of 1956 Mischievously, Sub Section 1 of Section 205 of the Act of 1956 is quoted in the complaint as the provision which is violated. But on a perusal of the entire Section 205, it admits declaration of dividend out of the profits of the company for any previous financial year. The proviso to Section 205(1) of the Act of 1956 reads thus: a) if the company has not provided for depreciation for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. A criminal trial cannot be allowed to assume the character of a fishing and roving enquiry. It would not be permissible in law to permit a prosecution to linger, limp and continue on the basis of a mere hope and expectation that in the trial some material may be found to implicate and the accused. Such a course of action is not contemplated in the system of criminal jurisprudence that has been evolved by the courts over the years. A criminal trial, on the contrary, is contemplated only on definite allegations, prima facie, establishing the commission of offence by the accused which fact has to be proved by leading unimpeachable and acceptable evidence in the course of the trial against the accused................ 8. It is the settled proposition of law that the complaint failing to disclose prima facie case is liable to be quashed. When the complaint allegation and relevant factors when taken together fail to disclose the commission of an offence, it is the duty of the Court to interfere and stop the investigation (As per State of West Bengal and Others v. Swapan Kumar Guha and Others, reported in (1982) 1 SCC 561). 9. Question of sanction under Section 197 of Cr.P.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a case against the accused. (4) Where, the allegations in the FIR 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 the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with malafide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. The case on hand fits in both 1st category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in the complaint. (vii) The person sough to be made liable should be in charge of and responsible for the conduct of business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases. Though in the present case, the allegation is in respect of offence punishable under Section 447 of the Act of 2013, above principles would apply to the prosecution under the Company's Act also with same force. The complaint allegation is silent as to how and in which capacity each of the accused is vicariously liable to the alleged offence. As per law laid down by the Apex Court in the case of Maksud Saiyed v. State of Gujarat and Others, reported in (2008) 5 SCC 668, when the offence is by a Company, the Court taking cognizance has to examine, whether the Directors are personally liable for the offence. Even if the statute provides for vicarious liability of an offence, it is obligatory on the part of complainant to make requisite allegations which would attract the provisions constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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