TMI Blog2024 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ministry of Corporate Affairs, New Delhi. It is clear from the petition of complaint that neither the Company nor the persons, who were in-charge of the day affairs of the company, have been made parties in the case. Without the Company and the persons responsible for the day to day affairs of the Company, the prosecution of the petitioner alone, who acted on behalf of the company is bad in law and thus clearly an abuse of the process of law. The proceedings pending before the Learned, 2nd Special Court, Calcutta at West Bengal under Section 448 of the Companies Act, 2013 for alleged violation of Section 233 of the Companies Act, 2013, is bad in law and thus liable to be set aside - revision allowed. - HON BLE JUSTICE SHAMPA DUTT (PAUL) For the Petitioner : Mr. Abhrojit Mitra, Sr. Adv., Mr. Somopriyo Chowdhury, Mr. Debapratim Guha, Mr. Anirudhya Dutta, Ms. Anchita Sarkar. For the Opposite Party : Mr. Sailendra Kr. Tiwari. JUDGMENT SHAMPA DUTT (PAUL), J.: 1. The present revision has been preferred praying for quashing of complaint and proceeding being complaint no. 35/2019 pending before the Learned, 2nd Special Court, Calcutta at West Bengal under Section 448 of the Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013 is misconceived, without any basis and contrary to law. 8. It is submitted, that the ingredients of the offence as alleged in the Complaint Petition are not attracted at all. Further, the alleged violation of Section 233(1)(b) of the Act, 2013 in relation to the Scheme of Amalgamation of Fort Gloster Electric Limited (Transferor Company), the wholly owned subsidiary of the Company with the Company (Transferee Company) (hereinafter referred to as the Scheme) is without any substance or merit. The Scheme was approved by eighty shareholders of the Transferee Company holding one hundred per cent of the total number present and voting at the meeting of the shareholders of the Transferee Company held on 21st August, 2018, wherein the shareholders were also given the option of e-voting from 18th August, 2019 to 20th August, 2019. 9. It is further stated that a scheme of amalgamation of the wholly owned subsidiary namely, Fort Gloster Electric Limited with the holding company being the transferee company, namely, Jayshree Chemicals Limited was presented for approval before the Hon ble Regional Director, Eastern Region, Ministry of Corporate Affairs, under the provisions of Section 233 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove the scheme of amalgamation. The opposite party while construing and interpreting Section 233(1)(b) of the Companies Act, 2013 gave a restrictive interpretation to the said sub-section as if to contend that the approval of ninety percent of the members should have been ninety percent of the total members of the company and not ninety percent of the members present and voting on the date of the meeting. The intention of the legislature both contained in Section 230 and Section 233 of the Companies Act, 2013 has to be read harmoniously and not in a restricted manner as has been sought to be done by the opposite party which demonstrates that the opposite party has acted in a vindictive manner and also contrary to law. 13. The Complainant/opposite party herein has specified its case as follows in Para 10 of the petition of complaint:- The aforesaid reply of the accused was examined by the office of Complainant and a report in this regard was forwarded to the Regional Director (Eastern Region), Ministry of Corporate Affairs, Government of India, Kolkata vide Letter No. ROC-WB/S-233/2019/182 dated 02.05.2019. In para-3 of the aforesaid report, the following was observed:- It is submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of the total of the paid up share capital of the company, who are to approve the scheme but 90% of the members present at the annual general meeting. 18. The following rulings have been relied upon by the petitioner:- i) IDFC Limited vs The Regional Director, Southern Region, Chennai. ii) Andrew Yule Company Ltd. Anr. vs Hooghly Printing Company Ltd. iii) Apollo Hospitals Enterprise Limited (Transferee Company) sanctioned by Regional Director, Southern Region on 28th June, 2021. iv) Quess Corp Limited sanctioned by Regional Director, South East Region on 15th November, 2019. v) Sastasundar Venture Limited (Transferee Company) with Myjoy Tasty Food Private Limited and Myjoy Hospitality Private Limited sanctioned by Regional Director, Eastern Region on 9th January, 2018. vi) Health Care Global Enterprises Limited (Transferee Company) with HCG Pinnacle Oncology Private Limited sanctioned by Regional Director, South East Region on 30th January, 2018. vii) Narayana Hrudayalaya Limited (Transferee Company) with Newrise Healthcare Private Limited sanctioned by Regional Director, South East Region on 4th October, 2017. viii) Usha Martin Telematics Limited Ors. -vs-Registrar of Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly approach this Tribunal to get appropriate orders. 21. The further argument in Para 6 of the said judgment, that under Section 233 of the Companies Act, 2013, the respondent has no power to reject the scheme, it can only approach the tribunal to get appropriate orders also found support from the tribunal in the said case. 22. In Andrew Yule Company Ltd. Anr. (Supra), the tribunal clearly held:- 15. In the present case, we are in respectful agreement with a view of the larger bench of the Hon'ble Punjab Haryana High Court in Swift Formulation Private Limited (supra) . We also find merit in the contentions of Mr. Jishnu Chowdhury, Ld. Counsel for the petitioning companies that the literal and logical meaning of section 233(1)(d) can only be that the scheme should be approved by majority representing 9/10th in value of the creditors present in such meeting, and not 9/10th of the total value of debt. 23. This too supports the petitioner s case herein. 24 . On the other hand the opposite party (Registrar of Companies) has relied upon the ruling in:-2019 SCC online NCLT 14115 wherein it has been held:- i) It is submitted that the Ministry of Corporate Affairs, New Delhi vide its l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective companies indicated in a meeting convened by the company by giving a notice of twenty-one days along with the scheme to its creditors for the purpose or otherwise approved in writing iv) Section 233(1)(b) of the Act requires that the scheme is approved by the respective members or class of members at a general meeting holding at least 90% of the total number of shares. Section 233(1)(d) of the Act requires that the scheme is approved by majority representing nine-tenths in value of the creditors or class of creditors in a meeting convened by the company. v) Therefore, for the purpose of fast track approval of merger or implementation, the approval of the scheme is required from at least 90% of the total number of shares and also from a majority representing nine-tenth in value of the creditors or class of creditors. vi) Therefore, for the purpose of fast track approval of merger or implementation, the approval of the scheme is required from at least 90% of the total number of shares and also from a majority representing nine-tenths in value of the creditors or class of creditors. vii) The voting details have already been extracted above and clearly show that the require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a scheme of merger or amalgamation may be entered into between two or more small companies or between a holding company and its wholly-owned subsidiary company or such other class or classes of companies as may be prescribed, subject to the following namely:- (a) .. (b) The objections and suggestions received are considered by the companies in their respective general meetings and the scheme is approved by the respective members or class of members at a general meeting holding at least ninety per cent of the total numbers of shares 27. The relevant part of Section 233(1)(b) of the Act is holding at least ninety percent of the total numbers of shares . 28. Thus it is clear that the petitioners herein do not have the required percentage as per the circular dated 24.08.2017 of Ministry of Corporate Affairs, New Delhi vide its letter No. 2/31/2013-CAA-CL-V-Pt-2. 29. But the petitioner s Company/Companies is at liberty to take recourse to Section 233(5), 233(6), and under Section 232, of the Companies Act, 2013. 30. The next contention is as to whether the petitioner is liable for offence punishable under Section 447 and Section 448 of the Companies Act. 31. Section 447 of the Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case, it is clear that till the circular by the Ministry of Corporate Affairs, New Delhi vide its letter No. 2/31/2013-CAA- CL-V-Pt-2 dated 24.08.2017, there was an ambiguity in respect of Section 233(1)(b) of the Act. 34. Annexure H at page 82 of the revisional application is Form no. CAA-12. Confirmation order of scheme of amalgamation between M/s Fort Gloster Electric Limited with M/s Jayshree Chemicals Private Ltd., is as follows:- Pursuant to the provision of Section 233 of the Companies Act, 2013, the Scheme of compromise, arrangement or merger for transfer of M/s Fort Gloster Electric Limited (Transferor Company) with M/s Jayshree Chemicals Limited (Transferee Company) approved by their respective members and creditors as required under Section 233(1)(b) and (d) of the Companies Act, 2013 is hereby confirmed and the scheme shall be effective from the date of this confirmation. A copy of the approved scheme is attached to this order. Sd/- Regional Director (ER) 35. The said order has been issued by the Regional Director. 36. Next is the order taking cognizance by the Judge, 2nd Special Court, Calcutta. The relevant portion of order is reproduced here:- .Perused the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the complaint under Section 203 Cr. P.C. Upon consideration of the statement of complainant and the material adduced at that stage if the Magistrate is satisfied that there are sufficient grounds to proceed, he can proceed to issue process under Section 204 Cr. P.C. Section 202 Cr. P.C. contemplates postponement of issue of process . It provides that the Magistrate on receipt of a complaint of an offence of which he is authorised to take cognizance may, if he thinks fit, postpones the issue of process for compelling the attendance of the person complained against, and either inquire into the case himself, or have an inquiry made by any Magistrate subordinate to him, or an investigation made by a police officer, or by some other person for the purpose of deciding whether or not there is sufficient ground for proceeding. If the Magistrate finds no sufficient ground for proceeding, he can dismiss the complaint by recording briefly the reasons for doing so as contemplated under Section 203 Cr. P.C. A Magistrate takes cognizance of an offence when he decides to proceed against the person accused of having committed that offence and not at the time when the Magistrate is just informed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... izance of any offence under S. 190(1)(a), Criminal P.C., he must not only have applied his mind to the contents of the petition, but he must have done so for the purpose of proceeding in a particular way as indicated in the subsequent provisions of this Chapter, proceeding under S. 200, and thereafter sending it for enquiry and report under S. 202. When the Magistrate applies his mind not for the purpose of proceeding under the subsequent sections of this Chapter, but for taking action of some other kind, e.g., ordering investigation under Section 156(3), or issuing a search warrant for the purpose of the investigation, he cannot be said to have taken cognizance of the offence... (Underlining added) The same view was reiterated by this Court in Jamuna Singh Ors. vs. Bhadai Sah, (1964) 5 SCR 37 and Nirmaljit Singh Hoon vs. State of West Bengal Anr., (1973) 3 SCC 753. 14. Elaborating upon the words expression taking cognizance of an offence by a Magistrate within the contemplation of Section 190 Cr. P.C., in Devarapally Lakshminarayana Reddy Ors. vs. V. Narayana Reddy Ors., AIR 1976 SC 1672 , this Court held as under:- But from the scheme of the Code, the content and marginal heading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Those in charge of the affairs of the Company in failing to register the Company as a dealer acted in the honest and genuine belief that the Company was not a dealer. Granting that they erred, no case for imposing penalty was made out. Almost every statute confer operational power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evidence when a private complaint is filed by a public servant in discharge of his official duties; however, it is the duty of the Magistrate to apply his mind to see whether on the basis of the allegations made and the evidence, a prima facie case for taking cognizance and summoning the accused is made out or not. This Court explained the reasoning behind this exemption in National Small Industries Corporation Limited v. State (NCT of Delhi) and Others, (2009) 1 SCC 407: 12. The object of Section 200 of the Code requiring the complainant and the witnesses to be examined, is to find out whether there are sufficient grounds for proceeding against the accused and to prevent issue of process on complaints which are false or vexatious or intended to harass the persons arrayed as accused. ( See Nirmaljit Singh Hoon v. State of W.B.) Where the complainant is a public servant or court, clause (a) of the proviso to Section 200 of the Code raises an implied statutory presumption that the complaint has been made responsibly and bona fide and not falsely or vexatiously. On account of such implied presumption, where the complainant is a public servant, the statute exempts examination of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scharge of duties of the company. 50. The Supreme Court in Shiv Kumar Jatia vs. State of NCT of Delhi, AIR 2019 SC 4463, Criminal Appeal nos. 1263, 1264 and 1265-1267 of 2019, decided on 23 August, 2019 , held:- 27. The liability of the Directors/the controlling authorities of company, in a corporate criminal liability is elaborately considered by this Court in the case of Sunil Bharti Mittal. In the aforesaid case, while considering the circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an accused person, this Court has held, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. At the same time it is observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the Statute specifically provides for. It is further held by this Court, an individual who has perpetrated the commission of an offence on behalf of the company can be made an accused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade only against the company and other staff members who are incharge of day to day affairs of the company. In absence of specific allegations against the Managing Director of the company and having regard to nature of allegations made which are vague in nature, we are of the view that it is a fit case for quashing the proceedings, so far as the Managing Director is concerned. 51. In Dayle De Souza vs Government of India Through Deputy Chief Labour Commissioner (C) and Anr., in Criminal Appeal No. . of 2021 (arising out of SLP (CRL.) No. 3913 of 2020), decided on October 29, 2021 , the Supreme Court held:- 24. In Sharad Kumar Sanghi v. Sangita Rane, (2015) 12 SCC 781 this Court observed that:- 11. In the case at hand as the complainant's initial statement would reflect, the allegations are against the Company, the Company has not been made a party and, therefore, the allegations are restricted to the Managing Director. As we have noted earlier, allegations are vague and in fact, principally the allegations are against the Company. There is no specific allegation against the Managing Director. When a company has not been arrayed as a party, no proceeding can be initiated against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o attract the vicarious liability of others. Thus, the words as well as the company appearing in the section make it absolutely unmistakably clear that when the company can be prosecuted, then only the persons mentioned in the other categories could be vicariously liable for the offence subject to the averments in the petition and proof thereof. One cannot be oblivious of the fact that the company is a juristic person and it has its own respectability. If a finding is recorded against it, it would create a concavity in its reputation. There can be situations when the corporate reputation is affected when a Director is indicted. In similar terms, the Court further held: (SCC p. 688, para 59) 59. In view of our aforesaid analysis, we arrive at the irresistible conclusion that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. The other categories of offenders can only be brought in the drag-net on the touchstone of vicarious liability as the same has been stipulated in the provision itself. xx xx xx 12. The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exception would possibly be when the company itself has ceased to exist or cannot be prosecuted due to a statutory bar. However, such exceptions are of no relevance in the present case. Thus, the present prosecution must fail for this reason as well. 52. In Sunil Bharti Mittal Vs Central Bureau of Investigation, (2015) 4 SCC 609, decided on January 9, 2015 , the Supreme Court held:- 43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels Tours (P) Ltd., (2012) 5 SCC 661 : (2012) 3 SCC (Civ) 350 : (2012) 3 SCC (Cri) 241], the Court noted that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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