Jenson Paul vs State Of Kerala

Ziyad Rahman A.A., J

Both these Crl.MCs are filed by the accused in Crime No.1107/2021 of Infopark Police Station, Kakkanad. The aforesaid crime was initially registered against the petitioner for the offences punishable under Sections 405,406,408 and 420 of the Indian Penal Code (IPC). Subsequently, the Investigating Officer submitted a further report incorporating the offences punishable under Section 447 of the Companies Act, 2013 as well.

The crime was registered based on a private complaint submitted by the 3rd respondent in both the said Crl.M.Cs before the Sessions Court, Ernakulam, which is the Special Court designated as per Section 435 of the Companies Act, 2013, for trial of the offences punishable under the said Act.

The   basic   allegation   in   the   complaint submitted by the 3rd respondent, which is produced as Annexure-A2 in Crl.M.C. No.5207/2021 are as follows:

3.1. The complainant is a non-resident Indian businessman. The accused was one of the Directors of M/s. Valley World Entertainment(P)Limited, a Company registered under the Companies Act. The petitioner/accused represented to the complainant that the said Company has a development plan to acquire 1.50 Acres of land, and if the 3rd respondent could provide some amount, he could also join in the said venture. Accordingly, based on the understanding between the 3rd respondent and the petitioner, the 3rd respondent invested Rs.6 Crores, as the petitioner herein appraised him that the paid-up capital of the Company needs to be revised as Rs.10 Crores. The said amounts were transferred into the account of M/s Valley World Entertainment Pvt. Ltd from the Company M/s Eram Property Network Private Limited, of which the 3rd respondent is the Managing Director. Upon making such investment, the petitioner created three share certificates of the Company, allegedly allocating the shares of the Company to the aforesaid complainant. It is further alleged that the Registrar of Companies was not informed of the issuance of said share certificates. Later, the petitioner swindled the amount invested by the 3rd respondent in the said Company by utilising the same for his own purposes without any decision of the Directors of the Company. It was alleged that, at the time of making investments, 23 signed cheques were handed over by the 3rd respondent to the accused, in which 21 cheques were illegally and fraudulently used by the petitioner for withdrawing the said amounts. Thus, the complaint was submitted by the 3rd respondent alleging offences punishable under Section 36 r/w Section 447 of the Company Act, 2013 and Sections 406,415 and 420 of IPC.

The said complaint was forwarded by the learned Special Court to the Police for investigation under Section 156(3) of Cr.PC and Annexure-A1 crime has been registered. Now the investigation in the said case is in progress. Crl.MC No.5207/2021 was filed by the petitioner in such circumstances for quashing Annexure-A1 FIR, Annexure-A2 private complainant submitted by the 3rd respondent and all proceedings pursuant thereto. Subsequently, Crl.M.C.No.2005/2022 was filed by the petitioner/accused challenging the order dated 11.8.2021 in Crl.M.P.No.1133/2021 passed by the Special Court referring the private complaint submitted by the 3rd respondent to the Station House Officer, Kakkanad under 156(3) of Cr.PC.

Heard Sri.N.J.Mathews, and Sri. Joy George, the learned counsels appearing for the petitioner/accused and Sri.Vipin Narayan, the learned Pubic Prosecutor for the State and Sri.Ranjith Thampan, the learned Senior Counsel appearing for the 3rd respondent in both the Crl.MCs.

The learned counsel for the petitioner raised various contentions to support the prayer sought in the above Crl.M.C. According to the learned counsel, the order referring the private complaint for investigation under section 156(3) of Cr.PC could not have been invoked by the special court as the same can be done only by the jurisdictional Magistrate. It was also contended that, as per proviso to Section 212(6) of the Companies Act, 2013, there is a prohibition in conducting the investigation in relation to the offences punishable under the Companies Act as the same can be conducted only by the Serious Fraud Investigation Office and not by the Police. The learned counsel also places reliance on various decisions, including the decision of the Hon’ble Telangana High Court in Sumana Paruchuri v. Jakka Vinod Kumar Reddy [CDJ 2022 TSHC 232]. It was also contended that, the petitioner is only a shareholder and does not have the locus standi to initiate criminal proceedings in relation to the transactions of the Company.

The learned Public Prosecutor as well as the learned Senior Counsel for the 3rd respondent oppose the said contention. It was pointed out that, the learned Sessions Judge being the special court, is entrusted with ample powers including the powers under Section 156(3) of the Cr.PC, and there is nothing wrong in forwarding the complaint to the Police. It was also contended that Section 212(6) r/w. Section 439 of the Companies Act does not contemplate any prohibition in referring a private complaint for investigation to the Police. It was pointed out that the restriction was only for taking cognizance.

I have carefully gone through the records and heard the contentions on both sides. The first issue to be considered is concerning the contention of the learned counsel for the petitioner as to the power of the learned Sessions Judge to refer the private complaint under section 156(3) of Cr.PC. As far as the Sessions Court, which passed the said order, is concerned, it was a special court designated under section 435 of the Companies Act, 2013. Section 438 of the Companies Act contemplates the application of the Code of Criminal Procedure in respect of the proceedings before the court which reads as follows:

“S. 438. Application of Code to proceedings before Special Court.- Save as otherwise provided in this Act, the provisions of the Code of Criminal Procedure, 1973 shall apply to the proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be deemed to be a Court of Session or the Court of Metropolitan Magistrate or a Judicial Magistrate of the First Class, as the case may be and the person conducting a prosecution before a Special Court shall be deemed to be a Public Prosecutor.”

It is evident from the said provision that, all the provisions of the Cr.PC are made applicable to the proceedings and while exercising the said powers, the special court shall be deemed to be a court of Session or Metropolitan Magistrate or a Judicial First Class Magistrate as the case may be. Thus, all the provisions in the Cr.PC save as provided under this Act are expressly made applicable to the proceedings before the special court, and therefore, nothing would preclude the special court from exercising the powers under section 156(3) of Cr.PC as well.It is to be noted in this regard that there is no provision in the Companies Act that specifically prohibits the special court from exercising said powers. Moreover, Section 436(2) of the Companies Act contemplates that, when trying an offence under the Companies Act, the special court may also try an offence other than the offence under the Companies Act with which the accused may be charged at the same trial. Therefore, it is evident that, even if the private complaint contained offences other than those under the Companies Act, nothing would preclude the special court from exercising its powers. Therefore, I find no merit in the contention put forward by the learned counsel for the petitioner in this regard.

The next contention put forward by the learned counsel for the petitioner is with regard to the prohibition of conducting an investigation in relation to the offence committed under the provisions of the Companies Act. The relevant provisions in this regard are under sections 212(6) of the Companies Act r/w section 447 of the Act. The said provision reads as follows:

“212. Investigation into affairs of Company by Serious Fraud Investigation Office.-

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(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 offence covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless-

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the Court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail.

Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by-

(i) The Director, Serious Fraud Investigation Office; or

(ii) any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.”

As per sub-section (6) of section 212 of the Companies Act, notwithstanding anything contained in the Code of Criminal Procedure, the offence under section 447 of the Companies Act was made as cognizable offence. The offence under section 447 of the Companies Act deals with the offence of ‘fraud’. The second proviso to sub-section (6) of section 212 of the Companies Act, specifically contemplates that the special court shall not take cognizance of any offence referred to this sub-section except upon a complaint in writing made by The Director, Serious Fraud Investigation Office or any officer of the Central Government authorized, by a general or special order in writing in this behalf by that Government.

The contention raised by the learned counsel for the petitioner by placing reliance upon this provision is that, as one of the offences alleged against him is under Section 447 of the Companies Act, by virtue of the prohibition contained in the second proviso to sub-section (6) of section 212 of the Companies Act, the investigation could not have been conducted by the Police. It was also pointed out that, section 207 to 212 of the Companies Act contemplates a special procedure for investigating the matter and the same cannot be done by a Police Officer who may not have the necessary infrastructure or expertise to inquire into the offences under the Companies Act.

However, I am not inclined to accept the said contention for the following reasons: First of all, it is to be noted that, in the second proviso to sub-section (6) of Section 212 of the Companies Act, the prohibition is contemplated only in respect of taking cognizance and, therefore, the said question of prohibition would come only at the stage when the cognizance is to be taken. As far as the present stage of this case is concerned, a private complaint has been submitted by the 3rd respondent, which was referred for investigation under section 156(3) of the Cr.PC. Based on the same, the Police is now conducting investigation. At this stage, it cannot be concluded that the special court has taken cognizance of the offences. Passing an order under section 156(3) of the Cr.PC would not amount to an order taking cognizance of the offences. The position of law in this regard is well settled. In Jayant Etc. v.State Madhyapradesh [2020(6)KLT 849], the Hon’ble Supreme Court considered the power of the Magistrate to direct the registration of an FIR in exercise of powers under section 156(3)of Cr.PC, in respect of the offences under the Mines and Minerals (Development and Regulation)Act, 1957 (hereinafter referred to ‘MMDR Act’), were considered. As per section 22 of the MMDR Act, there is a specific prohibition in taking cognizance of the offences under the said Act. In the said decision, after referring to the various decisions where the meaning of the expression “taking cognizance” was considered, it was held that at the stage when the special court refers a complaint for investigation under section 156(3) Cr.PC, the court has not taken cognizance of the offence, and it will be at a pre-cognizance stage. Thus, it was held that the specific prohibition as contemplated under section 22 of the MMDR Act in taking cognizance of the offence under the said Act was not applicable to the court when the power under section 156(3) of Cr.PC was being exercised.

It is to be noted in this regard that as per section 212(6) of the Companies Act, the offences covered under section 447 of the Act were made cognizable even though all the other offences under the Companies Act are not cognizable. As far as a cognizable offence is concerned, by virtue of section 154 of Cr.PC, the Police have a statutory obligation to register an FIR when the commission of such cognizable offence is reported.

There is yet another aspect which fortifies the said view. Section 212 of the Companies Act contemplates a detailed procedure for the investigation into the affairs of the companies to be conducted by the Serious Fraud Investigation Office. Of course, it contains a prohibition in conducting the investigation by any other Central or State agency but that prohibition is applicable only when the Serious Fraud Investigation Office has taken over an investigation upon the same being assigned to them by the Central Government. Sub-section (2) of Section 212 is very much relevant which reads as follows:

“212(2): Where any case has been assigned by the Central Government to the Serious Fraud Investigation Office for investigation under this Act, no other investigating agency of Central Government or any State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further with and the concerned agency shall transfer the relevant documents and records in respect of such offences under this Act to Serious Fraud Investigation Office.”

A careful reading of the said provision would indicate that the words “…..no other investigating agency of Central Government or State Government shall proceed with investigation in such case in respect of any offence under this Act and in case any such investigation has already been initiated, it shall not be proceeded further…….” would make it clear that, there is no absolute prohibition in initiating or conducting an investigation. The sub-section (2) of section 212 does envisage a situation where the investigation was initiated or being conducted by any other agency of the State or Central Government and only when the Serious Fraud Investigation Office takes over the investigation, the prohibition would come into play. Thus, the only irresistible conclusion possible is that, there is no absolute prohibition for conducting the investigation so long as the Serious Fraud Investigation Office has not taken over the investigation.

It is true that in the decision rendered by the Telangana High Court in Sumana Paruchuri v. Jakka Vinod Kumar Reddy [CDJ 2022 TSHC 232], it was held that, there is an express prohibition under section 212(6) of the Companies Act, 2013, for conducting an investigation by the Police in relation to the offences under the provisions of the Companies Act. However, in the light of the above observations and other statutory provisions as referred to above, I respectfully disagree with the said observations. Therefore, I find that the contention of the learned counsel for the petitioner in this regard is not legally sustainable.

The other contention raised by the learned counsel for the petitioner is that, being a shareholder of the appellant, he does not have any locus standi to initiate criminal proceedings against the affairs of the company. However, the said contention cannot be considered at this stage. From the nature of the allegations, it is evident that, the specific case of the 3rd respondent is that, the amount invested by him in the company was diverted by the petitioner without following the procedure contemplated under the Companies Act, i.e., without any resolution of the Board of Directors. It is also the allegation of the 3rd respondent that, the said amount was siphoned off by the petitioner for his personal enrichment. Therefore, the allegation raised against the petitioner was in respect of the act which he committed in his personal capacity. Now, the investigation is only at its preliminary stage, and no conclusion as to the aforesaid question can be arrived at this stage.

It is also contended by the learned counsel for the petitioner that the averments in the complaint would not make out any of the offences under the Companies Act. It is also contended by the learned counsel for the petitioner that, as of now, there are no materials for attracting the offences alleged against the petitioner. However, the said contention also cannot be entertained at this stage. Now, the case is under investigation, and what is sought to be quashed is the FIR. As far as the FIR is concerned, the essential requirement for registration of an FIR is whether the information received by the Police discloses any cognizable offence. Whether there are supporting materials to substantiate the said information or not is a matter to be investigated. Thus, at the stage of the registration of the FIR, it is not necessary to insist upon necessary materials disclosing the commission of the cognizable offence, but the question to be considered is whether the allegation or the information discloses the commission of a cognizable offence. The said position of law has been made clear by this Court in Gopalakrishnan P. @ Dileep v. State of Kerala and Others [2022(3) KLT 1]. Therefore on that ground also, I do not find any scope for interference.

In State of Haryana and Others v. Ch.Bhajan Lal and Others [AIR 1992 SC 604], the circumstances under which the interference can be made by the High Court in a criminal proceedings under Article 226 of the Constitution of India or Section 482 Cr.PC has been clearly mentioned. The circumstances pointed out by the Hon’ble Court are as follows:

“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.

Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under S.156(1) of the Code except under an order of a Magistrate within the purview of S.155 (2) of the Code.

where the uncontroverted allegations made in the FIR 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.

Where, the allegations in the F.I.R. 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 S.155(2) of the Code.

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 sufficien ground for proceeding against the accused.

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.

Where a criminal proceeding is manifestly attended with mala fide 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.”

I am unable to find any grounds in this case, as referred to in Bhajan Lal’s case (supra), justifying the invocation of the powers under section 482 Cr.P.C in these cases.

Thus, after considering all the contentions put forward by the learned counsels on both sides and perusing the materials placed on record, I am of the view that, this is not a fit case in which powers of this Court under section 482 Cr.PC can be invoked. Thus, I do not find any merit in these petitions, and accordingly, both these Crl.M.Cs. are dismissed. However, it is clarified that, the observations made by this Court are only to find out as to whether the powers of this Court under section 482 of Cr.P.C is to be invoked or not and under no circumstances, the same would preclude the trial court from considering the same on merits. It shall be open for the court concerned to decide on the issues untrammeled by the observations made in this case.