Special Court barred from taking cognizance of Companies Act offences based on private complaints; IPC charges to be tried in appropriate court.
In a significant ruling, the Supreme Court of India has quashed the proceedings under Sections 448 and 451 of the Companies Act, 2013 against Yerram Vijay Kumar and Rajeev Kumar Agarwal, while allowing the continuation of criminal proceedings under the Indian Penal Code (IPC) in a case involving allegations of fraud and forgery. The judgment, delivered by a bench comprising Justices J.K. Maheshwari and K. Vinod Chandran, sets a precedent on the jurisdiction and procedural requirements for taking cognizance of offences under the Companies Act vis-à-vis private complaints.
The apex court's decision came in response to appeals against a Telangana High Court ruling which dismissed the petition filed under Section 482 of the Code of Criminal Procedure by the appellants. They sought to quash criminal proceedings initiated by the complainant, alleging that the appellants illegally convened meetings and fabricated documents to alter the company’s directorship, among other charges.
Central to the case was whether offences under Sections 448 and 451 of the Companies Act could be based on a private complaint. The Supreme Court clarified that offences covered under Section 447, which prescribes punishment for fraud, require a complaint by the Director of the Serious Fraud Investigation Office (SFIO) or an authorized government officer, as per Section 212(6) of the Companies Act. Since Sections 448 and 451 are intrinsically linked to Section 447, the Special Court could not have taken cognizance based solely on a private complaint.
Moreover, the court highlighted that the Special Court's jurisdiction to try IPC offences alongside Companies Act offences ceases once the latter are quashed. Consequently, the IPC charges will be transferred to a court with appropriate territorial jurisdiction.
The judgment underscores the legal safeguards against frivolous complaints under the Companies Act, ensuring that allegations of fraud are subject to scrutiny by competent authorities before prosecution. Nonetheless, the court dismissed the appellants' argument that pending civil litigation precluded criminal proceedings, reiterating that civil disputes do not negate the potential for criminality.
The ruling affects ongoing legal proceedings, directing the transfer of IPC-related charges to a suitable court while quashing the Companies Act charges. The decision has significant implications for how corporate fraud allegations are prosecuted, reinforcing the procedural rigor required under the Companies Act.
Bottom Line:
Special Court under the Companies Act cannot take cognizance of offences under Section 448 and 451 of the Companies Act based on a private complaint, as these offences are covered under Section 447 which mandates a complaint by the Director of SFIO or an authorized government officer. However, the criminal proceedings under IPC can continue in a court of territorial jurisdiction after quashing of Companies Act offences.
Statutory provision(s): Sections 212(6), 447, 448, 451, 436(2) of the Companies Act, 2013; Sections 420, 406, 426, 468, 470, 471, 120B of the Indian Penal Code, 1860; Section 482 of the Criminal Procedure Code, 1973.
Yerram Vijay Kumar v. State of Telangana, (SC) : Law Finder Doc id # 2835142
