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N. Sundareswaran and ors. Vs. K.K. Babu - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtKerala High Court
Decided On
Judge
Reported in1981CriLJ966
AppellantN. Sundareswaran and ors.
RespondentK.K. Babu
Cases ReferredR.P. Kapur v. State of Punjab
Excerpt:
.....complainant herein) or a private individual has to be inferred. on being satisfied about it, the central government may prosecute such person for the offence. on investigation and report, if the central government is satisfied that any person has' committed any criminal offence with reference to or in relation to the company, he may be prosecuted for the offence. the fact that large number of individuals invest money in the formation of companies, that such body corporates occupy significant position in the economic structure and life of the nation and the fact that mismanagement of companies by way of criminal misappropriation and commission of other offences vis-a-vis of the funds and the assets of the company, require that an institution like the central government should have power..........of the company. section 233a of the act in appropriate cases contemplated therein, enables the central government to direct a special audit of the company's accounts for a specified period and the appointment of a chartered accountant for that purpose. section 233b of the act enables the central government in appropriate cases to direct an audit of the cost accounts of the company in a specified manner. section 234 of the act enables the registrar in appropriate cases to pass a written order calling upon the company to give written information or explanation on specified matters and makes it obligatory on the company to provide the required information or explanation. under section 234a of the act, it is open to the registrar, subject to the limitations contained in the section, to.....
Judgment:
ORDER

U.L. Bhat, J.

1. The first accused in C.C. No. 25 of 1980 on the file of the Chief Judicial Magistrate, Kottayam has filed Crl. M. P. No. 441 of 1980 seeking to quash the complaint invoking the provisions of Section 482 of the Code of Criminal Procedure, 1973 (for short the 'Code'). Accused Nos. 2 to 5 therein have filed Crl. M. P. No. 426 of 1980 seeking the same relief. Both these applications are opposed by the respondent-complainant.

2. The respondent herein filed a private complaint before the Chief Judicial Magistrate, Kottayam against the petitioners in the two petitions alleging offences under Sections 406, 420, 465, 471 and 477A, I.P.C. read with Section 34. I.P.C. with reference to the funds said to have been collected in connection with the S. N. D. P. Yogam Platinum Jubilee Celebrations by all or some of the accused. It is alleged that the collections were made on the representation that out of the collections, a building costing Rs. 10,00,000/- will be put up for housing the office of the S. N. D. P. Yogam at Quilon, that this representation was false to the knowledge of the accused even when they made the representation, that considerable part of the collections were suppressed and misappropriated and that they are not shown in the accounts of the Yogam or the Committee and also that the accounts have been falsified for this purpose. It is further alleged that the accused approached the complainant for making collections and he actually collected money from M/s. Radhakrishnan, Sreedharananda and others and handed over the money to the accused at Kottayam. It is further alleged that the Platinum Jubilee Celebration Committee was chosen by the Board of Directors of the S. N. D. P. Yogam and the accused are the office-bearers of the Committee and that of the accused, accused 2 to 4 were also members of the Board of Directors of the Yogam at the relevant time, though the first accused was not such a Director. After filing the complaint the sworn statement of the complainant was recorded and the learned Magistrate issued process to the accused persons. The sustainability of the complaint is now challenged.

3. The contentions urged by the learned Counsel appearing for the petitioners in these two petitions may be summarised as follows: viz., (i) that there is an implied legal bar against the reception of a private complaint in regard to offences relating to Companies coming under the purview of the Indian Companies Act, (ii) that the complaint amounts to the abuse of process of the Court inasmuch as the complainant did not have recourse to the remedies provided under the Indian Companies Act, and (iii) that the allegations in the complaint are vague and do not disclose the commission of any offence

4. Sri K. Sukumaran, the learned Counsel appearing on behalf of the petitioners in Crl. M. P. No. 426 of 1980 referred to the various provisions of the Indian Companies Act, 1956 (hereinafter referred to as the 'Act') that is Sections 209, 209A, 215, 217, 219, 224, 227, 234 - 237, 242, 397 and 408, in support of his contention that the Act is a self-contained Code, providing for prosecution after a particular procedure in regard to offences committed by any person under any law and that in this view an implied bar for prosecution at the instance of a member of the Company (like the complainant herein) or a private individual has to be inferred. I have been referred to the decision in R.P. Kapur v. State of Punjab : 1960CriLJ1239 wherein the scope of inherent power of the High Court under Section 561A of the Code of 1898 (corresponding to Section 482 of the present Code) was explained. In doing so, three out of the categories of cases where inherent power is to be exercised, were considered. The first category referred to in the decision is 'where it manifestly appears that there is a legal bar against the institution or continuance of the criminal proceeding in respect of the offence alleged.' The decision itself mentions that the absence of the requisite sanction may furnish cases under this category. According to the learned Counsel for the petitioners, legal bar referred to by the Supreme Court need not necessarily be an express legal bar, but also could be an implied bar. According to them, the scheme and contents of the provisions of the Act referred to earlier would amount to an implied legal bar.

5. I may, in this connection, refer to Section 9 of the Code of Civil Procedure (for short the C. P. C). It states that civil courts shall have jurisdiction to try all suits of the several nature except suits of which their cognizance is either expressly or impliedly barred. There are several statutes where the jurisdiction of the civil court is expressly barred. Even in the absence of an express bar, the provisions of a particular statute may give rise to an implied bar. Where rights are created or recognised under a special statute and the statute prescribes special remedies and provides for a special procedure and also contemplates a hierarchy of tribunals for securing the remedies, etc., there can be no dispute that there is an implied bai of the jurisdiction of the civil court; but, it is important to note that the Code of Criminal Procedure does not contain any provision parallel to Section 9 of the C. P.C. in relation to an implied bar. Section 4(1) of the Code states that 'all offences under the Indian Penal Code shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions hereinafter contained.' Section 5 of the Code saves special or local laws. Section 26 of the Code states that subject to the provisions of the Code any offence under the Indian Penal Code may be tried by the courts specified therein including the court of Magistrate as shown in the First Schedule. Reading these provisions together it would follow that ordinarily any offence under the Indian Penal Code can only be investigated, inquired into, tried, or otherwise dealt with according to the provisions of the Code, subject of course to any special or local law or special jurisdiction or special procedure prescribed by some other law.

6. Chapter XII of the Code relates to information to the police and their powers to investigate with specific reference to cognizable cases. It is the duty and the right of an officer-in-charge of a police station to investigate any cognizable case without orders of a Magistrate and on completion of such investigation he has to forward to the concerned Magistrate a report in the prescribed form as stated in Section 173 of the Code. It is that report which is generally referred to as the Charge-Sheet. Chapter XIV of the Code refers to conditions requisite for initiation of proceedings. Section 190 of the Code deals with cognizance of offences by Magistrates and enables the Magistrates with the appropriate authority to take cognizance of any offence either upon receiving a private complaint or a police report or upon other information or knowledge. Sections 195 - 199 of the Code occurring in Chapter XIV prescribe certain special conditions in regard to the prosecutions for the offences specified therein. Section 195 provides that in regard to the offences specified therein cognizance shall not be taken except on a written complaint by the concerned public servant or his superior in certain cases and except upon a written complaint of the concerned court or its superior court in certain other cases. Section 198 of the Code states that in regard to offences under Chapter XX of the I.P.C. cognizance shall not be taken except upon a complaint made by some person aggrieved by the offence. Section 199 of the Code states that in regard to an offence under Chapter XXI of the I.P.C. cognizance shall not be taken except on the complaint made by some person aggrieved by the offence. Sections 196 and 197 of the Code lay down that in regard to certain offences mentioned therein, the court shall not take cognizance except with the previous sanction of the Central or the State Government, as the case may be. Excepting Sections 195 - 199, my attention has not been drawn to any other provisions of the Code, creating any restriction on the right of an individual to file a complaint or imposing any restriction on the power of the court to take cognizance. Of course, Sections 195 - 199 of the Code do not constitute any bar against the prosecution. They are only special conditions in relation to the status of a complainant for the taking cognizance by a court. No provision of the Code contemplates any other type of bar against the initiation of prosecution by private individuals. I am stressing this because the learned Counsel for the petitioners did not argue that it is not open to a Station House Officer of the concerned police station to register a case against the petitioners for the offences mentioned in the complaint (except of course the offence alleged under Section 465, which is a non-cognizable offence). There is no contention that the Indian Companies Act stipulates any express bar against the initiation of prosecution under the Code by a private individual.

7. The Supreme Court in R.P. Kapur's case : 1960CriLJ1239 , while referring to a legal bar was careful enough in mentioning that absence of requisite sanction may furnish cases under the first category of cases mentioned in para 6 of the judgment. Of course there can be other statutes which contain similar provisions relating to sanction or otherwise The observation of the Supreme Court does not lend support to the interpretation suggested by the petitioners' counsel that the legal bar contemplated need not necessarily be express legal bar, but also can be an implied legal bar, since the concept of implied legal bar is totally foreign to the scheme of the Code. This view is all the more strengthened by the absence of any provision in the Code parallel to Section 9 C.P.C. and recognising an implied bar.

8. Let me now consider the provisions of the Companies Act relied on by the petitioners counsel to see whether an implied bar could be spelled out from the provisions of the Act. The petitioners are office bearers of the S. N. D. P. Yogam Platinum Jubilee Celebration Committee, a committee constituted by the S. N. D. P. Yogam, which is a company within the ambit of the Act. The complainant is no doubt a member of the company.

9. Section 209 of the Act requires the company to keep proper books of account with respect to all transactions at its registered office and contains other explanatory provisions. Sectiop 209-A of the Act makes it obligatory for these books of accounts to be open for inspection during business hours by the Registrar or by any authorised officer. Section 215 of the Act requires every balance-sheet and Profit and Loss account to be authenticated on behalf of the Board of Directors in the manner provided therein. Section 216 of the Act requires the profit and loss account to be annexed to the balance-sheet and audit report. Section 217 of the Act requires the report of the Board of Directors to be attached to every balance-sheet and that the report should contain all details contemplated under that section relating to finance, etc. The right of every member to get a copy of the balance-sheet and the connected records within a particular period is safeguarded under Section 219 of the Act. Section 220 of the Act requires that three copies of this record to be filed with the Registrar. Appointment of auditor for every company is provided by Section 224 of the Act: Section 227 of the Act explains the powers and duties of the auditors to go into the entire financial dealings and financial position of the company. Section 233A of the Act in appropriate cases contemplated therein, enables the Central Government to direct a special audit of the company's accounts for a specified period and the appointment of a Chartered Accountant for that purpose. Section 233B of the Act enables the Central Government in appropriate cases to direct an audit of the cost accounts of the company in a specified manner. Section 234 of the Act enables the Registrar in appropriate cases to pass a written order calling upon the company to give written information or explanation on specified matters and makes it obligatory on the company to provide the required information or explanation. Under Section 234A of the Act, it is open to the Registrar, subject to the limitations contained in the Section, to move the competent Magistrate to pass an order of seizure of books and papers likely to be destroyed, altered, falsified or secreted. The Magistrate may authorise the Registrar to enter any premises to search the same and seize the concerned records.

10. Under Section 235 of the Act, it is open to the Central Government to appoint Inspectors to investigate the affairs of a company and report to the Government. Section 236 of the Act provides for application by members of the company to move the Central Government to direct such an investigation. The Central Government has residuary powers under Section 237 of the Act to order investigation. The reports to be made by the Inspectors are provided in Section 241 of the Act. Section 242 of*the Act states that if the report discloses the commission of any offence by any person in relation to the company or in relation to any other body corporate, etc. on being satisfied about it, the Central Government may prosecute such person for the offence. Section 397 of the Act provides for application to court for relief in cases of oppression. Section 408 provides powers to the Government to prevent oppression or mismanagement.

11. A reading of the provisions of the Act referred to above will show that a company and the office bearers of a company have certain statutory duties with reference to the financial dealings, maintenance of accounts, disclosure of information, etc., that the members of the company have a right to get copies of the balance-sheet, etc. and that the Registrar of Companies has considerable powers in relation to the records of the company and for calling for informations required by him. The Central Government may direct an investigation into the affairs of the company either on the report of the Inspectors so appointed or on an application of not less than 1/1.0 or l/5th of the members of the company as required under Section 236 of the Act. On investigation and report, if the Central Government is satisfied that any person has' committed any criminal offence with reference to or in relation to the company, he may be prosecuted for the offence. These provisions certainly do not amount to an express bar against initiation of prosecution by a member of the company or by a private individual. It cannot also be said that these provisions constitute an implied bar against such prosecution. The Act only enables the Central Government to prosecute the person concerned. Normally the Central Government cannot prosecute a person under the Code, in view of the circumstances under which cognizance can be taken as laid down in Section 190 of the Code. Of course under Section 190(c) of the Code it may be open to the Central Government to bring relevant information to the notice of a Magistrate em-powered to take cognizance. In such a case it cannot be said that the Central Government is prosecuting a person. Thus, it is clear that Section 242 of the Act is an enabling provision, enabling the Central Government to enter the picture and prosecute a person. The fact that large number of individuals invest money in the formation of companies, that such body corporates occupy significant position in the economic structure and life of the nation and the fact that mismanagement of companies by way of criminal misappropriation and commission of other offences vis-a-vis of the funds and the assets of the company, require that an institution like the Central Government should have power to prosecute the offenders directly. The fact that such a power is vested in the Central Government does not imply that the right of a private individual to move appropriate criminal court under the provisions of the Code is taken away or suspended or limited in any way. I am not referring to acts or omissions which have been rendered punishable under the Act. The above discussion relates only to the acts or omissions committed in relation to a company and which constitute an offence punishable under the Indian Penal Code. With reference to such an offence, the operation of the Code is not limited or abridged or suspended by the Scheme or the provisions of the Act. It may be noted that the prosecution under Section 242 of the Act is to be preceded by a report of the Inspector appointed under Section 235 of the Act. Such an investigation can be directed only on the request of a particular percentage of the total number of members or on the request of the Registrar. It is thus clear that it is not open to a lesser number of members or even a single member or any private individual to call for an investigation. In other words, no action which one member can take under the provisions of the Act would result in the prosecution provided under Section 242 of the Act. This means that the Act does not provide for prosecution of any person on the motion of one member or one individual. At the same time the provisions of the Act are not sufficient to hold that the right of a member or an individual to initiate prosecution under the Code is taken away. It is possible to read the provisions of the Act in harmony with the provisions of the Code. Any member of the company or any particular individual can initiate prosecution directly under the Code by way of a private complaint or can give information to the Station House Officer of a police station regarding the commission of a Cognizable offence by any person in relation to the affairs of a company. In the latter case the Station House Officer of the concerned police station is obliged, on receipt of such information to conduct investigation and in appropriate cases such investigation may lead to a charge-sheet. If, however, the Registrar or the required percentage of members of the company are of the opinion that such a complaint or investigation by the station house officer is not sufficient or adequate to bring the culprits to book, it is open to them to make appropriate motion under Section 236 of the Act which could lead to a prosecution under Section 242 of the Act. The two sets of provisions are not mutually destructive or exclusive. Section 242 of the Companies Act is only supplementary to the provisions of the Code. The provisions of the Act do not constitute an implied bar against the initiation of prosecution by the complainant in this case.

12. Sri S. Easwara Iyer, learned Counsel for the revision petitioner in Crl. M. P. No. 441 of 1980 very much stressed the contention that the complaint constitutes an abuse of process of the court. This argument is another limb of the contention based on the provisions of the Act. It is submitted that the complainant has a good and adequate alternative remedy in the Act and therefore his rushing to the Court without seeking that remedy constitutes an abuse of process of court. I have already indicated that the provisions of the Act cannot be taken as constituting an implied bar against a complaint like the present one. It is also not argued before me that it is not open to a Station House Officer of a police station exercising jurisdiction under the provisions of the Code to initiate investigation on receipt of credible information regarding the commission of I.P.C. offences and after due investigation to lay a charge before the competent court in the nature of final report as provided under Section 173 of the Code. If this jurisdiction, which involves not only the power but also the duty of the Station House Officer of a police station to investigate and lay a final report in regard. to these offences, exists, and I may state that such jurisdiction is not denied, I fail to see how the initiation of prosecution for the same offences by a member of a company before a competent court would constitute abuse of process of court. Prosecution by the Central Government under Section 242 of the Act has to be preceded by an investigation contemplated under Section 235 of the Act at the instance of the Registrar of the Companies or by a motion by members of the company not below the proportion mentioned in Section 236 of the Act or at the instance of the company itself by a special resolution or by an order of court. It is clear that a member of the company or a private individual has no locus standi in moving for an investigation which may ultimately result in the prosecution provided under Section 242 of the Act. Of course, it may be open to a member of the company to organise a considerable number of the members of the company to join him in making an application under Section 236 of the Act in which case an investigation could be ordered provided the Central Government is satisfied regarding the existence of the conditions contemplated under the provisions of the Act. In other words, a person like the complainant in this case has to pass through all these hurdles in order to ensure a prosecution by the Central Government. It cannot be said, that such a remedy of such a limited nature, contingent on the fulfilment of so many conditions by himself and on the satisfaction on the part of the Central Government, is an effective or efficacious alternative remedy open to him vis-a-vis the remedy provided under the Code. In the normal course he is entitled to take advantage of the provisions of the Code to approach the Court. The Act does not provide for any remedy, alternative to the remedy available to him in the Code. I. therefore, reject the contention that the private complaint filed by the complainant in this case without having recourse to the provisions of the Act amounts to an abuse of process of the court.

13. The last argument canvassed before me is that many of the averments contained in the complaint and the sworn statement, even assuming that the allegations contained therein are true, do not disclose the commission of the offences alleged, that is, those under Sections 406, 420, 465, 471 and 477A I.P.C. The allegations made in the complaint are of a very wide scope involving large sums of money collected during a long period and alleged to have been misappropriated during the relevant period. In the very nature of things, it is difficult to expect the complainant to mention every item of collection, misappropriation, forgery or false entry, though it is necessary for him to make the allegations in the precise manner so that the accused can understand what is the case they have to meet. While generally contending that none of the offences alleged is disclosed in the complaint it Is particularly stressed that offences under Sections 465, 471 and 477A I.P.C. cannot in the very nature of the allegations be said to arise in the case. It is clear that the learned trial Magistrate did not apply his mind as to whether the allegations are so vague that cognizance should not have been taken and process issued or whether the allegations do not disclose any one or more of the offences indicated. I am of the opinion that instead of this Court in exercise of its inherent powers sifting and analysing at this stage the allegations contained in the complaint and the sworn statement with reference to various matters involved and coming to a conclusion on this question, it is desirable that the learned Magistrate himself does so. In this view the cognizance taken by the Magistrate and the order issuing process by him to the accused cannot stand.

14. It is also suggested during the discussion at the bar that in a matter like the present one, involving serious allegations of misappropriation of substantial amounts over a wide range of period by persons involved in public life, it is desirable that investigation be ordered under Section 156(3) of the Code before taking cognizance or at any rate, investigation be ordered under Section 202 of the Code, I do not want to express any opinion on the desirability of this course. J would only indicate that it is open to the learned Magistrate to apply his mind in regard to these matters also and pass appropriate orders. In case investigation if ordered, it is open to him to direct that investigation should be under the supervision of a Police Officer of a higher rank. In the result, the proceedings of the Magistrate taking cognizance and issuing process to the accused are quashed. The learned Magistrate is directed to deal with the complaint in accordance with law after applying his mind to the various matters indicated in this order and of course without any reference to any observation on the merits which might have been made in this order. The two Crl. M. Ps, are allowed to this extent.


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