K.Shakuntala vs The State Of Telangana.,Rep.,Pp ...
2023 Latest Caselaw 2718 Tel

             THE HON'BLE SRI JUSTICE E.V.VENUGOPAL

                CRIMINAL PETITION No.9924 OF 2015
ORDER:

1 This criminal petition, under Section 482 Cr.P.C, is filed seeking to

quash the order dated 25.06.2015 passed in Criminal Revision Petition

No.14 of 2015 on the file of the Court of the Metropolitan Sessions Judge,

Hyderabad, wherein and whereby the order dated 10.10.2014 passed in

S.R.No.6583 of 2013 by the learned Special Judge for Economic Offences,

Hyderabad, rejecting the complaint filed by the petitioner, was confirmed.

2 Heard Sri Prabhakar Sripada, learned senior counsel for the petitioner

and Sri Ch.Pushyam Kiran, learned counsel for the respondents.

3 The facts that lead to the filing of the present criminal petition, in

nutshell, are that the petitioner herein filed a private complaint before the

learned Special Judge for Economic Offences, Hyderabad, under Sections

190 (i) (a) r/w Section 200 Cr.P.C. against the respondents herein for the

offences punishable under Sections 68 and 628 of the Companies Act, 1956

and Sections 406, 409, 417 and 420 of IPC. The allegation was that the

petitioner and the respondent Nos.2 and 3 have close acquaintance with

each other and on that acquaintance the respondent Nos.2 and 3 induced

the petitioner to invest amounts in the A.1 company by purchasing shares

representing that the A.1 company is flourishing and the petitioner would

get profits by way of dividends in the ratio of 15 : 20 of the investment.

Believing the version of respondent Nos.2 and 3, the petitioner invested

Rs.25.00 lakhs in the first respondent company. However, in spite of

receiving the said amount, the respondents have not issued share

certificates to the petitioner and deceived her. Hence the petitioner lodged

a private complaint before the learned trial Court against the respondents

for the offences alleged supra.

4 The learned trial Court, having recorded the sworn statement of the

petitioner, rejected the complaint filed by the petitioner in view of Section

521 of the Companies Act, which says that cognizance of the offence under

the Companies Act, which is alleged to have been committed by any

company or its officer, can only be taken on a written complaint of the

Registrar of Companies or of any shareholder of the company or of any

authorised person of Central Government in that behalf.

5 Aggrieved by the said order of the learned trial Court dated

10.10.2014, the petitioner preferred Criminal Revision Petition No.14 of

2015 on the file of the learned Metropolitan Sessions Judge, Hyderabad.

The learned Sessions Judge, by order dated 25.06.2015, dismissed the said

revision petition observing that though the documents filed by the

petitioner would show that she gave the amounts to the first respondent,

but by mere giving amount the petitioner will not become a shareholder

unless there is some acknowledgement from the first respondent inducting

the petitioner as shareholder. The learned Sessions Judge further observed

that the learned trial Court being a Special Court does not have jurisdiction

to take cognizance of the other offences. Hence, when the offences under

the Companies Act cannot be taken cognizance of, the other offences

obviously cannot be taken cognizance of by the Special Court.

6 As stated supra, aggrieved thereby, the petitioner preferred this

Criminal Petition under Section 482 of Cr.P.C.

7 At the time of hearing, the learned counsel for the petitioner inter

alia urged the following grounds:

i. The word 'shareholder' would indicate a person who has purchased the shares of a company and has applied to the company for registering him as shareholder and that such a person would be competent to file a complaint as contemplated under Section 621 of the Companies Act, 1956.

ii. The lower appellate Court erred in observing that the petitioner will not become a shareholder unless there is some acknowledgement from the first respondent inducting the petitioner as a shareholder by overlooking the receipts dated 18.09.2005 and 24.09.2005 issued by the respondents.

iii. Both the Courts below failed to see that the petitioner was made to part with a huge amount of Rs.25,00,00/- which was paid by way of cheques in the year 2005 and there is no justification for the respondents to simply keeping the money without allotting shares to the petitioner, which is nothing but a clear violation of Sections 68 and 628 of the Companies Act, 1956.

8 In support of his contentions, the learned counsel for the petitioner

relied on the following judgments:

a. Federal Bank Ltd., Vs. Sarala Devi Rathi 1 b. Herdilia Unimers Ltd., Vs. Renu Jain 2 c. Prabhu Chawla Vs. State of Rajasthan 3 d. Dhariwal Tobacco Products Ltd, Vs. State of Maharashtra 4 e. Madhu Limaye Vs. State of Maharashtra 5 f. Nirmaljit Singh Hoon Vs The State of West Bengal 6 g. P.Vijayan Vs. State of Kerala 7 h. Chandra Deo Singh Vs. Prokash Chandra Bose @ Chabi Bose 8 i. Sheoraj Singh Ahlawat Vs. State of U.P 9 j. State of Maharashtra Vs. Priya Sharan Maharaj 10 k. State of Orissa vs. Debendra Nath Padhi 11 l. Vivek Gupta Vs. Central Bureau of Investigation 12

9 In the light of the above submissions this Court feels it appropriate to

extract the relevant provisions of the Companies Act, 1956, which are as

follows:

Section 68 of The Companies Act, 1956

68. Penalty for fraudulently inducing persons to invest money. Any person who, either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading, or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into-

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwriting shares or debentures; or

(b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures; shall be punishable with imprisonment for a term

1 1996 Lawsuit (Raj) 196 2 1995 Lawsuit (Raj) 161 3 (2016) 16 SCC 30 4 (2009) 2 SCC 370 5 (1977) 4 SCC 551 6 (1973) 3 SCC 753 7 (2010) 2 SCC 398 8 AIR 1963 SC 1430 9 (2013) 11 SCC 476 10 (1997) 4 SCC 393 11 (2005) 1 SCC 568 12 (2003) 8 SCC 628

which may extend to five years, or with fine which may extend to ten thousand rupees, or with both.

Section 113 of The Companies Act, 1956

113. Limitation of time for issue of certificates.

(1) 1 Every company, unless prohibited by any provision of law or of any order of any court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred: Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub- section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods.

Section 628 of The Companies Act, 1956

628. Penalty for false statements. If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes of any of the provisions of this Act, any person makes a statement-

(a) which is false in any material particular, knowing it to be false; or

(b) which omits any material fact knowing it to be material; he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to two years, and shall also be liable to fine.

10 In Federal Bank Ltd., Vs. Sarala Devi Rathi (1 supra) the High

Court of Rajasthan held as follows:

6. According to the allegations, the respondent had purchased the shares by paying the price thereof and had sent them by registered post, for being transferred in her name in the records of petitioner No. 1-bank. Section 113 of the Act, casts a duty on the petitioners, to transfer those shares and to deliver them to the respondent within a period of two months from the date of receipt thereof and in case of default, the company and any officer of the company, who is in default, has to be punished with fine, which may extend to five hundred rupees for every day during which the default continues. The respondent having purchased the shares by paying the price therefore, had become the owner thereof and no interest in the shares had been left with the person in whose name the shares stood earlier in the record of the petitioners. If the interpretation, sought to be given by learned counsel for the petitioners, on Section 621 of the Act, is accepted, that would defeat the purposes of the provision and would enable the company to avoid its liability, as the person, after selling the share, will have no interest, whatsoever, in coming forward and filing the complaint, alleging the non-transfer of the

share in favour of the purchaser. I have, therefore, no hesitation in rejecting this contention of learned counsel for the petitioners.

11 In Herdilia Unimers Ltd. vs. Renu Jain (2 supra) the Rajasthan High

Court held as follows:

8. It is also submitted that the petitioner is not a holder of the share and cannot file a complaint under Section 621 of the Companies Act. This argument of the learned counsel for the petitioner is contrary to his own submission when it is clearly admitted that 100 shares of the company are allotted. The moment the shares are allotted and the share certificate is signed, and the name is entered in the register maintained for the purpose, the person becomes the shareholder whether the person has received the share certificate or not. This contention has also no force and is rejected.

12 As seen from the record, the petitioner paid money to the

respondents / accused. The petitioner filed the account copy, certificate of

the bank manager showing that the cheques issued in favour of the

respondents / accused were honoured. The authorised signatory of the

respondents company also issued letter stating that the share application

money was received and a receipt to that effect was also issued.

13 The grievance of the petitioner is that though the respondents have

received the share application money they have not issued share

certificates. It is not understood as to why the respondents having

received the money have not issued the certificates in favour of the

petitioner. The certificate dated 18.09.20105 and 24.09.2005 categorically

show that they acknowledged receipt of the amounts in the form of share

application money, ought not to have kept the same with them. The

cheque numbers are also tallying. Further as contended by the petitioner,

the balance sheet of the first respondent company as on 31.03.2008 also

reflects that an amount of Rs.32,48,983-00 is lying with them under the

caption 'share application money received'.

14 Therefore, the view taken by the courts below is erroneous. The

petitioner having subscribed that much of amount with the respondents /

accused cannot be deprived of her right to become shareholder of the first

respondent company. The action of the respondents in not allotting the

shares and giving shares certificates is not correct. Whether the

respondents have deceived the petitioner or not or whether the amount

which the respondents have taken from the petitioner is towards share

application money will come to light during the course of investigation /

trial. The respondents having received the amounts cannot put the

petitioner and her money in dark without accounting for the same.

15 Therefore, the order dated 25.06.2015 passed in Criminal Revision

Petition No.14 of 2015 on the file of the Court of the Metropolitan Sessions

Judge, Hyderabad, confirming the order dated 10.10.2014 passed in

S.R.No.6583 of 2013 by the learned Special Judge for Economic Offences,

Hyderabad, is liable to be set aside and this criminal petition deserves to be

allowed.

16 Accordingly this criminal petition is allowed. The learned Special

Judge for Economic Offences, Hyderabad shall proceed with the matter in

accordance with law.

17 Miscellaneous petitions if any pending in this criminal petition shall

stand closed.

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E.V.VENUGOPAL, J.

Date: 26.09.2023 Kvsn