Point of Law: Quash of criminal proceedings– Directors of company - admittedly proceeding initiated by Official Liquidator since not being one under Section 446, respondent / Official Liquidator ought to have obtained sanction as mandated and only then proceeded further.

ORDER :

1. The present respondent filed a complaint under C.C. No.545/2007 before the learned Special Court ( Economic Offences), Bengaluru (for brevity, ‘Trial Court’) under Section 538(1)(c) of the Companies Act, 1956 (for brevity ‘the Act’) read with Rule 9 of the Companies (Court) Rules, 1959 (for brevity, ‘1959 Rules’) and Section 200 of Code of Criminal Procedure (for brevity, ‘Cr.P.C.’) against the present petitioners alleging failure on the part of the petitioners in handing over the books and records of M/s. Shimbu Imports and Exports (P) Ltd. (in liquidation) punishable for default under Section 538(1)(c) of the Act.

2. The present petitioners filed an application under Section 245 of the Cr.P.C. read with Section 633 of the Act seeking their discharge from the offence punishable under Section 538(1)(c) of the Act.

3. The Trial Court by its impugned order dated 18.11.2011 kept open the said application and posted the case for recording of evidence stating that the same would be in consonance with the provisions of Section 244 of Cr.P.C. and other provisions under Chapter XX of Cr.P.C. and the Act and the 1959 Rules.

4. Aggrieved by the same, the accused Nos.1 and 2 in the Trial Court have preferred the present petition. The respondent is being represented by his learned counsel.

5. Heard the arguments of learned Senior Counsel for the petitioners and also of the learned counsel for the respondent.

Perused the materials placed before this Court.

6. The only point that arises for my consideration is whether the impugned Order of the Trial Court warrants interference by exercise of power under Section 482 of Cr.P.C. by this Court?

7. Learned Senior Counsel appearing for the petitioners in his arguments submitted that this Court in Co.P.85/1998 passed an Order on 19.03.1999 for winding up of the company M/s. Shimbhu Imports and Exports (P) Ltd. The present petitioners are the Directors of the said company. All the books and registers sought for by the Official Liquidator who has taken over the possession of the assets of the company have been submitted to him along with the letter dated 11.07.2003 of the petitioner No.1. A copy of the said letter with the details of the books and registers handed over to the Official Liquidator are produced at Annexure-C. 618 books were handed over to the Official Liquidator. However, without considering the said aspect, the proceeding under Section 538(1)(c) of the Act has been initiated. As such, the same deserves to be set aside.

8. Learned Senior Counsel more vehemently submitted that the Official Liquidator has not obtained the sanction of the Court for instituting the present criminal petition under challenge against the present petitioners which is mandatory under Section 457(1)(a) of the Act, as such, the entire proceeding is vitiated and deserves to be quashed. In his support, he relied upon the Judgment of the Hon’ble Apex Court in Jaswantrai Manilal Akhaney Vs. State of Bombay reported in (1956) 26 Comp Cas 340 and also the Judgment of the Andhra Pradesh High Court in Official Liquidator Vs. T.J. Swamy and Others reported in (1992) 73 Comp Cas 583. He further submitted that the handing over of books of accounts has been acknowledged and the same has been taken judicial notice of in another action upon a company application No.1196/1999 in Co.P. 85/1998 by this Court on 09.11.2006, a copy of which is produced at Annexure-E. He further submitted that even if this Court comes to a conclusion that the Directors / petitioners have committed a default, the same is unintentional, bona fide, as such, they may be excused under Section 633 of the Act.

9. Learned Official Liquidator in his very brief argument submitted that for initiation of any action under Section 538(1)(c) of the Act for violation of Section 457(1) of the Act, no sanction is required. In his support, he relied upon an Order dated 19.01.2001 passed by the Delhi High Court in D.K. Kapur Vs. Reserve Bank of India and Others report