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1978 Supreme(Del) 68
High Court Of Delhi
B.L.SHARMA - Appellant
Versus
OMPERKASH MALHOTRA - Respondent
Civil Miscellaneous (Main) 208 of 1974
Decided On : 05/04/1978
B.N.NAYAR, J.N.Verma
In the case of a voluntary winding up, the Magistrate has jurisdiction to take cognizance of an offence under Section 454(5) of the Companies Act, 1956, but a complaint under Section 454(5) cannot be filed against a joint liquidator by the other joint liquidator, and a complaint under Section 454(5) has to be filed jointly by both liquidators.
Headnote:
COMPANIES ACT - VOLUNTARY WINDING UP - JURISDICTION OF MAGISTRATE - OFFENCE U/S 454 (5) - PROPER ACCUSED - SUBSEQUENT EVENTS - COMPLAINT BY SINGLE LIQUIDATOR - VALIDITY.
Fact of the Case:
A petition was filed under Section 482 of the CrPC and Article 227 of the Constitution of India challenging the jurisdiction of a Magistrate to proceed with a complaint filed under Section 454(5) of the Companies Act, 1956, in relation to a company in voluntary winding up. The petitioner, a joint liquidator, argued that the Magistrate lacked jurisdiction, the proper accused were not joined in the complaint, and the complaint was not filed by the proper person.
Finding of the Court:
The court held that the Magistrate had jurisdiction to proceed with the complaint as there was no order for winding up by the Court and Section 511-A of the Act changed the requirements of Section 454 when applied to a voluntary winding up. However, the court found that the complaint could not proceed against the petitioner, who was a joint liquidator, as one liquidator could not be asked by the other to file a statement of affairs. The court also held that the complaint was improperly filed as it was not filed jointly by both liquidators, as required by Section 512(4) of the Act.
Issues: 1. Whether the Magistrate had jurisdiction to proceed with the complaint. 2. Whether the proper accused were joined in the complaint. 3. Whether subsequent events made the complaint invalid. 4. Whether the complaint was filed by the proper person.
Ratio Decidendi: 1. The court interpreted Section 454(5a) and Section 511-A of the Companies Act, 1956, and held that in the case of a voluntary winding up, the Magistrate had jurisdiction to take cognizance of an offence under Section 454(5). 2. The court interpreted Section 454(2) and Section 512(4) of the Act and held that a complaint under Section 454(5) could not be filed against a joint liquidator by the other joint liquidator, as one liquidator could not be asked by the other to file a statement of affairs. 3. The court held that a supervision order passed by the Court did not make the complaint invalid, as it only allowed further proceedings to be dealt with as if a winding up order had been passed by the Court. 4. The court interpreted Section 621 and Section 512(4) of the Act and held that a complaint under Section 454(5) had to be filed jointly by both liquidators, and a complaint filed by a single liquidator was improperly filed.
Final Decision: The petition was allowed, and the complaint was quashed.
( 1 ) THIS is a petition u/s 482 of the Cr. PC. read with Article 227 of the Constitution of India, which is concerned with a criminal case filed by Shri O. P. Malhotra, respondent No. 1 u/s 454 (5) of the Companies Act, 1956, in relation to M/s. Youngmen Benefit Chit Fund (P) Ltd. , which is a company in the process of being wound up in a creditors voluntary winding up. The winding up commenced on 27th April, 1973, by means of a special resolution. The resolution passed by the share-holders appointed the said Shri 0. P. Malhotra as joint liquidator along with Shri B. L. Sharma, who is one of the petitioners in this case. The date of the share-holders resolution is 27th April, 1973 and it seems to have been passed by the creditors on the same date. According to the application, there were six directors on that date and Shri O. P. Malhotra, respondent No. 1 was removed by the creditors at a meeting held on 11th August, 1973. I may here mention that in separate proceedings, I have since removed both Shri O. P. Malhotra and Shri B. L. Sharma and appointed the Official Liquidator and the company is being wound up under the supervision of the Court.
( 2 ) THE objection of the petitioners is that Shri O. P. Malhotra has filed a false complaint u/s 454 (5) of the Companies Act, 1956, in the Court of Shri R. N. Jindal, Magistrate 1st Class, Delhi. A copy of that complaint has also been filed. The validity of the complaint and the jurisdiction of the Magistrate have been challenged in the petition,
( 3 ) A counter-affidavit was filed by Shri O. P. Malhotra and some certified copies of the orders passed by Magistrate have also been filed. I may mention that the Magistrate has held that there is substance in the complaint and it should be proceeded with.
( 4 ) THERE are really four points for decision in this case (1) Whether the Magistrate has jurisdiction to proceed with the complaint, (2) whether the proper accused have been joined in the complaint, (3) whether there are any subsequent events justifying the quashing of the complaint, and lastly, whether the complaint has to be quashed because it it not filed by the proper person,
( 5 ) FOR the decision of these points, it is not necessary to deal with the factual allegations and counter allegations made in the petition in the reply, nor is it indeed necessary to refer to the fact that the petition has been amended twice. It is sufficient to deal with the purely legal questions that arise in the case.
( 6 ) THERE is an objection that the petition is not maintainable under Article 227 of the Constitution which was the from in which it was originally filed, but as a prayer has been added u/s 482 of the Cr. P. C. by means of the amendment, perhaps this objection can wait till I have dealt with the merits of the legal points raised stated earlier.
( 7 ) I first take up the question whether the Magistrate has jurisdiction to proceed with the complaint. It is stated in Section 454 (5a) of the Companies Act, 1956, that the Court by which the winding up order is made or the Provisional Liquidator is appointed may take cognizance of an offence u/s 454 (5 ). Normally, the Court which is competent to take jurisdiction is the High Court, because the High Court acts as the Court for the purposes of passing up orders. It is, therefore, submitted that the Magistrate cannot take cognizance. However, in the case of a voluntary liquidation, there is no order for winding up and, hence the question arises which is the Court which has jurisdiction to take cognizance of the offence. In this connection, it is necessary to refer to section 622 of the Act which states :
"no Court inferior to that of a Presidency Magistrate or a Magistrate of a first class shall try any offence against this Act". As this Section is read along with the Criminal P. C. , it would appear at first sight that a Magistrate is competent to take cognizance of an offence u/s 454 (5) just as he has power to take cognizance of a
