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IN THE HIGH COURT OF GUJARAT
J.M. Panchal, J.
V.M. Modi – Petitioner
Versus
State of Gujarat and another – Respondents
Miscellaneous Criminal Application No. 5639 of 1994
Decided On : 22-02-1995
COMPANIES ACT - SECTION 621 - COMPLAINT - JURISDICTION - SHAREHOLDER - VALIDITY OF ORDER - STAY - ABUSE OF PROCESS - MALA FIDES - QUASHING OF CRIMINAL PROCEEDINGS - SECTION 482 OF THE CRIMINAL PROCEDURE CODE, 1973.
Fact of the Case:
The petitioner, an accused in a criminal case filed a petition under Section 482 of the Criminal Procedure Code, 1973, seeking to quash the criminal proceedings initiated against him for an alleged offense under Section 621A of the Companies Act, 1956. The complaint was filed by the respondent, who claimed that the petitioner failed to comply with an order passed by the Company Law Board directing the registration of certain share transfers.
Finding of the Court:
The court found that the complaint was not maintainable as it was not filed by a legally competent authority or person. The court also noted that the operation, execution, and implementation of the order passed by the Company Law Board had been stayed by the High Court, a fact that was not disclosed by the respondent in the complaint.
Issues: 1. Whether the complaint was maintainable in light of the bar created by Section 621 of the Companies Act, 1956? 2. Whether the respondent abused the process of law by suppressing the fact that the order passed by the Company Law Board was stayed by the High Court?
Ratio Decidendi: 1. Section 621 of the Companies Act, 1956, bars courts from taking cognizance of offenses under the Act unless the complaint is filed by the Registrar, a shareholder of the company, or a person authorized by the Central Government. In this case, the complaint was not filed by any of these legally competent authorities or persons, rendering it not maintainable. 2. The respondent's failure to disclose the stay granted by the High Court amounted to an abuse of the process of law, as it misled the magistrate into taking cognizance of the offense.
Final Decision: The court allowed the petition and quashed the criminal proceedings against the petitioner, holding that the complaint was not maintainable and that the respondent had abused the process of law.
JUDGMENT :
J.M. Panchal, J.
1 .By means of filing this application under section 482 of the Criminal Procedure Code, 1973, the petitioner who is the original accused has prayed to quash Criminal Case No. 760 of 1994 instituted in the court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad, by respondent No. 2 regarding the alleged commission of offence punishable under section 621A of the Companies Act, 1956.
2. One Mrs. Pushpaben Sumantrai Nayak holds five equity shares of Rs. 10 each of Atul Products Ltd. jointly with her husband, Mr. Sumantrai Gopalji Nayak. On November 30, 1990. Mrs. Pushpaben executed four deeds for transferring one equity share each in favour of :
B. (1) Pushpaben Sumantrai Nayak, (2) Dipak Jayantilal Shah, (3) Sumantrai Gopalji Nayak,
C. (1) Pushpaben Sumantrai Nayak, (2) Dipika Ramanlal Shah, (3) Sumantrai Gopalji Nayak, and
D. (1) Pushpaben Sumantrai Nayak, (2) Dipika Ramanlal Shah, (3) Sumantrai Gopalji Nayak.
Pushpaben Sumantrai Nayak retained one share with her. The transfer deeds were lodged with Atul Products Limited by respondent No. 2 on December 5, 1990, along with one share certificate No. 7407.
3. Atul Products Limited returned the said share certificate and four transfer deeds, vide letter dated December 5, 1990, to respondent No. 2, as the intended transfer amounted to splitting of the share certificate and it was not in consonance with article 24 of the articles of association of the company.
4. Feeling aggrieved by the action of the company, respondent No. 2 preferred Appeal No. 42(iii) CLB/WR/1990, before the Company Law Board (Western Region Bench), Bombay, under the provisions of section 111 of the Companies Act, 1956. The Company Law Board passed an order dated September 18, 1992 [See Dipakkumar Jayantilal Shah v. Atul Products Ltd. [1995] 82 Comp Cas 603 (CLB)], directing Atul Products Limited, to register the transfer. The said order dated September 18, 1992, was sent by the Company Law Board, vide its letter dated September 25, 1992, which was received by Atul Products Limited on September 30, 1992.
5. Being aggrieved by the order of the Company Law Board, Atul Products Limited, preferred First Appeal No. 2272 of 1992 on November 20, 1992, before the High Court under the provisions of section 10F read with section 10 of the Companies Act, 1956. The company also filed Civil Application No. 4751 of 1992 for stay. The court passed the following order on November 24, 1992 :
Paragraph 4(A) of the civil application is as under :
"Pending the hearing admission and final disposal of the accompanying first appeal your Lordships may be pleased to stay the operation, execution and implementation of the order dated September 18, 1992 [See Dipakkumar Jayantilal Shah v. Atul Products Ltd. [1995] 82 Comp Cas 603 (CLB)], passed by the Company Law Board, Western Region, Bombay."
Thereafter, the following order was passed on December 28, 1992 :
"S.O. to January 20, 1993. Ad interim relief as granted earlier till further orders."
On January 28, 1993, the High Court, after hearing learned counsel for Atul Products Ltd. and respondent No. 2, passed the following order :
"Having heard Mr. Gandhi, learned advocate, for the appellant and Mr. Deepakkumar Shah, the respondent, party-in-person, I think, the ad interim relief granted earlier deserves to be continued as interim relief pending the hearing and disposal of the first appeal. Rule is made absolute accordingly."
Thereafter, respondent No. 2 filed a complaint on December 2, 1994, against the petitioner and others for the alleged commission of offence punishable under section 621A of the Companies Act, 1956, on the plea that the order dated September 18, 1992, passed by the Company Law Board, Western Region, Bombay, was no
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