Ajit Singh vs Registrar of Companies

Shabihul Hasnain, J.—Heard Mr. Ravi Kant, Senior Advocate, assisted by Mr. Altaf Mansoor, Advocate for the petitioners, Mr. Bireshwarnath, for the C.B.I., and Mr. A.M. Johari.

This petition has been filed by the petitioners u/s 633(2) of the Companies Act, 1956, read with Rule 9 of the Companies (Court) Rules, 1959. A prayer has been made that petitioners be exempted of the apprehended prosecutions under proceedings in respect of case crime No. R.C., 1(S)/2006/CBI/SCB/Lucknow of 2006 U/ss 120-B/467/468/ 471/477-A I.P.C. pending before the Court of Special Magistrate, CBI, Lucknow.

A stay was granted by this Court on 9-6-2009 which has been extended from time to time. A stay vacation application was moved and its extension has been opposed by the opposite parties. Since affidavits have been exchanged the matter is being heard finally.

A preliminary objection has been raised by Sri Bireshwar Nath, learned Counsel for the C.B.I. that the petition u/s 633(2) is not maintainable on facts and circumstances of the case. The objection was sought to be replied by the petitioners'' counsel. The narration of facts in brief thus becomes imperative.

The petitioners are the two Directors of a Company registered at Lucknow under the Companies Act, 1956 viz, Ms, Carlton Hotels Private Limited.

An F.I.R. was lodged on 12-1-2006 with the C.B.I., under Sections 120B, 420, 467, 468, 471, 477A of the I.P.C., against one V.K. Gupta, the Chartered Accountant of the said Company. This FIR was lodged on the letter sent by Deputy Secretary, Government of India, Ministry of Finance, Department of Company Affairs, New Delhi addressed to the Director, C.B.I. North Block, New Delhi. This letter was sent after a preliminary inquiry which was conducted by the Ministry on the basis of a complaint made by one A.M. Johari. It was alleged that in the Annual Returns made up to 30-9-1997, 29-9-1998 and 30-9-1999 filed by the Company, page Nos. 3 to 14 were inserted/changed subsequently as the original annual return contains only twelve pages.

On the basis of this F.I.R., C.B.I, started the investigation after taking the statement etc., the final report was submitted on 22-8-2007 by the Inspector of C.B.I. Sri Rajbeer Singh before the Court of Special Judicial Magistrate (C.B.I.) in case No. RC 1 (S)/2006/CBI/SCB/Lucknow of 2006.

The present Intervener Sri Arvind Johari submitted a protest application before the Court of Special Judicial Magistrate, CBI, on 5-2-2008 for rejection of aforesaid final/closure report. The protest application was entertained despite reply filed by the CBI in favour of the closure and the order to further investigate the case was passed on 18-7-2008 by the Special Judicial Magistrate (C.B.I.). It is against this investigation that the present petition u/s 633(2) of the Company Act has been filed.

The main argument put forward by Sri Ravi Kant, learned Senior Advocate is that the case is covered u/s 633(2) of the Companies Act, inasmuch as, that there are no charges against the petitioner in the F.I.R. directly. Only V.K Gupta has been named in the F.I.R. The F.I.R. has been annexed on pages 78 to 49 of this petition. Learned Senior Advocate further argued that the F.I.R. was lodged after a detailed inquiry by the Central Government. The inquiry report is also annexed as annexure No. 8 at page 133 of the petition. This inquiry report has been submitted by Mr. R.K. Meena, Deputy Director (I) dated 27-6-2003. A perusal of the inquiry report shows that only suspicion of tampering of records has been shown in the inquiry report and nowhere, the petitioners have been implicated even remotely. The complicity of one V.K. Gupta as well as involvement of the staff/officials of the office of the Registrar, Companies, U.P.-Uttaranchal, has also not been ruled out. Under the circumstances when the preliminary inquiry conducted by the Central Government has not found anything against the petitioners and the Investigating Officer of the C.B.I., has recommended the closure of the case, re-investigation against the petitioners only amounts to harassment and nothing else. Even the action of Mr. V.K. Gupta is covered by the word ''misfeasance'' given in Section 633(2). Section 633 of the Act is quoted below:

633. Power of Court to grant relief in certain cases.-(I) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the Court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case including those connected with his appointment, he ought fairly to be excused, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit:

Provided that in a criminal proceeding under this sub-section, the Court shall have no power to grant relief from any civil liability which may attach to an officer in respect of such negligence, default, breach of duty, misfeasance or breach of trust.

(2)Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the High Court for relief and the High Court on such application shall have the same power to relieve him as it would have had if it had been a Court, before which a proceeding against that officer for negligence, default, breach of duty, misfeasance of breach of trust had been brought under Sub-section (1).

(3)No Court shall grant any relief to any officer under Sub-section (1) or Sub-section (2) unless it has, by notice served in the manner specified by it, required the Registrar and such other person, if any, as it thinks necessary, to show cause why such relief should not be granted.

The main argument of the learned Counsel for the petitioner is that since nothing has been done by the petitioners and only suspicion regarding tampering of the record has been shown against V.K. Gupta, hence, Section 628 will come into play making the petition completely covered under the umbrella of Section 633(2) of the Company Act. Sri Ravi Kant has shown before this Court many definitions and meaning of ''misfeasance'', which according to him, encompasses the offences mentioned in the F.I.R. The various dictionaries have been referred by Sri Ravi Kant in this regard. In addition of this argument, Mr. Ravi Kant has referred to paras 9 and 10 of the reply filed by the Inspector C.B.I. Rajbir Singh, available at page 170 of the petition. In these two paragraphs, Inspector has noted that on being questioned, V.K. Gupta had admitted about making some correction in the annual return but it was before filing of the same in the office of Registrar of Companies, Kanpur. He has also noted that Johari brothers were not Directors in the year 1999 and handwriting of V.K. Gupta could not be matched conclusively with that of the correction made in the annual return.

Apart from this factual aspect, learned Senior Advocate tried to distinguish the case of Rabindra Chamria and others Vs. The Registrar of Companies, West Bengal and others, along with civil appeals. Learned Counsel very diligently led the Court to paras 17,22,23,24 and 26 of the said judgment. According to his interpretation of the judgment Section 633(2) will apply in the case of the petitioners because the offences mentioned in the F.I.R. are referable to Indian Penal Code and not of any special enactment. He has argued giving a new dimension that the judgment of Rabindra Chamria''s case (supra) was confined to the acts; like Provident Fund Act, or the Payment of Wages Act; or any other such special enactment and it would not mean to include the provisions of the I.P.C. According to him, at the best, the charges are referable to Section 628 of the Companies Act; and hence, the intervention of the High Court granting him stay, is justified. He has also picked up reference to Section 628 at pages 135 and 136 of the report of the inquiry conducted by the Central Government. This about sums up of the total argument of the learned Counsel for the petitioner.

In reply, Sri Bireshwar Nath has reiterated his preliminary objection. He has once more drawn attention of this Court towards Rabindra Chamria''s case (supra) and said that the learned Counsel for the petitioner has misread and misunderstood the provisions of Section 633 of the Company Act as well as the law laid down in Rabindra Chamria''s case (supra). He says that the said case by Hon''ble Supreme Court leaves absolutely no doubt that the offences which are not covered under the Company Act, itself, cannot be subject matter of Section 633 of the Act. The protection provided u/s 633 of the Act is very limited. He has laid great emphasis on paras 23 and 24 of the said judgment, which reads as follows:

Under the Company Act of 1956 (similarly under the old Act of 1913), various duties and liabilities have been imposed; equally offences have been created for the non performance of such duties. These offences are offences in relation to the performance of certain duties under the Act. The various offences are mentioned under Sections 59, 62, 63, 68B, 142, 162, 207, 218, 272, 374, 420, 423, 538 to 545 and 606.

The expression ''any proceedings'' occurring in Section 633 cannot be read out of context and treated in isolation. It must be construed in the light of penal provisions. Otherwise what will happen is the penal clauses under the various other Acts would be rendered ineffective by application of Section 633. Again, if the Parliament intended Section 633 to have a coverage wider than the Act, it would have specifically provided for it as, otherwise, it is sound rule of construction to confine provision of a stature to itself.

On the basis of the above discussions, the Court feels that in the F.I.R. Section 120B IPC has been clearly mentioned. The offence committed by V.K. Gupta are referable to Sections 420, 467, 468, 471, 497 I.P.C., thereby constituting forgery, cheating and falsification of record. Generally speaking Section 120B constitutes an integral part of the said offences. V.K. Gupta is a chartered accountant of the Company, in which the petitioners are Directors. There is no independent interest of V.K. Gupta for committing such forgery without fruits of the crime dropping in the lap of the petitioners. The Directors of the Company are natural beneficiaries of the act of V.K. Gupta. In such a situation, stopping of the investigation on the behest of the Directors, cannot be justified. The petitioners have obtained a stay not only against their arrest but also from the investigation to be proceeded with. A crime, which after the investigation by the Central Government was referred to C.B.I., will thus be buried forever if the hands of the investigating authority are clubbed.

Sri Bireshwar Nath has further argued that the petitioner deserves no indulgence by this Court on other ground also. He states that the petitioner have concealed material facts from this Court. According to him on 18-5-2009, the petitioner filed anticipatory bail petition u/s 438 Cr. P.C. before the Delhi High Court and a writ petition under Article 226 of the Constitution of India before a Division Bench of this Court. Delhi High Court was pleased to grant ten days transit bail to the petitioner vide his order dated 21-5-2009. When the period expired on 1-6-2009. The petitioner wrote to C.B.I. seeking further fifteen days time for appearing before it on account of illness and urgent work. During this period, they moved instant petition u/s 633 of the Companies Act on 8-6-2009. This is third petition, in which the petitioner secured ex parte order of stay of arrest on 9-6-2009. He further states that the Division Bench of this Court dismissed the writ petition pending before it on 20-7-2009 on the ground that multiple petitions for the same relief has been filed by the petitioner and further mentioned that the petitioners had concealed material facts including filing of petition of anticipatory bail before the Delhi High Court.

Sri Bireshwar Nath further states that the petitioners got another petition filed by Mr. V.K. Gupta u/s 482 of the Cr.P.C. on 1-9- 2009. Mr. V.K. Gupta is a co-accused and he was released on bail on the same date, However, no relief was granted to him by the Court. Sri Bireshwar Nath says that the hands of the investigating agency have been tied by the order dated 9-6-2009. They are avoiding investigation and appearance before the C.B.I., on one pretext and the other while they have no legal right. They are availing the benefits by abusing the process of law. Sri Bireshwar Nath strongly argued for dismissing the petition on the aforesaid ground also. Apart from his earlier reliance on Rabindra Chamria''s case (supra), he has also placed reliance on the judgment of this Court in the matter of Piyush Rastogi v. Moulik Finance and Resorts Ltd Company Petition No. 6 of 2006 dated 22-4-2008. In this case, his Lordship relying on the case of Rabindra Chamria''s case has dismissed the petition reaffirming that the action other than under the Companies Act, are not protected by Section 633 of the Act.

An application has been moved by one Mr. Arvind Johari. His name was originally in the array of the opposite parties but later on it was deleted. By this Court''s order dated 11 -8-2009 he was permitted to address the Court as an Intervener.

Sri Ravi Kant strongly opposed that Intervener Sri Johari cannot be heard in the matter as he has no locus. He has further argued that all the documents provided by Mr. Arvind Johari and the application filed by him, deserve to be rejected. No cognizance of his appearance and the arguments should be taken by the Court.

Mr. Arvind Johari has drawn the attention of this Court that he has already been allowed to address the Court as an Intervener by the earlier order. He stated that he was the complainant. Moreover, he has placed reliance on the case reported in M/s. J.K. International Vs. State, Govt of NCT of Delhi and Others, and other respondents, wherein a Full Bench of Hon''ble Apex Court has held as under:

But the situation here is different, as the accused approached the High Court for quashing the criminal proceedings initiated by the appellant. It may not be that the complainant should have been made a party by the accused himself in the petition for quashing the criminal proceedings, as the accused has no such obligation when the case was charge-sheeted by the police. It is predominantly the concern of the State to continue the prosecution. But when the complainant wishes to be heard when the criminal proceedings are sought to be quashed, it would be negation of justice to him if he is foreclosed from being heard even after he makes a request to the Court in that behalf. What is the advantage of the Court in telling him that he would not be heard at all even at the risk of the criminal proceedings initiated by him being quashed. It is no solace to him to be told that if the criminal proceedings are quashed he may have the right to challenge it before the higher forums.

The scheme envisaged in the Code of Criminal Procedure (for short ''the Code''), indicates that a person who is aggrieved by the offence committed, is not altogether wiped out from the scenario of the trial merely because the investigation was taken over by the police and the charge-sheet was laid by them. Even the fact that the Court had taken cognizance of the offence is not sufficient to debar him from reaching the Court for ventilating his grievance. Even in the Sessions Court, where the Public Prosecutor is the only authority empowered to conduct the prosecution as per Section 225 of the Code, a private person who is aggrieved by the offence involved in the case, is not altogether debarred from participating in the trial. This can be discerned from Section 301(2) of the Code which reads thus:

If in any such case any private person instructs a pleader to prosecute any person in any Court, the Public Prosecutor or Assistant Public Prosecutor in charge of the case shall conduct the prosecution, and the pleader so instructed shall act therein under the directions of the Public Prosecutor or Assistant Public Prosecutor, and may, with the permission of the Court, submit written arguments after the evidence is closed in the case.

In such a situation, the Court feels it proper that Mr. Arvind Joharl may be allowed to address the Court. Mr. Johari has narrated the facts of the case as is borne out from the record. He has repeated the arguments, which were already advanced by Sri Bireshwar Nath. The documents and the applications, which have been moved, have not added anything substantial. Although, he has been allowed to be heard but the Court is not actually taking any cognizance of his arguments or the documents and the affidavits filed by him. Since the petition is being finally heard, there is no question of considering his application for non extension of the interim order. In sum and substance, the petition is being decided on the basis of the arguments advanced by learned Senior Advocate Sri Ravi Kant and Mr. Bireshwar Nath, learned Counsel for the C.B.I.

In view of the above discussions and the case law referred to above, this Court comes to a definite conclusion that this petition u/s 633 of the Companies Act is not maintainable in the present circumstances. The proceedings under Sections 120B, 467, 468, 471 and 477A I.P.C. are definitely the proceedings outside of the purview of Section 633(2) of the Companies Act. The petition is dismissed. Interim order, if any, operating in this writ petition, is discharged.