Healthcare Associates Private Limited vs India Medtronic Private Limited & Anr

O R D E R

Brief facts of the matter:

"That Corporate Debtor, in partial discharge of its liability, issued 3 (Three) cheques dated 07.02.2019 amounting to a sum of Rs.3,21,20,236/- (Rupees Three Crore Twenty-One Lakh Twenty Thousand Two Hundred and Thirty-Six Only) in favour of the Operational Creditor. These cheques were dated between February 9, 2018 and April 5, 2018. However, to the Operational Creditor's utter shock the same were dishonored and returned by the bank vide the return memos stating "Drawers signature differs" as the reason for dishonor.

Analysis and Findings

Para 11 “…………It is also argued that to invoke Section 464 of Penal Code false document has to be made with a dishonest and fraudulent intention as was held in the matter of “Dr. Vimla Vs. Delhi Administration” by Hon’ble Supreme Court in Criminal Appeal No. 213 of 1960 decided on 29th November, 1962 (MANU/SC/0163/1962) (1963 SCR Supl. (2) 585). The Financial Creditor has submitted that to order prosecution of perjury there must be prima facie case of deliberate falsehood and matter of substance and Court has to be satisfied that there is reasonable foundation for the charge. Mere inaccurate statement cannot be basis for charge of perjury. It is argued that I.A. Nos. 41 and 42 of 2020 were filed with bona fide intention to restore CP/204/2019 and to restore earlier order dated 2nd December, 2019. It is further argued that under Section 340 of Cr. P.C. Court is not bound to make a complaint regarding commission of offence referred in Section 195 (1) (b) (i) as the Section is conditioned by the words “Court is of opinion that it is expedient in the Interest of Justice” to initiate proceedings.”

Para 13 “The Adjudicating Authority in the impugned Order observed that no order of prosecution of the person verifying the affidavit can be ordered by the Authority and it was outside the realm of jurisdiction of the Authority. For such reasoning, the Adjudicating Authority without going into the merits of I.A. No. 51 and 52 of 2020 proceeded to observe that the Corporate Debtor may approach the appropriate forum for redressal. It observed that, it would be venturing into jurisdiction of Criminal Court if it went into I.A. No. 51 and 52 of 2020. With regard to these observations and findings, reference needs to be made to Section 424 of the Companies Act, 2013 which was amended by Act 31 of 2016 w.e.f. 15.11.2016 and reference to IBC was inserted. Section 424 of the Companies Act, 2013 reads as under (amended Section 424):

“424.

Procedure Before Tribunal and Appellate Tribunal.- (1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or, as the case may be, an appeal before it, be bound by the procedure laid down in the Code of Civil Procedure, 1908, but shall be guided by the principles of natural justice, and, subject to the other provisions of this Act [or of the Insolvency and Bankruptcy Code, 2016] and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

(2)

The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their functions under this Act 1[or under the Insolvency and Bankruptcy Code, 2016], the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908.) while trying a suit in respect of the following matters, namely:—

(a)

summoning and enforcing the attendance of any person and examining him on oath;

(b)

requiring the discovery and production of documents;

(c)

receiving evidence on affidavits;

(d)

subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office;

(e)

issuing commissions for the examination of witnesses or documents;

(f)

dismissing a representation for default or deciding it ex parte;

(g)

setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and

(h)

any other matter which may be prescribed.

(3)

Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the court within the local limits of whose jurisdiction,—

(a)

in the case of an order against a company, the registered office of the company is situate; or

(b)

in the case of an order against any other person, the person concerned voluntarily resides or carries on business or personally works for gain.

(4)

All proceedings before the Tribunal or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code, and the Tribunal and the Appellate Tribunal shall be deemed to be civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).” (Emphasis Supplied)

Para 14 “Now Section 195 of IPC requires reference. The same reads as follows:

“(1)

No Court shall take cognizance-

(a)

(i) of any offence punishable under sections 172 to 188 (both inclusive) of the Indian Penal Code (45 of 1860 ), or

(ii)

of any abetment of, or attempt to commit, such offence, or

(iii)

of any criminal conspiracy to commit such offence, except on the complaint in writing of the public servant concerned or of some other public servant to whom he is administratively subordinate;

(b)

(i) of any offence punishable under any of the following sections of the Indian Penal Code (45 of 1860 ), namely, sections 193 to 196 (both inclusive), 199, 200, 205 to 211 (both inclusive) and 228, when such offence is alleged to have been committed in, or in relation to, any proceeding in any Court, or

(ii)

of any offence described in section 463, or punishable under section 471, section 475 or section 476, of the said Code, when such offence is alleged to have been committed in respect of a document produced or given in evidence in a proceeding in any Court, or

(iii)

of any criminal conspiracy to commit, or attempt to commit, or the abetment of, any offence specified in subclause (i) or sub- clause (ii), 29[except on the complaint in writing of that Court, or of some other Court to which that Court is subordinate.]

(2)

Where a complaint has been made by a public servant under clause (a) of sub- section (1) any authority to which he is administratively subordinate may order the withdrawal of the complaint and send a copy of such order to the Court; and upon its receipt by the Court, no further proceedings shall be taken on the complaint:

Provided that no such withdrawal shall be ordered if the trial in the Court of first instance has been concluded.

(3)

In clause (b) of sub- section (1), the term" Court" means a Civil, Revenue or Criminal Court, and includes a tribunal constituted by or under a Central, Provincial or State Act if declared by that Act to be a Court for the purposes of this section.

(4)

For the purposes of clause (b) of sub- section (1), a Court shall be deemed to be subordinate to the Court to which appeals ordinarily lie from the appealable decrees or sentences of such former Court, or in the case of a Civil Court from whose decrees no appeal ordinarily lies, to the principal Court having ordinary original civil jurisdiction within whose local jurisdiction such Civil Court in situate: Provided that-

(a)

where appeals lie to more than one Court, the Appellate Court of inferior jurisdiction shall be the Court to which such Court shall be deemed to be subordinate;

(b)

where appeals lie to a Civil and also to a Revenue Court, such Court shall be deemed to be subordinate to the Civil or Revenue Court according to the nature of the case or proceeding in connection with which the offence is alleged to have been committed.”

Para 16 “As the Corporate Debtor is harping on Section 193 of Penal Code the same also be referred which is as under:

“193.

Punishment for false evidence. —Whoever intentionally gives false evidence in any stage of a judicial proceeding, or fabricates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine; and whoever intentionally gives or fabricates false evidence in any other case, shall be punished with imprisonment of either description for a term which may extend to three years, and shall also be liable to fine.

Section 193 of Penal Code has three explanations which are not necessary to reproduce but can be kept in the view.”

Para 17 “……..Under Section 340 of Cr. P.C. the Adjudicating Authority can hold preliminary inquiry if it is “of opinion that it is expedient in the Interest of Justice that an inquiry should be made” into the any offence referred in Clause ‘b’ of Sub-Section 1 of Section 195, which appears to have been committed in or in relation to a proceeding in that Court or, as the case may be, in respect of a document produced or given in evidence in a proceeding in that Court, i.e.-Adjudicating Authority, here.”

Para 18- “The Learned Counsel for the Appellant/Corporate Debtor has argued that without Adjudicating Authority holding preliminary inquiry and going through the procedure as prescribed under Section 340, it is not possible for the Appellant to file private complaint before any Magistrate for the Act complained as there is bar created under Section 195 of Cr. P.C. and no Court will take cognizance. The Learned Counsel has relied on various Judgments. We do not think it is necessary to refer to the various Judgments as it is apparent to us that no Court can take cognizance of offence punishable under Sections as mentioned in Section 195(1)(b)(i) except on complaint in writing by the Court concerned. Reference to Judgment in the matter of “Narendra Kumar Srivastava Vs. State of Bihar” (2019) 3 SCC 318 itself makes the points clear which parties are raising against each other. In the matter of “Narendra Kumar Srivastava” Contempt case was dropped by High Court on the basis of compliance shown by Respondents in show-cause affidavit. Appellant therein filed Private Complaint before Assistant Chief Judicial Magistrate alleging that because of the false and wrong statement made by Respondents in their show-cause affidavit, High Court dropped Contempt Case. Magistrate took cognizance but in Revision, High Court set aside the Order. Appeal was filed to Supreme Court. Hon’ble Supreme Court maintained Order of High Court inter alia observing: “

“17.

Section 340 CrPC makes it clear that a prosecution under this section can be initiated only by the sanction of the court under whose proceedings an offence referred to in Section 195 (1) (b) has allegedly been committed. The object of this section is to ascertain whether any offence affecting administration of justice has been committed in relation to any document produced or given in evidence in court during the time when the document or evidence was in custodia legis and whether it is also expedient in the interest of justice to take such action. The court shall not only consider prima facie case but also see whether it is in or against public interest to allow a criminal proceeding to be instituted.

18.

This Court in Chajoo Ram V. Radhey Shyam⁶ , held that the prosecution under Section 195 CrPC could be initiated only by the sanction of the court and only if the same appears to be deliberate and conscious. It emphatically held as under: (SCC p. 779, para 7)

“7.

The prosecution for perjury should be sanctioned by courts only in those cases where the perjury appears to be deliberate and conscious and the conviction is reasonably probable or likely. No doubt giving of false evidence and filing false affidavits is an evil which must be effectively curbed with a strong hand but to start prosecution for perjury too readily P a g e 26 | Company Appeal (AT) (Insolvency) No. 626 of 2020 and too frequently without due care and caution and on inconclusive and doubtful material defeats its very purpose. Prosecution should be ordered when it is considered expedient in the interests of justice to punish the delinquent and not merely because there is some inaccuracy in the statement which may be innocent or immaterial. There must be prima facie case of deliberate falsehood on a matter of substance and the court should be satisfied that there is reasonable foundation for the charge.

19.

In Santokh Singh V. Izhar Hussain^{77.. (1973) 2 SCC 406 : 1973 SCC (Cri) 828”}, this Court has held that every incorrect or false statement does not make it incumbent on the court to order prosecution. The court has to exercise judicial discretion in the light of all the relevant circumstances when it determines the question of expediency. The court orders prosecution in the larger interest of the administration of justice and not to gratify the feelings or personal revenge or vindictiveness or to serve the ends of a private party. Too frequent prosecutions for such offences tend to defeat its very object. It is only in glaring cases of deliberate falsehood where conviction is highly likely that the court should direct prosecution.

6.

(1971) 1 SCC 774 : 1971 SCC (Cri) 331 (Emphasis Supplied)”