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Judgment
,,
This application has been filed under Section 340 read with Section 195(1)(b) of the Criminal Procedure Code, 1973 (‘CrPC’) seeking",,
institution of criminal proceedings against the Petitioner in SLP (Civil) No. 3309/2018 for giving false evidence before this Court.,,
The facts giving rise to this application are as follows: The Respondents/plaintiffs claim to be the lessors of suit premises being C.S. No. 560 and,,
561, final Plot No. 268, T.P.S. III of Mahim Division, Ward No. 6/North 5546 (1-1A) situated at Mogul Lane, Tulsi Pipe Road, known as Senapati",,
Bapat Marg, Mahim, Mumbai- 400 016. The Petitioner/defendant Company was a monthly tenant of the suit premises. The Respondents terminated",,
the tenancy by notice to quit dated 11.02.2009 and subsequently filed Suit No. 48/62/2009 before the Court of Small Causes, Mumbai (‘Trial",,
Court’) for possession and injunction against the Petitioner. The Respondents averred in their suit that the Petitioner is a public limited company,,
having a paid-up share capital of more than Rs. 1 crore; hence it would not be protected under the Maharashtra Rent Control Act, 1999. Section 3(1)",,
(b) of the Maharashtra Rent Control Act, 1999 provides that the Act shall not apply to any premises let or sub-let to private limited and public limited",,
companies having a paid up-share capital of more than one crore rupees.,,
The Petitioner claimed in its written statement that as of 31.02.2007, it had a paid up share capital of Rs. 1,03,64,000; however, by resolution dated",,
01.03.2007, it had reduced its share capital to Rs. 93,74,000. Hence it raised a preliminary objection to the jurisdiction of the Trial Court to try the suit.",,
2.1 Consequently, the matter was directed to be heard on the preliminary issue of whether the Trial Court had jurisdiction to entertain, try and decide",,
the suit. The Respondent relied on the income tax return filed by the Petitioner Company for the assessment year 2008-2009 (i.e. pertaining to the,,
financial year 2007-2008), which showed that the paid-up share capital of the company as on the date of termination of the tenancy was Rs.",,
1,03,64,000. A revised return showing the share capital to be Rs.93,74,000/- was filed only on 4.04.2009, which was subsequent to the notice for",,
termination of the tenancy.,,
2.2 Per contra, the Petitioner argued before the Trial Court that the share capital had been reduced by way of ‘buy-back’ of shares on",,
1.03.2007, and hence the paid-up share capital for the financial year 2007-2008, ending on 31.03.2008, was Rs. 93,74,000. Mr. R.K. Agarwal, who is",,
the Director of the Petitioner Company, was examined as D.W. 1 in this regard. He deposed that the Registrar of Companies had been informed of",,
the aforesaid reduction in share capital; that the assistant of the Company’s internal auditing firm had inadvertently entered the share capital of the,,
Company as Rs. 1,03,64,000/- while preparing the income tax return for the assessment year 2008-2009; and upon discovery of the error, the revised",,
return dated 4.04.2009 (supra) was filed. That the audit report and the balance sheet for the year 2007-2008 showed that the share capital had been,,
reduced, and the same had been submitted to the Central Excise and Sales Tax Departments. The audit report and the balance sheet dated 19.9.2008,",,
as prepared for the financial year 2007-2008, and as produced in the evidence of D.W. 1, were marked as Exhibits 81 and 82 respectively.",,
Additionally, D.W. 3 Mr. Gautam Nemani, who was stated to be a shareholder of the Company, deposed that he had surrendered 18,000 shares at the",,
rate of Rs. 10 per share, though he admitted that the book value of a single share was Rs. 73.46. D.W. 5, the internal auditor of the Company deposed",,
that the Company had bought back 99,000 shares of face value of Rs. 10 each, and therefore the Petitioner’s share capital for the year 2007-2008",,
was Rs. 93,74,000/-.",,
D.W. 6, the statutory auditor of the Company, similarly deposed that he had prepared the balance sheet dated 19.09.2008, for the financial year 2007-",,
2008 (as mentioned supra) showing the reduced share capital as Rs. 93,74,000/-. He also certified that the figure stated in Column 12 of the balance",,
sheet, showing the basic and diluted earning per share (hereinafter ‘EPS’) as Rs. 15.91 per share, was correct.",,
2.3 However, the Trial Court rejected the Petitioner’s contentions, finding that there were material discrepancies in the evidence of their",,
witnesses, which made their case regarding ‘buy-back’ of shares improbable. That there was no record of the letters dated 09.03.2007 and",,
25.03.2007 which the Petitioner contended it had filed before the Registrar of Companies as returns relating to the buy-back, and electronic return",,
was filed only on 05.09.2009, though filing of electronic returns has been made mandatory from 16.09.2006 onwards. Hence the Petitioner had not",,
complied with the procedure for buy-back of shares as prescribed under Sections 77A, 77B and 159 of the Companies Act, 1956.",,
Importantly, it was pointed out that there was a significant discrepancy in the audit report and the balance sheet dated 19.09.2008, inasmuch as the",,
weighted average number of shares for the financial year 2007-2008 in Column 12 of the balance sheet was stated to be the same as that for the year,,
2006-2007, i.e., 10,36,400, even though the share capital of the Petitioner Company had been reduced.2 Therefore it was evident that the revised",,
income tax return filed by the Petitioner was a subsequent act, post notice of termination of tenancy served by",,
2 The Trial Court had erroneously stated that the ‘EPS’ was 10,36,400, perhaps because the heading of Column 12 states ‘EPS’,",,
however the same does not have any bearing on the merits of the case. the Respondent, and that the actual paid-up share capital of the Petitioner",,
Company as on the date of termination of the tenancy was Rs. 1,03,64,000/-. Hence the Trial Court would have jurisdiction to try the",,
Respondent’s suit.,,
2.4 The Trial Court’s findings were affirmed by the Court of Small Causes (Appellate Bench). The High Court dismissed the revisional application,,
filed by the Petitioner. Subsequently, on 09.04.2018, a three-Judge Bench comprising one of us dismissed SLP (Civil) No. 3309/2018 filed by the",,
Petitioner before this Court, out of which the present application arises. Therefore it is not disputed that the finding on the preliminary issue of",,
jurisdiction has attained finality, and the trial of the suit on merits is presently pending before the Trial Court.",,
2.5 However it is the case of Respondent No. 4 in the aforesaid SLP (Civil) No. 3309/2018 (hereinafter ‘Applicant’) that the Petitioner in the,,
aforesaid SLP deliberately made false interpolations in the auditor’s report and the balance sheet dated 19.9.2008, while submitting these",,
documents before this Court. The Applicant’s contention is that these documents have been revised/interpolated for the first time in the course of,,
the SLP proceedings, for the purpose of misleading this Court. Hence the present application has been moved on 24.04.2018, soon after the dismissal",,
of the SLP, seeking institution of criminal proceedings against the Petitioner for the offence of perjury.",,
Learned Senior Counsel Mr. Amit Sibal, arguing on behalf of the Applicant, submitted that the Petitioner/defendant, in its reply to the application for",,
interim injunction filed by the Applicant before the Trial Court, had annexed the audited balance sheet dated 19.09.2008 for the financial year 2007-",,
2008 (supra). In the version filed before the Trial Court, the paid-up share capital of the Petitioner/defendant was shown as Rs. 1,03,64,000/-as on",,
31.03.2007, and Rs. 93,74,000/- as on 31.03.2008.",,
Therefore as per the Petitioner’s stand, the buy-back process was completed in April 2007. If that was the case, the number of Weighted",,
Average shares and the EPS for the financial year 2007-2008 ought to have been computed accordingly. However, Mr. Sibal pointed out that the",,
number of Weighted Average shares in the balance sheet was stated to be 10,36,400 for both financial years 2006-2007 and 2007-2008, even though it",,
should have changed to 9,37,400 for the year 2007-2008. Further, the EPS was also calculated on the basis of the original share capital of Rs.",,
,2007-08,2006-07
a) Net profit available for Equity
Shareholders",16486673,13577864
b) Weighted average number of
Equity Shares",1036400,1036400
c) Basic and Diluted earning per
share of Rs. 10 each",15.91,13.10
balance sheet, is a significant deviation from the original document submitted before the Trial Court. ‘EPS’ is used as a common tool for",,
gauging the profitability of a company. It indicates the benefit reaped per individual shareholding of a company. The auditor’s report provides the,,
formula for calculating EPS as follows:,,
Basic and diluted earnings per share=Net Profit for the Financial Year/Weighted Average Number of Shares,,
The term ‘Weighted Average’ of shares in commercial parlance refers to the number of shares in a company calculated after adjusting for any,,
change in shareholding over a given financial reporting period. This is as opposed to the ‘outstanding’ number of shares, which merely shows",,
the number of shares as existing with a company on a given date. Therefore, if the company has increased its share capital by purchasing new shares,",,
or reduced its share capital through buy-back or other means, the ‘Weighted Average’ would change accordingly.",,
5.1 As mentioned supra, it was noticed by the Trial Court that even though Column 7 of the balance sheet dated 19.09.2008 stated that the Petitioner",,
Company had bought back 99,000 equity shares in the financial year 2007-2008, Column 12 showed that the ‘Weighted Average’ number of",,
shares continued to be the same, i.e., 10,36,400, for the financial years 2006-2007 and 2007-2008. Hence the Trial Court found that the auditor’s",,
report was unreliable as evidence to conclude that the Petitioner Company had reduced its share capital.,,
It can be further noticed, as pointed out by the learned senior counsel for the Applicant, that if the EPS had been calculated on the basis of the",,
reduced share capital, i.e. 9,37,400 shares it would have been 17.59. However, the EPS has been calculated as 15.91 on the basis of the same",,
Weighted Average number of shares as was held in the Petitioner Company in 2006-2007, i.e. 10,36,400 shares.",,
5.2 It is pertinent to note that the Petitioner, for the first time in the SLP, raised a ground that since the buy-back process was not complete as on",,
01.04.2007, the EPS as shown in Column 12 of the auditor’s report was calculated on basis of the original share capital of Rs 1,03,64,000/-.",,
Therefore it appears that the Petitioner, in order to overcome the discrepancy between Column 7 and Column 12 of the Auditor’s Report at the",,
stage of SLP proceedings before this Court, changed the words ‘Weighted average number of Equity Shares’ to ‘number of Equity Shares as",,
on 1/4/07’ by hand. This would indicate that the number of outstanding equity shares held in the Petitioner Company continued to be the same as,,
of 1.04.2007, and the revised ‘Weighted Average’ and EPS were not calculated as the buy-back process had not yet been completed by that",,
date.,,
5.3 We do not wish to comment in detail upon the intention behind making the aforesaid interpolations. At this juncture, all that is required to be",,
assessed is whether a prima facie case is made out that there is a reasonable likelihood that the offence specified in Section 340 read with Section,,
195(1)(b) of the CrPC has been committed, and it is expedient in the interest of justice to take action. From the above discussion, it is evident that the",,
handwritten modification made by the Petitioner in Column 12 of the balance sheet dated 19.09.2008 is a significant alteration from the terms as used,,
in the original document. Hence we find that a prima facie case is made out that the Petitioner has fabricated evidence for the purpose of the SLP,,
proceedings before this Court.,,
We further find that prima facie case is also made out against Mr. R.K. Agarwal, for having sworn in his affidavit before this Court as to the veracity",,
of the facts stated and documents filed in SLP (Civil) No. 3309/2018, even though he had relied upon the original auditor’s report, which did not",,
contain any handwritten interpolation, in his evidence before the Trial Court.",,
In similar circumstances, a three-Judge Bench of this Court in In Re: Suo Motu Proceedings against R. Karuppan, Advocate, (2001) 5 SCC 289",,
had authorized the Registrar General of this Court to depute an officer to file a complaint for perjury against the respondent therein. Accordingly, we",,
direct the Secretary General of this Court to depute an officer of the rank of Deputy Registrar or above of the Court to file a complaint under Sections,,
193 and 199 of the Indian Penal Code, 1872 against the Petitioner Company in SLP (Civil) No. 3309/2018 and Mr. R.K. Agarwal, before a Magistrate",,
of competent jurisdiction at Delhi. The officer so deputed is directed to file the aforesaid complaints and ensure that requisite action is taken for,,
prosecuting the complaints.,,
Thus, the present application is allowed in the above terms.",,