- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELALTE JURISDICTION WRIT PETITION NO.2739 OF 2006 Sesa Goa Limited & Ors. ... Petitioners V/s. State of Maharashtra & Anr. ... Respondents Mr.Amit Desai with Mr.P.R. Jehangir and Mr.Gopal Krishna Shenoy I/b M/s.Udwadia & Udeshi for Petitioners Mr.P.A. Pol, APP, for Resp. No.1 - State Mr.Z.T. Andhyarujina I/b V.M. Sharma for Respondent No.2 a/w WRIT PETITION NO.254 OF 2008 Mr.S. Araki & Ors. ... Petitioners V/s. State of Maharashtra & Anr. ... Respondents Mr.Amit Desai with Mr.P.R. Jehangir and Mr.Gopal Krishna Shenoy I/b M/s.Udwadia & Udeshi for Petitioners Mr.P.A. Pol, APP, for Resp. No.1 - State Mr.V.M. Sharma for Respondent No.2 CORAM: SMT.NISHITA MHATRE, J. JUDGEMENT RESERVED ON: JULY 4, 2008 JUDGEMENT DELIVERED ON: DECEMBER 11, 2008 JUDGMENT: 1. These petitions impugn the order passed on 4.10.2006 by the additional Chief These petitions impugn the order passed on 4.10.2006 by the additional Chief Metropolitan Magistrate, 40th Court, Girgaum and by the Sessions Court in Criminal Revision Application No.509 of 2004. After the Writ Petition No.2739 of 2006 was argued, an application was made on behalf of Respondent No.2 in Writ Petition No.254 of 2008 that the writ petition should be adjourned in order to permit the Counsel appearing for Respondent No.2 to address the Court. The petitions involve the same issue. The parties were aware that they were being heard together and therefore, ought to have been ready to argue the matter immediately after the first petition was over. I have, therefore, refused the adjournment. 2. The Petitioner Nos.1 and 2 are public limited companies; Petitioner No.2, being a subsidiary of Petitioner No.1. Petitioner No.2 (for short, hereinafter referred to as the `SIL') was incorporated in 1993 whereas Petitioner No.1 (for short, hereinafter referred to as the `SGL') has been in existence for well over two decades. SGL currently holds 88.25% of the shares of SIL. 3. Respondent No.2 claims to own 57450 shares of SIL and contends that she is a shareholder of both SGL and SIL. She filed a complaint on 8.7.2003 against both the companies and the Directors of SGL, some of whom were also on the Board of SIL. The allegations made in the complaint were that the Companies had com mitted offences under section 73 of the Companies Act, 1956 as well as u/s 403 and 406 r/w section 34 of the Indian Penal Code. Four transactions have been set out in the complaint on the basis of which the allegations have been made. It is contended that monies were paid by the complainant to SIL in 1993 pursuant to a 'preferential offer' document dated 28.8.1993. It is contended that the ˜Preferential Offer" document indicated that the shares of SIL would be listed on the stock exchange. The complainant had believed the promise held out in the preferential offer document issued by SIL in 1993 and was induced into purchasing its shares. It is alleged that SIL had breached this promise and had thereby committed criminal misappropriation and criminal breach of trust. Besides that, according to the complainant, these acts or omissions of the petitioners’ amount to a violation of section 73 of the Companies Act (for short, hereinafter referred to as 'section 73'). The second transaction spoken - 3 - of in the complaint is that on 5.6.2003, SGL had sought to buy the shares of SIL at a price of Rs.30/- knowing full well that SIL had failed to list its shares on the stock exchange. This according to the complainant was in breach of the statutory requirements of section 73 as that section contemplates return of monies with interest @ 15%, in case of failure to list the shares on the stock exchange. This meant that the rate ought to have been approximately Rs.57/- per share instead of which shares were purchased at a value of Rs.30/- by SGL. The third transaction which is objected to by the complainant is the sale of pig iron and the iron ore plant of SGL to SIL at an exaggerated price. The complainant claimed that money was siphoned out from SIL into SGL, resulting in offences of criminal misappropriation and criminal breach of trust. The fourth transaction which is objected to is the sale of pig iron ore by SGL to SIL at a price which according to the complainant was steep, resulting in siphoning of monies from SIL to SGL which constituted offences u/s 403, 406 r/w section 34 of the Indian Penal Code. The Directors of SGL, some of whom were also the Directors of SIL have been accused by the complainant as they were 'officers in default' within the meaning of the Companies Act which could be seen by piercing the corporate veil of the two companies, SGL and SIL. 4. It has been mentioned in this complaint that Respondent No.2 has also filed criminal complaint No.4/S/2000 currently numbered as C.C. No.111/SW/2005 pending in the same Court. This complaint was filed on 15.1.2000. The complainant has alleged that offences under sections 63, 68 r/w 64, 65 and 67 of the Companies Act and sections 403, 406, 420 and 120B of the Indian Penal Code have been committed. Cognizance was taken of this complaint and the learned Magistrate has issued process under sections 63 and 69 of the Companies Act and section 415 r/w 420 of the Indian Penal Code against the accused Nos.1 to 4, some of whom are the Directors on the Boards of SIL and SGL. The order issuing process was challenged unsuccessfully by the Petitioners up to the Supreme Court. 5. The learned Magistrate has issued process in the second complaint i.e. the complaint filed in 2003 and that order has been confirmed by the Sessions Court. It is this order which is challenged in the present petition. 6. Counsel have advanced arguments on five main issues viz: (i) the powers of the high court u/s 482 CrPC; (ii) limitation; (iii) whether the acts or omissions of the petitioners constitute offences u/s 403 and u/s406 IPC; (iv) whether any offence has been committed u/s73 of the Companies Act; (v) whether the directors who have allegedly committed offences are ‘officers in default’ u/s.5 of the Companies Act; and (vi) whether the directors are vicariously liable for the offences, if any, committed by the companies. The powers of this Court u/s 482 7. It is well settled in a catena of judgments that the High Courts should refrain from using their powers u/s 482 of the CrPC. In case such powers are to be used they should be used sparingly and in the rarest of rare cases, not to stifle a legitimate prosecution. The Court must consider whether the uncontroverted allegations contained in the complaint, prima facie, constitute offences. The submission of Mr. Andhyarujina, the learned counsel for the Respondent is that the powers of this Court u/s 482 are to be exercised under extraordinary circumstances. The quashing of a complaint under extraordinary powers of the High Court u/s 482 of the CrPC is not a normal relief which should be granted by the High court. The learned counsel relies on the decision in the case Som Mittal v/s. Government of Karnataka, 2008 Cr.L.J. 1927 of the 3-Member bench of the apex court. He also relies on the judgment in the case of State of Haryana v/s. Bhajanlal, AIR 1992 SC 604 where the apex Court has - 5 - enunciated 7 categories of cases in which the High Court ought to exercise its powers vested under 482 of the CrPC. It is submitted that the present case does not fall into any of the categories enlisted in Bhajan Lal's case (supra) and, therefore, the petitions ought to be dismissed. Apart from this, the learned counsel submits that when this Court considers a matter u/s 482 of the CrPC it is not necessary to determine whether the charges alleged in the complaint would end in conviction. Reliance is placed on the judgment in the case of Stree Atyachar Virodhi Parishad v/s. Dilip Nathumal Chordia, 1989(1) SCC 715. 8. On the other hand, the learned counsel for the Petitioners, Mr. Desai submits that the complaint smacks of malafides and it is well settled that the powers of this Court u/s 482 of the Code are sufficiently wide to quash prosecutions which are founded on malafides. The learned counsel submits that the complaint is an abuse of the process of law and is an attempt to coerce SGL/SIL to pay to the Respondent huge amounts of money in respect of the shares that she holds in SIL. It is submitted that although the shares of SIL were allotted to the Respondent in 1993 she took no action in connection with her grievances till late 1999 by which time the manage m ent of the companies had changed thrice. It is also submitted that in Writ Petition No.1280 of 1999 filed by the Respondent, the Division Bench of this Court while dismissing the Writ Petition, observed that if there was a breach of promise to list the securities, as alleged by the Petitioners i.e. the Respondent herein, she would have remedies under the Contract Act or under the provisions of the Companies Act. The learned Counsel points out that no action has been initiated by the Respondent under the provisions of the Indian Contract Act. Criminal Complaint No.4/S/2000 alleging violation of the provisions of section 63 and 68 of the companies Act and various other sections with respect to the alleged misstatements contained in the preferential offer document of 28.8.1993 has already been filed in January 2000. He submits that the malafides of Respondent No.2 are apparent from the fact that she has impleaded the Directors who had joined the Board of Directors of the Companies between February 1993 and April 2003, none of whom had anything to do with the preferential offer document or transactions prior to their joining the Board. The learned counsel draws my attention to the fact that the Respondents have voluntarily accepted the offer by tendering merely 531950 shares to SGL at a price of Rs.30/-out of her entire shareholding. She has held on to 57450 shares only to maintain actions against the companies, according to the learned counsel. The learned counsel then submits that although originally only 57450 shares of SIL were allotted to Respondent No.2, she acquired additional shares through off-mark transactions resulting in an aggregate holding of 589400 shares. He also submits that no civil remedy has been initiated by the complainant till today. 9. In the case of Bhajan Lal (supra), the Supreme Court has enlisted by way of illustrations 7 categories of cases in which High Court ought to exercise its jurisdiction u/s 482 of the CrPC, thus: 102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the - 7 - Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. Where an uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. Where the allegation in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contmplated under Section 155(2) of the Code. Where the allegations made in the FIR or complaitn are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. Where a criminal proceeding is manifestly attended with malafide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. 103. We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice. 10. In the present case, the submission of the learned counsel for the petitioner is that the present criminal proceedings fall within the ambit of the illustration contained in the 7th category of cases. It must be noted here that the earlier complaint filed by Respondent No.2 i.e. cc No. 4/S/2000 is with respect to offences committed u/s 63 and 68 of the Companies Act. They relate to the same preferential offer document of 28.8.1993. The contentions raised in the present complaint could thus have been incorporated in the earlier complaint. However, the Respondent for the reasons best known to her has chosen to file two separate complaints with respect to the same document, three years apart. The earlier complaint significantly alleges that offences have been committed by the Petitioners u/s 403 and 406 of the Indian Penal Code in respect of the application monies, apart from them having committed offences u/s 420 Indian Penal Code. No process was issued under 403, 406 and that order has not been challenged by the Respondent. In the earlier complaint again, the provisions of section 73 of the Companies Act have been invoked in response to an application made by one of the Directors to challenge the order u/s 319 of the CrPC. No charges have been framed under section 73 as yet although it appears that Respondent No.2, through her constituted attorney, had insisted that charges be framed under this provision of law. The malafides are also evident from the fact that the Respondent instead of having additional charges framed in the earlier complaint has filed a fresh complaint against the Petitioners. In fact it must be noted that the foundation of the earlier complaint filed in the year 2000 and that of the present one is the same: the preferential offer document of 1993. Although the respondent had tried to establish that offences had been committed by the petitioners under sections 403 and 406 IPC as also u/s73 of the Companies Act, process was not issued with regard to the alleged offence under these sections. Significantly, the respondent has not challenged the order refusing to issue process under these sections. Instead, the respondent has abused the process of law by filing a second complaint in 2003 for the same offences. This act of the respondent is apparently actuated by malafides. In my view, therefore, the submissions of the learned counsel for the Petitioners must be accepted. 11. This is an eminently fit case in which the powers vested in this Court u/s 482 of the CrPC should be exercised. Apart from this, the offences have not been established as I shall presently discuss and therefore, the complaint must be quashed. - 9 - LIMITATION 12. The next question which must be considered is that of limitation. Section 468 of the CrPC contemplates a bar to taking cognizance of an offence after expiry of the period of limitation. The offences alleged in the complaint are u/s 73 of the Companies Act and Sections 403 and 406 of the Indian Penal Code. The limitation prescribed for taking cognizance of offences committed under section 73 is one year, whereas for sections 403 and 406 of the Indian Penal Code it is three years. The learned counsel for the Petitioners has urged that if section 73 is made applicable to the preferential offer document of August 1993, the complaint is barred by nearly nine years for which there is absolutely no explanation in the complaint. He submits that the alleged offence described in the complaint is not a continuing offence and, therefore, the complaint is barred by limitation. As regards sections 403 and 406, he submits that the alleged entrustment of monies and non-repayment of the same resulting in an alleged conversion are not continuing offences. The offence allegedly has taken place in 1993 when the Respondent has sold her shares of SIL to SGL @ Rs.30 on the basis of the preferential offer document of 1993. He therefore submits that the complaint is barred by limitation. He relies on the judgments of the Supreme Court in the cases of State of Punjab v/s. Saran Singh, AIR 1981 Supreme Court 105, Mahipal Singh v/s. State, 1986 Cr.L.J. 1851 and Dinbandhu Banerjee v/s. Nandini Mukherjee, 1994 Cr.L.J. 422. The learned counsel also points out that the delay in filing the complaint cannot be condoned u/s 473 much after cognizance has been taken of the complaint. He urges that delay can be condoned only prior to taking cognizance of the offence. He relies on the judgment of the learned Single Judge of this Court in the case Kirloskar Cumins v/s. Mayur Jamnadas in Criminal Revision Application No.178 of 1997 delivered in January 2007. 13. Per contra, the learned counsel for the Respondent has submitted that the offences alleged against the petitioners are continuing offences as contemplated under the provisions of section 472 of the CrPC. He submits that the very fact that the Petitioners had not complied with their promise contained in the preferential offer document to list the shares of SIL, and the shares were unlisted at least till 5.6.2003, would indicate that the offences u/s 73 and section 406 were continuing offence. He submits that the monies of the shareholders of SIL had been entrusted to the company in a separate account and therefore they amount to continuing offences. The learned counsel then urges that the provisions of section 73 are akin to the provisions of the Employees Provident Fund and Miscellaneous Provisions Act which is social welfare legislation as construed by the apex Court. The learned counsel buttresses his arguments by relying on the judgments in the case of Bhagirath Kanoria v/s. State of M.P., AIR 1984 Supreme Court 1688 and Japani Sahoo v/s. Chandra Sekhar Mohanty AIR 2007 Supreme Court 841. He contends that the judgments relied on by the learned counsel for the Petitioners, in fact support his case that the offences alleged against the Petitioners are continuing offences for which there is no prescribed period of limitation. He submits further that in the light of the allegations contained in the complaint that there is a possibility that the trial Court would frame charges against the Petitioners under the provisions of section 409 of the Indian Penal Code and in such an event the provisions of limitation contained in section 468 of the CrPC can never be made applicable. He places reliance on the judgment in the case of the Supreme Court in the State of West Bengal v/s. Laisal Haque, AIR 1989 SC 129 where it has been held that issuance of a summons under specific sections cannot be a ground for dismissal of a complaint on the ground of limitation since a person summoned under that section of the Indian Penal Code could be charged under any other section which does not attract the provisions of limitation. 14. In my opinion, the complaint is clearly barred by limitation. The offences - 11 - alleged against the Petitioners relate to the preferential offer document issued in 1993. The Respondent has claimed that there is a promise contained in that offer document to list the shares of SIL on the stock exchange. This has not been done till date and, therefore, the provisions of section 73 have been breached. A perusal of the offer document indicates that clause D of 2.2 which contains one of the objects and purposes of the offer stipulates that it was initially envisaged by SIL that its shares would be listed on the Stock Exchange through a public issue within a time frame of 12 to 18 months. Since this was not possible, the shareholders were given an option to sell their shares of SIL to SGL at a price of Rs.30/- per share. Thus, the period during which the shares of SIL were to be listed, was within 12 to 18 months. Undisputedly, the complainant had acquired the shares of SIL in 1993 and therefore, at best, going by the offer document the shares should have been listed on the Stock Exchange after 12 to 18 months. Admittedly, this was done. Therefore, the alleged offence was complete 18 months after the shares of SIL were purchased by the respondent. Undoubtedly, this offer document was only limited to the shareholders of SGL and Respondent No.2 being one such shareholder, had accepted the offer made to purchase the shares of SIL in 1993 itself. The non-listing of the shares according to the complainant amounts to an offence. If that is accepted then the offence has been completed in mid 1995. The present complaint has been filed in 2003, well beyond the period of limitation. 15. The other allegation against the Petitioners is that they had committed an offence u/s 73 of the Act when SGL and its Directors had sought to buy the shares of SIL from the shareholders of SIL at a price of Rs.30 in breach of the statutory requirements of section 73. Again, this breach relates to the preferential offer document of 1993 and therefore, the complaint with regard to that offence is barred by limitation. As regards offences under sections 403, 406, the allegations in the complaint relate to the sale of pig iron plant by SGL to SIL at an exaggerated price and the sale of iron ore by SGL to SIL at a very high price. These acts, according to the respondent, resulted in the siphoning of monies of SIL to SGL constituting offences of criminal misappropriation and criminal breach of trust. Apart from this, the Petitioners have not returned the monies of the Respondent used for the purchase of shares of SIL, with interest @15% as stipulated in section 73 and, therefore, it amounts to criminal misappropriation and criminal breach of trust, urges the learned counsel for the respondent. Assuming these allegations are well founded, they all relate to incidents which occurred in 1993 and, therefore, the complaint is barred by limitation. It is well settled that the purpose of specifying the period of