Allowed

George Joseph v. the Official Liquidator of

Karnataka HC10 Feb 2023CRL.RP/429/2019

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed the revision petition, quashing the conviction and sentence of the petitioner for failure to produce documents under the Companies Act. It held that prosecution without the mandatory sanction under Section 457(1)(a) vitiated the proceedings, setting aside the conviction and the appellate order dismissing it on technical grounds.

What did the court decide?

Judgment, conviction and sentence set aside; order of appellate court setting aside; liberty granted to re-initiate proceedings with court sanction.

George Joseph Vs the Official Liquidator of — Company and Corporate | Karnataka HC (2023)

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CRL.RP No. 429 of 2019

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 10^TH DAY OF FEBRUARY, 2023

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ CRIMINAL REVISION PETITION NO. 429 OF 2019

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BETWEEN:

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GEORGE JOSEPH AGED ABOUT 70 YEARS, RESIDING AT NO.APT-F, LOKESHORE MANOR, 112-G, CHETTY ROAD, BANGALORE-560001. …PETITIONER (BY SRI. PRAVEEN C., ADVOCATE)

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AND:

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Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA

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THE OFFICIAL LIQUIDATOR OF M/S NUCOR WELD PVT. LTD., (IN LIQN) ATTACHED TO HIGH COURT OF KARNATAKA, 4^TH FLOOR, D AND F WING, KENDRIYA SADAN, KORMANGALA, BANGALORE-560097

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…RESPONDENT

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(BY SRI. K.S.MAHADEVAN, ADVOCATE)

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THIS CRL.RP IS FILED UNDER SECTION 397 READ WITH SECTION 401 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO SET ASIDE THE ORDER OF CONVICTION DATED 26.11.2014 IN C.C. NO.114/2008 BY THE HON’BLE SPECIAL COURT FOR ECONOMIC OFFENCES AT BANGALORE AND IN CRL.A. NO.1362/2014 DATED 07.02.2019 PASSED BY THE LEARNED LXVII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BANGALORE, ACQUIT THE PETITIONER.

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THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:

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2 - CRL.RP No. 429 of 2019

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ORDER

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The Petitioner has challenged the Judgment of conviction and order of sentence dated 26.11.2014 passed by the Presiding Officer, Special Court for Economic Offences, Bengaluru, (for short, ‘the Trial Court’) in C.C. No.114/2008 by which he was convicted for the offence punishable under Section 538(1)(c) of the Companies Act, 1956 (for short, ‘the Act of 1956’) read with Rule 9 of the Companies Court Rules, 1959 (for short, ‘the Rules of 1959’) and he was sentenced to undergo imprisonment for a term of two years and to pay fine of Rs.5,000/-. The petitioner has also challenged the Order dated 07.02.2019 passed by the LXVII Additional City Civil and Sessions Judge, Bengaluru City, (for short, ‘the Appellate Court’) in Criminal Appeal No.1362/2014 by which it dismissed the said appeal for non-prosecution.

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The petitioner claimed to be an ex-Director of M/s.Nucor Weld Pvt. Limited (henceforth referred to as 'the Company in liquidation'). The Company in liquidation was wound up in terms of the Order dated 01.07.2002 passed by this Court in Company Petition No.99/1998. By the said order, an Official Liquidator was appointed to liquidate the dues of the

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3 - CRL.RP No. 429 of 2019

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Company in liquidation. The Official Liquidator on assuming control of the Company in liquidation, issued notice to the petitioner and other Directors of the Company in liquidation for the production of certain documents pursuant to which the petitioner produced some documents. However, the Official Liquidator alleged that the petitioner failed to produce certain other documents, filed Company Application No.300/2003 before this Court and the said application was dismissed as not maintainable. A private complaint in PCR No.119/2007 was filed by the respondent No.1 alleging that the petitioner had committed an offence punishable under Section 538(1)(c) of the Act of 1956.

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The Trial Court took cognizance of the offence and registered the aforesaid complaint as C.C. No.114/2008 and secured the presence of the petitioner, who was enlarged on bail. The substance of the accusation was read over to the petitioner, who pleaded not guilty and claimed to be tried. An Assistant in the office of the official liquidator was examined as PW.1 and documents as per Exs.P1 to P12 were marked. The petitioner/accused No.2 and accused Nos.1 and 4 confronted Exs.D1 to D4 to PW.1 and the same were admitted and hence,

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CRL.RP No. 429 of 2019

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marked. The statement of the petitioner under Section 313 of the Cr.P.C. was recorded and he denied the incriminating evidence against him. However, he did not lead any oral evidence in his defence.

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Based on the oral and documentary evidence on record, the Trial Court held that the petitioner was guilty of the offence punishable under Section 538(1)(c) of the Act of 1956 read with Rule 9 of the Rules of 1959 and hence, convicted him for the said offence and sentenced him to undergo imprisonment for a period of two years and to pay fine of Rs.5,000/-.

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The petitioner being aggrieved by the said Judgment of conviction, filed Criminal Appeal No.1362/2014. The Appellate Court in terms of its Order dated 07.02.2019, dismissed the appeal for non-prosecution.

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Being aggrieved by the above, petitioner has filed this revision petition.

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Learned counsel for the petitioner submitted that the power to institute any criminal proceedings against the petitioner is circumscribed by Section 457 of the Act of 1956

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and therefore, the instant prosecution of the petitioner by the Official Liquidator without the required sanction prescribed under Section 457(1)(a) of the Act of 1956 is illegal. In this regard, he relied upon the Judgment of a Coordinate Bench of this Court in Crl. P. No.1159/2012 disposed off on 23.03.2021, where a Coordinate Bench was dealing with a similar case where prosecution was launched against the ex-Directors of the Company in liquidation, without prior sanction of the Court. The Coordinate Bench, after considering the position of law declared by the Hon'ble Apex Court, held that the entire prosecution initiated by the Official Liquidator is faulty and hence, quashed the criminal proceedings against the petitioners therein and further granted liberty to the respondent therein to initiate proceedings for the alleged violation under Section 538(1)(c) of the Act of 1956, if they desired to do so in accordance with law and after obtaining the sanction of the Court as required under Section 457(1)(a) of the Act of 1956. The learned counsel therefore prayed that a similar order be passed in the present case.

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8. Learned counsel for the respondent submitted that

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on facts, the petitioner had failed to produce the documents despite being called upon to do so and therefore, an offence

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CRL.RP No. 429 of 2019

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under Section 538(1)(c) of the Act of 1956 was made out against him. He submitted that not obtaining sanction of the Court is only an irregularity which does not vitiate the prosecution, unless the petitioner showed that he was prejudiced by such non-compliance.

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I have considered the submissions made by the learned counsel for the petitioner as well as the learned counsel for the respondent. I have perused the records of the Trial Court and also its Judgment as well as the impugned order passed by the Appellate Court.

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A coordinate Bench of this Court in Crl.P. No.1159/2012 (supra) while considering the fact of noncompliance of Section 457(1)(a) of the Act of 1956 referred to the Judgment of the Hon’ble Apex Court in Jaswantrai Manilal Akhaney v. State of Bombay [(1956) 26 Comp Cas 340] as well as the Judgment of the Andhra Pradesh High Court in Official Liquidator v. T.J. Swamy and Others [(1992) 73 Comp Cas 583] and held that there is no escape from complying Section 457(1)(a) of the Act of 1956, before initiating any criminal prosecution against the ex-directors of a

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CRL.RP No. 429 of 2019

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Company under liquidation. It is pertinent to emphasize that the purpose of Section 457(1)(a) of the Act of 1956 is to ensure that the Court to whom the Official Liquidator has to answer, is kept informed about the proceedings concerning any matter pertaining to the Company in liquidation. The Judgments referred supra apply on all fours to the facts of this case.

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Under the circumstances, the instant prosecution initiated against the petitioner is without following a substantive requirement of law and the same has vitiated the proceedings initiated against the petitioner / accused No.2 in C.C. No.114/2008.

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12 In that view of the matter, the impugned Judgment of conviction and Order of Sentence passed by the Trial Court in C.C. No.114/2008 in so far as it relates to the petitioner herein warrants interference. Similarly, the impugned order passed by the Appellate Court in Crl.A. No.1362/2014 is liable to be set aside, since it could not have dismissed the appeal for non-prosecution but must have perused the records and disposed off the appeal on merits.

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CRL.RP No. 429 of 2019

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Hence, this petition is allowed. The Judgment of conviction and Order of sentence dated 26.11.2014 passed by the Presiding Officer, Special Court for Economic Offences, Bengaluru, in C.C. No.114/2008 in so far as the petitioner herein is concerned is set aside. Likewise, the Order dated 07.02.2019 passed by the LXVII Additional City Civil and Sessions Judge, Bengaluru City, in Criminal Appeal No.1362/2014 is set aside. However, as held by a coordinate Bench of this Court in Criminal Petition No.1159/2012 (supra), the respondent is at liberty to initiate proceedings against the petitioner herein for the alleged violation of Section 538(1)(c) of the Act of 1956, if they so desire, in accordance with law and after duly obtaining the sanction of the Court as required under law. All other contentions of the parties are kept open.

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Sd/JUDGE

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SMA

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List No.: 1 Sl No.: 32

George Joseph v. the Official Liquidator of

Case brief

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George Joseph v. the Official Liquidator of

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