IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15TH DAY OF MAY 2020
BEFORE
THE HON’BLE MR. JUSTICE JOHN MICHAEL CUNHA
CRIMINAL PETITION NO.1643 OF 2020
C/W CRIMINAL PETITION NO.1729 OF 2020
CRIMINAL PETITION NO.1496 OF 2020 CRIMINAL PETITION NO.1499 OF 2020
CRIMINAL PETITION NO.1500 OF 2020
CRIMINAL PETITION NO.1643 OF 2020 BETWEEN:
M R BHAT
S/O LATE VASUDEVA BHAT AGED ABOUT 58 YEARS,
REGIONAL DIRECTOR (SOUTHERN REGION) MINISTRY OF CORPORATE AFFAIRS
SHASTRI BHAVAN 5TH FLOOR, 26 HADDOWS ROAD
CHENNAI-600006.
PRESENT ADDRESS AS PER THE PCR NO.4/2018
MR.BHAT
3RD FLOOR CORPORATE BHAVAN
BANDALAGUND NAGOLE HYDERABAD 500 068
...PETITIONER (BY SRI:UDAYA HOLLA, SR. ADVOCATE A/W
SRI: T.KRISHNA, ADVOCATE )
2
AND:
INDIA AWAKE FOR TRANSPARENCY
A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 HAVING REGISTERED
OFFICE AT NO.24, DESIKA ROAD, MYLAPORE
CHENNAI-600004. REP BY SRI P SADANAND GOUD
S/O MR.P.BIKSHAPATHI GOUD, AGE 40 YEARS,
24, DESIKA ROAD, MYLAPORE.
CHENNAI 600 004 …RESPONDENT
(BY SRI: R. SUBRAMANIAN, ADVOCATE A/W SRI: SHAKEER ABBAS M., ADVOCATE)
THIS CRIMINAL PETITION IS FILED U/S 482 CR.PC
PRAYING TO QUASH THE COMPLAINT, ORDER TAKING COGNIZANCE DATED 27.01.2020, AND THE ENTIRE
PROCEEDINGS IN PCR.NO.4/2018 AND FURTHER ACTIONS CONNECT WITH SPECIAL C.C.NO.69/2020 PENDING ON THE
FILE OF THE COURT OF THE XXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, SPECIAL JUDGE, BENGALURU URBAN
DISTRICT (CCH-24) BENGALURU CITY IN THE COMPLAINT FILED BY THE RESPONDENT NO.1 AGAINST THE PETITIONERS FOR
THE OFFENCES P/U/S 409,34,120B OF IPC AND SECTION 13(1)(d) R/W 13(2) OF THE PREVENTION OF CORRUPTION ACT.
CRIMINAL PETITION NO.1729 OF 2020
BETWEEN:
G VENKATESHWARA RAO S/O LATE G VENKATA SUBBAIAH NAIDU
AGED ABOUT 62 YEARS, PARTNER AT M/S. RAMRAJ AND CO.,
3
CHARTERED ACCOUNTANT,
NO.65, 4TH FLOOR, 29TH A CROSS, GEETHA COLONY, 4TH BLOCK,
JAYANAGAR, BANGALORE-560011.
...PETITIONER
(BY SRI:UDAYA HOLLA, SR. COUNSEL A/W SRI: T.KRISHNA, ADVOCATE )
AND:
INDIA AWAKE FOR TRANSPARENCY
A COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956 HAVING REGISTERED
OFFICE AT NO.24,
DESIKA ROAD, MYLAPORE CHENNAI-600004.
REP BY SRI P SADANAND GOUD S/O MR.P.BIKSHAPATHI GOUD,
AGE 40 YEARS, 24, DESIKA ROAD,
MYLAPORE. CHENNAI 600 004
…RESPONDENT
(BY SRI: R. SUBRAMANIAN, ADVOCATE A/W SRI: SHAKEER ABBAS M., ADVOCATE)
THIS CRIMINAL PETITION IS FILED U/S.482 CR.P.C
PRAYING TO QUASH THE COMPLAINT, ORDER TAKING COGNIZANCE DATED 27.01.2020 AND THE ENTIRE
PROCEEDINGS IN P.C.R.NO.2/2018 AND FURTHER ACTIONS CONNECT WITH SPL.C.C.NO.69/2020 PENDING ON THE FILE OF
XXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AND SPECIAL JUDGE, BENGALURU URBAN DISTRICT, BENGALURU
THE COMPLAINT FILED BY THE RESPONDENT NO.1 AGAINST
4
THE PETITIONER FOR THE OFFENCE P/U/S 409,34,120B OF IPC
AND SECTION 13(1)(d) R/W 13(2) OF P.C. ACT.
CRIMINAL PETITION NO.1496 OF 2020
BETWEEN:
1. SRI. AZIM HASHAM PREMJI S/O SHRI MOHD HASHAM PREMJI
AGED ABOUT 74 YEARS, SURVEY NO.75, 133, 135/1, 136/1
NO.574, DOKKAKANNELLI VILLAGE, SARJAPUR ROAD
BENGALURU-560035
2 . MRS YASEEM AZIM PREMJI
W/O SHRI AZIM HASHAM PREMJI AGED ABOUT 72 YEARS,
SURVEY NO.574 DOKKAKANNELLI VILLAGE,
SARJAPUR ROAD BENGALURU-560035
3 . MR PAGALTHIVARTHI SRINIVASAN
AGED ABOUT 59 YEARS, S/O SRI P VASUDEVAN
NO.524, 16TH CROSS, INDIRA NAGAR II STAGE
BENGALURU-560038
4 . M/S HASHAM INVESTMENT AND
TRADING COMPANY PVT LTD NO.134,
NEXT TO WIPRO CORPORATE OFFICE DODDAKANNELLI SARJAPUR ROAD
BENGALURU-560035 REP BY MR PAGALTHIVARTHI SRINIVASAN
...PETITIONERS
5
(BY SRI: RAVI B.NAIK, SR. ADVOCATE A/W SRI: K.B. MONESH KUMAR, ADVOCATE)
AND:
1 . INDIA AWAKE FOR TRANSPARENCY NO.24, DESIKA ROAD
MYLAPORE CHENNAI-600004
REP SRI P SADANAND GOUD
2 . SRI G VENKATESWARA RAO CHARTERED ACCOUNTANT
PARTNER M/S RAMRAJ AND CO
CHARTERED ACCOUNTANTS NO.65 IV FLOOR, 29TH CROSS
GEETHA COLONY, 4TH BLOCK JAYANAGAR
BENGALURU-560011 …RESPONDENTS
(BY SRI: R. SUBRAMANIAN, ADVOCATE A/W
SRI: SHAKEER ABBAS, ADVOCATE FOR R1; SRI: UDAYA HOLLA, SR. ADVOCTE A/W
SRI: T. KRISHNA, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED U/S 482 CR.PC PRAYING TO QUASH THE COMPLAINT, ORDER TAKING
COGNIZANCE DATED 27.01.2020 AND THE ENTIRE
PROCEEDINGS IN PCR NO.2/2018 PENDING ON THE FILE OF THE XXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU ON THE COMPLAINT FILED BY THE RESPONDENT NO.1 AGAINST THE PETITIONERS FOR THE OFFENCES P/U/S
409,34,120B OF IPC AND SECTION 13(1)(d) R/W 13(2) OF THE P.C ACT.
6
CRIMINAL PETITION NO.1499 OF 2020 BETWEEN:
1. SHRI AZIM HASHAM PREMJI
S/O SHRI MOHD HASHAM PREMJI AGED ABOUT 74 YEARS,
SURVEY NO.75, 133, 135/1, 136/1 NO.574, DOKKAKANNELLI VILLAGE,
SARJAPUR ROAD BENGALURU-560035
2 . MRS YASEEM AZIM PREMJI W/O SHRI AZIM HASHAM PREMJI
AGED ABOUT 72 YEARS, SURVEY NO.574
DOKKAKANNELLI VILLAGE,
SARJAPUR ROAD BENGALURU-560035
3 . MR PAGALTHIVARTHI SRINIVASAN
AGED ABOUT 59 YEARS, S/O SRI P VASUDEVAN
NO.524 16TH CROSS, INDIRA NAGAR II STAGE
BENGALURU-560038
4 . M/S HASHAM INVESTMENT AND TRADING COMPANY PVT LTD
NO.134, NEXT TO WIPRO CORPORATE OFFICE DODDAKANNELLI, SARJAPUR ROAD
BENGALURU-560035
REP BY MR PAGALTHIVARTHI SRINIVASA ...PETITIONERS
(BY SRI: RAVI B.NAIK, SR. COUNSEL A/W
SRI: K.B. MONESH KUMAR, ADVOCATE)
7
AND:
1. INDIA AWAKE FOR TRANSPARENCY
NO.24, DESIKA ROAD MYLAPORE
CHENNAI-600004 REP SRI P SADANAND GOUD
2 . SRI A N JAYARAM
C/O RESERVE BANK OF INDIA 10/3/8
NRUPATHUNGA ROAD BENGALURU-560001
(DELETED VIDE COURT ORDER DATED 18.3.2020)
…RESPONDENTS
(BY SRI: R. SUBRAMANIAN, ADVOCATE AND SRI: SHAKEER ABBAS, ADVOCATE FOR R1)
THIS CRIMINAL PETITION IS FILED U/S 482 CR.PC
PRAYING TO QUASH THE COMPLAINT, ORDER TAKING COGNIZANCE DATED 27.01.2020 AND THE ENTIRE
PROCEEDINGS IN PCR NO.3/2018 PENDING ON THE FILE OF THE XXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU ON THE COMPLAINT FILED BY THE RESPONDENT NO.1 AGAINST THE PETITIONERS FOR THE OFFENCES P/U/S
409,34,120B OF IPC AND SECTION 13(1)(d) R/W 13(2) OF THE P.C ACT.
CRIMINAL PETITION NO.1500 OF 2020
BETWEEN:
1. SHRI AZIM HASHAM PREMJI S/O SHRI MOHD HASHAM PREMJI
AGED ABOUT 74 YEARS, SURVEY NO.75, 133, 135/1, 136/1
8
NO.574, DOKKAKANNELLI VILLAGE,
SARJAPUR ROAD BENGALURU-560035
2 . MRS YASEEM AZIM PREMJI
W/O SHRI AZIM HASHAM PREMJI AGED ABOUT 72 YEARS,
SURVEY NO.574 DOKKAKANNELLI VILLAGE,
SARJAPUR ROAD BENGALURU-560035
3 . MR PAGALTHIVARTHI SRINIVASAN
AGED ABOUT 59 YEARS, S/O SRI P VASUDEVAN
NO.524 16TH CROSS,
INDIRA NAGAR II STAGE BENGALURU-560038
4 . M/S HASHAM INVESTMENT AND
TRADING COMPANY PVT LTD NO.134, NEXT TO WIPRO CORPORATE OFFICE
DODDAKANNELLI, SARJAPUR ROAD BENGALURU-560035
REP BY MR PAGALTHIVARTHI SRINIVASA ...PETITIONERS
(BY SRI: RAVI B.NAIK, SR. COUNSEL A/W
SRI: K.B. MONESH KUMAR, ADVOCATE)
AND:
1. INDIA AWAKE FOR TRANSPARENCY NO.24, DESIKA ROAD
MYLAPORE CHENNAI-600004
REP SRI P SADANAND GOUD
9
2. SRI M R BHAT
3RD FLOOR, CORPORATE BHAVAN, BANDALAGUDU NAGOLE,
HYDERABAD-500068. …RESPONDENTS
(BY SRI: R. SUBRAMANIAN, ADVOCATE AND
SRI: SHAKEER ABBAS, ADVOCATE FOR R1 SRI: UDAYA HOLLA, SENIOR COUNSEL A/W
SRI: T. KRISHNA, ADVOCATE FOR R2)
THIS CRIMINAL PETITION IS FILED U/S 482 CR.PC
PRAYING TO QUASH THE COMPLAINT, ORDER TAKING
COGNIZANCE DATED 27.01.2020 AND THE ENTIRE
PROCEEDINGS IN PCR NO.4/2018 PENDING ON THE FILE OF
THE XXIII ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU ON THE COMPLAINT FILED BY THE RESPONDENT
NO.1 AGAINST THE PETITIONERS FOR THE OFFENCES P/U/S
409,34,120B OF IPC AND SECTION 13(1)(d) R/W 13(2) OF THE
P.C ACT.
---
THESE CRIMINAL PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 18.03.2020 AND COMING ON FOR
PRONOUNCMENT OF ORDER THROUGH VIDEO CONFERENCE,
THIS DAY, THE COURT MADE THE FOLLOWING:-
10
O R D E R
These petitions are directed against the common order
passed by the XXIII Additional City Civil and Sessions Judge,
Special Judge, Bengaluru Urban District (CCH.24) dated
27.01.2020 in PCR.No.2/2018, PCR.No.3/2018 and
PCR.No.4/2018, whereby summons are issued to the petitioners
to face trial for the offences punishable under sections 409, 34
and 120-B of Indian Penal Code and section 13(1)(d) read with
section 13(2) of the Prevention of Corruption Act, 1988.
2. The outline facts leading to the petitions are as follows:
(i) Respondent No.1 herein namely India Awake for
Transparency, Chennai, presented three private complaints
(PCR Nos.2/2018, 3/2018 and 4/2018) against the petitioners
herein under section 200 Cr.P.C., seeking their prosecution for
the above offences. In all the three complaints, accused Nos.1
to 4 are common and accused No.5 in the respective complaints
is different.
11
(ii) The common case of the complainant in all the three
private complaints is that, accused No.1 – Mr.Azim Hasham
Premji, accused No.2 – Mrs.Yaseem Azim Premji and accused
No.3 – Mr.Pagalthivarthi Srinivasan were entrusted with the
dominion over the properties and assets of three Companies by
name (a) Vidya Investment and Trading Company Private
Limited (“Vidya” for short), (b) Regal Investment and Trading
Company Private Limited (“Regal” for short) and (c) Napean
Trading and Investment Company Private Limited (“Napean” for
short) as Directors and they were holding the assets of these
three Companies of the total worth of Rs.31,342 Crores in
fiduciary capacity, without having any financial interest or
ownership therein and that by allowing these assets transferred
to a newly constituted Company by name Hasham Investment
and Trading Company Private Limited (“Hasham” for short)
namely accused No.4, in collusion and connivance with
respective accused No.5 who were then occupying the position of
public servants as on the date of the alleged transaction, they
have committed the offences punishable under sections 409, 34
12
read with 120B of IPC and section 13(1)(d) read with section
13(2) of the Prevention of Corruption Act, 1988.
3. These allegations were founded on the premise that the
aforesaid three Companies (hereinafter referred to as
“Transferor Companies”) were owned by each other in such
manner that 2 of the 3 Companies held 50% of the shares in the
other i.e., Regal and Napean held 50% each of the shares of
Vidya and similarly, Regal and Vidya each held 50% of the
shares of Napean and further Vidya and Napean each held 50%
of the shares of Regal. These three Companies had total assets
of Rs.51,549.47 Crores. However, by taking advantage of their
position as Directors, during 2010-2012, accused Nos.1 to 3 took
away Rs.13,602 Crores of assets of the above three Companies
by way of gifts and transferred the same to a Private Trust
controlled by accused Nos.1 and 2. In respect of the remaining
assets of Rs.31,342 Crores, it is alleged that accused persons
conspired among themselves and merged the three Companies
into fourth accused Company namely Hasham Investment and
Trading Company Private Limited – a Company wholly owned by
13
the Private Trust run by accused Nos.1 and 2 without any
payment and through this device got control over the entire
assets worth Rs.31,342 Crores belonging to the Transferor
Companies of which they were the Directors. According to the
complainant, the decision to seek the merger of Transferor
companies attracted the offence under section 409 IPC and
further all the accused persons having entered into a criminal
conspiracy with a view to enrich accused Nos.1 to 3 of the huge
assets belonging to the Transferor Companies which otherwise
would have vested with the Union of India as bona vacantia or
escheat have rendered themselves liable for prosecution for the
above offences.
4. Learned Special Judge on taking cognizance of the
above offences recorded the sworn statement of the
complainant and considering the statements made on oath and
the large number of documents produced in support of the
allegations made in the complaint, issued summons to the
petitioners to face trial for the above offences which are
impugned in these petitions.
14
5. The contentions of accused Nos.1 to 4 (petitioners in
Criminal Petition Nos.1496/2020, 1499/2020 and 1500/2020)
are that the learned Special Judge has proceeded to take
cognizance of the matter mechanically without application of
mind. She failed to note that the complainant had invoked
section 200 Cr.P.C. without taking recourse to section 154(3) of
Cr.P.C. Learned Special Judge also failed to appreciate that the
amalgamation was accepted by the High Court of Karnataka
after issuance of notices and by following due process of law.
The Ministry of Corporate Affairs, the Regional Head of the RBI
were parties to the proceedings and the scheme was accordingly
sanctioned by the High Court. Learned Special Judge, by holding
that the reports submitted to the scrutiny of the High Court were
fabricated, has virtually cast aspersions on the orders passed by
the High Court. The allegations made in the complaints, even if
they are taken at their face value and accepted in their entirety,
do not prima facie constitute any offences or make out a case
against accused Nos.1 to 4. The uncontroverted allegations
made in the complaints and the evidence made available in
15
support of the same do not disclose commission of any offences.
Learned Special Judge also failed to note that the scheme of
amalgamation was sought to be challenged by the complainant
on the same set of allegations as contained in the complaints.
The NCLT, Bengaluru, dismissed the petition of respondent No.1
/ complainant and the complainant took up the same in Appeal
before the NCLAT, Delhi. The Hon’ble NCLAT, Delhi was pleased
to dismiss the appeal by imposing cost of Rs.2 lakhs. Learned
Special Judge also failed to note that the complainant had given
a false affidavit to the effect that no complaint has been filed in
any other Court touching the subject matter of the complaints
eventhough the complainant had filed separate complaints dated
01.11.2016, 14.03.2017 and 28.04.2017 addressed to RBI
Governor, Union of India which were followed up through a Writ
Petition before the High Court of Delhi. Further the complainant
had also filed an application before the High Court of Karnataka
to recall the order of amalgamation passed by the High Court
and the same is pending consideration of the High Court and
hence, initiation of criminal proceedings being manifestly
attended with mala fides and are maliciously instituted with an
16
ulterior motive of wreaking vengeance on the petitioners, with a
view to spite them due to private and personal grudge, are liable
to be quashed.
6. The petitioner in Criminal Petition No.1729/2020 namely
accused No.5 in PCR No.2/2018 – Sri.G. Venkateshwara Rao has
also set up identical contentions in his petition and in addition
has taken up a plea that he was not a public servant and was
only providing consultancy services as a Chartered Accountant.
There was no employee - employer relationship with the official
liquidator/ High Court with the petitioner, as such, the PCR was
not maintainable.
7. The petitioner in Criminal Petition No.1643/2020
namely accused No.5 in PCR.No.4/2018 – Sri.M.R.Bhat has
urged similar contentions as stated above and in addition has
contended that the trial court failed to appreciate the basic tenet
of Company Law that a Company is a legal or artificial person
capable of holding property in its name and be the owner of yet
another company. The Trial Court failed to appreciate that the
provisions of Article 296 get attracted only when there are no
17
claimants to a property. The petitioner is a public servant with
Union Government and is presently working as the Regional
Director, Ministry of Corporate Affairs (Southern Region),
Chennai and proceedings could not be initiated against him
without previous sanction under section 19 of the PC Act.
Hence, the order of cognizance and issuance of process being
opposed to facts and circumstances and the law is liable to be
quashed.
8. Elaborate arguments are advanced by learned Senior
Counsels appearing for the respective petitioners touching the
merits of the case as well as the legality of the order passed by
learned Special Judge in line with the statement of objections
filed into the Court and have referred to large number of
authorities in support of their contentions. But the petitioners
having invoked the jurisdiction of this Court under section 482
Cr.P.C., the scope of the petitions being limited, I have
considered only the relevant material which is necessary for
deciding the controversy involved in these petitions.
18
9. The position of law is well settled that while issuing
the process, satisfaction of the Special Judge or the Magistrate is
confined to the issue as to whether prima facie case is made out
against the accused and not with regard to the sufficiency of
evidence to secure conviction of the accused. It is now well
settled that the inherent powers under section 482 of Cr.P.C. can
be exercised to give effect to an order under the Code to prevent
abuse of process of the court or to otherwise secure the ends of
justice. The inherent powers under this section should not be
exercised to stifle a legitimate prosecution. The High Court
should normally refrain from giving a prima facie decision in a
case where all the facts are incomplete and hazy; more so, when
the evidence has not been collected and produced before the
Court and the issues involved, whether factual or legal, are of
such magnitude that they cannot be seen in their true
perspective without full material. In MADHAVRAO JIWAJIRAO
SCINDIA vs. SAMBHAJIRAO CHANDROJIRAO ANGRE reported in
1988 Criminal Law Journal 853, it is held that,
“... The legal position is well settled that when a
prosecution at the initial stage is asked to quashed, the
19
test to be applied by the Court is as to whether the
uncontroverted allegations as made prima facie
establish the offence. It is also for the court to take into
consideration any special features which appear in a
particular case to consider whether it is expedient and in
the interest of justice to permit a prosecution to
continue.”
10. Tested on the touchstone of this settled legal
principle, it only needs to be considered as to whether the
allegation made in the above complaints and the material
produced in support thereof prima facie make out the
ingredients of the offences charged against the petitioners? In
that view of the matter, the points that arise for consideration in
these petitions are as follows:
(1) Whether the allegations made in the complaints prima
facie disclose the ingredients of offences punishable under
sections 409, 34, 120-B of IPC and sections 13(1)(d) read
with 13(2) of Prevention of Corruption Act, 1988?
(2) Whether the order of taking cognizance by the learned
Special Judge amounts to sitting over appeal against the
orders passed by the High Court of Karnataka in
20
sanctioning the scheme of amalgamation in Company
Petition No.182/2014 connected with Company Petition
Nos.183/14, 184/2014 and 185 /2014?
(3) Whether prosecution of accused No.5 in the respective
proceedings is bad in law for want of prior sanction under
section 19 of the Prevention of Corruption Act, 1988?
POINT No.1:
11. The essence of the complaints is that the accused
persons conspired with each other to enrich accused Nos.1 to 4
of Rs.31,342 Crores of public money which were the assets of
the three Companies namely Napean, Vidya and Regal.
According to the complainant, these assets were entrusted to
accused Nos.1 to 3 in their capacity as Directors of these
Companies. None of them had any financial interest, either
directly or indirectly, in the assets of these Companies by way of
holding any equity shares and therefore, the act of the accused
in getting these valuable assets transferred to the fourth accused
Company of which accused Nos.1 to 3 were the shareholders,
21
offend the provisions of sections 409, 120-B of IPC as well as
section 13(1)(d) of the PC Act.
12. The petitioners do not dispute the fact that accused
Nos.1 to 3 were the Directors of the Transferor Companies
namely Napean, Vidya and Regal and that the scheme
formulated by them for amalgamation of these Companies was
approved by this Court in Company Petition Nos.182/2014,
183/2014, 184/2014 and 185/2014 dated 26.03.2015 and
accordingly, the Transferor Companies were held dissolved
without the process of winding up. The material on record
disclose that as on the date of amalgamation, the equity
shareholdings with the three Transferor Companies were
interlinked/cross held by each of the Companies which means
that the ownership of the assets exclusively vested with the
three Companies and not with accused Nos.1 to 3.
13. Undeniably, accused Nos.1 to 3 were representing the
Transferor Companies as Directors and not as owners thereof. It
is also not in dispute that the fourth accused Company is wholly
owned and controlled by the Private Trust formed by accused
22
Nos.1 and 2 and accused Nos.1 to 3 are the only Directors of
accused No.4 Company. It is recorded by the learned Special
Judge in the impugned order that as on 31.03.2014, accused
No.4 – Company was under loss of Rs.22.53 Crores and had
accumulated further loss of Rs.169.15 Crores and had availed
Rs.170 Crores loan from accused Nos.1 and 2 to meet its losses
which fact has not been disputed. It is in this background, the
merger was proposed by accused Nos.1 to 3 and the same was
accepted and sanctioned by this Court by its order dated
26.03.2015.
14. The above facts clearly reveal that three financially
robust Companies of which accused Nos.1 to 3 were the
Directors have been absorbed / consolidated with accused No.4,
a loss making Company, through the process of amalgamation,
as a result, huge assets held by the three Transferor Companies
have been transferred to accused No.4 – Company without
accused No.4 paying any consideration for buying over the
assets of the Transferor Companies. By this device or
mechanism, the ownership and control of the assets of the
23
Transferor Companies have been effectively taken over by
accused Nos.1 to 3. These facts, in my view, clearly fall within
the mischief of section 409 of IPC.
15. It is trite that a shareholder is separate from the
Company in which he holds share. In the instant case, as on the
date of amalgamation, accused Nos.1 to 3 were neither the
owners nor the shareholders of the Transferor Companies. The
petitioners have virtually conceded the factual position that the
equity shares of the Transferor Company No.1 were held equally
by the Transferor Company No.2 and the Transferor Company
No.3. Likewise equity shares of Transferor Company No.2 and
Transferor Company No.3 were cross held equally by other two
Transferor Companies. Under the said circumstances, when the
corporate vehicle is set up for the purpose of acquiring the
control or ownership over the assets of the incorporated
Companies to which accused Nos.1 to 3 were not legally entitled,
it is necessary to find out the persons and the purpose behind
setting up such a corporate vehicle on the guise of
amalgamation. Moreover faced with the allegation that the entire
24
transaction was improper and sullied by breach of the obligation
cast under law on accused Nos.1 to 3 and the facade of
corporate entity has been used to circumvent a statute to
achieve or perpetuate monopoly over the assets of an
incorporated Company, it is imperative for the Court to tear the
web of legal entity by piercing the corporate veil.
16. In this context, it may be useful to refer to the view
endorsed by the Hon’ble Supreme Court in BALWANT RAI
SALUJA AND ANOTHER vs. AIR INDIA LIMITED & Others, (AIR
2015 SC 375, wherein following the decision in LIFE INSURANCE
CORPORATIN OF INDIA vs. ESCORTS LIMITED & Others, AIR
1986 SC 1370, it is held as under:
“66. The doctrine of “piercing the corporate veil”
stands as an exception to the principle that a
company is a legal entity separate and distinct from
its shareholders with its own legal rights and
obligation. It seeks to disregard the separate
personality of the company and attribute the acts of
the company to those who are allegedly in direct
control of its operation. The starting point of this
doctrine was discussed in the celebrated case of
Salomon v. A Salomon & Co. Ltd. [1897 AC 22]. Lord
25
Halsbury LC (paragraphs 31-33), negating the
applicability of this doctrine to the facts of the case,
stated that:
‘…. a company must be treated like any
other independent person with its rights
and liabilities [legally] appropriate to
itself … whatever may have been the
ideas or schemes of those who brought it
into existence.’
67. Most of the cases subsequent to
Salomon case [supra], attributed the doctrine of
piercing the veil to the fact that the company was a
“sham” or a “façade”. However, there was yet to be
any clarity on applicability of the said doctrine.
68. In recent times, the law has been
crystallised around the six principles formulated by
Munby, J. in Ben Hashem v. Ali Shayif, [2008] EWHC
2380 (Fam]. The six principles, as found at paras
159-164 of the case are as follows:
(i) Ownership and control of a company were not
enough to
justify piercing the corporate veil;
(ii) The court cannot pierce the corporate veil, even
in the absence of third-party interests in the
26
company, merely because it is thought to be
necessary in the interests of justice;
(iii) The corporate veil can be pierced only if there is
some impropriety;
(iv) The impropriety in question must be linked to
the use of the company structure to avoid or conceal
liability;
(v) To justify piercing the corporate veil, there must
be both control of the company by the wrongdoer(s)
and impropriety, that is use or misuse of the
company by them as a device or facade to conceal
their wrongdoing; and
(vi) The company may be a “façade” even though it
was not originally incorporated with any deceptive
intent, provided that it is being used for the purpose
of deception at the time of the relevant transactions.
The court would, however, pierce the corporate veil
only so far as it was necessary in order to provide a
remedy for the particular wrong which those
controlling the company had done.
70. The position of law regarding this principle in
India has been enumerated in various decisions. A
Constitution Bench of this Court in LIC v. Escorts
Ltd. [(1986) 1 SCC 264]: (AIR 1986 SC 1370), while
discussing the doctrine of corporate veil, held that:
27
(SCC pp.335-36, para 90): (at p.1418, para 90 of
AIR).
‘90. … Generally and broadly speaking,
we may say that the corporate veil may
be lifted where a statute itself
contemplates lifting the veil, or fraud or
improper conduct is intended to be
prevented, or a taxing statute or a
beneficent statute is sought to be evaded
or where associated companies are
inextricably connected as to be, in reality,
part of one concern. It is neither
necessary nor desirable to enumerate the
classes of cases where lifting the veil is
permissible, since that must necessarily
depend on the relevant statutory or other
provisions, the object sought to be
achieved, the impugned conduct, the
involvement of the element of the public
interest, the effect on parties who may be
affected, etc.””
17. In the backdrop of the above principles, if the
provisions of section 409 of IPC under which the petitioners are
sought to be charged is analysed, the section reads as under:
28
409. Criminal breach of trust by public servant, or
by banker, merchant or agent.—Whoever, being
in any manner entrusted with property, or with
any dominion over property in his capacity of a
public servant or in the way of his business as a
banker, merchant, factor, broker, attorney or
agent, commits criminal breach of trust in respect
of that property, shall be punished with
1[imprisonment for life], or with imprisonment of
either description for a term which may extend to
ten years, and shall also be liable to fine.
Section 405 of IPC defines criminal breach of trust as
under:
405. Criminal breach of trust.—Whoever, being in
any manner entrusted with property, or with any
dominion over property, dishonestly
misappropriates or converts to his own use that
property, or dishonestly uses or disposes of that
property in violation of any direction of law
prescribing the mode in which such trust is to be
discharged, or of any legal contract, express or
implied, which he has made touching the
discharge of such trust, or wilfully suffers any
other person so to do, commits “criminal breach
of trust”.
29
18. As held by the Hon’ble Supreme Court in
R.VENKATAKRISHNAN VS CENTRAL BUREAU OF
INVESTIGATION, (2009) 11 SCC 737, in para 143,
“The terms of the section are very wide. They
apply to one who is in any manner entrusted with
property or dominion over property. The section
does not require that the trust should be in
furtherance of any lawful object. It merely
provides, inter alia, that if such a person
dishonestly misappropriates or converts to his
own use the property entrusted to him; he
commits criminal breach of trust.”
19. Further, in JAIKRISHNADAS MANOHARDASDESAI vs.
THE STATE OF BOMBAY, AIR 1960 SC 889, the Hon’ble Supreme
Court, in para 6, has held thus,
“6. ... to establish a charge of criminal
breach of trust, the prosecution is not obliged to
prove the precise mode of conversion,
misappropriation or misapplication by the accused
of the property entrusted to him or over which he
has dominion. The principal ingredient of the
offence being dishonest misappropriation or
conversion which may not ordinarily be a matter
of direct proof, entrustment of property and
30
failure in breach of an obligation to account for
the property entrusted, if proved, may in the light
of other circumstances, justifiably lead to an
inference of dishonest misappropriation or
conversion. Conviction of a person for the offence
of criminal breach of trust may not, in all cases,
be founded merely on his failure to account for
the property entrusted to him, or over which he
has dominion, even when a duty to account is
imposed upon him, but where he is unable to
account or renders an explanation for his failure
to account which is untrue, an inference of
misappropriation with dishonest intent may
readily be made.”
20. In CHELLOOR MANKKAL NARAYAN ITTIRAVI
NAMBUDIRI vs. STATE OF TRAVANCORE- COCHIN, AIR 1953 SC
478, in para 21, it is observed that,
“ ... to constitute an offence of criminal breach of
trust it is essential that the prosecution must
prove first of all that the accused was entrusted
with some property or with any dominion or
power over it. It has to be established further
that in respect of the property so entrusted, there
was dishonest misappropriation or dishonest
conversion or dishonest use or disposal in
violation of a direction of law or legal contract, by
31
the accused himself or by someone else which he
willingly suffered to do.”
21. In the instant case, undeniably accused Nos.1 to 3
were only the Directors of the Transferor Companies as on the
date of the alleged transaction. As explained in Palmer’s
Company Law, 20th Edition, page 513, “Directors” are in the eye
of law, agents of the Company for which they act, and the
general principles of the law of principal and agent regulate in
most respects the relationship of the Company and its Directors.
22. In R.K.DALMIA etc., vs. DELHI ADMINISTRATION, AIR
1962 SC 1821, interpreting the expression “dominion over the
property”, the Hon’ble Supreme Court in para 97 thereof has
observed that,
“Both Dalmia and Chokhani being agents of the
company the control, if any, they had over the
securities and the funds of the company, would
be in their capacity as agents of the company and
would be in the course of Dalmia’s duty as the
Chairman and Director or in the course of
Chokhani’s duty as a duly appointed agent of the
company. If they committed any criminal breach
32
of trust with respect to the securities and funds of
the company, they would be committing an
offence under section 409 IPC.”
23. In the light of the above factual and legal position, the
impugned order cannot be faulted with. As the allegations made
in the complaints prima facie make out the ingredients of the
offence under section 409 of IPC and there being clear
allegations of conspiracy which are duly supported by the
documents marked during the sworn statement of the
complainant, the learned Special Judge was justified in issuing
summons to the petitioners namely accused Nos.1 to 4 to
answer the above charges. At the stage of issuing summons,
learned Special Judge is not required to satisfy herself as to the
correctness or otherwise of the allegations made against the
petitioners nor is she required to record a finding that the
material produced by the complainant is sufficient to secure a
conviction against the proposed accused. As the material on
record prima facie made out the ingredients of the offences
alleged against the petitioners, I do not find any reason to
33
interfere with the impugned order insofar as accused Nos.1 to 4
are concerned.
24. The argument of the learned Senior Counsels
appearing for the petitioners that the amalgamation having been
sanctioned by the High Court, learned Special Judge had no
jurisdiction to proceed against the petitioners also does not merit
acceptance. Amalgamation, no doubt, is a process in which
separate organizations unite to form a larger organisation or a
group. The amalgamation of small firms is also permissible under
law. But in the instant case, no material has been produced
either by accused Nos.1 to 3 or any other accused to show that
any of the three Transferor Companies belonged to accused
Nos.1 to 3 or that they had any financial stake therein so that
they could decide to form a larger group of Companies for
whatever purpose. On the other hand, the circumstances alleged
in the complaints and the facts borne on the documents
produced by the complainant indicate that on the basis of
amalgamation, Transferor Companies are completely obliterated
and their assets are taken over by accused No.4. It may be that
34
initially accused Nos.1 and 2 themselves had invested in the
Transferor Companies, but the subsequent events emerging
from the records clearly go to show that accused Nos.1 to 3
ceased to hold any shares in the Transferor Companies ever
since 1980. As such, as on the date of the alleged transaction,
none of them had any beneficial ownership over the assets of
these Companies. Even otherwise, law on the point in clear that
“the Company is at law a different person altogether from the
subscribers ...; and, though it may be that after incorporation
the business is precisely the same as it was before, the same
persons are managers, and the same hands receive the profits,
the company is not in law the agent of the subscribers or trustee
for them.” See SALOMON vs. SALOMON & COMPANY Ltd., 1987
AC 22.
25. It also needs to be stated that the alleged transaction
is not a simple or innocuous amalgamation as sought to be made
out by the petitioners; rather the whole exercise as reflected in
the voluminous documents produced before the Special Court
indicate that the entire transaction was contrived to get hold of
35
the valuable assets of the Transferor Companies camouflaged as
amalgamation. But for this amalgamation, in the event of
winding up of the Transferor Companies, its assets would have
been taken over by its legitimate shareholders and in their
absence, the same would have been appropriated by the Union
as bona vacantia. Since the allegations proceed on the basis
that in order to take over the assets of the Transferor
Companies, accused Nos.1 to 3 misused their fiduciary position
as agents of the Company and have acted in breach of trust and
consequently managed to enrich themselves in collusion with
accused No.5 by transferring these assets to accused No.4,
which was wholly owned by the Private Trust controlled by
accused No.1 and 2, in my view, the facts alleged in the
complaints prima facie attract the ingredients of the offences
under section 409 read with section 34 and section 120B of IPC
entailing prosecution of the petitioners for the above offence.
26. The argument of the learned Senior Counsels that the
order passed by the learned Special Judge amounts to judicial
impropriety inasmuch it has the effect of sitting in appeal over
36
the orders passed by the Hon’ble High Court is totally misplaced
and is liable to be rejected outright. The complainant has not
questioned the validity of the amalgamation order passed by the
court, rather the accusations spring from the breach of trust
committed by accused Nos.1 and 3 in amalgamating the
Transferor Companies with accused No.4 and thereby taking
over the assets of the Transferor Companies of which they were
mere agents or Directors. Merger is not the subject matter of
the offence set out in the complaints. Complaints pertain to the
breach of trust by accused No.1 to accused No.3 as Directors
and their conspiracy with accused No.4 and accused No.5 in
committing the offences under section 13(1)(d) of P.C. Act. It
may be that as against the orders of the High Court, the
complainant has resorted to legal remedy available under law by
making an application to recall the order of amalgamation, but
that by itself does not debar the Special Court from deciding the
allegations constituting the criminal offence arising out of the
transaction.
37
27. A transaction may give rise to civil or criminal
remedies. It is trite that availability of civil remedy cannot be a
ground for quashing criminal prosecution. As held in M/s.INDIAN
OIL CORPORATION vs. M/s.NEPC INDIA LIMITED & Others,
(2006) 6 SCC 736, “The test is whether the allegations in the
complaint disclose a criminal offence or not.” For example, if a
collusive decree is obtained from a court of law fabricating
documents and later the said decree is set aside by the Civil
Court, the parties to fabrication and forgery cannot seek to avoid
criminal prosecution on the plea that the offending decree has
been set aside by a Civil Court when charged with the offence of
forgery and falsification of records. Likewise, assuming that the
proposal for amalgamation set up by the petitioners was not
accepted by the High Court and/or for any reason the High Court
which sanctioned amalgamation found it proper to recall its
order, even then, it does not afford a defence to the petitioners
to contend that their prosecution is illegal, as long as the acts
complained against the petitioners prima facie disclose the
ingredients of criminal breach of trust. Therefore, I do not find
any substance in the submissions canvassed by the learned
38
counsel for the petitioners that in view of the pendency of the
recall application filed by the complainant seeking to set at
naught the order of amalgamation, the prosecution of the
petitioners for the alleged offences is not legally tenable. As the
complainant has clearly made out the ingredients of the offences
under section 409 read with section 34 of IPC as well as the
ingredients of section 120-B IPC insofar as the accused Nos.1 to
4 are concerned, in my view, no fault could be found with the
impugned order passed by the learned Special Judge issuing
summons to accused Nos.1 to 4 to face trial for the above
offences.
28. Coming to the prosecution of accused No.5 in the
respective cases is concerned, the specific allegation against
accused No.5 in PCR.No.2/2018 (petitioner in Criminal Petition
No.1729/2020 Sri.G.Venkateshwara Rao) are that, he was a
practicing Chartered Accountant appointed by the Karnataka
High Court at Bengaluru to inspect the books and records of the
three Companies for the purpose of making the report in terms
of the second proviso to section 394 of the Companies Act 1956,
39
as to whether the affairs of the three Companies were conducted
in breach of these principles or public interest. It is alleged in
the complaint that the petitioner/accused No.5 therein conspired
with accused Nos.1 to 4 in commissioning the above offences
with a view to take over the assets of the three Companies by
accused Nos.1 to 4 of the net worth of Rs.31342 Crores as on
31.03.2004 wholly belonging to the public and for this purpose,
conspired to commit the offence within the meaning of section
13(1)(d) of the PC Act read with section 409 IPC. It is further
alleged that pursuant to the above conspiracy, accused No.5
allowed the merger to take place by falsely setting out in the
report made to the High Court of Karnataka as though the affairs
of the Company had not been conducted prejudicial to the
interest of the members and further as though the affairs of the
three Companies were not conducted against public interest and
that none of the Directors of the three Companies namely
accused Nos.1 to 3 derived any benefit from these Companies.
In paragraph No.32 clauses (a) to (k) of the complaint, the
specific instances of false misrepresentations made by accused
No.5 have been enumerated and I do not find it necessary to
40
reproduce the same in verbatim. Suffice it to note that each of
these allegations are sought to be supported by voluminous
documents. These allegations, therefore, cannot be brushed
aside as false and baseless as contended by the petitioner. Even
otherwise, as already noted above, the power under section 482
Cr.P.C. cannot be exercised at the threshold to stifle legitimate
prosecution when the allegations disclose the ingredients of the
criminal offence.
29. Though the petitioner in Criminal Petition
No.1729/2020 has urged in the petition that he is not a public
servant as defined under the provisions of the PC Act, 1988, yet
in the course of hearing, learned Senior Counsel appearing for
him has fairly conceded that in view of the appointment made by
the Hon’ble High court to discharge the duties in connection with
the administration of justice, petitioner answered the description
of “public servant” within the meaning of section 2(c)(v) and (vi)
of PC Act, 1988. However, as on the date of taking cognizance
of the alleged offence, the petitioner namely accused No.5
Sri.G.Venkateshwara Rao ceased to be a public servant and
41
therefore, in view of the provisions of the unamended section
19 of the PC Act, 1988, sanction for the prosecution of the
petitioner/accused No.5 in PCR.No.2/2018 is not necessary.
30. The allegations insofar as accused No.5 in
PCR.No.4/2018 (petitioner in Criminal Petition No.1643/2020 -
Sri.M.R.Bhat) are that he was working as the Registrar of
Companies, Karnataka, when the offences set out in the
complaint were committed. Presently, he is holding the office as
the Regional Director (Southern Region), Ministry of Corporate
Affairs, Chennai. He conspired with accused Nos.1 to 4 in
commissioning of the alleged offences with a view to take over
the assets of the three Companies of the net worth of Rs.31342
Crores by accused Nos.1 to 4, thus committed offences
punishable under section 13(1)(d) of the PC Act read with
sections 409 and 120-B of IPC. It is alleged in the complaint
that notice under section 394A of the Companies Act was issued
to the Office of the Regional Director, Ministry of Corporate
Affairs, having jurisdiction in respect of the Companies
concerned in the merger, with the object of ensuring that all
42
relevant views of the various Government organizations were
obtained before the Central Government made its report to the
High Court. However, the Regional Director authorized the
petitioner/accused No.5, then functioning as the Registrar of
Companies, Karnataka, to deal with the requirements of section
394A of the Companies Act. The petitioner however allowed the
merger to take place by not setting out the essential facts in
respect of the merger. The various instances of misconduct
committed by the petitioner namely accused No.5 are detailed in
para 31 clauses (a) to (h) and are sought to be substantiated
through relevant documents. Therefore, it cannot be said that
the prosecution of the petitioner is vindictive and baseless as
contended. These allegations prima facie disclose the elements
of section 13(1)(d) of the PC Act as well as section 120-B of IPC.
Sub-clause (iii) of section 13(1)(d) of PC Act contemplates that,
a Public Servant who while holding office, obtains for any person
any valuable thing or pecuniary advantage without any public
interest would be guilty of criminal misconduct. At the stage of
issuing summons to the petitioner, the learned Special Judge
was not required to ascertain the veracity of these allegations.
43
Having regard to the nature of the allegations set out in the
complaint which are sought to be substantiated through
documentary evidence, in my view, learned Special Judge was
justified in taking cognizance of the alleged offences and issuing
summons to the petitioner to face trial for the said offences.
POINT No.2:
31. The contention urged on behalf of this petitioner that
the prosecution initiated against him is bad in law for want of
prior sanction as envisaged under section 19 of the PC Act does
not merit acceptance. Sri.Udaya Holla, learned Senior Counsel
appearing for the petitioner namely accused No.5 in Criminal
Petition No.1643/2020 vehemently submitted that the petitioner
is a “public servant” as defined under section 2(c) of the PC Act.
As per the amended section 19 of the PC Act, learned Special
Judge was debarred from taking cognizance of the offences
punishable under sections 7, 11, 13 and 15 against a public
servant without proper sanction. The PC Act, 1988 was
amended by the Amendment Act, 2018 from 26.07.2018. As on
that date, the court had not taken cognizance of the alleged
44
offences. The records indicate that till completion of recording of
the sworn statement i.e., on 28.11.2018, there was no credible
material before the learned Special Judge to take cognizance of
the offences. Hence, as on the date of coming into operation of
the amended provisions of section 19 of the PC i.e., 26.07.2018,
cognizance of the alleged offence was not taken and therefore,
the provisions of the amended section 19 of the PC Act apply to
the facts of this case. Developing on this point, the learned
counsel would submit that the amendment brought to the PC Act
repealed the earlier provisions and in its place, the new provision
has been replaced and therefore, learned Special Judge could
not have taken cognizance of the alleged offences insofar as
petitioner namely accused No.5 is concerned without the
previous sanction of the Central Government. In support of this
submission, learned Senior Counsel has placed reliance on the
decision of the Full Bench decision of this Court in the case of
THE HASSAN CO-OPERATIVE MILK PRODUCERS SOCIETIES
UNION LIMITED & Others vs. STATE OF KARNATAKA,
DEPARTMENT OF CO-OPERATIVE SOCIEITIES & Others, ILR
2014 Karnataka 4257, wherein it is held that, substitution of a
45
provision results in repeal of the earlier provision and its
replacement by the new provision. When the Legislature
amends the old provision by way of substitution it intends to
keep alive the old provision. Referring to the law laid down by
the Hon’ble Supreme Court on the issue, the Full Bench of this
Court has held that,
“… the amendment which has the effect of
substitution of a provision has the effect of
replacing the old provision by the substituted
provision and in the absence of repugnancy,
inconsistency and absurdity, must be construed
as if it has been incorporated in the Act right from
abinitio. In other words, an amendment by way
of substitution has retrospective operation.”
32. Repelling the above argument, learned counsel
appearing for respondent No.1/ complainant referring to the law
laid down in Anthulay’s case, reiterated that petitioner namely
accused No.5 having ceased to hold the office of the Registrar of
Companies which position he was holding as on the date of
commission of the alleged offence, there was no requirement of
obtaining the prior sanction. Further placing reliance on the
46
exposition of law made by the Hon’ble Supreme Court in NANI
GOPAL MITRA vs. STATE OF BIHAR, AIR 1970 SC 1636 (para
Nos.5 and 6), learned counsel emphasized that,
As a general rule the amended law
relating to procedure operates retrospectively.
But there is another equally important principle
viz. that a statute should not be so construed as
to create new disabilities or obligations or
impose new duties in respect of transactions
which were complete at the time the amending
Act came into force. The same principle is
embodied in Section 6 of the General Clauses
act which is to the following effect:
“6. Effect of repeal – Where this Act or
any Central Act or Regulation made after the
commencement of this Act, repeals any
enactment hitherto made or hereafter to be
made, then, unless a different intention
appears, the repeal shall not-
(b) affect the previous operation of any
enactment so repealed or anything duly done or
suffered thereunder; or
(e) affect any investigation, legal
proceeding or remedy in respect of any such
47
right, privilege, obligation, liability, penalty,
forfeiture or punishment as aforesaid;
and any such investigation, legal
proceeding or remedy may be instituted,
continued or enforced, and any such penalty,
forfeiture or punishment may be imposed as if
the repealing Act or Regulation had not been
passed.”
6. The effect of the application of this
principle is that pending cases although
instituted under the old Act but still pending are
governed by the new procedure under the
amended law, but whatever procedure was
correctly adopted and concluded under the old
law cannot be opened again for the purpose of
applying the new procedure.”
33. Since the contentions raised by learned Senior
Counsel touches the very jurisdiction of the Trial Court, I have
given my thoughtful consideration to the submissions and have
meticulously examined the records of the Trial Court. On going
through the order sheet maintained by the Trial Court and the
observations made in para Nos.16 to 18 of the impugned order,
I find that the learned Senior Counsel has built up the above
48
argument on the supposition that cognizance of the alleged
offence was taken by the learned Special Judge subsequent to
the Amendment Act, 2018, but records speak otherwise. Of
course it is true that learned Special Judge has not stated in so
many words about taking cognizance of the alleged offences, but
the law is now well settled as held in CREF FINANCE LTD., vs.
SHREE SHANTHI HOMES (P) Ltd. and Another, (2005)7 SCC 467.
“… Cognizance is taken of the offence and not of
the offender and, therefore, once the court on
perusal of the complaint is satisfied that the
complaint discloses the commission of an
offence and there is no reason to reject the
complaint at that stage, and proceeds further in
the matter, it must be held to have taken
cognizance of the offence.”
34. In the instant case, the order sheet indicates that, on
receiving the complaint on 16.12.2017, the same was put up
before the learned Special Judge on 18.12.2017. Learned
counsel for the complainant was heard-in-part and the matter
was adjourned for further hearing and thereafter, the matter
was adjourned from time to time and written arguments of the
49
complainant was received on 06.03.2018 and the matter was set
down for recording sworn statement of the complainant on
02.08.2018.
35. What is taking cognizance has been explained by the
Hon’ble Supreme Court in R.R.CHARI vs. STATE OF UTTAR
PRADESH, AIR 1951 SC 207, wherein it is held,
“What is taking cognizance has not been
defined in the Criminal Procedure Code and I
have no desire to attempt to define it. It seems
to me clear however that before it can be said
that any Magistrate has taken cognizance of any
offence under Section 190(1)(a) of the Criminal
Procedure Code, he must not only have applied
his mind to the contents of the petition but he
must have done so for the purpose of
proceeding in a particular way as indicated in
the subsequent provisions of this Chapter-
proceeding under Section 200 and thereafter
sending it for inquiry and report under Section
202. When the Magistrate applies his mind not
for the purpose of proceeding under the
subsequent sections of this Chapter, but for
taking action of some other kind e.g. ordering
investigation under Section 156(3), or issuing a
50
search warrant for the purpose of the
investigation, he cannot be said to have taken
cognizance of the offence. The Court further
held that “as to when cognizance is taken of
an offence will depend upon the facts and
circumstances of each case and it is impossible
to attempt to define what is meant by taking
cognizance.”
36. Viewed in the light of the above exposition, the facts
noted in the order sheet clearly indicate that the learned Special
Judge has applied her mind to the facts of the case right from
the date of receiving the complaint and thereafter, decided to
proceed in the matter and therefore, it has to be held that
cognizance of the alleged offence was taken on 18.12.2017 itself
when the complainant was heard-in-part and the learned Special
Judge adjourned the matter for proceeding further in the matter.
Therefore, learned Special Judge having taken cognizance of the
offences much prior to the introduction of the amendment, it is
only the law prevailing as on the date of the cognizance is
applicable to the facts of the case. Hence, the submission of the
learned Senior Counsel that by virtue of the Amendment Act,
51
2018, the Trial Court has fallen in error in taking cognizance of
the alleged offences without prior sanction from the Central
Government cannot be accepted.
37. Lastly, the contention urged by learned Senior
Counsel Sri.Ravi B.Naik for the petitioners in Criminal Petition
Nos.1496/2020, 1499/2020 and 1500/2020 that the impugned
order is not in conformity with the directions issued by the
Hon’ble Supreme Court in PRIYANKA SRIVASTAVA AND ANOTHER
vs. STATE OF UTTAR PRADESH and Others reported in (2015) 6
SCC 287 also cannot be a ground to quash the proceedings. A
reading of the complaints indicate that the complainant did not
seek reference of the complaints for investigation under section
156(3) Cr.P.C., rather the prayer made in the complaint was to
proceed against the petitioners for the alleged offences under
section 200 Cr.P.C. In PRIYANKA’s case, referred to supra, the
Hon’ble Supreme Court has laid down that, there has to be prior
applications under Sections 154(1) and 154(3) while filing a
petition under Section 156(3) Cr.P.C. In para 31 of the above
decision it is observed that,
52
“… Both the aspects should be clearly spelt out in the application and necessary
documents to that effect shall be filed. The warrant for giving a direction that an application
under Section 156(3) be supported by an affidavit is so that the person making the application should be conscious and also
endeavour to see that no false affidavit is made. It is because once an affidavit is found to be
false, he will be liable for prosecution in accordance with law. This will deter him to casually invoke the authority of the Magistrate
under Section 156(3).”
Therefore, even this ground is not available to the petitioners to
seek quashment of the proceedings initiated against them.
POINT No.3:
38. In the light of the above discussion and for the
reasons stated above, I do not find any justifiable ground to
interfere in the impugned order. As a result, petitions are liable
to dismissed and accordingly, they are dismissed.
Sd/-
JUDGE
Bss.
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