Yerram Vijay Kumar vs The State Of Telangana

2026 INSC 42 IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. OF 2026 (Arising out of SLP (Crl.) No. 11530 OF 2024)

YERRAM VIJAY KUMAR …

APPELLANT(S)

VERSUS

THE STATE OF TELANGANA & ANR. …RESPONDENT(S)

WITH

CRIMINAL APPEAL NO. OF 2026 (Arising out of SLP (Crl.) No. 14783 OF 2024)

RAJEEV KUMAR AGARWAL …APPELLANT(S)

VERSUS

THE STATE OF TELANGANA & ORS. …RESPONDENT(S)

JUDGMENT

J.K. Maheshwari, J.

1. Leave granted.

2. Signature Not Verified The present appeals have been filed against the impugned Digitally signed by

judgment dated 20.06.2024 passed by the Single Bench of High Gulshan Kumar Arora Date: 2026.01.09 15:45:41 IST Reason:

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Court for the State of Telangana at Hyderabad (hereinafter

referred to as “High Court”) whereby the petition under Section

482 of the Code of Criminal Procedure, 1973 (hereinafter referred

to as “CrPC”) of the Appellants – accused was dismissed. The

prayer in the said petition was to quash the criminal proceedings

in complaint case bearing C.C. No. 58 of 2022 filed by

Respondent No. 2 – Complainant against the Appellants where

the Special Court for Economic Offences at Hyderabad

(hereinafter referred to as “Special Court”) has taken cognizance

of offences under Sections 448 & 451 of the Companies Act, 2013

(hereinafter referred to as “Companies Act”) and Sections 420,

406, 426, 468, 470, 471 & 120B of the Indian Penal Code, 1860

(hereinafter referred to as “IPC”).

FACTS

3. The genesis of the dispute lies in the affairs of a private

limited company, namely M/s Shreemukh Namitha Homes

Private Limited (hereinafter referred to as “Company”), which was

incorporated on 19.08.2015 under the provisions of the

Companies Act by the Complainant and his wife, Namitha. At the

2 time of incorporation, they were the promoters, first Directors

and majority shareholders of the Company. Accused No. 1, i.e.,

Appellant in the Criminal Appeal arising out of SLP (Crl.) No.

11530/2024 was inducted as a Director in the Company on

03.09.2016. Accused No. 2, i.e., Appellant in the Criminal Appeal

arising out of SLP (Crl.) No. 14783/2024 was inducted as a

Director in the Company on 27.08.2015. The initial disputes

between the parties arose with regard to management and

control of the Company.

4. The original Articles of Association (hereinafter referred to

as “AoA”) of the Company did not provide any fixed tenure for

Directors, nor did it contemplate their retirement by rotation. On

17.08.2016, Accused No. 1 entered into a Memorandum of

Understanding with the Complainant and certain other

stakeholders, pursuant to which he agreed to make substantial

financial investment, approximately to the tune of Rs. 30 crores,

in a real estate project of the Company. The arrangement

contemplated sharing of profits in mutually agreed proportions.

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5. An Extra-Ordinary General Meeting (hereinafter referred to

as “EOGM”) is stated to have been held on 22.08.2016, preceded

by a Board Meeting on 21.07.2016, in which amendments to the

AoA were approved and uploaded on the website of the Ministry

of Corporate Affairs (hereinafter referred to as “MCA”) on

12.09.2016. As alleged by Accused No. 1, no notice of either

meeting was served upon him despite being a Director of the

Company at the relevant time. The relevant portion of the

amended AoA is reproduced as thus: -

“64. (i) Subject to the provisions of Section 149, the board shall have the power at any time, and from time to tim, to appoint a person as an additional director, provided the number of directors and additional directors together shall not at any time exceed the maximum strength fixed by the Board for the articles.

(ii) Such person shall hold office only up to the date of the next annual general meeting of the company but shall be eligible for appointment by the company as a director at that meeting subject to provisions of the Act.”

6. As a result of the amendment in the AoA, the tenure of a

Director was fixed until the date of next annual general meeting

of the company.

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7. On 02.11.2021, the complainant and his wife convened

another EOGM wherein the AoA were further amended, in terms

of which, all Directors other than the Complainant and his wife

were required to retire annually and seek re-appointment.

Pursuant thereto, an Annual General Meeting was held on

30.11.2021 wherein resolutions for re-appointment of the

Accused were placed. The said resolutions failed as the

Complainant and his wife, holding majority shareholding, voted

against them. As such, the accused ceased to be Directors of the

Company with effect from 30.11.2021.

8. Such removal was challenged by Accused No. 1 before the

National Company Law Tribunal at Hyderabad (hereinafter

referred to as “NCLT”) by filing Company Petition No. 10 of 2022,

which is pending adjudication.

9. Subsequent to such challenge, on 19.05.2022, the

Complainant filed a private complaint before the Special Court

alleging that Accused No. 1 illegally convened an EOGM on

01.12.2021 without authority, appointed third parties as

Directors in the Company, fabricated the Board and shareholders’

5 resolutions, and uploaded statutory filings along with other

forged and false documents on the website of the Ministry of

Corporate Affairs. In parallel, two civil suits were also instituted

by the Appellants before the competent civil courts seeking a

permanent injunction against the Company and the Complainant

from violating the terms and conditions of MoU dated 17.08.2016

and a declaration that the agreements to sell executed by the

Complainant with respect to the properties of the Company be

declared void, respectively.

10. The Special Court recorded the sworn statement of the

Complainant and, by order dated 10.10.2022, took cognizance of

the alleged offences and issued summons to the Appellants,

leading to registration of C.C. No. 58 of 2022. Aggrieved by the

summoning order and further proceedings, the Appellants

invoked inherent jurisdiction of the High Court under Section

482 of CrPC and filed the quashing petition. The Appellants inter

alia contended that the dispute was essentially civil and

corporate in nature; the criminal complaint was a counterblast to

the proceedings pending before NCLT; cognizance of offences

6 involving alleged fraud under the Act, particularly Section 447

was barred by Section 212(6) of the Act in the absence of a

complaint by the Serious Fraud Investigation Office (hereinafter

referred to as “SFIO”) or other authorised agency; and that the

mandatory statutory procedure as per the Companies Act

preceding investigation were not followed.

11. The High Court vide the impugned judgment dismissed the

quashing petition, holding that the allegations disclosed a prima

facie commission of serious offences involving forgery and fraud,

and that disputed questions of fact could not be examined in a

petition under Section 482 of CrPC. The Appellants have,

therefore, approached this Court by way of the present appeals.

ARGUMENTS ADVANCED

12. Mr. Shailesh Madhiyal, learned Senior Advocate appearing

on behalf of the Appellants, vociferously urged that the High

Court failed to appreciate that the learned Special Court had

taken cognizance of various offences including Section 448 of the

Companies Act. It is his submission that Section 448 of the

7 Companies Act clearly specifies that whoever fails to act as per

mandate of the said provision shall be liable to be punished

under Section 447 of the Companies Act. Therefore, the Special

Court should not have taken cognizance under said provisions

against the Appellants despite there being an express legal bar

contained in the second proviso to Section 212(6) of the

Companies Act, which prohibits the taking of cognizance of

offences covered under Section 447 of the Companies Act except

on a complaint made by the categories of persons prescribed

thereunder, namely, the Director of SFIO or any officer of the

Central Government authorised by an order in writing in that

behalf.

13. It is further submitted that a bare reading of Section 448

makes it clear that any person who makes a false statement as

specified therein "shall be liable under Section 447". In other

words, the liability for an offence under Section 448 is directly

linked to Section 447, which prescribes the punishment for

fraud. Therefore, the legal bar imposed by the second proviso to

Section 212(6) of the Companies Act, as applicable to Section

8 447, is squarely applicable to offences alleged under Section 448

of the Act, hence, the Special Court is precluded from taking

cognizance of such offences on filing of a private complaint by the

Complainant.

14. It is also submitted that the cognizance by the Special Court

was without jurisdiction as the procedure mandated under

Section 206 of the Companies Act was not followed. Section 206

provides that the Registrar of Companies, on receiving

information, shall seek explanation and conduct enquiry. On

being satisfied about violation of the Companies Act in running

the affairs of the company, the Registrar may conduct enquiry

and can then report to the Central Government for conducting

further investigation, which, if satisfied, may entrust the case to

SFIO for further investigation. In the instant case, the said

procedure has been completely bypassed.

15. Learned Senior Counsel further submitted that the

Complainant has given a criminal cloak to a civil dispute

inasmuch as there are several civil cases pending between the

parties in respect of the present dispute. The Appellants have

9 filed O.S. No. 55 of 2022 before the III Junior Civil Judge,

Kukatpally, O.S. No. 99 of 2022 before the XV Additional District

Judge, Kukatpally, and C.P. No. 10 of 2022 before the National

Company Law Tribunal, which are all pending for adjudication.

Therefore, the impugned proceeding was maliciously instituted

and liable to be quashed.

16. Per contra, Mr. Kumar Vaibhaw, learned Advocate appearing

for Respondent No. 1 - State of Telangana, submitted that the

Special Court has taken cognizance of the offences based on the

material placed on record and had issued summons to the

Appellants. It is submitted that there is no bar on the Special

Court in taking cognizance of the offence under Section 448 of

the Companies Act, on a private complaint. It is further

submitted that all the contentions raised by the Appellants have

to be examined at the time of framing of charges, and the

Appellants ought not to be permitted to ask for quashing of the

private complaint and the order taking cognizance under Section

482 CrPC. There are several disputed questions of fact which

need to be looked into for the purpose of adjudication, and such

10 an adjudicatory process cannot be undertaken by the Court in

proceedings under Section 482 CrPC.

17. Learned Senior Advocate, Mr. Jayant Muth Raj, appearing

for Respondent No. 2 - Complainant, adopted the submissions

made on behalf of Respondent No. 1 - State and further

submitted that the Companies (Amendment) Act, 2015

(hereinafter referred to as “2015 Amendment Act”) came into

effect on 29.05.2015, and from such date, Section 212(6) of the

Companies Act was amended to delete Section 448 and other

provisions from its ambit. Prior to the amendment, Section 212(6)

covered offences under various provisions of the Companies Act,

including Section 448, which attracted the punishment for fraud

provided in Section 447 of the Act. However, after the

amendment, the bar on taking cognizance is applicable only for

the offence under Section 447 of the Act. It is submitted that the

present complaint has been filed for the offence under Sections

448 and 451 of the Companies Act, and not under Section 447.

In view of the amendment made to Section 212(6), there is no bar

on the Special Court from taking cognizance of offences under

11 Section 448 of the Act on the basis of a private complaint. The

bar is applicable only for offences under Section 447.

18. It is also submitted that the Appellants had surreptitiously

conducted an EGOM on 01.12.2021 without the requisite

quorum and illegally appointed two Directors in an attempt to

usurp managing control over the Company from Respondent No.

2. The Appellants fraudulently submitted FORM DIR-12 to the

Ministry of Corporate Affairs, declaring the aforesaid

appointments, despite being well aware of the fact that they no

longer held the position of Director after 30.11.2021.

19. It is submitted that the Appellants have played fraud on the

members of the Company and have falsified the records of the

Company. The Appellants, with an intention to deceive the

shareholders and other Directors of the Company and with an

intent to usurp the management of the Company, passed

resolutions appointing the wife of Accused No. 1 and another

person as Directors of the Company falsifying the records of the

Company. Therefore, it constitutes serious offences under the

Companies Act as well as under the IPC. The allegations require

12 trial, and cannot be quashed at this stage. The impugned

judgment does not suffer from any legal infirmity and does not

warrant interference by this Court. As such, the present appeals

deserve to be dismissed.

ISSUES FOR CONSIDERATION

20. After hearing learned counsel for the parties at length and

on perusal of the facts and material placed on record, the

following issues arise for consideration:

(i) Whether cognizance of the alleged offences under Sections

448 and 451 of the Companies Act could have been taken on

a private complaint in view of the statutory scheme of the

Companies Act and if not, whether the criminal proceedings

must be quashed in respect of those sections?

(ii) If the proceedings for the offences under Sections 448 and

451 of the Companies Act ought to be quashed, would the

criminal proceedings also have to be quashed in respect of

the offences under the IPC in light of the provisions as

contained in Section 436(2) of the Companies Act?

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(iii) Whether continuation of the criminal proceedings would

amount to abuse of process of law, warranting interference

under Section 482 of CrPC?

ANALYSIS OF ISSUE 1:

Since Issue 1 has a material bearing on the other issues framed,

we are analysing the contentions in that respect, first.

Scheme of the Companies Act

21. In the present case, cognizance has been taken by the

Special Court under Sections 448 and 451 of the Companies Act.

Section 448 of the Companies Act prescribes the punishment for

false statement by any person in any return, report, certificate,

financial statement, prospectus, statement or other document

required by the Companies Act or Rules. Section 448 of the

Companies Act is relevant for the purposes of this case and is

therefore quoted for reference: -

“448. Punishment for false statement. – Save as otherwise provided in the Act, if in any return, report, certificate, financial statement, prospectus, statement or other document required by, or for, the purposes of any of the provisions of this Act or the rules made thereunder, any person makes a statement, -

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(a) which is false in any material particulars, knowing it to be false; or

(b) which omits any material fact, knowing it to be material, he shall be liable under Section 447.”

22. Section 451 of the Companies Act punishes repeated

commission of an offence punishable either with fine or with

imprisonment within three years by a company or an officer of

the company. Section 451 is also relevant, and is therefore

quoted: -

“451. Punishment for repeated default. – If a company or an officer of a company commits an offence punishable either with fine or with imprisonment and where the same offence is committed for the second or subsequent occasions within a period of three years, then, that company and every officer thereof who is in default shall be punishable with twice the amount of fine for such offence in addition to any imprisonment provided for that offence.”

23. Section 448 of the Companies Act, in turn, makes a

reference to Section 447 of the Companies Act, which prescribes

the punishment for fraud. The said Section is integral to Section

448 therefore reproduced as under: -

“447. Punishment for fraud. – Without prejudice to any liability including repayment of any debt under this Actor any other law for the time being in force, any person

15 who is found to be guilty of fraud, involving an amount of at least ten lakh rupees or one per cent. of the turnover of the company, whichever is lower shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to ten years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to three times the amount involved in the fraud:

Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than three years.

Provided further that where the fraud involves an amount less than ten lakh rupees or one per cent of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to 3[fifty lakh rupees] or with both.

Explanation – For the purposes of this section –

(i) “fraud”, in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss;

(ii) “wrongful gain” means the gain by unlawful means of property to which the person gaining is not legally entitled;

(iii) “wrongful loss” means the loss by unlawful means of property to which the person losing is legally entitled.”

24. The thrust of the argument presented by the Appellants is

that there is a specific bar contained in the second proviso to

16 Section 212(6) of the Companies Act which prevents the Special

Court from taking cognizance of an ‘offence covered under

Section 447’ except upon a complaint in writing made by the

Director, SFIO or any officer of the Central Government

authorized, by general or special order in writing in this behalf by

the Government. Section 212(6) of the Companies Act is relevant

and is therefore quoted herein:

“212. Investigation into affairs of Company by Serious Fraud Investigation Office. – (6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), offence covered under section 447 of this Act shall be cognizable and no person accused of any offence under those sections shall be released on bail or on his own bond unless—

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release; and

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there are reasonable grounds for believing that he is not guilty of such offence and that he is not likely to commit any offence while on bail:

Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, maybe released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence referred to this subsection except upon a complaint in writing made by —

(i) the Director, Serious Fraud Investigation Office; or

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(ii) any officer of the Central Government authorised, by a general or special order in writing in this behalf by that Government.”

25. Making a reference to the second proviso of Section 212(6)

of the Companies Act, it is argued by the Appellants that in the

absence of a complaint as specified therein, merely on a private

complaint by the Respondent No. 2, cognizance could not have

been taken by the Special Court.

26. Therefore, what falls for our consideration is whether the

offence under Section 448 of the Companies Act is an ‘offence

covered under Section 447’ of the Companies Act as mentioned in

the Section 212(6) of the Companies Act, which would then

attract the bar against taking cognizance under the second

proviso to Section 212(6) of the Companies Act.

27. It is pertinent to note that the phrase ‘offence covered under

Section 447’ was introduced by means of a substitution in

Section 212(6) of the Companies Act in the 2015 Amendment Act

with effect from 29.05.2015. Prior to the amendment, instead of

the phrase ‘offence covered under Section 447’, Section 212 of the

Companies Act mentioned “the offences covered under sub-

18 sections (5) and (6) of section 7, section 34, section 36, sub-section

(1) of section 38, sub-section (5) of section 46, sub-section (7) of

section 56, sub-section (10) of section 66, sub-section (5) of section

140, sub-section (4) of section 206, section 213, section 229, sub-

section (1) of section 251, sub-section (3) of section 339 and section

448 which attract the punishment for fraud provided in section

447”.

28. After the amendment to Section 212 in 2015, instead of

individually mentioning different sections which attract the

punishment for fraud under Section 447 of the Companies Act,

‘offence covered under Section 447’ was substituted. However, if

we look to the Companies (Amendment) Bill, 2014 (Bill No. 185 of

2014) it provides the Statement of Objects and Reasons. In

Clause (xii) of the same, it is mentioned:

“(xii) to amend sub-section (6) of section 212 of the said Act to provide for bail restrictions to apply only for offence relating to fraud u/s 447;”

29. The intent of legislature, as evinced from the ‘Statement of

Objects and Reasons’ of the said Bill is to limit the applicability of

19 the rigorous twin-conditions for grant of bail set out in Section

212(6) to the offence under Section 447 of the Companies Act.

30. In the context of the facts of this case, in the matter of

taking cognizance with respect to ‘offence covered under section

447’, the interplay has been brought by the legislature under

Section 212(6) of the Companies Act. The said section is in two

parts – (I) the ‘offence covered under section 447’ shall be

cognizable and (II) no person accused of any offence under those

sections shall be released on bail, subject to twin conditions as

mentioned therein. The first proviso to Section 212(6) provides a

relaxation to children below 16 years of age, women, sick or

infirm in the matter of releasing on bail. The second proviso

relates to taking cognizance and makes a reference to first part of

Section 212(6) whereby the Special Court has been permitted to

take cognizance only on a complaint in writing by the Director,

SFIO or any officer of the Central Government authorised by

general or special order in writing in this behalf by the

government. The said special provision has been enacted because

20 as per Section 439 (1) and (2) of the Companies Act the other

offences of the Companies Act were made non-cognizable.

31. In addition to Section 447 of the Companies Act, the

provision under Section 448 of the Companies Act also has

relevance, it criminalizes a statement made by any person in any

return, report, certificate, financial statement, prospectus,

statement or other document required by the Companies Act or

Rules, which is (a) false in any material particulars, knowing it to

be false or (b) which omits any material fact, knowing it to be

material. In such case, the person shall then be liable under

Section 447 of the Companies Act, which lays down the

punishment for fraud. As per Section 447 of the Companies Act,

depending on whether (a) the amount involved is more or less

than ten lakh rupees or one per cent of turnover of the company,

whichever is lesser or (b) involves public interest or not, the

punishment has been prescribed in terms of imprisonment and

fine.

32. Particularly, the stipulation that the ‘person (s)’ shall be

‘liable under Section 447’ is contained not only in Section 448 of

21 the Companies Act, but also for offences as contained in Sections

34, 56(7), 66(10). Additionally, it has been mentioned that the

‘person (s)’ shall be ‘liable for action under Section 447’ in case of

offences as mentioned in Sections 7(5), 7(6), 8(11), 34, 36, 38(1)

(c), 46(5), 76A, 86(2), 90(12), 140(5), 229, 251, 339(3) of the

Companies Act. As such, some offences under the Companies Act

have been elevated to the level of ‘fraud’. It appears that Section

447 is the catch-all provision laying down the punishment for

fraud, in various manifestations thereof, in a multitude of

Sections of the Companies Act. The word ‘fraud’ itself has been

given a very wide and all-encompassing meaning in Section 447

of the Act, where it is defined in explanation (i) to Section 447 as:

“‘fraud’ in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss;”

33. From a bare perusal of the aforementioned provisions of the

Companies Act, it is clear that Section 447 of the Companies Act

lays down the punishment for ‘fraud’ in various forms. In the

22 present case, cognizance has been taken by the Special Court

under Section 448 and 451 of the Companies Act. Section 448

itself does not lay down any punishment for its contravention, it

simply lays down the ingredients of the offence of making a false

statement and provides that in case such a false statement is

made, the ‘person(s)’ shall be liable under Section 447 of the

Companies Act. That is to say, even if, after trial, an offence under

Section 448 is proved to have been committed by a ‘person’, it is

only with the aid of Section 447 of the Companies Act that the

punishment for the said offence may be imposed. Section 448 of

the Companies Act, therefore, cannot be read in isolation and

must be read along with Section 447 of the Companies Act.

Therefore, the offence under Section 448 is an offence ‘covered

under Section 447’ of the Companies Act mentioned in Section

212(6), since the offence under Section 448 is inextricably linked

to the punishment for ‘fraud’ as mentioned in Section 447 and as

such, the second proviso to Section 212(6) of the Companies Act

is attracted.

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34. If the intention of the legislature were to bar the Special

Court from taking cognizance of only the offence under Section

447 of the Companies Act, there would be no need to mention

offences ‘covered under’ Section 447 in Section 212(6) of the

Companies Act. Prior to the 2015 Amendment Act, various

offences of the Companies Act were mentioned in Section 212(6)

which, when proved, made the accused liable for the punishment

prescribed for ‘fraud’ under Section 447 of the Companies Act.

After the amendment, which was intended to ensure that the

restrictive twin-condition for grant of bail is applied only in cases

where Section 447 of the Companies Act has been invoked, the

words ‘offence covered under Section 447’ was substituted.

35. That being said, the bar on taking cognizance by the Special

Court in cases involving Section 447 of the Companies Act was a

safeguard which was put in place to prevent filing of frivolous

complaints by disgruntled company members / shareholders or

competitors with vested interests. As such, in case an allegation

of fraud under Section 447 of the Companies Act is to be made

out, the complaint has to be made by the Director, SFIO or an

24 officer authorized by a written order of the Government. This

adds a further level of scrutiny and investigation prior to taking

cognizance in cases where allegations of fraud are made and

ensures that cognizance is not taken by the Special Court simply

upon filing of a private complaint.

View taken by different High Courts

36. During hearing, it has been brought to our notice that the

Single Bench of the High Court in its earlier judgment dated

06.06.2022, Sumana Paruchuri v. Jakka Vinod Kumar

Reddy1 had interpreted the provisions as contained in Section

212(6) and Section 447/448 of the Companies Act in a challenge

made by the accused therein to the criminal proceedings initiated

on a private complaint and held as thus:-

“16. As seen from Section 212 (6) of the Companies Act, 2013, it provides a safeguard against frivolous complaints and ensures that a prosecution for fraud can only be launched after due investigation. Learned counsel for the respondent No. 1 contended that the respondent No. 1 was entitled to file complaint as a shareholder of the company under Section 439 (2) of the Companies Act, 2013. But, an exception is carved out under Section 439 (1) itself that every offence under the Act except the offences referred to in sub-section (6) of Section 212 of the Act shall

1 2022:TSHC:30033.

25

be deemed to be non-cognizable. As such, Section 439 of the Companies Act, 2013 is not applicable to offences covered under Section 447 of the said Act. The contention of the learned counsel for the respondent No. 1 was that under Section 439 of the Companies Act, 2013, the Court can take cognizance of any offence including Section 447 of the Act so long as the SFIO had not been assigned investigation by the Central Government under Section 212 of the Act. But the heading of Section 439 of the Act itself would read as “offences to be non cognizable”. Hence, cognizance of the offence under Section 447 of the Act could not have been taken by the trial Court on a private complaint, as it is a cognizable offence.

17. Under Section 206 of the Companies Act, 2013, the Registrar of Companies based on the information received by him, seek for explanation, call for production of document and conduct enquiry. If the Registrar is satisfied on the basis of information available with him, or furnished to him or on a representation made to him by any person that the business of a company is being carried out not in compliance with the provisions of the Act, he can proceed with enquiry. If the enquiry conducted by the Registrar discloses material for further investigation, he, under Section 210 of the Companies Act, 2013 can report to the Central Government to conduct investigation into the affairs of the company. If the Central Government considers the allegations as true and considering the gravity of the offence that the matter was fit to be investigated by the SFIO, directs the matter to be investigated by the SFIO under Section 212 of the Companies Act,2013. The Investigating Officers who were having better investigation skills in forensic auditing, corporate affairs and capital market would conduct investigation. If the Complainant is aggrieved, he should have resorted to the procedure as contemplated under the Act. The Registrar of Companies is a competent person to call for the records, conduct an enquiry and to arrive at an opinion. If there is any material, he would submit a report to the Government for investigation by SFIO. If SFIO is able

26 to collect material sufficient to prosecute then it would file charge sheet after taking necessary sanctions from the Central Government. If the contention of the Complainant that any shareholder can file a complaint for fraud is accepted, it would open flood gates for any person commencing criminal proceedings merely by filing a complaint. There were several companies with millions of shareholders. The condition prescribed under Section 212(6) of the Act is a safeguard against frivolous criminal complaints. As such, I do not find any merit in the contention of the leamed counsel for the respondent No. l that a private complaint for fraud is maintainable before the Special Court.

xxxx

21. Since the punishment for the offence under Section 448 of the Companies Act, 2013 was also under Section 447 of the Act, it was covered by the bar of taking cognizance under Section 212(6) of the Act.”

37. This judgment of the High Court pronounced on an earlier

date than the impugned order has not been noticed by the High

Court while passing the impugned judgment. We acknowledge the

judgment dated 06.06.2022 and its pronouncement on the

proposition of law as contained therein. The issue in the present

appeal is the same as in the earlier case, the High Court ought to

have considered its previous judgment which is on an identical

question of law in almost similar factual situation. Principles of

judicial comity and stare decisis are applicable to the High Court

and the Court while passing the impugned order should have

27 noticed its earlier judgment and, if so required, referred the

matter to a larger bench.

38. The Madras High Court in Sivananda Rajaram v. M/s New

Shipping Kaisha Ship Management Pvt. Ltd.2 quashed a

complaint case under Section 447 in light of the bar against

taking cognizance under Section 212(6) of the Companies Act.

39. The Karnataka High Court has taken a similar view in M.

Gopal v. Ganga Reddy3 and quashed the order of the Magistrate

taking cognizance under Section 447 of the Companies Act on a

private complaint filed by a shareholder. The Court held that the

shareholder can go through the procedure under Section 213 of

the Act in order to make a complaint which may eventually result

in prosecution under Section 447 of the Companies Act.

40. The Delhi High Court in Yogesh Chander Goyal and Ors.

Vs. State and Anr.4 has referred to the judgments of the Madras

High Court and Karnataka High Court and held that the order

2 Criminal Petition (OP) No. 19154/2021.

3 2022:KHC:35824.

4 2024 SCC OnLine Del 3197.

28 taking cognizance under Section 447 of the Companies Act on a

private complaint cannot be sustained in law.

Application of principles to the facts of the present case

41. Coming to the facts of this case, the High Court in the

impugned judgment has not discussed or addressed the

provisions of law as contained in Sections 448/451 read with

Section 212(6) of the Companies Act nor has it referred to its

previous judgment on similar facts. It has reached a finding that

a mini-trial cannot be conducted by the High Court when

exercising its inherent jurisdiction under Section 482 of the

CrPC. The Court has found that allegations against the

Appellants are serious in nature and they require trial to elicit

the true facts of the case.

42. It goes without saying that the Special Court in the present

case has, in its order dated 10.10.2022 taken cognizance under

Section 448, 451 of the Companies Act and Sections 420, 406,

426, 468, 470, 471 & 120B of the IPC. We have found above that

the punishment section for Section 448 of the Companies Act is

29 Section 447 of the Companies Act and both sections cannot be

read in isolation, since they are inextricably linked.

43. It is trite law that anything that cannot be done directly,

also cannot be done indirectly. Merely because there is a bar

under the second proviso to Section 212(6) of the Companies Act

against taking cognizance of the offence under Section 447 of the

Companies Act unless specific conditions mentioned therein are

met, does not mean that cognizance may be taken by the Special

Court under Section 448 of the Act without including the

punishment section, i.e. Section 447 on filing of a private

complaint.

44. Non-inclusion of the punishment section under Section 447

since the very inception will also lead to procedural absurdity

since ultimately the said Section 447 of the Companies Act must

be invoked in order to impose any punishment after trial is

conducted. In saying so, we are aware of the proposition of law

that cognizance is taken of an offence and not of a section under

the law, and at the stage of framing charges, the Court may add

or remove sections. However, in the present case, when there is a

30 specific requirement under law which acts as a pre-condition for

taking cognizance under Section 447 of the Companies Act, the

decision of the Special Court to take cognizance under Section

448 of the Companies Act without invoking the punishment

section, Section 447 cannot be countenanced.

45. As such, the offence under Section 448 of the Companies

Act is an ‘offence covered under Section 447’ as mentioned in

Section 212(6) of the Companies Act and therefore, the bar

against taking cognizance under the second proviso of Section

212(6) of the Companies Act, unless specific conditions are met,

is attracted in the present case. Cognizance, therefore, in such a

case, cannot be taken merely by filing of a private complaint by

the Complainant. However, it is not to say that the Complainant

is left absolutely remediless. The right recourse for a person, who

makes an allegation of fraud in the affairs of a company is to file

an application under Section 213 of the Companies Act before the

NCLT upon satisfying the eligibility under Section 213(a) and

213(b) of the Companies Act.

31

46. The offence under Section 451 of the Companies Act is for

punishment in case of repeated default. Since we are finding that

cognizance cannot be taken for Section 448 of the Companies Act

without following the requirements under the second proviso to

Section 212(6) of the Companies Act, cognizance of ‘repeated

default’ under Section 451 of the Companies Act is not made out.

47. As an upshot of the above discussion, the inescapable

conclusion reached is that the complaint case bearing C.C. No.

58/2022, the order dated 10.10.2022 of the Special Court and all

consequential proceedings to the extent of Section 448 and 451 of

the Companies Act shall stand quashed.

ANALYSIS OF ISSUE 2 AND 3

48. It has been contended before us by the Appellants that in

view of the provisions as contained in Section 436(2) of the

Companies Act, if the offences under the Companies Act are

quashed, the Special Court may not try the offences under the

sections of the IPC under which cognizance has been taken vide

order dated 10.10.2022 of the Special Court.

32

49. Section 436(2) of the Companies Act is relevant and is

therefore reproduced as under:

“436. Offences triable by Special Courts. – (2) When trying an offence under this Act, a Special Court may also try an offence other than an offence under this Act with which the accused may, under the Code of Criminal Procedure, 1973 (2 of 1974) be charged at the same trial.”

50. It is contended by the Appellants, in light of the

aforementioned provision, that a Special Court under the

Companies Act may try offences under the IPC only when it is

also trying an offence under the Companies Act and not when the

offences under the Companies Act have been quashed.

51. A similar question arose before this Court in S.

Satyanarayana v. Energo Masch Power Engg. & Consulting

(P) Ltd.,5 albeit in slightly different factual scenario and in the

context of the Companies Act, 1956, where this Court held that

when multiple persons are made accused in respect of the same

set of facts, even if some of them are prosecuted against for the

offences under the Companies Act and others are being

prosecuted against only for the offences under the IPC, the

5 (2015) 13 SCC 1.

33 Special Court can try all the accused persons together in order to

avoid multiplicity of proceedings.

“11. We accordingly set aside the findings of the High Court that taking of cognizance against Accused A- 4, A-5, A-6 and A-9 is without jurisdiction on the ground that the complaint does not make out a prima facie case for the offences under Section 628 of the Companies Act, 1956 against the said accused. At this stage, it may be noted that the Special Court is empowered to try the offences under the Companies Act along with other Acts by virtue of a notification issued by the erstwhile Government of Andhra Pradesh dated 13-3-1981 which empowers such Special Courts to try offences under specified enactments such as the Companies Act, 1956the Income Tax Act, 1961, the Wealth Tax Act, 1957, etc., which reads as follows:

“… even if such cases include offences punishable under the Penal Code, 1860 and any other enactments, if such offences form part of the same transaction….” (vide Notification reproduced in Supt. of Customs v. Kannur Abdul Kader Mohammed Haneefa [2014 SCC OnLine Hyd 622 : (2014) 310 ELT 49] ), SCC OnLine Hyd para 15.

Thus, even if a number of persons are accused of offences under a special enactment such as “the Companies Act and as also the IPC” in respect of the same transaction or facts and even if some could not be tried under the special enactment, it is the Special Court alone which would have jurisdiction to try all the offences based on the same transaction to avoid multiplicity of proceedings. We make this observation because at some stage in the hearing the learned

34 counsel addressed us on this point. We make it clear that in the present case all the accused are liable to be tried by the Special Court in respect of the offences under IPC as well as the Companies Act as alleged in the complaint.”

52. The High Court of Madhya Pradesh dealt with a similar

question in Sunil Mandwani v. State of M.P.,6 where the FIR

was registered under various sections of the IPC only yet the

accused approached the Court seeking discharge on the ground

that only offences under the Companies Act are made out and

therefore only a Special Court under the Companies Act has

jurisdiction to try the case. In that context, the Court held that

since no trial has been initiated against the accused under the

Companies Act, in the absence of offences under the Companies

Act, the relevant Special Court does not have jurisdiction to try

the IPC offences and only the Court having territorial jurisdiction

may try such offences.

53. Pertinently, it is to be noticed that in S. Satyanarayana

(Supra), this Court has relied upon the notification of the

erstwhile Government of Andhra Pradesh dated 13.03.1981

which had empowered Special Courts under the Companies Act,

6 2019 SCC OnLine MP 1248.

35 1956 to try cases under the IPC and other enactments if such

offences form part of the same transaction. Even though no such

notification has been brought on record for designation of Special

Courts under the Companies Act, 2013, on research it is found

that ‘The Special Court for trial of Economic Offences- cum-VIII

Additional Metropolitan Sessions Judge Court-cum-XXII

Additional Chief Judge, City Civil Court, Hyderabad’ has been

designated as the Special Court for the State of Telangana by the

Central Government vide Notification bearing F. No. 01/12/2009-

CL-I (Vol. IV) dated 23.03.2017. In this notification issued in

exercise of powers conferred under Section 435(1) of Companies

Act, there is no mention of offences under the IPC, it merely

mentions ‘…hereby designates the following Courts mentioned in

the Table below as Special Courts for the purposes of providing

speedy trial of offences punishable with imprisonment of two years

or more under the said Act’.

54. That being said, under the Companies Act, Section 436(2)

governs the jurisdiction of the Special Court. The requirement of

‘same transaction’ is not present in Section 436(2) which only

36 lays down the pre-requisite that the Special Court should be

trying offences under the Companies Act, for it to also try

offences under the IPC. As such, once the offences under the

Companies Act are quashed, it is the Court of appropriate

territorial jurisdiction which would have jurisdiction to try the

private complaint filed by the Respondent No. 2 against the

Appellants. The learned Judge of the Special Court where the

C.C. No. 58 of 2022 is pending shall take steps, in consultation

with the Principal District Judge of the district to transfer the

complaint case to the appropriate court having territorial

jurisdiction to try the complaint case.

55. Arguments have also been made by the Appellants about

the propriety and legality of continuance of the proceedings in

respect of offences under the IPC and it has been submitted by

the Appellants that the complaint case insofar as it relates to

offences under the IPC, is abuse of process of law since there are

two civil suits and one company petition pending between the

parties. However, we are not convinced by this argument. It is

trite law that mere institution or pendency of civil proceedings

37 between the parties cannot be a ground to quash the criminal

proceedings instituted by the Respondent No. 2 by filing a

complaint case or to conclude that the dispute is purely civil in

nature.

56. The Respondent No. 2 and the Appellants were in a

commercial relationship and the inception of the dispute can be

traced to a tussle for control over the Company. The civil suits

filed by the Appellants are for seeking a permanent injunction

against the Company and the Complainant from violating the

terms and conditions of MoU dated 17.08.2016 and, a

declaration that the agreements to sell executed by the

Complainant with respect to the properties of the Company be

declared void, respectively, while the Company Petition has been

filed before the NCLT challenging the removal of the Appellants

from directorship in the Company. Pendency of these proceedings

would not absolve the criminality as alleged in the complaint, in

the facts and circumstances of this case.

57. Therefore, without expressing any views on merits of the

complaint case, we hold that there is no reason or ground to

38 quash the offences under the IPC of which cognizance has been

taken by the Special Court.

58. Issues 2 and 3 are answered as above.

CONCLUSION

59. In the interest of abundant clarity, as per the discussion

hereinabove, we have held that where the Special Court under

the Companies Act is taking cognizance of an offence under a

section in the Companies Act which, if proved, would make the

person(s) ‘liable under Section 447’ or ‘liable for action under

Section 447’, it must also invoke Section 447 with the

corresponding section and in such a case, it must comply with

the bar against taking cognizance as specified in the second

proviso to Section 212(6) of the Companies Act.

60. In view of the discussion, the present appeals are partly

allowed, the impugned judgment of the High Court is set aside

with the following directions:

I. The complaint case bearing C.C. No. 58/2022, the order

dated 10.10.2022 of the Special Court and all

39 consequential proceedings to the extent of Section 448

and 451 of the Companies Act shall stand quashed.

II. The learned judge of the Special Court where the C.C. No.

58 of 2022 is pending shall take steps, in consultation

with the Principal District Judge of the district to transfer

the complaint case to the appropriate court having

territorial jurisdiction to try the complaint case. The said

transfer shall be made within a period of 4 weeks and

then the complaint case shall be adjudicated on its own

merits, uninfluenced by any of the observations made

hereinabove, as expeditiously as possible.

III. We make it clear that the observations made hereinabove

in paragraph 56 are not an expression of any views on

the merits of the complaint, however, the competent

Court, which is continuing the offences under the IPC

and maintaining the private complaint may examine all

relevant objections, if any, raised at appropriate stage or

during trial by way of defence, uninfluenced by the above

observations.

40

61. All pending applications shall stand disposed of. There shall

be no order as to costs.

……..………………………….J. (J.K. MAHESHWARI)

……..………………………….J. (K. VINOD CHANDRAN)

NEW DELHI;

JANUARY 9, 2026.

41