Equivalent Citation: 2006(3)ALD593, [2007]137CompCas395(AP), (2006)6CompLJ541(AP), [2006]72SCL402(AP)
IN THE HIGH COURT OF ANDHRA PRADESH AT HYDERABAD
OSA No. 31 of 2002
Decided On: 18.03.2006

Appellants: M.C. Jain
Vs.
Respondent: Official Liquidator, High Court of A.P.

Hon'ble Judges:
Bilal Nazki and D. Appa Rao, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Milind G. Gokhale, Adv.

For Respondents/Defendant: M. Anil Kumar, Official Liquidator, Adv.

Subject: Company

Acts/Rules/Orders:
Companies Act, 1956 - Sections 454(5) and 454(5A); Civil Procedure Code (CPC) - Section 151 - Order 1, Rule 10; Companies (Court) Rules, 1959 - Rules 9; Criminal Procedure Code (CrPC)- Sections 161, 162, 173, 239, 240 and 319; Evidence Act - Section 3; Indian Penal Code

Cases Referred:
R.C. Kumar v. State of A.P. 1991 Cri.LJ 887; Ranjit Singh v. State of Punjab 1998 (2) ALD (Crl.) 649 L : AIR 1998 SC 3148; Kishun Singh v. State of Bihar (1993) 2 SCC 16 : 1993 AIR SCW 771

Disposition:
Appeal allowed

JUDGMENT

Bilal Nazki, J

1. This is an appeal filed against the order passed by learned Company Judge impleading the appellant as one of the accused in a Company Application under Section 454(5) and (5A) of the Companies Act, 1956.

2. It is submitted that after the winding up orders were passed, the Director of the Company sought extension of time for filing statement of affairs and accordingly filed the same within the time. However, the Official Liquidator felt that the statement of affairs had not been filed within the time and filed the company application being CA No. 611 of 1998 for prosecution of the Directors under Section 454(5) and (5A) of the Companies Act, 1956 for not filing the statement of affairs. Cognizance was taken in this matter by the learned Company Judge. The Official Liquidator filed an application being CA No. 512 of 2001 under Order 1 Rule 10 and Section 151 of the Code of Civil Procedure and under Rule 9 of the Companies (Court) Rules, 1959 to implead the appellant as 10th accused in the company application being CA No. 611 of 1998. The Company Court allowed the application, therefore the appeal.

3. The learned Counsel for the appellant submits that there was no power with the Company Court to array the appellant as an accused in the company application being CA No. 611 of 1998 after the cognizance against other nine accused had been taken. He submits that neither Order 1 Rule 10 nor Section 151 of the Code of Civil Procedure has any application in the matter. He also submits that Rule 9 of the Companies (Court) Rules, 1959 does not also apply. The contention raised by the learned Counsel for the appellant is that once the matter is taken cognizance under Section 454(5) and 5(A) of the Companies Act, 1956, the Company Court transforms itself into a Criminal Court under the provisions of the Code of Criminal Procedure, thereafter whatever steps that have to be taken in deciding the application under Section 454(5) and (5A) of the Companies Act, 1956 have to be taken in accordance with the provisions of the Code of Criminal Code. Section 454(5) and (5A) of the Companies Act, 1956 reads as under:

(5) If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one hundred rupees for every day during which the default continues, or with both.

(5A) The Court by which the winding up order is made or the provisional liquidator is appointed, may take cognizance of an offence under Sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898 (5 of 1898), for the trial of summons cases by Magistrates.

4. It is submitted that bare perusal of Section 454(5) and (5A) of the Companies Act, 1956 would show that when cognizance of offence was taken under Section 454(5) of the Companies Act, 1956, the matter had to be tried in accordance with the procedure laid down in the Code of Criminal Procedure for trial of summons cases by Magistrates. In a way the Company Court ceases to be a Company Court and has to proceed in the matter as a Magistrate, therefore any reference to Order 1 Rue 10 and Section 151 CPC or Rule 9 of the Companies (Court) Rules, 1959 would not be relevant. Rule 9 of the Companies (Court) Rules, 1959 lays down,

Inherent powers of Court, - nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court.

5. It is settled law that recourse to Rule 9 of the Companies (Court) Rules, 1959 can be taken only, when a specific provision is not provided, in order to do justice in the matter. After the cognizance is taken, the only provision under the Code of Criminal Procedure is Section 319 which lays down:

319(1) Where, in the course of any inquiry into, or trial of, an offence, it appears from the evidence that any person not being the accused has committed any offence for which such person could be tried together with the accused, the Court may proceed against such person for the offence which he appears to have committed.

(2) Where such person is not attending the Court, he may be arrested or summoned, as the circumstances of the case may require, for the purpose aforesaid.

(3) Any person attending the Court, although not under arrest or upon a summons, may be detained by such Court for the purpose of the enquiry into, or trial of, the offence which he appears to have committed.

(4) Where the Court proceeds against any person under Sub-section (1), then--

(a) the proceedings in respect of such person shall be commenced afresh, and the witnesses reheard;

(b) subject to the provisions of Clause (a), the case may proceed as if such person had been an accused person when the Court took cognizance of the offence upon which the inquiry or trial was commenced.

6. Section 319 lays down that when, in the course of any inquiry or trial of an offence, it appears from the evidence that any person, not being the accused, has committed any offence for which such person could be tried with the accused, the Court may proceed against such person for the offence. In the present case only an application has been moved by the Official Liquidator to array the appellant as an accused, but no evidence has come on record which would show that the appellant is also required to be tried along with other accused. This question was considered by this Court in a judgment reported in R.C. Kumar v. State of A.P. 1991 Cri.LJ 887. In Para-9 the Court held:

The next stage in the proceedings covered by a warrant case is discharging the accused or framing of charge against whom the offence is taken cognizance of under Section 239 Cr.P.C. on a consideration of the police report, the documents sent with it under Section 173 and making such examination of the accused as the Magistrate thinks necessary and after giving the prosecution as well the accused an opportunity of being heard, if the Magistrate considers the charge against the accused to be groundless, he shall discharge the accused after recording reasons therefor. In cases where upon such consideration, examination and hearing the Magistrate feels that there is ground for presuming that the accused has committed an offence triable by him, he shall frame a charge against the accused under Section 240 Cr.P.C. For situations similar to Sections 239 and 240 Cr.P.C. the provisions relevant to a Sessions Case triable by a Sessions Court are Sections 227 and 228 Cr.P.C. After framing of the charge, the next stage that follows in the proceedings is the commencement of trial. It is worth noticing here that in a private complaint inquiry intervenes in between framing of charge or discharging the accused and taking cognizance of the offence.

7. In Paras 16 and 17 the Court considered as to what would be the meaning of 'from the evidence' and they read as under:

The crucial requirement contemplated by Section 319 Cr.P.C. is that it should appear 'from the evidence' that a person not being the accused has committed an offence. Therefore, the primary requirement for application of Section 319 Cr.P.C. is availability of evidence in contradistinction from the 'police report and documents enclosed thereto' as contemplated by Section 173, Criminal Procedure Code. Before so distinguishing, no doubt, the question in the forefront is what is meant by evidence. The word 'evidence' is defined neither in the Criminal Procedure Code nor in the Indian Penal Code. However, Section 3 of the Evidence Act defined 'evidence' thus;

Evidence" means and includes

(1) all statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry, such statements are called oral evidence;

(2) all documents produced for the inspection of the Court; such documents are called documentary evidence;

In this background of the definition, the contention of Mr. Narasimha Reddy is that Section 161 Cr.P.C. statements, the confessional statement, the inquest report, etc. are all documents in the form of 'evidence' and therefore basing on those documents, the Magistrate can act under Section 319 Cr.P.C. It should at first be noticed that no document by its filing simpliciter does carry the value of inspection of the Court unless and until it is proved by someone and marked as an exhibit as per the provisions of the Evidence Act. A document produced should necessarily undergo the process of proof as a prerequisite for gaining the value of deservedness for purposes of inspection of the Court. It is not the case of Mr. Narasimha Reddy that the documents he has been referring to had undergone the process of proof. Still more interesting to notice is that the statements recorded under Section 161 Cr.P.C. are inadmissible in evidence, except for purposes of contradiction or omission in view of the specific bar imposed by Section 161 Cr.P.C. Section 162 Cr.P.C. to the extent relevant runs:

162. Statements to police not to be signed; Use of statements in evidence.

(1) No statement made by any person to a police officer...shall...be used for any purpose, save as hereinafter provided, at any inquiry or trial....

The savings provided by Section 162 Cr.P.C. are (i) contradictions and (ii) omission.

8. Similar view has been taken by the Supreme Court in Ranjit Singh v. State of Punjab 1998 (2) ALD (Crl.) 649 : MANU/SC/0627/1998 While interpreting Section 319, in Para 8 it said,

8. Now it is well neigh settled that "evidence" envisaged in Section 319 of the Code is the evidence tendered during trial of the case if the offence is triable by a Court of Session. The material placed before the committal Court cannot be treated as evidence collected during enquiry or trial.

9. In our view, the principles laid down by the Supreme Court can be extended even to the Magistrate's Court when he is trying an offence. In the case before the Supreme Court the trial was conducted by a Court of Sessions, therefore it was argued before the Supreme Court that the evidence collected during the inquiry by Magistrate was evidence within the meaning of 'evidence', which was also not accepted by the Supreme Court. The Supreme Court also referred to its earlier judgment reported in Kishun Singh v. State of Bihar MANU/SC/0460/1993 and quoted the following paragraph with approval:

On a plain reading of Sub-section (1) of Section 319 there can be no doubt that it must appear from the evidence tendered in the course of any inquiry or trial that any person not being the accused has committed any offence for which he could be tried together with the accused. This power, it seems clear to us, can be exercised only if it so appears from the evidence at the trial and not otherwise. Therefore, this sub-section contemplates existence of some evidence appearing in the course of trial wherefrom the Court can prima facie conclude that the person not arraigned before it is also involved in the commission of the crime for which he can be tried with those already named by the police.

In Para-19 is said:

Thus, once the Sessions Court takes cognizance of the offence pursuant to the committal order the only other stage when the Court is empowered to add any other person to the array of the accused is after reaching evidence collection when powers under Section 319 of the Code can be invoked. We are unable to find any other power for the Sessions Court to permit addition of new person or persons to the array of the accused. Of course it is not necessary for the Court to wait until the entire evidence is collected for exercising the said powers.

10. For these reasons, we allow the appeal, set aside the order of the Company Court. No costs.