Serious Fraud Investigation Office v. M/S Shonkh Technologies Limited

(iv) Section 621 of the Companies Act, states that no court shall take cognizance of any offence against the act which is alleged to have been committed by any company or any other officer thereof, except for the complaint in writing:-

(i) of the Registrar, or

(ii) of a shareholder of the company, or

(iii) of a person authorised by the Central Government.

(v) Learned counsel appearing on behalf of the petitioner/SFIO, therefore, submits that the power of SFIO emanates from the power of the Central Government to authorise a person and such power cannot be equated with the power of the Registrar or of a shareholder of a company who do not require any sanction from the Central Government to file a complaint. The case in hand is not with respect to sanction or direction but the same relates to the compliance of a statutory provision.

(vi) Without prejudice to his submissions as recorded hereinabove, he further states that it is well settled legal position that in the case of this nature, delay ought to have been condoned considering the gravity of the allegations against the respondent companies. Neutral Citation Number 2023/DHC/000448- 21 -

4. Learned counsel appearing on behalf of the petitioner further distinguished the decisions relied upon by the courts below and it has been submitted that the cases relied upon do not relate to filing of a complaint by SFIO or any person authorised by the Central Government but they relate to the power of the Registrar of Companies (hereinafter referred to as 'ROC') to file a complaint. It is for this reason, he states that the power to file complaint by the ROC will have no bearing under the facts of the present case. In addition, he has relied upon the decision of the Hon'ble Supreme Court in the case of Rohtas Industries v. S.D.Agarwal and Others[1] to state that the power conferred by the Central Government under Sections 235 and 237(b) of the Companies Act are discretionary powers, whereas, the Central Government has power to appoint one or more competent persons as Inspectors to investigate the affairs of the company and to report thereon, in such a manner as the Central Government may direct the company by special resolution or the court by order declaring that the affair of the company ought to be investigated by Inspectors appointed by the Central Government.

5. On the strength of the said authority, the learned counsel appearing on behalf of the petitioner/SFIO states that the report submitted by the Inspectors, does not bind anybody. The Government is not required to act on the basis of that report. To further elaborate his arguments on the decision of the Central Government, he states that the word used in Section 242 of the Companies Act is 'may' and therefore, the Central Government in all cases, where the reports are submitted under Section 241 of the Companies Act, need not to direct for prosecution, if it is accepted. To read it otherwise, would amount

Neutral Citation Number 2023/DHC/000448- 22 to reading the word 'may' as 'shall', which is against the settled principle of law. He, has cited the decisions of the Hon'ble Supreme Court in the case of Province of Bombay v. Khushaldar S. Advani and Others[2] (para 92), Dharmadeo Rai v. Ramngina Rai[3] (para 5) & Sub-Committee on Judicial Accountability v. Union of India & Ors.[4] (para 150).

6. Learned senior counsel appearing on behalf of the respondents, opposed the submissions and has made the following broad arguments:-

(i) The second revision is barred by Section 397 (3) of the

Cr.P.C. and hence, under the garb of Section 482 of the Cr.P.C., after dismissal of the first Criminal Revision Petition, under Section 397 of the Cr.P.C., the present petition is not maintainable. Reliance is placed on the decision of the Hon'ble Supreme Court in the matters of Jagir Singh vs Ranbir Singh And Anr[5] and Deepti @ Arati Rai vs Akhil Rai & Ors[6].

(ii) Section 242 of the Companies Act does not envisage obtaining of a prior sanction for filing of a complaint before the Magistrate. The decision of the Central Government under Section 242 of the Companies Act, is entirely an administrative process and cannot be equated with the status of a prior sanction or permission. While placing on record a copy of the Gazette Notification dated 06.05.2005, issued by MCA, it is

Neutral Citation Number 2023/DHC/000448- 23 pointed out that in exercise of power conferred by sub- Section 1 of Section 621 of the Companies Act, the Central Government had already authorised officers for filing and conducting prosecution under the Companies Act and one of the officers so authorized was Giriraj Singh, who filed the present complaint. Therefore, when there was already an authority for him to file the complaint by virtue of Gazette Notification, it cannot be heard from SFIO that for lack of permission, SFIO could not have filed the complaint before 03.06.2008.

(iii) Unlike other statues like Section 19 of the Prevention of

Corruption Act and Section 132 (6) of the Central Goods and Services Tax Act, 2017, there is no such provision in the Companies Act, which prohibits courts from taking cognizance of offence in the Companies Act without necessary prior sanction. There is no embargo on the Magistrate to take cognizance without a prior sanction and therefore, exclusion of the period in obtaining so called sanction, is not permissible as per Section 470(3) of the Cr.P.C.

(iv) In the present case, for all practical purposes, the limitation under Section 469(1)(3) of the Cr.P.C. had commenced on the first day when offence came to the knowledge of the SFIO which is on 20.04.2006, i.e. the day when Central Government filed the petition before the CLB, alleging commission of offence under the Companies Act. The limitation had expired in the year 2006 itself whereas, complaint in the present case has Neutral Citation Number 2023/DHC/000448- 24 been filed on 01.12.2008. Without prejudice to the said arguments, it is also submitted that even if the knowledge of the offence is taken to be 16.05.2006, i.e. when the Central Government in exercise of its power under Section 237(b) appointed officers of SFIO to conduct investigation into the affairs of the Respondent No.1 company, even then, also the complaint is barred by time because the limitation period of six months expired on 15.11.2006.

(v) In any case, even if the date on which report was submitted by SFIO i.e. 26.11.2007 is considered to be the date of knowledge of offence in question, in that case also, six months period expired on 25.05.2008 and in such an event, from whichever date the limitation is counted, the same had already expired much before the date of filing of the complaint. According to him, there were no reasons for condoning the delay in the application filed by the SFIO and for that reason, the same has rightly been rejected by the learned ACMM and the said order has been affirmed by the Revisional Court.

(vi) Learned senior counsel has supported his submission that the sanction is not required for prosecution of offences under the Companies Act by citing decisions in the cases of L.B. Singh, Dr. v. Registrar of Companies NCT of Delhi & Haryana,[7] Jiyuan Li v. Registrar of Companies,[8]

2014 SCC OnLine Mad 10240 Neutral Citation Number 2023/DHC/000448- 25 - Rajan v. M.O. Roy10, Gujarat Tea Processors & Packers Ltd. V. State of Gujarat11, M. M. Wagh v. State of Maharashtra12, Rakesh Kumar Jain v. State13, Pritam Singh v. State of Punjab14, R.P. Sharma v. State 15 and Mohit Kumar Mookherjee v. Registrar16.

(vii) With respect to the date of commencement of limitation period under Section 469(1)(b) of the Cr.P.C., he has placed reliance on a decisions of the Hon'ble Supreme Court in the case of Anil Kumar Gupta v. Union of India,17 Surinder Mohan Vikal v. A.L. Chopra,18 and Rajiv Kumar v. Registrar of Companies NCTof Delhi19. For the purposes of drawing distinction between sanction and direction, he placed reliance on decision of the Hon'ble Supreme Court in the case of Rameshwar Bhartia v. State of Assam20.

7. I have heard Shri Harish Vaidyanathan, learned CGSC appearing on behalf of SFIO and Shri Siddharth Luthra, learned senior counsel assisted by Shri Samarjit Pattanik, appearing on behalf of the respondents and perused the record.

8. It is true that the object of introduction of Section 397(3) of the Cr.P.C. is to prevent a second revision so as to avoid frivolous litigation. However, at the same time, the doors of the High Court to a

(2009) 151 Comp Cas 434 (Delhi)

Neutral Citation Number 2023/DHC/000448- 26 litigant, who has lost before the Sessions Judge, are not completely closed and in special cases, the bar under Section 397(3) of the Cr.P.C. can be lifted.

9. The power of the High Court to entertain a petition under Section 482 of the Cr.P.C. is not subject to the prohibition under Section 397(3) of the Cr.P.C. and is capable of being invoked in appropriate cases. This view is supported by the decision of the Hon'ble Supreme Court in the case of Shakuntala Devi and Ors. (supra). Even the decisions relied upon by the learned senior counsel for the respondents affirms the said legal position and therefore, it is held that there does not exist an absolute bar in entertaining petition under Section 482 of the Cr.P.C. against the order passed by the Sessions Judge in exercise of its revisional jurisdiction. The present petition is thus, maintainable.

10. A perusal of the order dated 25.09.2012, passed by the learned ACMM, indicates as under:-

(i) The learned ACMM decided an application of the complainant for condonation of delay in filing the complaint.

(ii) He assumed that SFIO is a wing of the Central

(iii) The knowledge of the offence was acquired by the complainant on 26.11.2007.

(iv) It is not mandatory for the complainant SFIO to seek any sanction from the Central Government to file the present complaint.

(v) No reason for condonation of delay has been explained.

(vi) Three decisions, namely, Dr.L.B.Singh (supra), Jiyuan

Li. (supra) and Rajiv Kumar & Ors. (supra) have been relied upon to substantiate the view taken by learned ACMM in rejecting the application for condonation of delay.

11. The impugned order dated 08.01.2014 passed by the learned Revisional Court takes into consideration the following aspects:-

(i) The date of knowledge of the offence to the Central

(ii) The object of Criminal Law in putting a bar of limitation on prosecution was to prevent the parties from filing cases after a delay and to prevent abuse of the process of court by filing vexatious and belated prosecutions.

(iii) There is no embargo under Section 242 of the Companies

12. The moot question that arises for consideration of this court is whether the period commencing from 26.11.2007 to 03.06.2008 i.e. the date on which the SFIO submitted its report to MCA and the date on which MCA convyed SFIO to file a complaint respectively, is to be excluded for the purposes of counting limitation in terms of Section 468 of the Cr.P.C.

13. The exclusion of the said period is sought on the strength of the provisions of Sections 469 & 470(3) of the Cr.P.C. Before proceeding further, it would be appropriate to refer certain provisions of the Cr.P.C. and of the Companies Act which are being reproduced as under:- Neutral Citation Number 2023/DHC/000448- 28 -

(i) Sections 468 to 470 of the Cr.P.C. are being reproduced as under:

468. Bar to taking cognizance after lapse of the period of limitation. (1) Except as otherwise provided elsewhere in this Code, no Court shall take cognizance of an offence of the category specified in sub- section (2), after the expiry of the period of limitation. (2) The period of limitation shall be- (a) six months, if the offence is punishable with fine only (b) one year, if the offence is punishable with imprisonment for a term not exceeding one year;

(c) three years, if the offence is punishable with imprisonment for term exceeding one year but not exceeding three years. (3) 1 For the purposes of this section, the period of limitation in relation to offences which may be tried together, shall be determined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most severe punishment.]

469. Commencement of the period of limitation. (1) The period of limitation, in relation to an offender, shall commence,- (a) on the date of the offence; or (b) where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier; or

(c) where it is not known by whom the offence was committed, the first day on which the identity of the offender is known to the person aggrieved by the offence or to the police officer making investigation into the offence, whichever is earlier. (2) In computing the said period, the day from which such period is to be computed shall be excluded.

470. Exclusion of time in certain cases. (1) In computing the period of limitation, the time during which any person has been prosecuting with Neutral Citation Number 2023/DHC/000448- 29 due diligence another prosecution, whether in a Court of first instance or in a Court of appeal or revision, against the offender, shall be excluded: Provided that no such exclusion shall be made unless the prosecution relates to the same facts' and is prosecuted in good faith in a Court which from defect of jurisdiction or other cause of a like nature, is unable to entertain it. (2) Where the institution of the prosecution in respect of an offence has been stayed by an injunction or order, then, in computing the period of limitation, the period of the continuance of the injunction or order, the day on which it was issued or made, and the day on which it was withdrawn, shall be excluded. (3) Where notice of prosecution for an offence has been given, or where, under any law for the time being in force, the previous consent or sanction of the Government or any other authority is required for the institution of any prosecution for an offence, then, in computing the period of limitation, the period of such notice or, as the case may be, the time required for obtaining such consent or sanction shall be excluded. Explanation.- In computing the time required for obtaining the consent or sanction of the Government or any other authority, the date on which the application was made for obtaining the consent or sanction and the date of receipt of the order of the Government or other authority shall both be excluded. (4) In computing the period of limitation, the time during which the offender- (a) has been absent from India or from any territory outside India which is under the administration of the Central Government, or (b) has avoided arrest by absconding or concealing himself, shall be excluded.

14. Sections 242 and 621 of the Companies Act are also reproduced as under:-

242. Prosecution. - (1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, managing agent, secretaries and treasurers or associate of a managing agent or secretaries Neutral Citation Number 2023/DHC/000448- 30 and treasurers, whose affairs have been investigated by virtue of section 239, been guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence; and it shall be the duty of 5 all offices and other employees] and agents of the company, body corporate, managing agent, secretaries and treasurers, or associate, as the case may be (other than the accused in the pro- ceedings), to give the Central Government all assistance in connec- tion with the prosecution which they are reasonably able to give. (2) Sub- section (6) of section 240 shall apply for the purposes of this section, as it applies for the purposes of that section.

621. Offences against Act to be cognizable only on complaint by Registrar, shareholder or Government. - (1) No court shall take congnizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the person authorised by the Central Government in that behalf: Provided that nothing in this sub- section shall apply to a prosecution by a company of any of its officers. [Provided further that the Court may take cognizance of offence relating to issue and transfer of securities and non-payment of dividend on a complaint in writing by a person authorized by the Securities Exchange Board of India.] (1A) 3 Notwithstanding anything contained in the Code of Criminal Procedure, 1898, (5 of 1898 ) 4 where the complainant under sub- section (1) is the Registrar or a person authorised by the Central Government, the personal attendance of the complainant before the Court trying the offence shall not be necessary unless the Court for reasons to be recorded in writing requires his personal attendance at the trial.] (2) Sub- section (1) shall not apply to any action taken by the liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections 425 to 560) or in Neutral Citation Number 2023/DHC/000448- 31 any other provision of this Act relating to the winding up of companies. (3) A liquidator of a company shall not be deemed to be an officer of the company, within the meaning of subsection (1).

15. Section 242 of the Companies Act prescribes that if from any report made under Section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, whose affairs have been investigated by virtue of Section 239, being guilty of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, would prosecute such person for the offence and it shall be the duty of all officers and other employees and agents of the company, or body corporate, other than the accused in the proceedings, to give the Central Government all assistance in connection with the prosecution which they are reasonably able to give.

16. It is thus, seen that the Central Government is well within its power to prosecute such person for the offence in relation to the company or in relation to any other body corporate whose affairs have been investigated by virtue of Section 239. There is no hurdle for the Central Government to prosecute such person if it appears to the Central Government that such person is guilty for any offence for which he is criminally liable. It is the discretion of the Central Government to take legal advice as it thinks fit.

17. Section 621 of the Companies Act provides for the procedure as to how, the prosecution would be initiated. It is provided under Sub- Section 1 of Section 621, that no court shall take cognizance of any offence against the Companies Act which is alleged to have been committed by any company or any officer thereof, except on the Neutral Citation Number 2023/DHC/000448- 32 complaint in writing of the Registrar or of a shareholder of the company or of a person authorized by the Central Government in that behalf. It is, therefore, seen that the Registrar, shareholder of the Company or any other person, who has been authorized by the Central Government, can file a complaint in writing for commission of “any offence" against the Companies Act.

18. The Registrar or a shareholder of the company are independently empowered to file a complaint for any offence under the Companies Act in accordance with other provisions of the Companies Act. However, the Central Government whenever, finds it necessary has to proceed to file a complaint while authorizing any person in that behalf.

19. Neither Section 242 nor Section 621 of the Companies Act speak anything with respect to "previous sanction" or "consent". The word used in Section 470(3) of Cr.P.C. is “previous consent" or "sanction”. In the instant case, it is seen that the Central Government itself is empowered to prosecute in accordance with Section 242 read with Section 621 of the Companies Act and it does not require any "previous sanction" or "consent" of any other authority and therefore, it is not open for the Central Government to claim exclusion of the period for counting limitation which remained pending with Government itself.

20. The SFIO has no role to play in terms of Sections 242 and 621 of the Companies Act unless, the SFIO is authorized by the Central Government, as a person authorized to file a complaint in writing. In the instant case, paragraph No.2 of the complaint clearly indicates that few officers of the SFIO were already authorised by the Central Government in exercise of power conferred by Sub Section 1 of Neutral Citation Number 2023/DHC/000448- 33 - Section 621 of the Companies Act, vide notification dated 06.05.2005. Paragraph 2 of the complaint is being reproduced as under: That the Complainant further submits that the present complaint is being filed by him in pursuance of the authority conferred on him by the Central Govt. Notification G.S.R. 284(E) dated 6th May 2005 published in Gazette of India on 11-05-2005. Accordingly the complainant pursuant to the publication of the notification in the official gazette is authorized to file the present complaint under section 621(1) of the Companies Act, A- 1956. A copy of the official gazette is marked as

21. Notification dated 06.05.2005 is also reproduced as under: MINISTRY OF COMPANY AFFAIRS NOTIFICATION New Delhi, the 6th May 2005 G.S.R. 284(E)- In exercise of the powers conferred by the sub-Section(1) of Section 621 of the Companies Act, 1956 (1 of 1956), the Central Government hereby authorise the following officers in the Serious Fraud Investigation Office (SFIO), Ministry of Company Affairs for the purposes of filing and conducting prosecution under the Companies Act, 1956

1. Shri B.S. Negi Assistant Director

2. Shri K.S. Nagar Assistant Director

3. Shri Mohan Singh Assistant Director

4. Shri Sandeep Agarwal Assistant Director

5. Shri M.O. Roy Assistant Director

6. Shri V.P. Verma Assistant Director

7. Shri Dinesh Kumar Assistant Director

8. Shri Sanjeev Kumar Gaur Assistant Director

9. Shri Rabi Barun Assistant Director

10. Shri Girraj Singh Assistant Director

11. Shri R.K. Bakshi Assistant Director

12. Shri G. Ram Mohan Roa Assistant Director

13. Shri Amit Mittal Assistant Director

14. Shri S.C. Sarsonia Assistant Director

15. Shri Pramod Beri Assistant Director [F.No. 3/5/2004/CL.V] Neutral Citation Number 2023/DHC/000448- 34 - JITESH KHOSLA. Jt. Secy.

22. It is therefore seen that the officer who has filed the complaint namely, Shri Giriraj Singh, Assistant Director, whose name is appearing at serial no.10 of the complaint was already authorized in terms of notification dated 06.05.2005, which is admitted position in terms of paragraph No.2 of the complaint. The commission of the offence came into the knowledge of the Central Government on 26.11.2007, i.e. the date on which SFIO submitted its report under Section 241 of the Companies Act. Therefore, the limitation for filing of the complaint commences from 26.11.2007.

23. As per mandate of Section 242 of the Companies Act, the application of mind on the said report and if necessary the legal opinion etc. was required to be completed, so as to ensure that within a period of six months the complaint is presented by authorized person on behalf of the Central Government before the competent court. The Central Government took around six months in taking decision dated 03.06.2008 to authorize SFIO to file the complaint. Firstly, since there was already a valid notificiation in favour of the officers to file a complaint on behalf of SFIO, there was no necessity to again authorize SFIO to file the complaint. If at all there was any requirement to formally convey the said officer to file the complaint, the same should have been done immediately, so as to ensure that the complaint is filed within a period of six months. Since the Central Government itself had taken about six months time to take a decision and then the SFIO took time to prepare the complaint to present it in the court, that cannot be a reason to exclude the period between 26.11.2007 to 03.06.2008. The SFIO who is only an authorized person can not claim exclusion of limitation, when it has no separate identity to file the complaint. Neutral Citation Number 2023/DHC/000448- 35 -

24. The Hon‟ble Supreme Court in the decision of Rakesh Kumar Jain (supra) has considered the import of the word "consent" and "sanction" as appearing in Sub Section 3 of Section 470 of the Cr.P.C. in the context of the provision of Section 13(3) of the Official Secret Act, 1923. It has been held that under Sub Section 3 of Section 13 of the Official Secret Act, it is provided that cognizance of offence under the said Act can be taken only upon complaint which is (a) filed by order of the appropriate government; (b) filed under authority of the appropriate government;

(c) by some officer empowered by the appropriate government.

It has been further held that “consent" or "sanction” envisaged under Section 470 of the Cr.P.C. cannot be equated with the “order" or "authority” for the purpose of finding the complaint as envisaged by Sub Section 3 of Section 13 of the Offical Secret Act.

25. A similar view has been taken by the learned Single Judge of the High Court of Madras in the case of Govind Rajan (supra) and in paragraph No.10 of the said decision, wherein it has been held that to prosecute a person for offence under Section 629(A) of the Companies Act, neither any "consent" nor any "sanction" from the Central Government is required. It has further been held that it may be true that on the administrative side, permission is obtained from the Central Government to launch prosecution, but that permission cannot be equated to a "consent" or "sanction" to be obtained statutorily reffered to under Sub Section 3 of Section 470 of the Cr.P.C.

26. It is therefore, in the considered opinion of this court that the period between 26.11.2007 to 03.06.2008 cannot be excluded for the purpose of counting limitation for filing of the complaint. Any other Neutral Citation Number 2023/DHC/000448- 36 interpretation would result in adding words in the legislation, which is not permissible in the interpretative process of the provisions.

27. The learned counsel appearing on behalf of the petitioner, however, is correct in his submission that the SFIO could not have filed the complaint unless the Central Government, after application of mind (taking legal opinion etc.), finds that any person in relation to the company or in relation to any other body corporate whose affairs has been investigated by virtue of sub Section 239, is guilty of any offence for which he is criminally liable. It is not for the SFIO to file the complaint. The same has to be filed by the Central Government. It is for the Central Government to timely take the decision and authorize the person concerned so that the complaint is filed within limitation.

28. It is imperative for the court, taking cognizance, to apply its judicial mind as to whether the prosecution has been launched within limitation statutorily prescribed for a particular offence. The administrative approval or permission to convey that in the instant case, the Central Government is convinced for commission of the offence, should have been taken immedialty after receipt of the report and any delay on the part of the Central Governement in taking the decision, cannot be construed to be in the benefit of the Central Government that too when, the same has not been explained at all. In appropriate case, under Section 473 of the Cr.P.C., the courts are empowered to take congnizance of an offence after the expiry of the period of limitation if it is satisfied on the facts and in the circumstances of the case that the delay has properly been explained or that it is necessary so to do in the interest of justice.

29. A perusal of the application for condonation of delay does not explain any reason or steps taken by the Central Government between 26.11.2007 to 03.06.2008. The only reason for condonation of delay Neutral Citation Number 2023/DHC/000448- 37 sought for is to exclude the period between 26.11.2007 to 03.06.2008, as without any santction or consent the SFIO could not have filed the said complaint. Since this court has already held that no "previous consent" or "sanction" was necessitated in terms of Section 242 read with Section 621 of the Companies Act, therefore, the said period cannot be excluded, and even the period of limitation cannot be extended in the instant case.

30. In view of the afforesaid, the instant petitions along with pending applications, if any, stand dismissed.

JUDGE JANUARY 19, 2023 MJ