Yerram Vijay Kumar vs. The State Of Telangana

REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
2026 INSC 42
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)
J U D G M E N T
J.K. Maheshwari, J.
1. Leave granted.
2. The present appeals have been filed against the impugned
Signature Not Verified
Digitally signed by
Gulshan Kumar Arora
Date: 2026.01.09
15:45:41 IST
Reason:
judgment dated 20.06.2024 passed by the Single Bench of High
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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.
3

5. An Extra-Ordinary General Meeting (hereinafter referred to
as “ ”) is stated to have been held on 22.08.2016, preceded
EOGM
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.
Such person shall hold office only up to the date
(ii)
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’
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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
inter
482 of CrPC and filed the quashing petition. The Appellants
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
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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.
The High Court vide the impugned judgment dismissed the
11.
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
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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
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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 “ ”) came into
2015 Amendment Act
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
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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
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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: -
– Save as
“448. Punishment for false statement.
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
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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
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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-
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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
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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
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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
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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
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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
1
Reddy 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.
x x x x
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
2
Shipping Kaisha Ship Management Pvt. Ltd. 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.
3
Gopal v. Ganga Reddy 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.
4
Vs. State and Anr. 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
5
(P) Ltd. , 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.

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
6
question in Sunil Mandwani v. State of M.P., 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’ .
That being said, under the Companies Act, Section 436(2)
54.
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