K R S MANI Vs. ANUGRAHA JEWELLERS LIMITED

JUDGEMENT

(1.) FOUR petitioners hereinabove claiming to hold 15.5 per cent, shares in Anugraha Jewellers Limited (company), a public limited company, have filed this petition under Sections 397/398, 402 and 403 of the Companies Act, 1956 (Act), alleging acts of oppression and mismanagement in the affairs of the company. The main allegations of the petitioners relate to the following : irregularities in the allotment of shares to the petitioners; irregularities in the matter of transfer of shares from the petitioners' group ; siphoning off of funds of the company in the form of alleged loans and advances to certain other companies; invalidity in the appointment of managing director ; irregular removal of petitioners' directors from the board ; defalcation in stock maintained in the company, etc.

(2.) Initially, only respondents Nos. 2, 3 and 4 collectively had filed a reply to the petition and on our directions that the company should also file a detailed reply, the same was done. The respondents have, in their reply, raised a preliminary objection on the maintainability of the petition on the ground that most of the allegations contained in the petition are subject-matter of other proceedings initiated by the petitioners in other for a prior in time and as such none of the allegations should be gone into by us.

(3.) RAMANI, advocate for the petitioners argued that the criminal complaint filed by the petitioners was under Section 406 of the Indian Penal Code alleging breach of trust by the respondents. Even though an FIR has been registered, the investigation is still on and no charge-sheet has been filed by the State. Further, according to him, Section 406 of the Companies Act makes Sections 539 to 544 applicable to proceedings under Section 397/398 as set forth in Schedule XI and as such proceedings can be initiated under these sections even if the concerned persons are criminally liable. Relying on State of Rajasthan v. Kalyan Sundaram Cement Industries Ltd. [1996] 86 Comp Cas 433 ; [1996] 3 SCC 87, P. Jayappan v. S.K. Perumal, ITO (First) [1984] 149 ITR 696 ; AIR 1984 SC 1693 and Muthukrishnan v. State [1990] Crl. LJ 2570 (Mad), he stated that in rare cases it is the criminal proceeding which has to be stayed and not the civil proceeding. Further, he stated that since the criminal complaint is a warrant case, the punishment being three years under Section 406 of the Indian Penal Code, there is no procedure by which the complainant can withdraw the complaint and it is only the public prosecutor who can do so with the consent of the court as decided in Veerathaiah v. Ramaswamy Iyengar, AIR 1964 Mys 11. However, he stated that the petitioners have already withdrawn the civil suits and as such there is no impediment in the petitioners' continuing with the present proceeding before the Company Law Board.