The Supreme Court has held that a Special Court cannot take cognizance of offences under Section 448 of the Companies Act, 2013 based on a private complaint, ruling that such offences are “covered under Section 447” and thus attract the statutory bar under Section 212(6). The Bench of Justice J.K. Maheshwari and Justice K. Vinod Chandran, while partially allowing the appeals, quashed the proceedings under Sections 448 and 451 of the Companies Act but directed that the accompanying IPC offences be transferred to a court of appropriate jurisdiction.
The apex court addressed whether a Special Court could take cognizance of offences under Sections 448 and 451 of the Companies Act, 2013, upon a private complaint, despite the bar contained in Section 212(6). The Court concluded that since Section 448 renders a person “liable under Section 447” (punishment for fraud), it falls within the ambit of the “offence covered under Section 447” mentioned in Section 212(6). Consequently, cognizance cannot be taken except upon a complaint in writing by the Director, Serious Fraud Investigation Office (SFIO), or an authorized officer of the Central Government.
Background of the Case
The dispute originated from the affairs of M/s Shreemukh Namitha Homes Private Limited. The Complainant (Respondent No. 2) and his wife were the promoters and majority shareholders. The Appellants, Yerram Vijay Kumar and Rajeev Kumar Agarwal, were inducted as Directors in 2016 and 2015, respectively.
Conflicts arose regarding management control. The Appellants alleged that amendments were made to the Articles of Association (AoA) without proper notice, altering the tenure of Directors. Subsequently, on November 30, 2021, resolutions for the re-appointment of the Appellants failed as the Complainant voted against them.
Following their removal, the Appellants moved the National Company Law Tribunal (NCLT). In a counter-move, the Complainant filed a private complaint on May 19, 2022, before the Special Court for Economic Offences at Hyderabad. The complaint alleged that the Appellants illegally convened an Extra-Ordinary General Meeting (EOGM) on December 1, 2021, appointed third parties as Directors, and fabricated resolutions and statutory filings (Form DIR-12).
The Special Court took cognizance of offences under Sections 448 & 451 of the Companies Act, 2013, and Sections 420, 406, 426, 468, 470, 471 & 120B of the Indian Penal Code (IPC). The Telangana High Court dismissed the Appellants’ petition to quash these proceedings, prompting the appeal before the Supreme Court.
Arguments of the Parties
For the Appellants: Mr. Shailesh Madhiyal, learned Senior Advocate, argued that Section 448 of the Companies Act explicitly states that a person making a false statement “shall be liable under Section 447”. He contended that the bar contained in the second proviso to Section 212(6) applies, which prohibits a Special Court from taking cognizance of any “offence covered under section 447” except upon a complaint by the Director, SFIO, or an authorized officer of the Central Government. He further submitted that the mandatory procedure under Section 206 of the Act was bypassed and that the dispute was essentially civil in nature.
For the Respondents: Mr. Jayant Muth Raj, learned Senior Advocate for the Complainant, and counsel for the State argued that the Companies (Amendment) Act, 2015 substituted specific section numbers in Section 212(6) with the phrase “offence covered under section 447”. They submitted that since the complaint was filed under Section 448 and not directly under Section 447, the bar did not apply. They emphasized that the allegations involved serious fraud and forgery to usurp company management and required trial.
Court’s Analysis
The Supreme Court rejected the Respondents’ interpretation. The Bench analyzed the text of Section 448, which states that if any person makes a false statement, “he shall be liable under Section 447.”
On Section 448 and 212(6): The Court observed:
“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…”
The Bench reasoned that Section 447 is a “catch-all provision” for fraud. Non-inclusion of Section 447 in the cognizance order does not circumvent the statutory bar. The Court held:
“It is trite law that anything that cannot be done directly, also cannot be done indirectly… 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.”
The Court clarified that the safeguard in Section 212(6) exists to prevent frivolous complaints. The proper recourse for allegations of fraud is to file an application under Section 213 of the Companies Act before the NCLT.
On Jurisdiction over IPC Offences: Regarding the IPC offences, the Court addressed the issue of jurisdiction under Section 436(2) of the Companies Act, which allows a Special Court to try offences under other Acts (like IPC) only “When trying an offence under this Act”.
The Court held that since the Companies Act offences (Sections 448 and 451) were being quashed, the Special Court no longer had jurisdiction to try the remaining IPC offences. However, the Court rejected the argument that the IPC proceedings should be quashed merely because of pending civil suits.
Decision
The Supreme Court partly allowed the appeals with the following directions:
- The complaint case and the order taking cognizance were quashed to the extent of Sections 448 and 451 of the Companies Act.
- Regarding the IPC offences (Sections 420, 406, 468, etc.), the Court directed the Special Court to transfer the case to the appropriate court having territorial jurisdiction within 4 weeks.
- The transferee court was directed to adjudicate the complaint on its own merits, uninfluenced by the Supreme Court’s observations.
The Court concluded: “Cognizance, therefore, in such a case, cannot be taken merely by filing of a private complaint.”
Case Details:
- Case Title: Yerram Vijay Kumar v. The State of Telangana & Anr. (With connected appeal)
- Case Number: Criminal Appeal No. of 2026 (Arising out of SLP (Crl.) No. 11530 OF 2024)
- Coram: Justice J.K. Maheshwari and Justice K. Vinod Chandran
