Two Parallel Criminal Proceedings From Same Set Of Facts?

For better analysis, let's assume a hypothetical situation: -

There is a Company namely "ABC Pvt Ltd.". It has 2 directors X and Y. Y in conspiracy with one Z fabricates board resolution in the name of 'ABC Pvt Ltd' with forged signatures of X and shows that Z has been appointed as Additional Director. Y and Z then also fabricate aresignation letter in the name of X thereby showing that X has resigned from the Company and hold a board meeting accepting the said forged resignation letter. Y with his digital signature uploads both the board resolutions of appointment of Z and resignation of X on the portal of Registrar of Companies.

Now, X lodges a complaint before police station and upon his complaint police registers FIR under relevant provisions of Indian Penal Code, 1860 ("IPC") and Information Technology Act, 2000 ("IT Act") for offences of forgery and criminal conspiracy. Police then files chargesheet and the Magistrate Court accordingly takes cognizance issues summons against Y and Z. In parallel, X also approaches NCLT u/s 59, 241, 242 and 213 of Companies Act, 2013 ("2013 Act") for rectification of register of members, oppression, mismanagement and investigation into affairs of the company.

Pursuant to the above, Y and Z approach the Hon'ble High Court u/s 482 of Code of Criminal Procedure, 1973 ("CrPC") praying for quashing of FIR and cognizance order on the ground that FIR allegedly discloses offence under section 447 of the Companies Act, 2013 (provision for fraud), and hence ordinary criminal courts are devoid of jurisdiction in light of sections 435 and 436 of the 2013 Act and therefore only special courts under the Companies Act, 2013 Act can take cognizance of the offences. Note: it is pertinent to note that the punishment for fraud under the 2013 Act pertains to financial fraud and wrongful loss/wrongful gain and there is no specific provision under the Act of 2013 for punishment for forgery.

Relevant provisions of Companies Act, 2013

Section 435(1) provides that Central Government may establish Special Courts for the purpose of speedy trial of offences under 2013 Act except under section 452.

Section 436(1) states that all offences as specified in section 435(1) shall be triable only by Special Courts. Section 436(2) states that when trying an offence under the 2013 Act, a Special Court may also offences under other laws with which the accused under CrPC may be charged at the same trial.

Analysis

No express bar on the jurisdiction of Ordinary Criminal Courts

Principles of interpretation of statutes are settled that ordinary Jurisdiction of a Civil or Criminal Court cannot be barred unless a statute provides such bar by express provision or necessary implication. ^[2]

The 2013 Act has established two types of forums. First, National Company Law Tribunal/National Company Law Appellate Tribunal ^[3] which, although is not civil court per se but has been vested with the powers of civil courts^[4], its orders enforced being equivalent to a decree passed by a Civil Court^[5] and is deemed to be a civil court for purposes of section 195 of CrPC^[6]. Second, Special Courts established u/s 435 which are special criminal courts vested with power to try offences as aforementioned in section 436(2).

There seems to be a peculiar difference in the legislative scheme qua the aforementioned forums. Qua NCLT, the 2013 Act provides an express provision under the guise of section 430 of the Act, which expressly bars the jurisdiction of civil courts from entertaining any suit or proceedings in respect of which NCLT is empowered to determine.^[7] However, qua Special Courts there is no express bar on the jurisdiction of ordinary criminal courts.

Therefore, it appears that while legislature consciously and expressly barred the jurisdiction of civil courts vis-à-vis NCLT however, legislature did not intent to bar the jurisdiction of ordinary criminal courts vis-à-vis Special Courts. Question that whether the 2013 Act even by implication bars the jurisdiction of criminal courts vide section 430 is no longer res integra, the Hon'ble Madhya Pradesh High Court in Manoj Shrivastava v. State of M.P.^[8] held that there is no express or implied bar on jurisdiction on ordinary criminal courts and same cannot be presumed or implied vide section 430 of the 2013 Act.

Judicial Decisions

Although there seems to be no direct comprehensive decision of the Supreme Court on this but few High Courts have had the occasion to address the issue whereby it was held that there is no express bar of criminal courts and moreover, the Special Court constituted under the Companies Act,2013 have jurisdiction to try cases where offences of Companies Act are disclosed along-with offences under criminal laws. Against these decisions of High Courts SLPs were filed before the Supreme Court which were dismissed. Therefore, it may be safe to presume that below-mentioned decisions have attained finality from Supreme Court.

1. Sunil Mandwani v. State of M.P.^[9]

Facts: Complainant and Sunil Mandwani were directors of a company. Sunil allegedly fabricated resignation letter in the name of Complainant and accepted the same in a board meeting. Sunil then allegedly uploaded the same on the portal of ROC. Subsequently, FIR was registered under relevant sections of IPC for cheating and forgery against Sunil. Chargesheet was filed and case committed. Sunil then filed an application for discharge on the ground that allegations made in FIR only disclose offence under 2013 Act and if an offence under 2013 Act as well as IPC is committed then only Special Court under the 2013 Act can try the offence. Trial Court dismissed the discharge application. Sunil Mandwani files Revision Petition before Madhya Pradesh High Court impugning the order of Trial Court.

The  Madhya Pradesh High Court while dismissing the petition held that:

"8. Provision of Section 436 (2) also provide that while trying an offence under the Companies 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 be charged at the same trial. This provision reads more scope of doubt that for special court who have jurisdiction, its a precondition that an offence punishable under the Companies Act, 2013 must be alleged or committed. However, in the present case, no offence under the Companies Act has been registered by the police. ……. In these circumstances the trial court has rightly held that applicants have fabricated and manipulated the records of the company to commit fraud and cheating against the complainant by showing resignation from the Board of Directors by forging the signatures by way of superimposing their signatures in the resignation letter … therefore, in absence of the any offence punishable under the Companies Act, Special Court is not having jurisdiction to try the case which is punishable under the Indian Penal Code…"

Special Leave Petition bearing No. 9745/2019 against this decision was filed before the Supreme Court, which was dismissed at the admission stage vide Order dated 13.12.2019.

2. S.P. Gupta v. State (NCT of Delhi)^[10]

The question before Delhi High Court in the above-captioned case was whether recourse to investigation in affairs of Company under section 235 to 242 of Companies Act 1956^[11] ("1956 Act") is the only way to launch prosecution in respect of the commission of offences under IPC by office bearers of the company?

It was contended by Petitioner that Respondents have approached Company Law Board (CLB) therefore parallel investigation by police into the same allegation is not permissible. Since 1956 Act provided complete machinery for investigation into affairs of the Company, resort to police investigation is impliedly barred thus FIR liable to be quashed.

The Delhi High Court while dismissing the petition held that: -

"10. ….The nature and scope of investigation to be conducted under Section 235 to 242 of the Act is vastly different from the nature and scope of the investigation to be conducted by the police. An investigation under Sections 235 to 242 of the Act is not an investigation of a criminal case. The purpose of investigation under the provisions of the Company Act is only to streamline the working of the company. Such investigations may reveal violation of rules and regulations by the office bearers or even commission of technical offences which are punishable under the Company Act for which investigation under Cr.PC maybe uncalled for. But if such investigations reveal the commission of offences under IPC. Section 242 of the Act enacts an enabling provision under which the Government can also launch prosecution. (AIR 1957 Madras 65, 1974 (44) Company Courts Page 108). On the other hand, an investigation by the police officer is launched on receipt of an information of the commission of a cognizable offence. Under section 157 of Cr. PC it is obligatory on the part of police officer to launch investigation if he suspects commission of cognizable offence or if the commission of such an offence is brought to his notice….Various High Courts and the apex court have taken consistent view that the provisions of Sections 235 to 242 of the Company Act do not have the effect of abrogating or repealing the provisions of Cr. PC which deal with the powers of the police officer to investigate report about the commission of the cognizable offence. …..A Division Bench of this court in the case of B.M. Bajoria v. Union of India and Ors. Reported in 2nd 1971 Vol. I Delhi page 715, had expressly repelled the argument that the only way to prosecute an office bearer of the company in respect of some act of embezzlement or misappropriation of funds concerning the affairs of the company is to direct investigation into the affairs of the company under Section 235 of the Act. ………

11. ….There is, however, nothing in section 242 or other provisions of the Companies Act to point to the conclusion that no prosecution can be launched or no report can be made to the police in respect of an alleged act of embezzlement or malfeasance by an individual connected with the company without recourse to an investigation under sections 235 or 237 of the Act. In the case of M. Vaidyanathan v. The Sub-divisional Magistrate, Erode and Ors., , question arose whether the provisions of section 630 of the Companies Act constituted a bar to the exercise of the jurisdiction vested in a police officer under sections 154, 156 and 157 of the Code of Criminal Procedure. The question was answered in the negative by Rajagopalan, J. ..."

SLP (Crl) M.P. No. 14246/2005 against this decision was filed before the Hon'ble Supreme Court, which was dismissed at the admission stage vide Order dated 03.07.2006.

No provision on joinder of Trial of Special Court and Ordinary Criminal Court pari materia to section 44 of PMLA Act, 2002

Another aspect which substantiates the argument that there can be simultaneous criminal proceedings under special court and ordinary criminal court, is that there is no provision of joinder of trial under the Act of 2013.

For instance, in our hypothetical situation on X's ordinary criminal court has taken cognizance for offences under the IPC and IT Act and, in the meanwhile, in X's petition u/s 59, 241,242 and 213 of 2013 Act, the NCLT has directed investigation by SFIO, who after completing investigation filed an investigation report before the Special Court for disclosing commission of offence under section 447 of 2013 Act.

Now there are two criminal courts which are trying different criminal offences emanating from same set of facts.

The legislature seems to be cognizant of the aforesaid issue, as the similar situation can also be found in the Prevention of Money-Laundering Act, 2002 ("PMLA Act"). Therein legislature has created a bridge between the two proceedings through section 44 of the PMLA Act. The same vide subsection (1)(c) provides that criminal court cognizant of scheduled offences shall on application commit the case relating to scheduled offence to the Special Court who shall proceed with the scheduled offence from the stage at which it is committed. The Explanation added in 2019 goes on to clarify that jurisdiction of Special Court while dealing offence under PMLA Act shall not be dependent upon orders passed in respect of Scheduled offence(s) and trial of both scheduled offence(s) and offence under PMLA by the same Court shall not be construed as joint trial.

However, as far as 2013 Act or broadly the Company law jurisprudence is concerned, these is no provision in 2013 Act pari materia to section 44(1)(c) & (d) of PMLA Act. It is noteworthy that both the sub-clauses (c) and (d) were added to section 44(1) of PMLA Act in 2013^[12]. Hence, there seems to be a deliberate omission by the legislature in 2013 Act in not incorporating provisions pari materia to section 44(1)(c) & (d) of PMLA Act.

Although as per the maxim generalia specialibus non derogant i.e., general law must yield to special law Companies Act prevails over CrPC, but this principle is applicable only when there is a conflict between general law and special law. Instead of a conflict there seems to be a deliberate vacuum. It appears that the maxim applicable to the present case is Casus Omissus Pro Omisso habendus est (A case omitted is to be held as intentionally omitted). A constitution bench of 5 judges of Supreme Court in S. Narayanaswami vs G. Pannerselvam & Ors,^[13] held that: -"16. A test laid down by Blackburn, J. in R. v. Cleworth [(1864) 4 B and S 927, 934] to determine what the correct presumption, arising from an omission in a statute should be, was whether what was omitted but sought to be brought within the legislative intention was "known" to the law-makers, and could, therefore, be "supposed to have been omitted intentionally". Another analogy can be drawn from the principles of interpretation of statutes, which are context of non-obstante clause in special enactments, that is presumption that when parliaments enacts a law it is aware of the prevailing laws.^[14]

Therefore, from the conspectus of the aforesaid analysis, it doesn't appear to be a case of legislative oversight in not incorporating a provision for joinder of trial between Special Court and Criminal Court, it may be safe to conclude that there can be two simultaneous criminal proceedings by both Special Court under 2013 Act for offences under the 2013 Act and general criminal court for trial of other offences. The Special Court constituted under the Companies Act,2013 have jurisdiction to try other offences only where offences of Companies Act are alleged to have been committed. Moreover, offences under the Companies Act are triable by Special Courts only if committed by members of the Company. Thus, in the absence of any allegation of offences under Companies Act, the jurisdiction of criminal courts trumps.

About the authors: Ashima Mandla is the partner and Syed M. Ahmad is an associate at Mandla & Singh Law Chambers.