The Supreme Court of India has declined to entertain a review petition filed by the Central government, which sought reconsideration of an earlier ruling concerning the Companies Act, 2013. The decision was rendered on Monday, reaffirming the Court’s stance that special courts cannot initiate proceedings for certain fraud-related offences under the Companies Act based solely on private complaints. This case is referenced as Union of India v. State of Telangana.
Supreme Court’s Clarification
A bench led by Chief Justice of India (CJI) Surya Kant, along with Justices K Vinod Chandran and Joymalya Bagchi, addressed the Central government’s plea to revisit the Court’s January 9 verdict. The verdict in question pertains to the limitations contained in the second proviso to Section 212(6) of the Companies Act.
When dismissing the review petition, the Court clarified that the Central government retains the authority to empower an officer, through a general or special written directive, to file a complaint as per Section 212(6). This section permits the initiation of action based on a written complaint from the Director of the Serious Fraud Investigation Office (SFIO) or an officer sanctioned by the Central government.
Government’s Concerns and Court’s Response
Additional Solicitor General Aishwarya Bhati, representing the Centre, expressed concerns about the ramifications of the January judgment on investigations not conducted by the SFIO, such as those involving the Registrar of Companies (ROC). The Court suggested that the government could navigate these challenges by utilising its statutory power to authorise an officer to lodge the complaint.
The Court emphasized that its previous ruling does not hinder the government from following the designated procedure under Section 212(6) to initiate legal proceedings.
Background of the Case
The original case revolved around allegations of mismanagement and control disputes within a private company. A private complaint accused former directors of illicitly holding meetings, fabricating resolutions, and submitting false statutory filings to the ROC. The Special Court for Economic Offences in Hyderabad had acknowledged offences under Sections 448 and 451 of the Companies Act, along with violations under the Indian Penal Code (IPC). However, the Telangana High Court refused to dismiss the criminal proceedings.
In its January decision, the Supreme Court concluded that Section 448, concerning false statements, is inherently linked to Section 447, which addresses fraud. As such, offences under Section 448 are considered under the purview of Section 447 for the purposes of Section 212(6), which restricts cognisance based on private complaints alone. Consequently, the Court nullified the proceedings related to Sections 448 and 451 but allowed prosecutions of IPC offences to proceed in the appropriate court.
By dismissing the review petition, the Supreme Court reaffirmed its earlier decision, while explicitly upholding the Centre’s authority to authorise an officer to initiate a complaint under the statutory framework of Section 212(6).
