Case Note & Summary
The case involves two criminal revision applications filed by directors of companies against whom the CBI had initiated prosecution. The applicants were directors of M/s Capman Financials Ltd. and M/s Networth Stock Broking Ltd., both registered under the Companies Act, 1956. The CBI alleged that the applicants had committed offences under the Prevention of Corruption Act, 1988, and the Indian Penal Code. The applicants sought quashing of the criminal proceedings on the ground that they were public servants and that no sanction under Section 197 of the Code of Criminal Procedure, 1973, had been obtained prior to taking cognizance. The court examined the definition of public servant under Section 2(c)(viii) of the Prevention of Corruption Act, 1988, and held that directors of government companies are public servants. The court noted that the companies were government companies within the meaning of Section 617 of the Companies Act, 1956, and thus the directors were in the service or pay of the government or a corporation owned or controlled by the government. The court relied on precedents to conclude that the applicants were public servants. The court further held that taking cognizance of an offence against a public servant without prior sanction under Section 197 CrPC renders the proceedings void ab initio. Consequently, the court allowed the criminal revision applications, quashed the proceedings, and set aside the impugned orders.
Headnote
A) Criminal Procedure - Sanction for Prosecution - Section 197 CrPC - Directors of Government Companies as Public Servants - The court considered whether directors of companies registered under the Companies Act, 1956, which were government companies, were public servants requiring sanction under Section 197 CrPC before prosecution. The court held that the directors were public servants under Section 2(c)(viii) of the Prevention of Corruption Act, 1988, and thus sanction was mandatory. Since no sanction was obtained, the proceedings were quashed. (Paras 1-10) B) Prevention of Corruption Act - Public Servant Definition - Section 2(c)(viii) - Directors of Government Companies - The court examined the definition of public servant under the Prevention of Corruption Act, 1988, and held that directors of government companies fall within the ambit of Section 2(c)(viii) as they are in the service or pay of the government or a corporation owned or controlled by the government. The court relied on precedents to conclude that the applicants were public servants. (Paras 5-8) C) Criminal Procedure - Cognizance Without Sanction - Void Ab Initio - The court held that taking cognizance of an offence against a public servant without prior sanction under Section 197 CrPC renders the proceedings void ab initio. The court quashed the criminal revisions and set aside the impugned orders. (Paras 9-10)
Issue of Consideration
Whether the criminal proceedings against the applicants, who were directors of companies, could be quashed for want of sanction under Section 197 of the Code of Criminal Procedure, 1973, as they were public servants under the Prevention of Corruption Act, 1988.
Final Decision
The court allowed both criminal revision applications and quashed the criminal proceedings against the applicants for want of sanction under Section 197 CrPC.
Law Points
- Sanction under Section 197 CrPC is mandatory for prosecution of public servants
- Directors of government companies are public servants under Section 2(c)(viii) of the Prevention of Corruption Act
- 1988
- Cognizance without sanction is void ab initio
- Proceedings cannot continue if sanction is not obtained.
