Case Note & Summary
The petitioner, former Managing Director of Megacity (Bangalore) Developers and Builders Limited, filed criminal petitions under Section 482 of the Code of Criminal Procedure, 1973 challenging the order dated 08-07-2022 passed by the XLII Additional Chief Metropolitan Magistrate, Bengaluru. The impugned order allowed an application filed by the Serious Fraud Investigation Office under Section 319 of the CrPC to implead the company as accused No.2 in pending criminal proceedings. The company was incorporated on 11-08-1994 under the Companies Act, 1956 and was engaged in the business of developing and constructing properties. In 1994-95, it launched the 'Vajragiri Township Project', attracting about 3100 applications. Due to steep increase in land prices and legal disputes over land acquisition, the project faced setbacks. The SFIO investigated the affairs of the company under Section 35(1) of the Companies Act, 1956 and filed its investigation report on 30-07-2011, alleging that promoters/directors misappropriated subscription money and that certain lands purchased by the company were from project funds and later sold to Prestige Bidadi Holdings Private Limited. The company filed objections on 09-09-2011. Subsequently, the Central Government approached the National Company Law Tribunal, Bangalore, which, by order dated 14-03-2019, replaced the existing Board of Directors with directors nominated by the Central Government. The Central Government also sought appointment of an Official Liquidator to wind up the company. Meanwhile, the SFIO registered a crime before the Special Court against the Managing Director invoking Section 200 of the CrPC, and the Magistrate took cognizance of offences under Sections 403 and 409 of the Indian Penal Code. During the pendency of the criminal case, the SFIO filed an application under Section 319 CrPC to implead the company as an additional accused, which was allowed by the Magistrate. The petitioner approached the High Court to set aside that order and discharge the company. The court heard arguments and reserved the matter for orders.
Issue of Consideration
Whether the order passed by the Magistrate impleading the company as an additional accused under Section 319 of the Code of Criminal Procedure, 1973 is legally sustainable.
Case Details
2023 LawText (KAR) (07) 2
Criminal Petition No. 8421 of 2022 C/W Criminal Petition Nos. 8740, 8741, 8742, 8768, 8797, 8800, 8805 of 2022
Sri Kiran S. Javali, Senior Advocate for Sri Arjun P. K., Advocate (for petitioner); Sri Madhukar Deshpande, Special Central Government Standing Counsel (for respondent No.1); Sri Gowthamdev C. Ullal, Central Government Counsel (for respondent No.1 in some petitions)
Serious Fraud Investigation Office and Megacity (Bangalore) Developers and Builders Limited
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Nature of Litigation
Criminal petitions under Section 482 of the Code of Criminal Procedure, 1973 challenging the order of impleadment of the company as an additional accused in a pending criminal case.
Remedy Sought
Set aside the order dated 08-07-2022 passed by the XLII Additional Chief Metropolitan Magistrate, Bengaluru, allowing the application under Section 319 CrPC and impleading the company as accused No.2, and consequently discharge the company from the proceedings.
Filing Reason
The Magistrate allowed the application filed by the Serious Fraud Investigation Office to implead the company as an accused, despite the company already being the subject of proceedings before the National Company Law Tribunal and facing winding up proceedings.
Previous Decisions
The National Company Law Tribunal, Bangalore, by order dated 14-03-2019 in Company Petition No.2 of 2014, replaced the Board of Directors of the company with nominees of the Central Government. The XLII Additional Chief Metropolitan Magistrate took cognizance of the complaint and registered the case for offences under Sections 403 and 409 IPC. The impugned order of impleadment was passed on 08-07-2022.
Issues
Whether the Magistrate exceeded jurisdiction in allowing the application under Section 319 CrPC to implead the company as an accused when the company was already under the control of Central Government nominees and winding up proceedings were initiated?
Whether the company can be held vicariously liable for the acts of its former directors in the absence of specific statutory provisions?
Whether the order of impleadment is sustainable in light of the pendency of proceedings before the National Company Law Tribunal?
Judgment Excerpts
The petitioner is before this Court calling in question order dated 08-07-2022 by which the XLII Additional Chief Metropolitan Magistrate at Bengaluru in C.C.No.30796 of 2021 allows an interlocutory application filed by the 1st respondent under Section 319 of the CrPC ordering impleadment of 2nd respondent/Megacity (Bangalore) Developers and Builders Limited as accused No.2 in the aforesaid proceedings.
The 2nd respondent who is now sought to be impleaded as accused No.2 is a Company incorporated on 11-08-1994 under the provisions of the Companies Act, 1956.
Procedural History
The company was incorporated on 11-08-1994 under the Companies Act, 1956. In 1994-95, it launched the Vajragiri Township Project. The SFIO investigated the company's affairs under Section 35(1) of the Companies Act, 1956 and submitted its report on 30-07-2011. The company filed objections on 09-09-2011. The Central Government approached the National Company Law Tribunal, Bangalore, which by order dated 14-03-2019 in Company Petition No.2 of 2014 replaced the board of directors with Central Government nominees. The Central Government also sought appointment of an Official Liquidator to wind up the company. The SFIO registered a crime under Section 200 CrPC against the Managing Director, and the Magistrate took cognizance in C.C.No.6415 of 2012 (later C.C.No.30796 of 2021) for offences under Sections 403 and 409 IPC. During the pendency of the case, the SFIO filed an application under Section 319 CrPC to implead the company as an additional accused. The Magistrate allowed the application on 08-07-2022. The petitioner challenged this order by filing criminal petitions under Section 482 CrPC before the High Court. The High Court heard the arguments and reserved the matter for orders.
Acts & Sections
- Companies Act, 1956: Section 35(1)
- Indian Penal Code, 1860: Sections 403, 409
- Code of Criminal Procedure, 1973: Sections 200, 319, 482
