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Section 397 in The Companies Act, 1956
The Companies Act, 1956
Section 398 in The Companies Act, 1956
The Code Of Criminal Procedure, 1973
Section 406 in The Companies Act, 1956
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Calcutta High Court
Mahabir Prasad Jalan And Ors. vs Bajrang Prasad Jalan And Ors. on 18 September, 1998
Equivalent citations: 2000 102 CompCas 81 Cal, (1999) 2 CompLJ 72 Cal
Author: S Sinha
Bench: S Sinha, D Dutta


1. These appeals were initially directed against an interim order dated February 6, 1997, passed by a learned single judge of this court in Bajrang Prasad Jalan v. Akshay Nidhi Ltd. (Company Petition No. 447 of 1990). The applicants respondents herein filed an application on February 12, 1990, under Section 397/398 of the Companies Act, 1956, for certain reliefs against the appellants and other respondents. Upon completion of exchange of affidavits the parties addressed the learned trial judge on the merits of the said application. While the arguments were almost complete learned counsel appearing on behalf of the applicants respondents offered that the proceedings be held on trial to which exception was taken by learned counsel appearing on behalf of the appellants on the ground that the said respondent had all along been present during the hearing of the proceeding in court and, thus, was aware of the rival contentions of the parties. At that juncture a question arose as to whether the court had the jurisdiction to try the appellants herein or some of them for alleged offences committed by them under the Eleventh Schedule to the Companies Act read with Section 406 thereof. Learned counsel started their submissions on the question as to whether the company court had the jurisdiction to try the criminal offences itself or at all. By reason of the said judgment the learned judge while holding that he had such jurisdiction also appointed Mr. Dipak Kumar Deb as special officer in regard to five companies, viz., Akshay Nidhi Ltd., Ultra Holding Pvt. Ltd., Sree Credit Company Pvt. Ltd., Bhanu Traders Pvt. Ltd. and Free India Dry Accumulators Ltd. superseding the boards of directors of the said companies. Sri Deb was to function as sole person in charge. Certain other directions were also issued as against the appellants.

2. In the appeals filed by the appellants against the said order dated February 6, 1997, a Division Bench by a judgment and order dated June 19, 1997, sought to dispose of the entire appeal holding :

"The order of the learned trial judge, so far as assumption of criminal jurisdiction by him is concerned, is quashed ; the appointment of the special officer so far it relates to the alleged subsidiaries of Akshay Nidhi, namely, Sree, Ultra, Bhanu and Fida are concerned, is set aside, along with the order of supersession of their boards of directors ; lastly the 1,250 shares of Raigarh Trading Company, which by a resolution were permitted to be sold, are to be handed over to the special officer within a month from the date of passing the order and such resolution would not be given effect to."

3. After the aforementioned judgment was pronounced, an objection was taken by learned counsel appearing on behalf of the respondents that arguments had been advanced only on the stay application. In that situation, the Division Bench comprising S.K. Mookherjee, the then Acting Chief Justice and N. K. Batabyal, J. by an order dated June 19, 1997, noted :

"It seems to us that we were under the wrong impression that in view of the detailed submissions, the appeals were heard and possibly S.B. Mukherjee is justified in taking the objection that arguments were only advanced with regard to the stay application. The orders, however, which we have passed under that impression refer to the disposal of the appeal and accordingly the orders require modification and for that purpose we have proposed to place the matter for further hearing tomorrow (June 20, 1997) at 2 p.m. After hearing the learned advocates appearing for the respective parties, if necessary, we shall modify the order keeping the appeals alive."

4. Thereafter the matter was heard out again on June 20, 1997, and the order dated June 19, 1997, was modified to a great extent in terms whereof all the final decisions on the questions raised before their Lordships were deleted and it was clarified that the said order dated June 19, 1997, would be confined only to the stay application. A special leave petition was taken from the said order by the applicants-respondents herein and the Supreme Court by an order dated March 27, 1998, directed that the appeal.would be decided on its own merits without reference to the order on the interim application. In that situation the matter has been placed before this Bench for hearing the appeal.

5. Before us, however, learned counsel for the parties submitted that keeping in view the fact that all the materials are on record and the parties had almost completed their submissions on the main application, this Bench may dispose of the main application filed by the respondents herein, namely, Bajrang Prasad Jalan finally. The said submissions of learned counsel for the parties had been recorded in the minutes dated April 23, 1998.

6. We are, therefore, concerned with two matters namely, (1) the criminal aspect of the petition and (2) the civil aspect of the petition.

7. We intend to deal with both the aspects separately as the points which would arise for consideration of this court would be different.

8. As the civil aspect of the matter is an original proceeding we intend to dispose of the same by a separate judgment. The order is confined only to the criminal aspect of the matter.

9. However, the facts of the matter in short will have to be noticed at the beginning in order to appreciate the contentions of both the parties.

10. Bajrang Prasad Jalan and Mahabir Prasad Jalan were two brothers. In their respective groups they were shareholders and/or directors of various companies including one known as Akshay Nidhi Limited having its registered office at 36, Chowringhee Road, Calcutta-700 071.

11. Several applications in relation to several companies including Debonair Agencies Ltd., Sandeep Jalan and the said Akshay Nidhi Limited were the subject-matter of proceedings under Section 597/398 of the Companies Act. Company Petition No. 447 of 1990 was filed by Bajrang Prasad Jalan against Akshay Nidhi Ltd. and others on September 12, 1990, for certain reliefs. The principal allegation to the said application was that 1,250 shares of Raigarh Trading" Ltd. held by Akshay Nidhi had been sold to one Aditya Kanoria who is a confirmed friend of Mahabir Prasad Jalan, appellant No. 1 herein.

12. According to the appellant the face value of Raigarh Trading share although Rs. 100 per share was sold at Rs. 25 per share. The decision to sell the said shares was taken on September 18, 1989, which was allegedly held at its registered office at 36, Chowringhee Road, Calcutta. Allegedly no notice of the said meeting was given to the other directors. It was further alleged that the minutes dated September 28, 1989, contained two sheets containing pages 15 to 18 although no other page either preceding or subsequent thereto was filed. It was alleged that the aforementioned acts and conduct were calculated and made with mala fide intent and collateral object of denying the applicants B. P. Jalan and his group from participating in the management of the said company and other companies. The appellants, however, contended that the said application was a misconceived one. The meetings of the board of directors were held on June 20, 1989, September 2, 1989, October 16, 1989, and December 28, 1989.

13. It was stated that R.K. Nakhat, Navnit Padia, V.S. Lalwani, Pawan Kumar Dalmia and Madan Gopal Lakhotia were the directors of the said company. The first respondent, however, contended that he and his group were holders of 36,000 fully paid-up equity shares of the said company. It was also stated that the two brothers agreed that all the assets of their father Mohanlal Jalan would be divided into half and half after another brother Tolaram Jalan separated himself. The shareholding pattern of the said company is as follows :

Shareholding position

1. Mahabir Prasad Jalan 20,000

2. Mahabir Prasad and Son (HUF) 10,000

3. Smt. Anushree Jalan 10,000

4. Bajrang Prasad Jalan 10,000

5. Bajrang Prasad and Son (HUF) 25,000

6. Phool Holdings Ltd. (Respondent No. 23 in company petition) 20,000

7. Aarkay Mercantile Ltd.


8. Swagat Properties Ltd. (Respondent No. 24) 15,000

9. Marut Jute Udyog Ltd. (Respondent No. 32) 15,000

10. Bhanu Traders Pvt. Ltd. (Respondent No. 4) 20,000

11. Nityanand Mercantile Ltd. (Respondent No. 22) 20,000

12. Others 20,000     2,00,000

14. The applicants-respondents in paragraphs 22 to 90 of their application have made various allegations of acts of omission and commission on the part of M. P. Jalan and his group. One of the allegations appears to be falsification of accounts. A learned counsel judge by an order dated February 6, 1997, appointed a learned member of the Bar as special officer in respect of the companies, viz., Akshay Nidhi Ltd., Ultra Holding's Pvt. Ltd., Sree Credit Company Pvt. Ltd., Bhanu Traders Private Limited and Free India Dry Accumulators Ltd.

15. A date was also fixed for criminal trial of the evidence covered by Schedule XI to the Companies Act.

16. Being aggrieved by and dissatisfied with the said order an appeal was preferred by M. P. Jalan which was registered as L. P. A. No. 1 of 1997 and a Division Bench by a judgment dated March 3, 1997, modified the interim order as regards the transaction of 1,250 shares of Raigarh Trading. The said order, however, was modified to certain extent by an order dated June 19, 1997.

17. It stands admitted that before the learned trial judge the hearing of the entire matter commenced. It is also admitted that no application for initiation of any criminal proceeding in terms of Section 406 read with Schedule XI to the Companies Act was filed. It is important to note that B. P. Jalan filed a similar application in respect of two other companies known as Debonair Agency Ltd. and Sandip Jalan. An order passed in the proceedings in relation to Debonair Agency Ltd. by B. L. Jain, J. dated June 17, 1996, in Company Petition No. 494 of 1989 was pending. In the said application, however, an application for initiation of a criminal proceeding was filed but Babulal Jain J. did not pass any order thereupon and disposed of the proceedings of Company Petition No. 494 of 1989. The said judgment is also under appeal before this court being Appeal No. 197 of 1996.

18. Before the learned trial judge, keeping in view the seriousness of the allegations the petitioner offered himself to be examined on oath, whereas, an objection was raised by learned counsel appearing on behalf of the appellant to the effect that as the principal witnesses had all along been present in court and had the occasion to hear the entire arguments, no fruitful purpose would be served thereby. At this juncture, it is stated, the learned trial judge started hearing learned counsel on the question as to whether the criminal aspect of the matter the trial can be held as regards the allegations of commission of offences as against the appellants in terms of Section 406 read with Schedule XI to the Companies Act. The learned judge in his impugned order rejected the contention that the principles of issue estoppel or a res judicata cannot be said to have any application also. The learned trial judge held :

"Now, it is quite true that Mr. Mukherjee did not whisper about the trial on evidence in the opening and that I mentioned a trial on evidence for the first time a little before Mr. Sen was about to close his opposition. But this is neither fishing out evidence nor descending into the arena of battle between the parties. Mr. Mukherjee rightly submitted that a judge is entitled to call for a trial on evidence in a Section 397/398 matter if the judge feels that better or further proof is necessary to be given by means of oral evidence from the box and by means of explanation of written argument again from the box.

The other and the simpler way of looking at the problem is this. Let us suppose Mr. Mukherjee did not mention the matter in the beginning but mentioned it in reply, i.e., even after Mr. Sen had sat down : can it be said, in the present state of the law that Mr. Mukherjee has called for a trial on evidence only in reply, thus his client should be shut out from going to the box ? Quite clearly the answer to this question will be in the negative. Once the idea of the trial on evidence arose, Mr. Mukherjee's clients 'supported the idea with full vigour. It cannot be that because Mr. Mukherjee did not mention the trial on evidence in the opening there cannot be a trial on evidence in this Section 397/398 matter ever."

19. The finding" of the learned trial judge is clearly wrong. The parties had proceeded on the basis that the proceedings under Section 397/398 of the Companies Act would be disposed of on affidavits and in that view of the matter, the question of starting the proceeding afresh upon conclusion of the argument would not have arisen. The allegations in the said Company Petition No. 447 of 1990 were that the appellants and some other persons belonging to their group broke open the locks of the almirahs kept at the registered office of respondent No. 2 at 36, Chowringhee Road, Calcutta and removed various statutory books and records and documents of respondents Nos. 2 to 5, 22, 23, 24 and 32 and refused to return the same to the registered office of the company. It was further alleged that pursuant to the inspection taken in accordance with the orders passed by this court in Suit No. 849 of 1989 dated February 20, 1990, February 24, 1990 and February 27, 1990, the first respondent allegedly was informed about certain falsification, alteration, etc., in the statutory books, records, documents of respondents Nos. 2 to 3.

20. A prayer was made in the said application being prayer (qq) to the effect that an investigation into the affairs of Akshay Nidhi Ltd., Ultra Holdings Pvt. Ltd., Sree Credit Company Pvt. Ltd., Bhanu Traders Pvt. Ltd., Free India Dry Accumulators Ltd., and into the conduct of respondents Nos. 6 to 21, 25, 26 and 29 to 31.

21. No prayer was, thus, made that the appellants or any other person be tried for commission of any offence laid down under Schedule XI read with Section 406 of the Companies Act, 1956.

22. The learned trial judge in extenso quoted the provision of Sections 391, 397, 398, 402 and 406 of the Companies Act as also Schedule XI. The learned judge considered the effect of Section 539 as modified in Schedule XI and posed the question :

"It will be seen that Section 539 mentions an offence which might result in an imprisonment up to seven years and also a fine which is without any limit. Which court will impose this fine or which court will impose the sentence of imprisonment is not mentioned in Section 539 itself. Therefore, arose the question which is the court which should do it. Should it be the company court or should it be an ordinary criminal court ?"

23. Upon taking into consideration the various provisions of the Companies Act, Code of Criminal Procedure as also the General Clauses Act, the learned trial judge in his judgment consisting of 118 pages inter alia, directed :

"The Schedule XI criminal trial in this matter shall commence on Friday, the March 14, 1997.

The petitioners shall prepare the following in that regard :

(a) A list of the accused ;

(b) For each of the accused, a charge, containing the sections of which breach is complained of, and the particulars of such breach and the references thereto already made in the pleadings before the court ;

(c) A list of witnesses proposed to be called by the petitioners in support of their prosecution ;

(d) A list of documents which are proposed to be relied on by the petitioners in the prosecution."

24. Before we embark upon the merits of the matter it may be observed that a trial could not have been directed to be commenced unless a cognizable offence has been brought to the notice of the court and the court takes cognizance of an offence whereafter only it can summon the accused to stand trial and thereafter adopt a procedure thereafter meaning thereby whether the trial would be summary one or a warrant one or the same would be tried by a Court of Sessions. It is unfortunate that a trial was directed to commence without knowing who the accused are, what would be the charges against them and, therefore, it is all the more surprising that the applicant was directed to prepare a list of accused and further directed to prepare a charge for each of the accused containing the sections of which breach is complained of and the particulars of some breach and the reference thereto already made in the pleadings before the court.

25. Apaft from the fact that the procedure adopted by the learned trial judge as would be noticed hereinafter is not contemplated under the statute, the impugned judgment is fraught with grave consequences. A court cannot fish out evidence in order to assist one party and particularly if a trial on evidence is held it would be advantageous to a party also in the civil proceeding who had all along been present in court and, thus, is aware of the rival contention. See Padam Sen v. State of Uttar Pradesh, and I.T.C. Limited v. M.M.P. Lines Pvt Ltd., .

26. A party to a lis who makes an allegation of commission of an offence by the other is under an obligation to prove the same even if the defendant in a proceeding has himself told an untrue story. Even in a civil proceeding particulars of fraud had to be pleaded and proved to the satisfaction of the court. Before a person can be asked to stand trial, commission of such fraud has to be prima facie proved and no criminal trial can be commenced only on the basis of allegations. But even in such case, such prima facie evidence has to be found out at the conclusion of the proceedings.

27. The jurisdiction to take cognizance of a particular offence has to be conferred by legislation. Such power must be conferred expressly. It cannot be assumed on intendment or upon taking recourse to the supposed interpretation of statute.

28. The Companies Act albeit is a special statute. It has defined offences and laid down the sentences. Except in the case of certain offences it does not lay down the procedure. It also in a case of this nature does not empower the company court to take cognizance. Keeping in view the provision of Articles 20 and 21 of the Constitution of India as also the criminal jurisprudence person summoned to stand trial only when the court satisfies itself that such a case had been made out. A conclusion to the aforementioned effect can be arrived at only upon application of mind to the materials on records. Before a person is asked to stand trial the court must come to a finding that a person so summoned a prima facie case has been made out against him.

29. A finding to the aforementioned fact can be arrived at only when the hearing of the main case takes place either on affidavits or on evidence. A direction to hold a trial, in our considered opinion, cannot be passed at interlocutory stage.

30. Section 2(11) of the Companies Act defined the court to mean :

"(a) with respect to any matter relating to a company (other than any offence against this Act), the court having jurisdiction under this Act with respect to that matter relating to that company, as provided in Section 10 ;

(b) with respect to any offence against this Act the court of a magistrate of the First Class or as the case may be, a presidency magistrate, having jurisdiction to try such offence."

31. We may put on record that in respect of other companies the respondents had filed similar applications on similar charges, i.e., Debonair Agency Ltd. and Sandip Investment Ltd. Although a great deal of argument has been advanced before us but it is stated that in the other company proceedings, it had been held that fraud had not been proved, but despite the same, the learned trial judge directed holding of trial. It is necessary for this court to consider the question as to whether the principle of estoppel by records would arise for consideration in their appeal in terms of the decisions in Fidelitas Shipping Company Ltd. v. V/0 Exportchleb [1965] 2 All ER 4 (CA). In a decision reported in 39 CLJ 40, 48, Nazoo Meah v. Mazar Ali 43 Cal LJ 501, 506 and Halsbury Law's of England, volume 10, fourth edition paragraph 1053 as such a question is an academic one.

32. Section 539 and Schedule XI of the Act deal with the situation where the alleged falsification, alteration, etc. has been committed after filing of a Section 397/398 application and thus any past act before the filing of such application would not be covered thereunder. In the instant case the allegations are that such falsification had taken place prior to filing of the application.

33. Section 454(5A) of the Companies Act expressly provides for a power to take cognizance of an offence under Sub-section (5) thereof upon receiving a complaint of facts constituting an offence and trying the offences itself in accordance with the procedure laid down in the Code of Criminal Procedure for the trial of summons cases by magistrates. No such provision exists in respect of offences under the XI Schedule.

34. Expressio unius est exclusio alterius which means the express mention of one thing implies the conclusion of another.

35. Had the intention of the Legislature been that the company court apart from the provision contained in Section 454(5A) of the Companies Act would have jurisdiction to take cognizance, the same was required to be stated in general terms.

36. It is now well known that in a statute if some power is explicitly conferred in relation to certain matters, such provisions would be deemed to be excluded in relation to the other. The learned judge appears to have proceeded with a preconceived notion as he started his judgment saying :

"The curtain lifts on this litigation on the auspicious Ram Navami Day of 1989 when the elder brother Mahabir stole company books from the younger brother Bajrang."

37. In our opinion, it is inconceivable that criminal trial will be held before conclusion of the hearing of the civil matter and that too without any complaint being" filed before the learned judge.

38. The learned trial judge also erred that the power to pass orders under Section 397/398 as also the power to punish for an offence as it partakes of the character of a criminal sentence of imprisonment or an imposition of a fine by a criminal court.

39. The entire approach, to our mind, is erroneous. The suggestion to hold a criminal trial appears to have come up for consideration at the instance of the learned judge, the parties did not say that a criminal trial on evidence should be held.

40. Section 406 of the Companies Act merely said that the provision of sections 539 to 544, both inclusive, shall apply in the form set forth in Schedule XI in relation to an application under Sections 397 and 398 of the Companies Act. Schedule XI which, inter alia, modifies the provision of sections 539 to 544 provide as to what would be the penalty for falsification of book and what would be the necessary ingredients therefor. It may be that such an offence takes place in the course of the trial resulting in a procedure adopted under Section 340 of the Code of Criminal Procedure but Schedule XI to the Companies Act creates separate offences although analogous provision exists in the Indian Penal Code. They make the persons liable for punishment if they are found guilty of commission of such offence irrespective of the fact as to whether such falsified books had been produced in a court or not. If the books had been produced in the court and an offence is created in a proceedings, the procedure laid down under Section 340 of the Code of Criminal Procedure has to be followed. This aspect of the matter has recently been considered by the apex court in Sachida Nand Singh v. State of Bihar [1998] C.Cr.L.R. (SC) 101.

41. In view of Sachida Nand Singh's case [1998] C.Cr.L.R. (SC) 101, as the case does not come within the purview of Section 195(1)(b)(ii) of the Indian Penal Code, a complaint petition would be maintainable.

42. Unless the power to take cognizance and try an offence is expressly conferred under special statute, the provision of the Code of Criminal Procedure would apply. Reference in this connection may be made to Section 4(2) and Section 26(b) of the Criminal Procedure Code which read thus :

"4. Trial of offences under the Indian Penal Code and other laws.--(2) All offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."

"26. Courts by which offences are triable.--Subject to the other provisions of this Code.--(b) any offence under any other law shall, when any court is mentioned in this behalf in such law, be tried by such court and when no court is so mentioned, may be tried by-

(i) the High Court, or

(ii) any other court by which, such offence is shown in the First Schedule to be triable."

43. The mention of the High Court in Section 26 of the Criminal Procedure Code, 1973, cannot be said to have any application in the instant case as at present it exercises original criminal jurisdiction only in terms of Sections 406 and 407 of the Code of Criminal Procedure. Thus, except such a matter, when an offence is punishable up to seven years the same would be tried by the Magistrate First Class. The First Schedule to the Code of Criminal Procedure, thus, has to be read with Section 2(11)(b) and Section 22 of the Companies Act.

44. In Harish Chandra v. R. B. Kavindra Narain Sinha , it is stated that there are only three ways by which the High Court could try an offence under the Act which are as follows :

(i) The High Court would have jurisdiction to try the accused only if the case was committed to the High Court under Section 194(1) of the Code of Criminal Procedure, 1898.

(ii) or if proceedings are started on an application by the Advocate General under Section 194(2) of the Code of Criminal Procedure, 1898.

(iii) or if any case is transferred to the High Court under Section 526 of the Code of Criminal Procedure, 1898.

45. The same view has been taken in [1949] 1 Cal 24 ; K. Venkata Rao v. State by the Registrar of Companies, Mysore, AIR 1965 Mysore 274 ; [1966] 36 Comp Cas 562 and [1970] All. W.R. 160.

46. Sections 194(1) and 194(2) have been deleted under the Criminal Procedure Code, 1973.

47. This court had the jurisdiction to try a sessions case but even such a jurisdiction has been curtailed by reason of section 8 of the City Sessions Court Act, 1953. Even the said provision now has been deleted in 1969 by West Bengal Act No. 33 of 1969 and thus, this court has no original criminal jurisdiction to try the offence except those which had been initiated prior to the coming into force of the said amendment Act.

48. It also appears to us to be against the basic principle of criminal jurisprudence that a civil and criminal trial should be held by the same court simultaneously. There are instances where civil proceeding has been stayed during pendency of a criminal proceedings and vice versa depending on the facts and circumstances of the case. See M.S. Sheriff v. State of Madras, ; Nandu Babu v. Rajendra Kumar Singh, .

49. However, in Superintendent and Remembrancer of Legal Affairs, West Bengal v. Birendra Chandra Chakravarty , in a case under Section 409 of the Indian Penal Code while holding that the dispute between the parties is civil dispute. The apex court held (p. 663) :

"We, however, think that it is not possible to fasten criminal liability, beyond reasonable doubt, upon the respondent before the right and the title to the Bansdroni properties is properly established by Smt. Saila Bala Devi by means of a civil suit. We think that the High Court was correct in coming to the conclusion, having regard to all the facts and circumstances of the case, that a dispute of an essentially civil nature had to be decided between Smt. Saila Bala Devi and the respondent before any question of criminal liability could be satisfactorily adjudicated upon."

50. The dangerous consequences which may follow if both the "civil" and "criminal" trials are held together would be that while in a civil proceeding a party may examine himself as a witness failing which an adverse presumption would be drawn against him, in a criminal proceedings he is not bound to examine himself nor can he be compelled to do so. This may result in a piquant situation.

51. In State of Rajasthan v. Kalyan Sundaram Cement Industries Ltd. , the apex court has held that a civil suit may not be stayed during the criminal proceeding. The aforementioned aspect of the matter was required to be taken into consideration in view of the observations of the learned trial judge to the following" effect :

"If the respondent does not go to jail, it might well be that he will be the purchaser of the shares of the oppressed group. If the respondent goes to jail, ,it might well be that the respondent will also be compelled to dis-invest the shares held by him in the company."

52. The learned trial judge evidently adopted a wrong procedure in directing holding of a criminal trial inter alia on the aforementioned ground. We may further note that the word "court" occurs in Sections 542 and 543 of the Companies Act whereby the court was given powers to grant compensation which is a civil relief but where the criminal offences under Sections 539 to 544 of Schedule XI were created, Parliament in its wisdom did not use the said word. Thus, evidently, a distinction has to be made between civil jurisdiction and criminal jurisdiction in Schedule XI itself and for that purpose, the court is required to take recourse to the purposive approach while interpreting the provision.

53. Let us now consider some of the decisions cited at the Bar. In M.V. Elisabeth v. Hanuan Investment and Trading Pvt. Ltd. AIR 1999 SC 1014, the apex court was dealing with the Colonial Courts of Admiralty (India) Act. It held that an action in admiralty would be an action in rem. This decision has no application in the facts of the present matter.

54. In Devarapalli Lakshminarayana Reddy v. V. Narayana Reddy, , the court was concerned with its power to send a complaint to the police for investigation under Section 156(3) of the Criminal Procedure Code. The court, however, held (p. 1677) :

"This raises the incidental question : what is meant by 'taking cognizance of an offence' by the magistrate within the contemplation of Section 190 ? This expression has not been defined in the'Code. But from the scheme of the Code, the content and marginal heading of Section 190 and the caption of Chapter XIV under which sections 190 to 199 occur, it is clear that a case can be said to be instituted in a court only when the court takes cognizance of the offence alleged therein. The ways in which such cognizance can be taken are set out in Clauses (a), (b) and (c) of Section 190(1). Whether the magistrate has or has not taken cognizance of the offence will depend on the circumstances of the particular case including the mode in which the case is sought to be instituted, and the nature of the preliminary action, if any, taken by the magistrate. Broadly speaking when on receiving a complaint, the magistrate applies his mind for the purposes of proceeding under Section 200 and the succeeding sections in Chapter XV of the Code of 1973, he is said to have taken cognizance of the offence within the meaning of Section 190(l)(a). If, instead of proceeding under Chapter XV, he, has in the judicial exercise of his discretion, taken action of some other kind, such as issuing a search warrant for the purpose of investigation, or ordering' investigation by the police under Section 156(3) he cannot be said to have taken cognizance of any offence."

55. In Harish Chandra v. R. B. Kavindra Narain Sinha , a Full Bench presided over by Sulaiman C. J. held (headnote of AIR) :

"There is absolutely no conflict between the provisions of Sections 5 and 29 of the Code. The mere fact that Section 29 empowers the High Court to try an offence under any other law than the Penal Code does not show that the High Court can take cognisance of the offence straight off, try the accused and convict and punish him without following the procedure laid down in the Code. So in the case of an offence due to contravention of the provisions of section 85 of the Companies Act, the High Court has no jurisdiction to take cognizance of and try any such offence and impose the fines prescribed by the Companies Act. The High Court would have jurisdiction to try the accused only if the case is committed to the High Court under Section 194{1) of the Criminal Procedure Code, or if proceedings are started on an application of the Advocate General under Section 194(2) or are transferred to it under Section 526 of the Criminal Procedure Code. It would not have jurisdiction to try the accused merely on an application made under section 85 of the Companies Act."

56. In Mohanlal Ganpatram v. Shri Sayaji Jubilee Cotton and Jute Mitts Co. Ltd., , the court clearly held (p. 103) :

"These are the only two cases in which on an application under Section 397 or 398, the court is empowered to give relief in respect of past and concluded transactions which are no longer continuing wrongs and they are really in the nature of exceptions to the general principle manifest from the language of Sections 397 and 398 that the power of the court under both the sections is confined only to making an order for the purpose of putting an end to oppressive or prejudicial conduct and the court cannot make an order setting aside or interfering with past and concluded transactions which are no longer continuing wrongs or giving compensation to the company or the aggrieved shareholders in respect of such transactions."

57. In Hanuman Prosad Verma v. Stock and Finance Ltd, [1985] 58. Comp Cas 338 (Cal), the court was concerned with absolutely a different situation. It lays down that an application under Section 406 read with rule 11(a), Sub-rules (18) and (19) must be followed for filing an application under Schedule XI could only be made in the course of proceedings under Section 397 or 398 of the Companies Act. Such an application was filed after the proceedings were concluded but in appeal liberty was given to apply which was held to mean that liberty to apply for direction for the purpose of clearly working out the order passed.

58. In Official Liquidator, R.C. Abrol and Co. Pvt. Ltd. v. R. C. Abrol [1977] 47 Comp Cas 537 a learned single judge of the Delhi High Court clearly held that the company court having no power to take cognizance except in a case falling under Section 454 of the Companies Act, no such criminal proceedings can be initiated in the company court.

59. For the reasons aforementioned the impugned judgment cannot be upheld. The appeal is, therefore, allowed but there will be no order as to costs.

D.B. Dutta, J.

60. I agree.