The Kerala High court granted the stayed the Fraud proceedings under Section 447 of the Companies Act before the special court.
The petitioners, Dr.J.P.Josheph invoked the power of the High Court to quash all proceedings against the petitioners on the files of Additional District and Session Court VII, Ernakulam i.e. Special Court under the Companies Act, 2013.
The Special Court has taken cognizance based on a complaint filed by the respondent for the offense of ‘fraud’ punishable under Section 447 of the Companies Act 2013.
The specific allegations against the petitioners are that they were the directors of the company by the name Cosmopolitan Hospitals Private Limited and the 6th petitioner herein was the Managing Director of the said company during the period up to September 2015. It is the case of a petitioner that the petitioner had continued as the Managing Director in spite of attaining disqualification under Section 196 (3).
It is alleged that the Petitioner attained the age of 70, and therefore, she could not have continued as a Managing Director, but she had drawn salary and gratuity, to which she is not eligible. Since the payment gratuity is authorized by the board of directors, the receipt of salary and gratuity by Petitioner is ‘fraud’ done in collusion with the other petitioners, which is punishable under Section 447 of the Companies Act.
It has been further submitted the allegations raised in the complaint has no legal basis and even assuming that such allegations are correct, the Special Court under the Companies Act cannot take cognizance for an offense under Section 447 of the Companies Act except on a complaint in writing made by the Director, Series Fraud Investigation Office or by other authorized officers of the Central Government as per the express provisions contained in 2ndproviso to subsection (6) of Section 212 of the Companies Act.
Thus, there is an express bar in taking cognizance by Special Court upon private complaint for the offences punishable under Section 447 of the Companies Act. The Special Court has taken cognizance and has issued summonses without considering the express provisions of sub section (6) of Section 212 of the Companies Act. The entire proceedings in pending on the files of Additional District and Sessions Court VII, Ernakulam is therefore liable to be quashed.
The single-judge bench of Justice V.G.Arun granted the interim stay of entire proceedings pending on the files of Additional District and Sessions Court VII, Ernakulam for the period of 2 months.
Advocates Shameem Ahamed M.P, S.M Ameerul Millath, Abid Millath and Cyriac Tom appeared for the petitioners.
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