Kiran Raj

The Supreme Court Division Bench of Justice J.K. Maheshwari and Justice K. Vinod Chandran on Friday (January 9) set aside a High Court order and quashed Companies Act charges arising from a private complaint against two directors. The complainant alleged they held an unauthorised meeting, inducted new directors and filed false forms. The Court held that allegations of fraud under the Companies Act cannot proceed through private complaints, since a Special Court may take cognizance only on a written complaint by the SFIO Director or a Central Government-authorised officer under Section 212(6). It clarified that an individual may approach the NCLT under Section 213 to seek an SFIO investigation, subject to eligibility, and directed that the remaining IPC offences be tried by the competent court.

The dispute arose from internal management and control issues within a private limited company incorporated under the Companies Act, 2013. The complainant and his wife were the original promoters, directors, and majority shareholders. Two individuals were inducted as directors at different points in 2015 and 2016. Differences subsequently emerged concerning governance, amendments to the Articles of Association, and control over the company’s affairs.

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Amendments to the Articles of Association were approved through meetings in 2016 and again in 2021, resulting in provisions requiring directors other than the complainant and his wife to retire and seek reappointment. Following an annual general meeting in November 2021, the reappointment resolutions concerning the accused directors failed, leading to cessation of their directorship.

One of the former directors challenged his removal before the National Company Law Tribunal, where proceedings remain pending. Thereafter, a private criminal complaint was filed alleging illegal convening of meetings, appointment of directors without authority, fabrication of resolutions, and filing of false statutory documents. The Special Court took cognizance of offences under Sections 448 and 451 of the Companies Act, 2013, along with several offences under the Indian Penal Code.

The accused sought quashing of proceedings under Section 482 CrPC, contending statutory bar under Section 212(6) of the Companies Act and asserting the dispute to be civil in nature. The High Court declined interference, leading to the present appeals.

The Court examined the statutory scheme of the Companies Act and the interlinkage between Sections 448 and 447. It “recorded that Section 448 does not prescribe an independent punishment and provides that a person making a false statement shall be liable under Section 447 of the Companies Act.”

The Bench “observed that Section 447 is the substantive provision laying down punishment for fraud and that offences under Section 448 cannot be read in isolation from Section 447.” It further “stated that an offence under Section 448 is inextricably linked to Section 447, since punishment can only be imposed by invoking Section 447.”

On the scope of Section 212(6), the Court “recorded that the phrase ‘offence covered under Section 447’ includes offences which attract punishment under Section 447, even if such offence is described under another provision of the Act.” The Court “observed that the second proviso to Section 212(6) creates a clear bar on taking cognizance unless the complaint is filed by the Director, SFIO, or an authorised officer of the Central Government.”

It was further “noted that permitting cognizance on a private complaint would defeat the statutory safeguard intended to prevent frivolous allegations of fraud in corporate affairs.” The Bench “stated that what cannot be done directly under law cannot be permitted indirectly by invoking Section 448 without complying with the conditions attached to Section 447.”

With respect to Section 451, the Court “observed that once cognizance under Section 448 itself is barred, the question of repeated default under Section 451 does not arise.”

On IPC offences, the Court “recorded that mere pendency of civil proceedings or company law proceedings does not bar continuation of criminal proceedings.” It “stated that allegations under the IPC require adjudication on their own merits and cannot be quashed solely on the ground of parallel civil remedies.”

The Court directed that “the complaint case bearing C.C. No. 58/2022, the order dated 10.10.2022 of the Special Court and all consequential proceedings to the extent of Section 448 and 451 of the Companies Act shall stand quashed.”

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“The learned Judge of the Special Court where the C.C. No. 58 of 2022 is pending shall take steps, in consultation with the Principal District Judge of the district to transfer the complaint case to the appropriate court having territorial jurisdiction to try the complaint case,” and that “the said transfer shall be made within a period of 4 weeks and then the complaint case shall be adjudicated on its own merits, uninfluenced by any of the observations made hereinabove, as expeditiously as possible.

“We make it clear that the observations made hereinabove in paragraph 56 are not an expression of any views on the merits of the complaint, however, the competent Court, which is continuing the offences under the IPC and maintaining the private complaint may examine all relevant objections, if any, raised at appropriate stage or during trial by way of defence, uninfluenced by the above observations.”

“All pending applications shall stand disposed of” and “there shall be no order as to costs.”

Advocates Representing the Parties

For the Appellants: Mr. Shailesh Madhiyal, Sr. Adv. Mr. Awanish Kumar, Adv. Mr. Anchit Singa, Adv. Ms. Garima, Adv. M/S. Dharmaprabhas Law Associates, AOR

For the Respondents: Mr. Kumar Vaibhaw, Adv. Ms. Devina Sehgal, AOR Mr. Dhananjay Yadav, Adv. Mr. Jayanth Muth Raj, Sr. Adv. Mr. Sadineni Ravi Kumar, AOR

Case Title: Yerram Vijay Kumar v. State of Telangana & Anr.; Rajeev Kumar Agarwal v. State of Telangana & Ors.
Neutral Citation: 2026 INSC 42
Case Number: Criminal Appeal Nos. of 2026 (arising out of SLP (Crl.) Nos. 11530 & 14783 of 2024)
Bench: Justice J.K. Maheshwari, Justice K. Vinod Chandran