Companies Act can't annul search & seizure under IPC

M Kishan Rao & Ors vs Mrs P Santha Reddy & Anr â€” (2002) 111 Company Cas Pg 361: The decision of the Andhra High Court in this case and the case mentioned below are linked because of the common facts of the case. The respondent was a shareholder of the fourth petitioner company and filed the case against petitioners 1, 2 and 3 under sections 297, 299 and 300 of the Companies Act and further sections 409 and 411 of the Indian Penal Code. It was alleged that petitioner 1 was functioning as MD of the company and petitioners 2 & 3, his sons, were directors of the company. Several contracts were entered into with bogus companies and the funds of the company to the tune of several crores of rupees were siphoned off by awarding a contract to a firm, of which the two partners were petitioners Nos 2 & 3. The board of the company consisted only of four persons, of whom petitioners 1-3 were interested directors, and no resolution for entering into a contract was in fact passed. On a petition to have the complaint quashed on the ground that it was filed beyond time, the court held that the offence under section 409 of the IPC (criminal breach of trust) was inextricably tied up with the offences under the Companies Act. The offences were in fact not against the company but the directors of the company. A prima facie case has been made out against the directors. The offence under section 409 was punishable with imprisonment for life or 10 years and no limitation was prescribed for the offence. The question of the complaint being barred by limitation having been filed after six months did not arise. Inspection of Books â€“ Search Warrant: Companies Act provisions do not supersede Penal Code provisions M Kishan Rao & Ors vs Mrs P Santha Reddy & Anr â€” (2002) 111 Company Cas Pg 373 The facts of the case have been mentioned. The point to be decided by the court in this case was whether a search warrant could be issued by a magistrate under the Criminal Procedure Code in order to ascertain the facts set out in the complaint. In the present case, the complainant obtained a search warrant from the special judge for economic offences for searching the premises of the registered offices of the company and for seizing certain documents. It was stated by the complainant that in order to prove the offences under section 299 and 300, it was necessary to examine the case books, correspondence, vouchers and bank statements to prove the offences under sections 409 and 411 of the Indian Penal Code. On behalf of the petitioners, viz, the MD and his sons, it was argued that orders for searching and inspection under the Companies Act could only be passed under section 627 and that such orders could be passed only if initiated by the public prosecutor or the central government or company prosecutor. It is not open to any shareholder to make such an application. It was further argued that section 627 barred the jurisdiction of any other court dealing with the subject under the Companies Act and therefore the search warrant obtained by the complainant was not valid. The court held that section 627 of the Companies Act could not act as a substitute for issuing a search warrant under the IPC and effect annulment of the relative section. It had also been argued by the company that issuing the warrant against the company violated the principle that an accused should not be compelled to bear witness against himself. The court held that in this case the company had been absolved of the offence. It was the directors alone who had been accused of the misdemeanours and the question of failure of this principle did not arise. The petition filed by the directors was dismissed.

Companies Act can't annul search & seizure under IPC

M Kishan Rao & Ors vs Mrs P Santha Reddy & Anr — (2002) 111 Company Cas Pg 361: The decision of the Andhra High Court in this case and the case mentioned below are linked because of the common facts of the case.

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