1                      CC.No.233-17


BEFORE THE SPECIAL COURT FOR ECONOMIC
      OFFENCES AT BANGALORE.

     Dated this the 26th day of April 2018.

                   : Present:
   Sri. SHANTHANNA ALVA M., B.A., LL.B.,
           Presiding Officer, Special Court
          for Economic Offences, Bangalore.

               CC. No. 233-2017

Complainants: 1. M/s.Peerless Engineering Products
                 Private Limited, No.26, 12th Main,
                 III-Block, Jayanagar, Bangalore-11.
                 Rep. by its Managing Director -
                 Sri. Sabhapathi, Dorai Raju.

               2. S. Dorai Raju,
                  S/o. Sabhapathi Mudaliar,
                  70 Years, No.26, 12th Main,
                  III-Block, Jayanagar, Bangalore-11.

           (By Sri. M.T.S., Advocate)

                  Vs.

Accused:     Haridas Pottath, S/o. Kumar Pottath,
             55 Years, "Sree Hari", No.56, 7th Main,
             Shankaranagar, Bangalore-560096.

             (Accused by Sri. K.V.S., Adv.,)
                                 2                  CC.No.233-17


                          JUDGMENT

1. The complainant No.1 is a registered company named as M/s. Peerless Engineering Products Private Limited, Bangalore and it represented by its complainant No.2 - Managing Director - S. Dorai Raju, filed the complaint u/s. 200 of Cr.P.C. alleging that the accused has committed the offence punishable u/s. 166 of the Companies Act, 2013. (Herein after referred as the 'Act')

2. The complainant's case in brief is that the main object of complainant No.1 company i.e., M/s. Peerless Engineering Products Private Limited, Bangalore is to manufacture, import, export, purchase and to sell LPG stoves and other appliances in all kinds of varieties of forms. Accused was inducted as director of the company on 07.12.1993. The complainant No.2-Managing Director of the company met with accident in the Year - 2000 and he lost the eyesight. Accused assured that he would help him to manufacture paper cups, but instead of that he started to exploit the company and use the open land 3 CC.No.233-17 belonging to the company in illegal way. Accused brought storage tanks for storing the acid for doing electroplating business. The accused is doing the illegal activities without the consent from the company and sitting on the land which does not belong to him. The carrying of electroplating business is illegal. Thus, the Karnataka Pollution Control Board issued a show cause notice dated: 02.03.2015 to the company, for carrying out such activities in violation of the provisions of Water (Prevention and Control of Pollution) Act, 1981. The accused issued the reply dated: 04.03.2015 and 06.03.2015 to the said notice on a fabricated letterhead. The letterhead not contains the address of the registered office of the company as required u/s. 12 of the Companies Act and that amounts to commission of offence punishable u/s.12(8) of the Act. The accused issued the reply and made the Karnataka Pollution Control Board that he has done with electroplating business for wrongful gain and thus, committed the offence punishable u/s. 447 of the Act. The 4 CC.No.233-17 accused also committed the forgery by signing the letter as a person authorized to represent the company and thereby committed the offence punishable u/s.416 and 419 of IPC. The accused intentionally violated the Pollution Laws and started the manufacturing of electroplating business. The accused is also preventing the Managing Director of the company from discharging his duties. The accused has also indulged in filing civil and criminal cases against the company and his intention to harass not only the company, but also the Managing Director personally taking advantage of his disability. The accused is acting against the interest of the company and he has been violating the duties as Director envisaged u/s. 166 of the Act, hence the complaint.

3. On the presentation of complaint, cognizance was taken and thereafter, recording the sworn statement, the case was registered against the accused for the offence punishable u/s. 12(8), 166 and 447 of the Act and summons was issued to accused. Accused appeared 5 CC.No.233-17 through his counsel and got enlarged on bail. Then, the copies of the complaint and other documents were furnished to him. Then, it revealed that the complaint is already filed for the offence punishable u/s. 447 of the Cr.P.C. and that involves the offence punishable u/s. 12(8) of the Act also. Thus, the accusation was framed only for the offence punishable u/s. 166 of the Act, and read over to the accused and he denied the accusation leveled against him and pleaded not guilty and claimed for trial

4. To prove the case, the authorized person of the complainant got examined as P.w.1 and got marked the documents as Ex.p.1 to 7. While the cross examining P.w.1, the accused got marked Ex.D.1.

5. After closure of the complainant's side evidence, the statement of accused was recorded as provided u/s. 313 of Cr.P.C. The accused denied incriminatory evidence found against him and he did not choose to lead the defence evidence.

6. Heard the arguments of the learned counsels of the complainant and accused. Perused the evidence on record & documents. The points that arise for consideration are :

Point No.1: Whether the complainant has proved that the accused acted against the interest of the company and he is violated the duties as Director of the company and thereby committed the offence punishable u/s.166 of the Act ?

Point No.2: What order?

7. My findings on the above said points are as under:

Point No.1: In the Negative, Point No.2: As per the final orders for the following: REASONS

8. Point No.1: The complainant No.1 is a registered company, complainant No.2 is the Managing Director. The accused is the Director of the complainant No.1 company. In the complaint, various allegations are made against the accused and most of them are already involved in the complaint filed against the accused, on which the case in 7 CC.No.233-17 CC. No 192/2016 was registered. The offence which not covered under the earlier complaint is the offence punishable under section 166 of the Act.

9. Firstly, it contended that Company hasn't authorized the Managing Director to file the complaint. It is argued that the Managing Director has no authority to file the complaint on behalf of the company. The complainant No.2 not produced the evidence to the effect that he authorized to file the complaint on behalf of the company. In the Article of Association of company, the power is not given to the Managing Director to file the criminal case on behalf of the company. It is not the case of complainant No.2 that the Board of Directors have authorized him to file the complaint against the accused. The Managing Director has right to file the complaint on his individual capacity against the Director of the company.

10. Sec. 166 (2) to (7) of the Companies Act, 2013 deals with the duties of Directors. Sub-Sec.2 says that - the director of a company shall act in good faith in order to 8 CC.No.233-17 promote the objects of the company for the benefit of its members as a whole, and in the best interest of the company, its employees, the shareholders, the community and for the protection of environment. Sub-Sec.3 says that

- the director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment. Sub-Sec.4 says that - a director of the company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company. Sub-Sec.5 says that - a director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relative, partners, or associates and if such director is found guilty of making any undue gain he shall be liable to pay an amount equal to that gain to the company. Sub-Sec.6 says that - a director of a company shall not assign his office and any assignment so made shall be void. Sub.-Sec.7 says that - if a director of the company contravenes the provisions of 9 CC.No.233-17 this section such director shall be punishable with fine which shall not be less than one lakh rupees, but which may extend to five lakh rupees.

11. In the complaint, so many allegations are made and most of them are already covered in the pending cases. The sum and substances of the accusation involved in this case is that accused in contravention of objection of company, started the business of electroplating and thereby acted against the interest of the company. The complainant No.2-Sri.S.Dorai Raju examined as P.w.1 deposed in line with complaint averments and produced the Memorandum and Articles of Association, notice dated: 02.03.2015 issued by the Karnataka State Pollution Control Board, the reply dated:06.03.2015 given the company, signed by the accused, the closure directions notice dated:18.08.2015 issued by the Karnataka State Pollution Control Board, the inspection report dated:17.07.2015, the company of the mahazar, notice dated:22.09.2015 issued 10 CC.No.233-17 by the Karnataka State Pollution Control Board are marked as Ex.p.1 to 7.

12. The accused produced and got marked the documents as Ex.D.1 and this document discloses that the complainant No.2 in the year 2012 filed the application to Karnataka State Pollution Control Board to give the consent for manufacture of machine equipments, hydraulic and pneumatic equipments with hard chrome plating. P.w.1 in the cross examination admitted that he sought the permission to carry out the electroplating business with all safety measures. P.w.1 admitted that after submission of application, the concerned official visited the factory premises. The oral and documentary evidence referred above discloses that the complainant No.2 on behalf of the company submitted the application to accord the permission to start the electroplating business.

13. The document is marked as Ex.p.2 discloses that the Karnataka State Pollution Control Board has issued show cause notice dated: 02.03.2015 to the company for 11 CC.No.233-17 violating the directions. Ex.p.3 is the reply dated: 06.03.2015 given by the accused. The documents is marked as Ex.p.4 to 6 disclose that the officials have inspected the premises of complainant No.1 company and then issued closure direction notice u/s.33(A) of the Water (Prevention and Control Pollution) Act, 1974, R/w. Rule 34 of the Karnataka State Board for Prevention and Control of Water Pollution (Procedure for Transaction of Business) and the (Prevention and Control Pollution ) Rules, 1976,

14. The learned counsel of the complainant argued that accused started the business of electroplating and manufacturer of paper cups and it amounts to acting against the interest of the company. The evidence on record shows that it is the complainant No.2 applied for the permission to start the electroplating and there is no reliable evidence to the effect that the accused started the electroplating and paper cups in the company premises. Only for the reason that the accused issued the reply dated:06.03.2015 to the show cause notice issued by the 12 CC.No.233-17 Karnataka State Pollution Board, it cannot be held that the accused acted against the interest of the company. In the reply, the accused tried to protect the interest of the company. Thus, on appreciation of evidence on record, I hold that there is no reliable evidence to the effect that the accused acted against the interest of the company. Accordingly, this point is answered in negative.

15. Point No.2: In view of my findings on Point No.1, I proceed to pass the following :-

ORDER By exercising the power conferred u/s. 255 (1) of Cr.P.C. accused is acquitted from the offence punishable u/s 166 of the Companies Act, 2013.

Bail bond of accused shall stands cancelled. (Dictated to the Stenographer, directly on computer, typed by her, corrected and then th pronounced by me, in open court on this the 26 day of April - 2018.) PRESIDING OFFICER.

ANNEXURE:

ON BEHALF OF THE COMPLAIN ANT:

WITNESSES:

P.w.1 - S.Doari Raju.

DOCUMENTS:

Ex.p.1 - C/c of Memorandum & Articles of Association, Ex.p.2 - C/c of Notice dated:02.03.2015 by KSPCB, Ex.p.3 - C/c of Reply dated:06.03.2015, Ex.p.4 - C/c of Closure Notice dated: 18.08.2015, Ex.p.5 - C/c of Inspection report dated:17.07.2015, Ex.p.6 - C/c of Mahazar dated:17.07.2015, Ex.p.7 - C/c of Notice dated:22.9..2015. .

ON BEHALF OF THE ACCUSED:

WITNESSES: Nil.

DOCUMENTS:

Ex.D.1 - Document under RTI.

(SHANTHANNA ALVA. M) PRESIDING OFFICER, SPL. COURT FOR ECONOMIC OFFENCES, BANGALORE.

26.04.2018 Complt., - M.T.S., Accused - KVS, For Judgment. (Judgment pronounced in open court vide separate order) ORDER By exercising the power conferred u/s.

255 (1) of Cr.P.C. accused is acquitted from the offence punishable u/s 166 of the Companies Act, 2013.

Bail bond of accused shall stands cancelled.

PRESIDING OFFICER.