Thursday, June 13, 2013

Non Acceptance Of Lawyers Opinion Would Not Amount Criminal Prosecution Against Him



It is beyond doubt that a lawyer owes an “unremitting loyalty” to the interests of the client and it is the lawyer’s responsibility to act in a manner that would best advance the interest of the client. Merely because his opinion may not be acceptable, he cannot be mulcted with the criminal prosecution, particularly, in the absence of tangible evidence that he associated with other conspirators. At the most, he may be liable for gross negligence or professional misconduct if it is established by acceptable evidence and cannot be charged for the offence under Sections 420 and 109 of IPC along with other conspirators without proper and acceptable link between them. It is further made clear that if there is a link or evidence to connect him with the other conspirators for causing loss to the institution, undoubtedly, the prosecuting authorities are entitled to proceed under criminal prosecution. Such tangible materials are lacking in the case of the respondent herein.
In the light of the above discussion and after analyzing all the materials, we are satisfied that there is no prima facie case for proceeding in respect of the charges alleged insofar as respondent herein is concerned. We agree with the conclusion of the High Court in quashing the criminal proceedings and reject the stand taken by the CBI.
SUPREME COURT OF INDIA
Central Bureau of Investigation, Hyderabad
v.
K. Narayana Rao
CRIMINAL APPEAL NO. 1460 OF 2012
SEPTEMBER 21, 2012
JUDGMENT
P. Sathasivam, J. –
1. Leave granted.
2. This appeal is directed against the final judgment and order dated 09.07.2010 passed by the High Court of Judicature, Andhra Pradesh at Hyderabad in Criminal Petition No. 2347 of 2008 whereby the High Court allowed the petition filed by the respondent herein under Section 482 of the Code of Criminal Procedure, 1973 (in short “the Code”) and quashed the criminal proceedings pending against him in CC No. 44 of 2007 (Crime No. 36 of 2005) on the file of the Special Judge for CBI cases, Hyderabad.
3. Brief facts :
(a)  According to the prosecution, basing on an information, on 30.11.2005, the CBI, Hyderabad registered an FIR being RC 32(A)/2005 against Shri P. Radha Gopal Reddy (A-1) and Shri Udaya Sankar (A-2), the then Branch Manager and the Assistant Manager, respectively of the Vijaya Bank, Narayanaguda Branch, Hyderabad, for the commission of offence punishable under Sections 120-B, 419, 420, 467, 468 471 read with Section 109 of the Indian Penal Code, 1860 (in short ‘the IPC’) and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 for abusing their official position as public servants and for having conspired with private individuals, viz., Shri P.Y. Kondala Rao – the builder (A-3) and Shri N.S. Sanjeeva Rao (A-4) and other unknown persons for defrauding the bank by sanctioning and disbursement of housing loans to 22 borrowers in violation of the Bank’s rules and guidelines and thereby caused wrongful loss of Rs. 1.27 crores to the Bank and corresponding gain for themselves. In furtherance of the said conspiracy, A-2 conducted the pre-sanction inspection in respect of 22 housing loans and A-1 sanctioned the same.
(b)  After completion of the investigation, the CBI filed charge sheet along with the list of witnesses and the list of documents against all the accused persons. In the said charge sheet, Shri K. Narayana Rao, the respondent herein, who is a legal practitioner and a panel advocate for the Vijaya Bank, was also arrayed as A-6. The duty of the respondent herein as a panel advocate was to verify the documents and to give legal opinion. The allegation against him is that he gave false legal opinion in respect of 10 housing loans. It has been specifically alleged in the charge sheet that the respondent herein (A-6) and Mr. K.C. Ramdas (A-7)-the valuer have failed to point out the actual ownership of the properties and to bring out the ownership details and name of the apartments in their reports and also the falsity in the permissions for construction issued by the Municipal Authorities.
(c)  Being aggrieved, the respondent herein (A-6) filed a petition being Criminal Petition No. 2347 of 2008 under Section 482 of the Code before the High Court of Andhra Pradesh at Hyderabad for quashing of the criminal proceedings in CC No. 44 of 2007 on the file of the Special Judge for CBI Cases, Hyderabad. By impugned judgment and order dated 09.07.2010, the High Court quashed the proceedings insofar as the respondent herein (A-6) is concerned.
(d)  Being aggrieved, the CBI, Hyderabad filed this appeal by way of special leave.
4. Heard Mr. H.P. Raval, learned Additional Solicitor General for the appellant-CBI and Mr. R. Venkataramani, learned senior counsel for the respondent (A-6).
5. After taking us through the allegations in the charge sheet presented before the special Court and all other relevant materials, the learned ASG has raised the following contentions:
 (i)  The High Court while entertaining the petition under Section 482 of the Code has exceeded its jurisdiction. The powers under Section 482 are inherent which are to be exercised in exceptional and extraordinary circumstances. The power being extraordinary has to be exercised sparingly, cautiously and in exceptional circumstances;
(ii)  The High Court has committed an error in holding that no material had been gathered by the investigating agency against the respondent herein (A-6) that he had conspired with the remaining accused for committing the offence; and
(iii)  There is no material on record to show that the respondent herein (A-6) did not verify the originals pertaining to housing loans before giving legal opinion and intentionally changed the proforma and violated the Bank’s circulars.
6. On the other hand, Mr. Venkataramani, learned senior counsel for the respondent (A-6), after taking us through the charge sheet and the materials placed before the respondent seeking legal opinion, submitted that he has not committed any offence much less an offence punishable under Section 120-B read with Sections 419, 420, 467, 468, 471 and 109 of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. He further submitted that based on the documents placed, the respondent herein after perusing and on satisfying himself, furnished his legal opinion for which he cannot be implicated as one of the conspirators for the offence punishable under Section 420 read with Section 109 IPC.
7. We have carefully perused all the relevant materials and considered the rival submissions.
8. In order to appreciate the stand of the CBI and the defence of the respondent, it is necessary to refer the specific allegations in the charge sheet. The respondent herein has been arrayed as accused No. 6 in the charge sheet and the allegations against him are as under:
“Para 20: Investigation revealed that legal opinions in respect of all these 10 loans have been given by Panel Advocate – Sri K. Narayana Rao (A-6) and valuation reports were given by Approved Valuer – Sri V.C. Ramdas (A-7). Both, the advocate and the valuer, have failed to point out the actual ownership of the property and failed to bring out the ownership details and name of the apartments in their reports. They have also failed to point out the falsehood in the construction permission issued by the municipal authorities.
Para 28: Investigation revealed that the municipal permissions submitted to the bank were also fake.
Para 29: Expert of Finger Print Bureau confirmed that the thumb impressions available on the questioned 22 title deeds pertain to A-3, A-4 and A-5.
Para 30: The above facts disclose that Sri P. Radha Gopal Reddy (A-1) and Sri M. Udaya Sankar (A-2) entered into criminal conspirary with A-3 and abused their official position as public servants by violating the bank norms and in the process caused wrongful gain to A-3 to the extent of Rs.1,00,68,050/- and corresponding wrongful loss to the bank in sanctioning 22 housing loans. Sri P.Y. Kondal Rao (A-3) registered false sale deeds in favour of borrowers using impostors as site owners, produced false municipal permissions and cheated the bank in getting the housing loans. He is liable for conspiracy, cheating, forgery for the purpose of cheating and for using forged documents as genuine. Sri B. Ramanaji Rao (A-4) and Sri R. Sai Sita Rama Rao (A-5) impersonated as site owners, executed the false sale deeds. They are liable for impersonation, conspiracy, cheating, forging a valuable security and forgery for the purpose of cheating. Sri K. Narayana Rao (A-6) submitted false legal opinions and Sri K.C. Ramdas (A-7) submitted false valuation reports about the genuineness of the properties in collusion with A-3 for sanction of the loans by Vijaya Bank, Narayanaguda branch, Hyderabad and abetted the crime. Sri A.V. Subba Rao(A-8) managed verification of salary slips of the borrowers of 12 housing loans in collusion with A-3 and abetted the crime.
Para 33: In view of the above, the accused A-1, A-2, A-3, A-4, A-5, A-6, A-7 & A-8 are liable for offences punishable under Section 120-B read with Sections 419, 420, 467, 468, 471 and 109 read with Section 420 IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act and substantive offences thereof.”
With the above details, let us consider whether there is prima facie allegation(s) and material(s) in order to pursue the trial against the respondent herein. In the same way, we have to see whether the reasoning and the ultimate conclusion of the High Court in quashing the charge sheet against the respondent herein (A-6) is sustainable. We are conscious of the power and jurisdiction of the High Court under Section 482 of the Code for interfering with the criminal prosecution at the threshold.
9. Mr. Raval, learned ASG in support of his contentions relied on the following decisions:
 (i)  State of Bihar v. Ramesh Singh, [1977] 4 SCC 39;
(ii)  P. Vijayan v. State of Kerala and Another, [2010] 2 SCC 398; and
(iii)  Sajjan Kumar v. Central Bureau of Investigation, [2010] 9 SCC 368.
10. The first decision Ramesh Singh (supra) relates to interpretation of Sections 227 and 228 of the Code for the considerations as to discharge the accused or to proceed with trial. Para 4 of the said judgment is pressed into service which reads as under:
“4. Under Section 226 of the Code while opening the case for the prosecution the Prosecutor has got to describe the charge against the accused and state by what evidence he proposes to prove the guilt of the accused. Thereafter comes at the initial stage the duty of the Court to consider the record of the case and the documents submitted therewith and to hear the submissions of the accused and the prosecution in that behalf. The Judge has to pass thereafter an order either under Section 227 or Section 228 of the Code. If “the Judge considers that there is no sufficient ground for proceeding against the accused, he shall discharge the accused and record his reasons for so doing”, as enjoined by Section 227. If, on the other hand, “the Judge is of opinion that there is ground for presuming that the accused has committed an offence which— … (b) is exclusively triable by the Court, he shall frame in writing a charge against the accused”, as provided in Section 228. Reading the two provisions together in juxtaposition, as they have got to be, it would be clear that at the beginning and the initial stage of the trial the truth, veracity and effect of the evidence which the Prosecutor proposes to adduce are not to be meticulously judged. Nor is any weight to be attached to the probable defence of the accused. It is not obligatory for the Judge at that stage of the trial to consider in any detail and weigh in a sensitive balance whether the facts, if proved, would be incompatible with the innocence of the accused or not. The standard of test and judgment which is to be finally applied before recording a finding regarding the guilt or otherwise of the accused is not exactly to be applied at the stage of deciding the matter under Section 227 or Section 228 of the Code. At that stage the Court is not to see whether there is sufficient ground for conviction of the accused or whether the trial is sure to end in his conviction. Strong suspicion against the accused, if the matter remains in the region of suspicion, cannot take the place of proof of his guilt at the conclusion of the trial. But at the initial stage if there is a strong suspicion which leads the Court to think that there is ground for presuming that the accused has committed an offence then it is not open to the Court to say that there is no sufficient ground for proceeding against the accused. The presumption of the guilt of the accused which is to be drawn at the initial stage is not in the sense of the law governing the trial of criminal cases in France where the accused is presumed to be guilty unless the contrary is proved. But it is only for the purpose of deciding prima facie whether the Court should proceed with the trial or not. It the evidence which the Prosecutor proposes to adduce to prove the guilt of the accused even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial. An exhaustive list of the circumstances to indicate as to what will lead to one conclusion or the other is neither possible nor advisable. We may just illustrate the difference of the law by one more example. If the scales of pan as to the guilt or innocence of the accused are something like even, at the conclusion of the trial, then, on the theory of benefit of doubt the case is to end in his acquittal. But if, on the other hand, it is so at the initial stage of making an order under Section 227 or Section 228, then in such a situation ordinarily and generally the order which will have to be made will be one under Section 228 and not under Section 227.”
11. Discharge of accused under Section 227 of the Code was extensively considered by this Court in P. Vijayan (supra) wherein it was held as under:
“10. ……. If two views are possible and one of them gives rise to suspicion only, as distinguished from grave suspicion, the trial Judge will be empowered to discharge the accused and at this stage he is not to see whether the trial will end in conviction or acquittal. Further, the words “not sufficient ground for proceeding against the accused” clearly show that the Judge is not a mere post office to frame the charge at the behest of the prosecution, but has to exercise his judicial mind to the facts of the case in order to determine whether a case for trial has been made out by the prosecution. In assessing this fact, it is not necessary for the court to enter into the pros and cons of the matter or into a weighing and balancing of evidence and probabilities which is really the function of the court, after the trial starts.
11. At the stage of Section 227, the Judge has merely to sift the evidence in order to find out whether or not there is sufficient ground for proceeding against the accused. In other words, the sufficiency of ground would take within its fold the nature of the evidence recorded by the police or the documents produced before the court which ex facie disclose that there are suspicious circumstances against the accused so as to frame a charge against him.”
12. While considering the very same provisions i.e., framing of charges and discharge of accused, again in Sajjan Kumar (supra), this Court held thus:
19. It is clear that at the initial stage, if there is a strong suspicion which leads the court to think that there is ground for presuming that the accused has committed an offence, then it is not open to the court to say that there is no sufficient ground for proceeding against the accused. The presumption of the guilt of the accused which is to be drawn at the initial stage is only for the purpose of deciding prima facie whether the court should proceed with the trial or not. If the evidence which the prosecution proposes to adduce proves the guilt of the accused even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial.
20. A Magistrate enquiring into a case under Section 209 CrPC is not to act as a mere post office and has to come to a conclusion whether the case before him is fit for commitment of the accused to the Court of Session. He is entitled to sift and weigh the materials on record, but only for seeing whether there is sufficient evidence for commitment, and not whether there is sufficient evidence for conviction. If there is no prima facie evidence or the evidence is totally unworthy of credit, it is the duty of the Magistrate to discharge the accused, on the other hand, if there is some evidence on which the conviction may reasonably be based, he must commit the case. It is also clear that in exercising jurisdiction under Section 227 CrPC, the Magistrate should not make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial.
Exercise of jurisdiction under Sections 227 and 228 CrPC
21. On consideration of the authorities about the scope of Sections 227 and 228 of the Code, the following principles emerge:
  (i)  The Judge while considering the question of framing the charges under Section 227 CrPC has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out. The test to determine prima facie case would depend upon the facts of each case.
 (ii)  Where the materials placed before the court disclose grave suspicion against the accused which has not been properly explained, the court will be fully justified in framing a charge and proceeding with the trial.
(iii)  The court cannot act merely as a post office or a mouthpiece of the prosecution but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the court, any basic infirmities, etc. However, at this stage, there cannot be a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial.
(iv)  If on the basis of the material on record, the court could form an opinion that the accused might have committed offence, it can frame the charge, though for conviction the conclusion is required to be proved beyond reasonable doubt that the accused has committed the offence.
 (v)  At the time of framing of the charges, the probative value of the material on record cannot be gone into but before framing a charge the court must apply its judicial mind on the material placed on record and must be satisfied that the commission of offence by the accused was possible.
(vi)  At the stage of Sections 227 and 228, the court is required to evaluate the material and documents on record with a view to find out if the facts emerging therefrom taken at their face value disclose the existence of all the ingredients constituting the alleged offence. For this limited purpose, sift the evidence as it cannot be expected even at that initial stage to accept all that the prosecution states as gospel truth even if it is opposed to common sense or the broad probabilities of the case.
(vii)  If two views are possible and one of them gives rise to suspicion only, as distinguished from grave suspicion, the trial Judge will be empowered to discharge the accused and at this stage, he is not to see whether the trial will end in conviction or acquittal.”
From the above decisions, it is clear that at the initial stage, if there is a strong suspicion which leads the Court to think that there is ground for presuming that the accused has committed an offence, in that event, it is not open to the Court to say that there is no sufficient ground for proceeding against the accused. A judicial magistrate enquiring into a case under Section 209 of the Code is not to act as a mere post office and has to arrive at a conclusion whether the case before him is fit for commitment of the accused to the Court of Session. He is entitled to sift and weigh the materials on record, but only for seeing whether there is sufficient evidence for commitment, and not whether there is sufficient evidence for conviction. On the other hand, if the Magistrate finds that there is no prima facie evidence or the evidence placed is totally unworthy of credit, it is his duty to discharge the accused at once. It is also settled law that while exercising jurisdiction under Section 227 of the Code, the Magistrate should not make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial. This provision was introduced in the Code to avoid wastage of public time and to save the accused from unavoidable harassment and expenditure. While analyzing the role of the respondent herein (A-6) from the charge sheet and the materials supplied along with it, the above principles have to be kept in mind.
13. In Rupan Deol Bajaj (Mrs.) and Another v. Kanwar Pal Singh Gill and Another, [1995] 6 SCC 194, this Court has considered the scope of quashing an FIR and held that it is settled principle of law that at the stage of quashing an FIR or complaint, the High Court is not justified in embarking upon an enquiry as to the probability, reliability or genuineness of the allegations made therein. By noting the principles laid down in State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, this Court held that an FIR or a complaint may be quashed if the allegations made therein are so absurd and inherently improbable that no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
14. In Mahavir Prashad Gupta and Another v. State of National Capital Territory of Delhi and Others, [2000] 8 SCC 115, this Court considered the jurisdiction of the High Court under Section 482 of the Code and held as under:
“5. The law on the subject is very clear. In the case of State of Bihar v. Murad Ali Khan [1988] 4 SCC 655 it has been held that jurisdiction under Section 482 of the Code of Criminal Procedure has to be exercised sparingly and with circumspection. It has been held that at an initial stage a court should not embark upon an inquiry as to whether the allegations in the complaint are likely to be established by evidence or not. Again in the case of State of Haryana v. Bhajan Lal 1992 Supp. (1) SCC 335 this Court has held that the power of quashing criminal proceedings must be exercised very sparingly and with circumspection and that too in the rarest of rare cases. It has been held that the court would not be justified in embarking upon an inquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint. It has been held that the extraordinary or inherent powers did not confer an arbitrary jurisdiction on the court to act according to its whim or caprice.
15. Regarding conspiracy, Mr. Raval, learned ASG after taking us through the averments in the charge sheet based reliance on a decision of this Court in Shivnarayan Laxminarayan Joshi and Others v. State of Maharashtra, [1980] 2 SCC 465 wherein it was held that once the conspiracy to commit an illegal act is proved, act of one conspirator becomes the act of the other. By pointing out the same, learned ASG submitted that the respondent herein (A-6), along with the other conspirators defrauded the Bank’s money by sanctioning loans to various fictitious persons.
16. We have already extracted the relevant allegations and the role of the respondent herein (A-6). The only allegation against the respondent is that he submitted false legal opinion to the Bank in respect of the housing loans in the capacity of a panel advocate and did not point out actual ownership of the properties. As rightly pointed out by Mr. Venkataramani, learned senior counsel for the respondent, the respondent was not named in the FIR. The allegations in the FIR are that A-1 to A-4 conspired together and cheated Vijaya Bank, Narayanaguda, Hyderabad to the tune of Rs. 1.27 crores. It is further seen that the offences alleged against A-1 to A-4 are the offences punishable under Sections 120B, 419, 420, 467, 468 and 471 of IPC and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988. It is not in dispute that the respondent is a practicing advocate and according to Mr. Venkataramani, he has experience in giving legal opinion and has conducted several cases for the banks including Vijaya Bank. As stated earlier, the only allegation against him is that he submitted false legal opinion about the genuineness of the properties in question. It is the definite stand of the respondent herein that he has rendered Legal Scrutiny Reports in all the cases after perusing the documents submitted by the Bank. It is also his claim that rendition of legal opinion cannot be construed as an offence. He further pointed out that it is not possible for the panel advocate to investigate the genuineness of the documents and in the present case, he only perused the contents and concluded whether the title was conveyed through a document or not. It is also brought to our notice that LW-5 (Listed Witness), who is the Law Officer of Vijaya Bank, has given a statement regarding flaw in respect of title of several properties. It is the claim of the respondent that in his statement, LW-5 has not even made a single comment as to the veracity of the legal opinion rendered by the respondent herein. In other words, it is the claim of the respondent that none of the witnesses have spoken to any overt act on his part or his involvement in the alleged conspiracy. Learned senior counsel for the respondent has also pointed out that out of 78 witnesses no one has made any relevant comment or statement about the alleged involvement of the respondent herein in the matter in question.
17. In order to appreciate the claim and the stand of the respondent herein as a panel advocate, we have perused the legal opinion rendered by the respondent herein in the form of Legal Scrutiny Report dated 10.09.2003 as to the title relating to Sri B.A.V.K. Mohan Rao, S/o late Shri Someshwar Rao which is as under.
“Legal Scrutiny Report
Dated 10.09.2003.
To
The Branch Manager,
Vijaya Bank,
Narayanaguda
Hyderabad
Sir,
Sub:- Title Opinion Shri BAVK Mohan Rao
S/o Late Shri Someswar Rao.
With reference to your letter dated NIL. I submit my Scrutiny Report as hereunder:-
1. Name and address of the Mortgagor
    Shri. BAVK Mohan Rao
    S/o Late Shri Someswar Rao
    R/o 1-1 290/3, Vidyanager, Hyderabad.
2. Details/Description of documents scrutinized:

Sl.No.
Date
Name of the documents
Whether Original/ Certified True Copy

1.
12.05.2003
C.C. Pahais for the year 1972-73 and 1978-79
Xerox Copy

2.
08.02.1980
Death Certificate of Shri PV Narahari Rao
Xerox Copy

3.
07.03.1980
Legal Heir Certificate of Shri PV Narahari Rao
Xerox Copy

4.
24.04.1980
C.C. of Regd. GPA No. 58/80
Xerox Copy

5.
19.09.1980
Regd. Sale Deed No. 1243/80 with Plan
Xerox Copy

6.
07.12.1998
Sanctioned Plan vide proceeding No. 2155/98
Xerox Copy

7.
02.01.2003
Development Agreement
Xerox Copy

8.
25.04.2003
EC No. 6654/2003 for the period from 28.06.1980 to 31.03.1982
Xerox Copy

9.
25.04.2003
EC No. 4136/2003 for the period from 01.04.1982 to 23.03.1984
Xerox Copy

10.
21.04.2003
EC No. 3918/2003 for the period from 24.03.1994 to 20.04.2003
Xerox Copy

11
28.07.2003
Agreement for Sale
Original
3. Details/Description of Property:-
Sl. No. Sy. No./H. No. Extent of land Location Boundaries Building Dist. Village
All that Flat bearing No. F-5 on First Floor, admeasuring 900 sq. Ft, along with undivided share of land 28 sq yds, out of total admeasuring 870 sq. yds constructed on Plot Nos. 3, 4 and 5 in Sy. Nos. 84 and 85 in the premises of “Guru Datta Nivas”, situated at Nerdmet, Malkajagiri Municipality, and Mandal, Ranga Reddy Dist. Hyderabad and bounded by:

FLAT BOUNDARIES:
LAND BOUNDARIES

NORTH: Flat No. F-6
20-0″

SOUTH: Open to sky
Wide Road, Sy No. 86

EAST : Corridor & Stair Case
Sy. Nos. 76 and 78 open to sky.

WEST : Open to sky

4. Brief History of the Property and How the owner/Mortgagor has derived title:
The Pahains for the years 1972-73 and 1978-79 under document No. 1 reveals that Sri. Venkat Naraari Rao is the pattadar and possessor of the land admeasuring Ac. 1-31 guntas in Sy No. 84 and Ac. 1-22 guntas in Sy No. 85 of Malkajgiri, Hyderabad.
The document No. 2 shows that Sri. PV Narahari Rao was expired on 23.01.1980 as per the Death Certificate issued by MCH.
The document No 3 shows that Smt. Saraswathi Bai is only the legal heir of Late Shri PV Narahari Rao.
The document No. 4 shows that Smt. Saraswathi Bai executed a GPA in favour of Sri. CV Prasad Rao, empowering him to deal and sell the above said property. The GPA was registered in the office of sub-Registrar of Hyderabad-East vide document No. 58/80 dated 24.04.1980.
The document No. 5 shows that Smt. Saraswathi Bai sold the Plot Nos. 3, 4 and 5 admeasuring 870 sq yds. situated at Malkajgiri, Hyderabad to Smt. N. Samson Sanjeeva Rao and executed a sale deed in his favour by virtue of document No. 1243/80 dated 19.09.1980 registered in the office of sub-registrar of Uppat, Ranga Reddy.
The document No. 6 shows that Shri N. Samson Sanjeeva Rao obtained permission from Malkajgiri Municipality for construction of Residential building consisting of Ground + 4 floors vide permit No. G1/2155/98 dated 07.12.1998.
The document No. 7 shows that Shri N. Samson Sanjeeva Rao entered into development agreement with Shri PY Kondal Rao for construction of residential flats in the above said plots.
The document Nos. 8, 9 and 10 are the Encumbrance Certificates for the period from 28.06.1998 to 20.04.2003 (23
years) which disclose only the transactions mentioned in document No. 5.
The document No. 11 shows that Shri N. Samson Sanjeeva Rao (owner) along with Shri PY Kondal Rao (builder) agreed to sell the Schedule Property (referred under Item No. III of this opinion) to Shri BAVK Mohan Rao (applicant) for a total sale consideration of Rs. 5,50,000/- and Shri. BAVK Mohan Rao (applicant) also agreed to purchase the said property for the same consideration.
5. Search and Investigation.

5.1
The person who is the present owner of the property
Shri NS Sanjeeva Rao (present owner/vendor) and Shri BAVK Mohan Rao (purchaser/Vendee)

5.2 to 5.5
xxx
xxx

5.6
Whether there the latest title deed and immediately previous title deed(s) are available in original
The document No. 5 is available in Xerox (original verified)

5.7 to 5.13
xxx
xxx

5.14
Whether the proposed equitable mortgage by deosit of title deed is possible? If so, what are the documents to be deposited? If deposit is not possible, can there be simple mortgage or a registered memorandum or by any other mode of mortgage?
Yes, Equitable mortgage is possible. The original registered Sale Deed executed in favour of Shri BAVK Mohan Rao (applicant) by the Vendors along with all the documents as mentioned in the list in Item No. 2 of this opinion should be deposited.

5.15 to 5.20
xxx
xxx


6-8 **
**
**
9. CERTIFICATE
I am of the opinion that Shri NS Sanjeeva Rao is having clear marketable title by virtue of Regd. Sale Deed No. 1243/1980 dated 19.09.1980 referred document No. 5 of this opinion. He can convey a valid clear marketable title in favour of Shri BAVK Mohan Rao (applicant) in respect of the schedule property (referred under Item No. 3 of this opinion) by duly executing a Regd. Sale Deed in his favour.
Shri BAVK Mohan Rao (applicant) can create a valid equitable mortgage with the Bank by depositing the original Regd. Sale deed executed in his by the vendors and also depositing all the documents as mentioned in the list in Item No. 2 of this opinion. I further certify that:-

1.
There are no prior mortgage/charge whatsoever as could be seen from the encumbrance certificate for the period from 28.06.1980 to 20.04.2003 pertaining to the immovable property covered by the above title deed(s).
Yes

2.
There are prior mortgages/charges to the extent, which are liable to be cleared or satisfied by complying with the following.
NA

3.
There are claims from minors and his/her/their interest in the property to the extent of (specify) the share of minor(s) with name
NA

4.
The undivided share of minor of (specify the liability that is fastended or could be fastened on the property).
NA

5.
The property is subject to the payment of Rupees (specify the liability that is fastened or could be fastened on the property)
NA

6.
Provisions of Urban Land (Ceiling and Regulation) Act are not applicable. Permission obtained.
NA

7.
Holding/Acquisitions in accordance with the provisions of the land:
NA

8.
The mortgage if created will be perfect and available to the bank for the liability of the intending borrower: Shri BAVK Mohan Rao (Applicant)

The Bank is advised to obtain the encumbrance certificate for the period from 21.04.2003 till the date after obtaining a registered sale deed in favour of Shri BAVK Mohan Rao (applicant)
SEARCH REPORT:
I have verified the title deed of Shri N.S. Sanjeeva Rao in the office of sub-Registrar of Uppal, Hyderabad on 18.07.2003 and found that the sale transaction between parties, schedule property stamp papers, regd. Sale Deed No. 1243/1980 are genuine. The verification receipt is enclosed herewith.
(K. NARAYANA RAO)
ADVOCATE”
The above particulars show that the respondent herein, as a panel advocate, verified the documents supplied by the Bank and rendered his opinion. It also shows that he was furnished with Xerox copies of the documents and very few original documents as well as Xerox copies of Death Certificate, Legal heir-ship Certificate, Encumbrance Certificate for his perusal and opinion. It is his definite claim that he perused those documents and only after that he rendered his opinion. He also advised the bank to obtain Encumbrance Certificate for the period from 21.04.2003 till date. It is pointed out that in the same way, he furnished Legal Scrutiny Reports in respect of other cases also.
18. We have already mentioned that it is an admitted case of the prosecution that his name was not mentioned in the FIR. Only in the charge-sheet, the respondent has been shown as Accused No. 6 stating that he submitted false legal opinion to the Bank in respect of the housing loans in the capacity of a panel advocate and did not point out actual ownership of the properties in question.
19. Mr. Venkataramani, learned senior counsel for the respondent submitted that in support of charge under Section 120B, there is no factual foundation and no evidence at all. Section 120A defines criminal conspiracy which reads thus:
“120A. Definition of criminal conspiracy.- When two or more persons agree to do, or cause to be done,-
 (1)  an illegal act, or
 (2)  an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy: Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.
Explanation.- It is immaterial whether the illegal act is the ultimate object of such agreement, or is merely incidental to that object.”
Section 120B speaks about punishment of criminal conspiracy. While considering the definition of criminal conspiracy, it is relevant to refer Sections 34 and 35 of IPC which are as under:
34. Acts done by several persons in furtherance of common intention.- When a criminal act is done by several persons in furtherance of the common intention of all, each of such persons is liable for that act in the same manner as if it were done by him alone.”
35. When such an act is criminal by reason of its being done with a criminal knowledge or intention. – Whenever an act, which is criminal only by reason of its being done with a criminal knowledge or intention, is done by several persons, each of such persons who joins in the act with such knowledge or intention is liable for the act in the same manner as if the act were done by him alone with that knowledge or intention.”
20. The ingredients of the offence of criminal conspiracy are that there should be an agreement between the persons who are alleged to conspire and the said agreement should be for doing of an illegal act or for doing, by illegal means, an act which by itself may not be illegal. In other words, the essence of criminal conspiracy is an agreement to do an illegal act and such an agreement can be proved either by direct evidence or by circumstantial evidence or by both and in a matter of common experience that direct evidence to prove conspiracy is rarely available. Accordingly, the circumstances proved before and after the occurrence have to be considered to decide about the complicity of the accused. Even if some acts are proved to have committed, it must be clear that they were so committed in pursuance of an agreement made between the accused persons who were parties to the alleged conspiracy. Inferences from such proved circumstances regarding the guilt may be drawn only when such circumstances are incapable of any other reasonable explanation. In other words, an offence of conspiracy cannot be deemed to have been established on mere suspicion and surmises or inference which are not supported by cogent and acceptable evidence.
21. In the earlier part of our order, first we have noted that the respondent was not named in the FIR and then we extracted the relevant portions from the charge-sheet about his alleged role. Though statements of several witnesses have been enclosed along with the charge-sheet, they speak volumes about others. However, there is no specific reference to the role of the present respondent along with the main conspirators.
22. The High Court while quashing the criminal proceedings in respect of the respondent herein has gone into the allegations in the charge sheet and the materials placed for his scrutiny and arrived at a conclusion that the same does not disclose any criminal offence committed by him. It also concluded that there is no material to show that the respondent herein joined hands with A-1 to A-3 for giving false opinion. In the absence of direct material, he cannot be implicated as one of the conspirators of the offence punishable under Section 420 read with Section 109 of IPC. The High Court has also opined that even after critically examining the entire material, it does not disclose any criminal offence committed by him. Though as pointed out earlier, a roving enquiry is not needed, however, it is the duty of the Court to find out whether any prima facie material available against the person who has charged with an offence under Section 420 read with Section 109 of IPC. In the banking sector in particular, rendering of legal opinion for granting of loans has become an important component of an advocate’s work. In the law of negligence, professionals such as lawyers, doctors, architects and others are included in the category of persons professing some special skills.
23. A lawyer does not tell his client that he shall win the case in all circumstances. Likewise a physician would not assure the patient of full recovery in every case. A surgeon cannot and does not guarantee that the result of surgery would invariably be beneficial, much less to the extent of 100% for the person operated on. The only assurance which such a professional can give or can be given by implication is that he is possessed of the requisite skill in that branch of profession which he is practising and while undertaking the performance of the task entrusted to him, he would be exercising his skill with reasonable competence. This is what the person approaching the professional can expect. Judged by this standard, a professional may be held liable for negligence on one of the two findings, viz., either he was not possessed of the requisite skill which he professed to have possessed, or, he did not exercise, with reasonable competence in the given case, the skill which he did possess.
24. In Jacob Mathew v. State of Punjab & Anr. [2005] 6 SCC 1 this court laid down the standard to be applied for judging. To determine whether the person charged has been negligent or not, he has to be judged like an ordinary competent person exercising ordinary skill in that profession. It is not necessary for every professional to possess the highest level of expertise in that branch which he practices.
25. In Pandurang Dattatraya Khandekar v. Bar Council of Maharashtra & Ors. [1984] 2 SCC 556, this Court held that “…there is a world of difference between the giving of improper legal advice and the giving of wrong legal advice. Mere negligence unaccompanied by any moral delinquency on the part of a legal practitioner in the exercise of his profession does not amount to professional misconduct.
26. Therefore, the liability against an opining advocate arises only when the lawyer was an active participant in a plan to defraud the Bank. In the given case, there is no evidence to prove that A-6 was abetting or aiding the original conspirators.
27. However, it is beyond doubt that a lawyer owes an “unremitting loyalty” to the interests of the client and it is the lawyer’s responsibility to act in a manner that would best advance the interest of the client. Merely because his opinion may not be acceptable, he cannot be mulcted with the criminal prosecution, particularly, in the absence of tangible evidence that he associated with other conspirators. At the most, he may be liable for gross negligence or professional misconduct if it is established by acceptable evidence and cannot be charged for the offence under Sections 420 and 109 of IPC along with other conspirators without proper and acceptable link between them. It is further made clear that if there is a link or evidence to connect him with the other conspirators for causing loss to the institution, undoubtedly, the prosecuting authorities are entitled to proceed under criminal prosecution. Such tangible materials are lacking in the case of the respondent herein.
28. In the light of the above discussion and after analysing all the materials, we are satisfied that there is no prima facie case for proceeding in respect of the charges alleged insofar as respondent herein is concerned. We agree with the conclusion of the High Court in quashing the criminal proceedings and reject the stand taken by the CBI.
29. In the light of what is stated above, the appeal fails and the same is dismissed.

Wednesday, June 12, 2013

Company Law Board may compound the offence, permission of court not required.

Supreme Court held that Company Law Board does not need permission of court u/s 621A(7) of Companies Act 1956 for compounding of offence under the Companies Act, 1956 involving imprisonment or with fine or with both. Court has held that in such cases both Company Law Board and Court have power to compound the offence.

                                                                  REPORTABLE


                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 2102 OF 2004


V.L.S. FINANCE LTD.                          …APPELLANT

                                   VERSUS

UNION OF INDIA & ORS.                       …RESPONDENTS



                                  JUDGMENT



CHANDRAMAULI KR. PRASAD,J.


      This appeal by special leave arises out  of  an  order  dated  5th  of
November, 2003 passed by the Company Judge,  Delhi  High  Court  in  Company
Appeal (B) No. 1 of 2001 whereby it has dismissed the appeal  assailing  the
order of the Company Law Board allowing the  compounding  of  offence  under
Section 211(7) of the Companies Act.

      Short facts giving rise to the present appeal are that  the  Registrar
of Companies, NCT of Delhi and Haryana laid complaint in the Court of  Chief
Metropolitan Magistrate, Tis Hazari, inter alia  alleging  that  during  the
course of inspection  it  was  noticed  in  the  balance  sheet  of  1995-96
Schedule of the fixed assets included land worth Rs. 21  crores.   According
to the complaint,      M/s. Sunair Hotels Ltd.,  for  short  ‘the  Company”,
had taken this land from New Delhi Municipal Corporation on licence and  the
Company only pays the yearly licence fee thereof.  Thus,  according  to  the
complainant, without any right land has been shown as land in  the  Schedule
of fixed assets, which is not a true and  fair  view  and  punishable  under
Section 211(7) of the Companies Act, hereinafter referred to as  “the  Act”.
The Company and its Chairman-cum-Managing Director, S.P. Gupta were  arrayed
as accused.


      However, before the court in seisin of the case could proceed with the
complaint,  the  Company  and  its  Managing  Director  jointly   filed   an
application before the Company Law Board for compounding the  offence.   The
Northern Region Bench of the Company Law Board, by its order  dated  9th  of
August, 2000 acceded to the prayer and compounded the  offence  against  the
Managing Director on payment of      Rs. 1000/- for each offence each  year.
 While doing so, the Company Law Board has held as follows:




           “…The exercise of powers by the Company Law Board under  621A(1)
           is independent of exercise of powers by  the  court  under  sub-
           section  (7)  and  all  offences  other  than  those  which  are
           punishable with imprisonment only or with imprisonment and  also
           fine, can  be  compounded  by  Company  Law  Board  without  any
           reference to sub-section (7), even in cases where prosecution is
           pending in a criminal court.  Thus, it is clear that Company Law
           Board if so approached can compound offences and in such case no
           prior permission of the Court is necessary.”






      Aggrieved by the same, appellant preferred Company Appeal  before  the
High Court, inter alia, contending that the power of  compounding  could  be
exercised by the criminal court and not by  the  Company  Law  Board.   Said
submission has not found favour and the Company Judge, in  this  connection,
observed as follows:




           “18. In the light of the aforesaid discussions, it is held  that
           the person seeking compounding of an offence in accordance  with
           the procedure laid down in the Criminal Procedure Code can do so
           before the criminal Court with the permission of the Court under
           sub-section (7) of Section  621A  of  the  Act,  which  normally
           cannot be done under the provisions of  the  Criminal  Procedure
           Code.  Such compounding of offence would always be relatable  to
           the offence punishable with imprisonment or with  fine  or  with
           both as is made clear under clauses (a) and (b)  of  sub-section
           (7).  Under the aforesaid  sub-section  the  offence  punishable
           with imprisonment or with fine or  both  shall  be  compoundable
           with the permission of the Court and for  such  compounding  the
           procedure laid down under the Criminal Procedure Code is  to  be
           followed in that regard provided the prosecution is  pending  in
           that Court.  I also hold the Company Law Board can  compound  an
           offence of the nature prescribed under  sub-section  (1)  either
           before the institution of the criminal proceeding or even  after
           institution of the criminal proceeding and the said power is not
           subject to the provisions of sub-section (7).  Both are parallel
           powers to be exercised by the prescribed  authorities  who  have
           been empowered under the statute and one power is not  dependent
           on the other……”




       Accordingly, the Company Judge dismissed the appeal.


      That is how the appellant is before us.


      We have heard Mr. R. Shankaranarayanan, for the  appellant,  Ms.  Binu
Tamta, for the respondent-Union of India  and  Mr.  Jayant  Bhushan,  Senior
Advocate for the Company and its Managing Director.


      It is an admitted position  that  the  allegations  made  exposed  the
accused to an offence punishable under Section 211(7) of the Act.  The  same
reads as under:

1 “211. Form and contents of balance-sheet and profit and loss account.—


2 xxx            xxx                    xxx

           (7) If any such person as is referred to in sub-section  (6)  of
           section 209  fails  to  take  all  reasonable  steps  to  secure
           compliance by the company, as respects any accounts laid  before
           the company in general meeting,  with  the  provisions  of  this
           section and with the other requirements of this Act  as  to  the
           matters to be stated in the accounts, he shall,  in  respect  of
           each offence, be punishable with imprisonment for a  term  which
           may extend to six months, or with fine which may extend  to  ten
           thousand rupees, or with both:
                 Provided that  in  any  proceedings  against  a  person  in
           respect of an offence under this section, it shall be a  defence
           to prove that a competent and reliable person was  charged  with
           the duty of seeing that the provisions of this section  and  the
           other requirements aforesaid were complied with  and  was  in  a
           position to discharge that duty:
                 Provided further that  no  person  shall  be  sentenced  to
           imprisonment for  any  such  offence  unless  it  was  committed
           wilfully.


                 xxx         xxx              xxx”




      Thus, the offence alleged is punishable with imprisonment for  a  term
which  may  extend  to  six  months  or  with  fine  which  may  extend   to
Rs. 10,000/- or with both.


      Mr. Shankaranarayanan has taken an extreme stand before this Court and
contends that the Company Law Board  has  no  jurisdiction  to  compound  an
offence punishable under  Section  211(7)  of  the  Act  as  the  punishment
provided  is  imprisonment  also.   Mr.  Bhushan,  however,   submits   that
imprisonment is not mandatory punishment under Section  211(7)  of  the  Act
and, hence, the Company Law Board has the authority to  compound  the  same.
He also points out that this submission was not at all advanced  before  the
Company Law Board and, therefore,  the  appellant  cannot  be  permitted  to
raise this question for the first time before this Court.   We  are  not  in
agreement with Mr. Bhushan in regard to his plea that this  question  cannot
be gone into by this Court at the first instance.   In  our  opinion,  in  a
case in which the facts pleaded give rise to a pure question  of  law  going
to the root of the matter, this Court possesses discretion to go into  that.
 The position would have been different had  the  appellant  for  the  first
time prayed before this Court for adjudication on an issue of fact and  then
to apply the law and hold that Company Law  Board  had  no  jurisdiction  to
compound the offence.


      Here, it is an admitted position that the allegation made exposed  the
Company and its Managing Director for punishment  under  Section  211(7)  of
the Act which provides for imprisonment or fine or with both.  In  the  face
of the same, no fact needs to be adjudicated and  the  point  being  a  pure
question of law going to the root of the matter, same can  be  permitted  to
be raised before this Court for the first time.  But that does not help  the
appellant as we are inclined to accept the  submission  of  Mr.  Bhushan  on
merit.  Section 621A was inserted by the Companies Amendment  Act,  1988  on
the recommendation of the Sachar Committee.  It was felt  that  leniency  is
required in the administration of the provisions  of  the  Act  particularly
penalty provisions because a large  number  of  defaults  are  of  technical
nature and arise out of ignorance on account of  bewildering  complexity  of
the provisions.  Section 621A of the Act; as stood at the relevant time  and
relevant for our purpose reads as follows:


           “621A. Composition of  certain  offences.-  (1)  Notwithstanding
           anything contained in the Code of Criminal Procedure, 1973 (2 of
           1974), any offence punishable under this Act  whether  committed
           by a company or  any  officer  thereof,  not  being  an  offence
           punishable with imprisonment only, or with imprisonment and also
           with fine, may, either before or after the  institution  of  any
           prosecution, be compounded by-

                 (a) the Company Law Board; or


                 (b) where the maximum amount of fine which may  be  imposed
                 for such offence does not exceed five thousand  rupees,  by
                 the Regional Director, on payment or credit, by the company
                 or the  officer,  as  the  case  may  be,  to  the  Central
                 Government of such  sum  as  that  Board  or  the  Regional
                 Director, as the case may be, may specify:


                       Provided that the sum so specified shall not, in  any
                 case, exceed the maximum amount of the fine  which  may  be
                 imposed for the offence so compounded:


                       Provided further that in specifying the sum  required
                 to be paid or credited for the compounding  of  an  offence
                 under this sub-section, the sum, if any,  paid  by  way  of
                 additional fee under Sub-section (2) of Section  611  shall
                 be taken into account.


                       xx          xx         xx


           (4)(a) Every application for the compounding of an offence shall
                 be made to  the  Registrar  who  shall  forward  the  same,
                 together with his comments  thereon,  to  the  Company  Law
                 Board or the Regional Director, as the case may be.


                 (b) Where any offence is  compounded  under  this  section,
                 whether before or after the institution of any prosecution,
                 an intimation thereof shall be given by the company to  the
                 Registrar within seven days from  the  date  on  which  the
                 offence is so compounded.


                 (c) Where any offence is compounded before the  institution
                 of any prosecution, no prosecution shall be  instituted  in
                 relation to such offence, either by the Registrar or by any
                 shareholder of the company or by any person  authorised  by
                 the Central Government against the offender in relation  to
                 whom the offence is so compounded.


                 (d) Where the composition of any offence is made after  the
                 institution of any prosecution, such composition  shall  be
                 brought by the Registrar in writing, to the notice  of  the
                 Court in which the  prosecution  is  pending  and  on  such
                 notice of the composition of the offence being  given,  the
                 company or its officer in relation to whom the  offence  is
                 so compounded shall be discharged.

                       xx         xx         xx
            (7) Notwithstanding anything contained in the Code of  Criminal
           Procedure, 1973,-

                 (a) any offence which is punishable  under  this  Act  with
                 imprisonment  or  with  fine,  or  with  both,   shall   be
                 compoundable  with  the  permission  of   the   Court,   in
                 accordance with the procedure laid down  in  that  Act  for
                 compounding of offences;


                 (b) any offence which is punishable  under  this  Act  with
                 imprisonment only or with imprisonment and also  with  fine
                 shall not be compoundable.

           (8) No offence specified in this  section  shall  be  compounded
           except under and in  accordance  with  the  provisions  of  this
           section.”


      From a plain reading of Section 621A(1) it is evident that any offence
punishable under the Act, not being an offence punishable with  imprisonment
only or with imprisonment and also  with  fine,  may  be  compounded  either
before or after the institution of the prosecution by the Company Law  Board
and in case, the minimum amount of  fine  which  may  be  imposed  for  such
offence does not exceed   Rs. 5000/-, by the Regional  Director  on  payment
of certain fine.  The penal provisions of  the  Act  provide  for  different
kinds of punishments for variety of  offences  and  can  be  categorised  as
follows:


           i) offences punishable with fine only,


      (ii) offences punishable with imprisonment only,


          ii) offences punishable with fine and imprisonment,

      (iv) offences punishable with fine or imprisonment,


      (v) offences punishable with fine or imprisonment or both.




      Section 211(7) of the Act provides for  punishment  with  imprisonment
for a term which may extend to  six  months  or  with  fine  or  with  both.
Therefore, an accused charged with the offence under Section 211(7)  of  the
Act has not necessarily to be visited with imprisonment or imprisonment  and
also fine but can be let off by imposition of  fine  only.   Therefore,  the
punishment provided under Section 211(7) of the  Act  comes  under  category
(v) aforesaid.  Section 621A(1) excludes such offences which are  punishable
with imprisonment only or with imprisonment and also with fine.  As we  have
observed above, the nature  of  offence  for  which  the  accused  has  been
charged necessarily does not  invite imprisonment or imprisonment  and  also
fine.  Hence, we are of the opinion that the nature of the offence  is  such
that it was possible to be compounded by the Company Law Board.


      Mr. Shankaranarayanan, then submits that sub-section  (7)  of  Section
621A confers jurisdiction on the court to accord permission for  compounding
of the offence punishable with imprisonment or with fine or with  both,  the
jurisdiction of the Company  Law  Board  is  excluded  and,  therefore,  the
Company Law Board erred in acceding  to  the  request  of  the  accused  for
compounding of the offence.          Sub-section (1)  of  Section  621A  and
sub-section (7) thereof are differently worded but on  their  close  reading
it is evident that both cover such offences depending  upon  the  nature  of
punishment.          Sub-section  (1)  of  Section  621A  excludes   offence
punishable with imprisonment only or with imprisonment  and  also  fine  and
includes  the  residue  offences  which  will  obviously   include   offence
punishable with imprisonment or with fine or with both  whereas  sub-section
(7) specifically include those and excludes, like sub-section (1),  offences
punishable with imprisonment  only  or  with  imprisonment  and  also  fine.
Therefore, both cover similar nature of  offences.   Hence,  the  power  for
compounding can be exercised in relation to the same nature of  offences  by
the Company Law Board or  the  court  in  seisin  of  the  matter  with  the
difference that the Company Law Board can proceed to compound  such  offence
either before  or  after  the  institution  of  any  prosecution.   In  this
connection, it shall be relevant to refer to Section 621A(4)b) of  the  Act,
which provides that where any offence  is  compounded  under  this  section,
whether before or after the institution of any  prosecution,  an  intimation
thereof shall be given by the Company to the Registrar within  7  days  from
the date on which the offence is  compounded.   Section  621A(4)d)  mandates
that where the composition of any offence is made after the  institution  of
any prosecution, such composition would  be  brought  by  the  Registrar  in
writing to the notice of the court in which the prosecution is  pending  and
on such notice of the composition of the offence being  given,  the  accused
in relation to whom the offence is so compounded shall be discharged.




      From the conspectus of what we have observed above, it  is  more  than
clear that an offence committed by an accused under the Act,  not  being  an
offence punishable with imprisonment only  or  imprisonment  and  also  with
fine, is permissible to be  compounded  by  the  Company  Law  Board  either
before or after the institution of any prosecution.  In view of  sub-section
(7) of Section 621A, the criminal court  also  possesses  similar  power  to
compound an offence after institution of the prosecution.


      Now the question is whether in the aforesaid circumstances the Company
Law Board can compound offence punishable with fine or imprisonment or  both
without  permission  of  the  court.   It  is  pointed  out  that  when  the
prosecution has been laid, it is the criminal court which is  in  seisin  of
the matter and it is only the magistrate or  the  court  in  seisin  of  the
matter who can accord permission to compound the offence.  In  any  view  of
the matter, according to the learned counsel, the Company Law Board  has  to
seek permission of the court and it  cannot  compound  the  offence  without
such permission.  This line of reasoning does not  commend  us.   Both  sub-
section (1) and sub-section (7) of Section 621A of  the  Act  start  with  a
non-obstante clause.  As is well  known,  a         non-obstante  clause  is
used as a legislative device to give the enacting part of  the  section,  in
case of conflict, an overriding  effect  over  the  provisions  of  the  Act
mentioned in the non-obstante clause.


      Ordinarily, the offence is compounded under the provisions of the Code
of Criminal Procedure and the power to accord  permission  is  conferred  on
the  court  excepting  those  offences  for  which  the  permission  is  not
required.  However, in  view  of  the  non-obstante  clause,  the  power  of
composition can be exercised by the court or the  Company  Law  Board.   The
legislature has conferred the same power to the Company Law Board which  can
exercise  its  power  either  before  or  after  the  institution   of   any
prosecution whereas the criminal court has no  power  to  accord  permission
for composition of an offence before  the  institution  of  the  proceeding.
The legislature in its wisdom has not put the rider of prior  permission  of
the court before compounding the offence by the Company Law  Board   and  in
case the contention of the appellant  is  accepted,  same  would  amount  to
addition of the words “with the prior permission of the court” in  the  Act,
which is not permissible.


      As is well settled, while interpreting the provisions  of  a  statute,
the court avoids rejection or addition of words and resort to that  only  in
exceptional circumstances to achieve the purpose of Act or  give  purposeful
meaning.  It is also a cardinal rule of interpretation that  words,  phrases
and sentences are to be given their natural, plain and clear meaning.   When
the language is  clear  and  unambiguous,  it  must  be  interpreted  in  an
ordinary sense and no addition or alteration of  the  words  or  expressions
used is permissible.  As  observed  earlier,  the  aforesaid  enactment  was
brought in view of the need of leniency in the  administration  of  the  Act
because a large  number  of  defaults  are  of  technical  nature  and  many
defaults occurred because of the complex nature of the provision.


      From what we have observed above, we are of the opinion that the power
under sub-section (1) and sub-section  (7)  of  Section  621A  are  parallel
powers to  be  exercised  by  the  Company  Law  Board  or  the  authorities
mentioned therein and  prior  permission  of  Court  is  not  necessary  for
compounding the offence, when power  of  compounding  is  exercised  by  the
Company Law Board. In view  of  what  we  have  observed  above,  the  order
impugned does not require any interference by this Court.






      In the result, we do not find any  merit  in  the  appeal  and  it  is
dismissed accordingly but without any order as to costs.


                                  ………………………………………………………………J
                                                             (CHANDRAMAULI
                                  KR. PRASAD)






                                                    ………..……….………………………………..J
                                       (V.GOPALA GOWDA)





NEW DELHI,
MAY 10, 2013.
-----------------------

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