Special Court Cannot Take Cognizance of Section 448/451 Without SFIO/Central Sanction, Supreme Court Quashes Those Counts and Directs Transfer of IPC Charges

A bench of Justices J.K. Maheshwari and K. Vinod Chandran heard appeals by two directors against the Telangana High Court’s refusal to quash criminal proceedings arising from a private complaint. The appeals challenged the Special Court’s order taking cognizance under Sections 448 and 451 of the Companies Act, 2013 and various sections of the IPC, contending that cognizance under Sections 448/451 could not be taken on a private complaint because those provisions were linked to Section 447 and attracted the bar in the second proviso to Section 212(6) of the Companies Act.

The Court partly allowed the appeals, set aside the High Court order and quashed the complaint insofar as it related to Sections 448 and 451 of the Companies Act, while permitting proceedings on the IPC counts to continue subject to transfer for trial by the appropriate territorial court. The Court held that Section 448 did not prescribe an independent punishment but made the accused “liable under Section 447”, and therefore could not be proceeded with on a private complaint without compliance with the second proviso to Section 212(6). The Court, in its reasoning, observed: “From a bare perusal of the aforementioned provisions of the Companies Act, it is clear that Section 447 of the Companies Act lays down the punishment for ‘fraud’ in various forms. In the present case, cognizance has been taken by the Special Court under Section 448 and 451 of the Companies Act. Section 448 itself does not lay down any punishment for its contravention, it simply lays down the ingredients of the offence of making a false statement and provides that in case such a false statement is made, the ‘person(s)’ shall be liable under Section 447 of the Companies Act. That is to say, even if, after trial, an offence under Section 448 is proved to have been committed by a ‘person’, it is only with the aid of Section 447 of the Companies Act that the punishment for the said offence may be imposed. Section 448 of the Companies Act, therefore, cannot be read in isolation and must be read along with Section 447 of the Companies Act. Therefore, the offence under Section 448 is an offence ‘covered under Section 447’ as mentioned in Section 212(6), since the offence under Section 448 is inextricably linked to the punishment for ‘fraud’ as mentioned in Section 447 and as such, the second proviso to Section 212(6) of the Companies Act is attracted.” The Court further noted that “it is trite law that anything that cannot be done directly, also cannot be done indirectly.”

Background The dispute arose from the affairs of M/s Shreemukh Namitha Homes Pvt. Ltd., incorporated by the complainant and his wife as promoters and majority shareholders. The appellants were inducted as directors and later contested management changes after amendments to the articles fixed director tenure until the next AGM. The complainant alleged that the appellants convened an unauthorised EOGM on 01.12.2021, appointed third parties as directors, fabricated board and shareholder resolutions and filed false statutory forms with the MCA; summons issued and C.C. No. 58 of 2022 was registered in the Special Court. The appellants had pending civil suits and an NCLT petition challenging removal from directorship.

Before the High Court under Section 482 CrPC the appellants argued that the complaint was a counterblast to corporate proceedings, that Section 212(6)’s second proviso barred private complaints in cases attracting Section 447, and that statutory investigative procedure under Section 206/212 had been bypassed. The High Court dismissed the quashing petition observing prima facie offences of forgery and fraud and declined to conduct a mini-trial. The Supreme Court analysed the scheme of the Companies Act, the effect of the 2015 amendment to Section 212(6), precedent from several High Courts and earlier coordinates, and concluded that where a section of the Companies Act makes a person “liable under Section 447” the proviso in Section 212(6) applied and cognizance could not be taken on a private complaint. The Court quashed proceedings under Sections 448 and 451, set aside the High Court order, and directed the Special Court to transfer the complaint so far as it related to IPC offences to the appropriate territorial court within four weeks; it clarified that the competent court could examine all objections on merits and that interim observations did not express views on merits. All pending applications were disposed of and no costs were ordered.

Case Details: Case No.: Criminal Appeal Nos. arising out of SLP (Crl.) No. 11530 of 2024 and SLP (Crl.) No. 14783 of 2024 (Criminal Appeals of 2026) Case Title: Yerram Vijay Kumar & Anr. v. The State of Telangana & Anr. / Rajeev Kumar Agarwal v. The State of Telangana & Ors. Appearances: For the Petitioner(s): Mr. Shailesh Madhiyal, Senior Advocate For the Respondent(s): Mr. Kumar Vaibhaw (for State of Telangana); Mr. Jayant Muth Raj (for Complainant)