Yerram Vijay Kumar Vs State of Telangana & Anr. (Supreme Court of India)
Private Complaints Barred for Companies Act Fraud—Sections 448/451 Require SFIO Route-Supreme Court:
No Private Shortcut to Corporate Fraud Prosecution: Supreme Court Rings the SFIO Bell
The Supreme Court (2026 INSC 42) partly allowed the appeals and quashed criminal proceedings under Sections 448 and 451 of the Companies Act, 2013, holding that such offences cannot be taken cognizance of on the basis of a private complaint.
The Court held that Section 448 (false statements) is inseparably linked to Section 447 (fraud) because Section 448 itself prescribes that a person making a false statement “shall be liable under Section 447.” Consequently, offences under Section 448 are “offences covered under Section 447” for the purpose of Section 212(6) of the Companies Act. The second proviso to Section 212(6) bars courts from taking cognizance of such offences except on a written complaint by the Director, SFIO, or an authorised Central Government officer. This statutory safeguard is intended to prevent frivolous or vexatious fraud prosecutions by private parties.
The Court clarified that Section 451 (repeated default) cannot survive independently once cognizance under Section 448 is barred, since it is merely consequential. Accordingly, cognizance taken by the Special Court under Sections 448 and 451 on a private complaint was held to be without jurisdiction and was quashed.
However, the Supreme Court refused to quash the IPC offences (Sections 420, 406, 468, 471, 120B, etc.), holding that the mere existence of parallel civil, NCLT, or corporate disputes does not by itself bar criminal prosecution. Since the Companies Act offences were quashed, the Special Court was directed to transfer the case to the appropriate regular criminal court having territorial jurisdiction for trial of the IPC offences alone.
The Court also emphasised that aggrieved shareholders are not remediless and may invoke the statutory mechanism under Section 213 of the Companies Act to seek investigation into company affairs, which may then culminate in SFIO action and prosecution for fraud, if warranted.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
