Mere non-issuance of duplicate share certificates on misplacement did not indicate malice of Company

Avion Builders Pvt. Ltd. Vs State of West Bengal (Calcutta High Court)

Conclusion: The criminal complaint case of cheating instituted against a company and its Directors over non-issuance of duplicate share certificates to the complainant was quashed as mere non-issuance of duplicate share certificates on misplacement by an alleged shareholder did not indicate malice on part of the company from the inception of the transaction and assessee acted with criminal intent at the inception on an anticipation that the shares would be misplaced at a subsequent stage.

Held:  Assessee contended that opposite party filed a complaint before the Chief Metropolitan Magistrate stating, inter alia, that the opposite party was a holder of 27,000 equity shares in the assessee-company. In 2016 the opposite party noticed that the said share certificates were misplaced and the said fact was intimated to assessee requesting issuance of duplicate share certificates. No reply being received by the opposite party, another letter was issued stating there was no share holding in the name of the opposite party as on that date. The balance sheet of assessee-company reflected that the opposite party was holding 27,000 shares in the company though the name of the opposite party was wrongly typed therein. The opposite party alleged that assessee dishonestly misappropriated the amount of share certificates for their own use for making wrongful gain. In the instant case, the allegations made against the accused-assessee were bereft of any intention of cheating or misappropriation at the inception of the transaction. The equity shares were admittedly issued against consideration and loss or misplacement of such shares by the opposite party was a subsequent event which was not contemplated by the parties at the time of issuance of the shares. No prima facie case of initial deception had been made out and under no stretch of imagination can it be held that assessee acted with criminal intent at the inception on an anticipation that the shares would be misplaced at a subsequent stage. No prima facie case of entrustment with or dominion over property or dishonest misappropriation of property or even ingredient of cheating had found place within the four corners of the complaint. Even if it was held that duplicate share certificates were deliberately not issued in favour of the opposite party with criminal intent, such act was done at a subsequent stage only after the original share certificates were misplaced and no such intent was found at the inception of the transaction. Even if the documents filed by assessee relating to subsequent transfer of the shares were not taken into consideration, a plain reading of the complaint itself was sufficient to hold that no prima facie case under section 420/406 of the Penal Code had been made out against the accused assessee. Several provisions of the Companies Act, 2013 had been referred to by assessees which deal with issuance of duplicate share certificates, procedure therefor and remedy for non issuance of the same. It was held, even at the cost of reiteration, that mere insertion of sections 420/406 of the Penal Code in the complaint did not by itself make out a prima facie case under the said provisions of law and it was the substance of the complaint which had to be looked into. No prima facie case of criminal intent at the inception having been made out against assessee in the complaint, thus, there was no criminal offence, far less an offence under section 420/406 of the Penal Code was disclosed in the complaint and allowing the proceedings to continue shall amount to abuse of the process of law.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

In the instant application under section 482 of the Code of Criminal Procedure the petitioners have prayed for quashing of the proceedings of complaint case no. C.S. / 21563 of 2019 under section 406/420/120B of the Penal Code pending before the Learned Metropolitan Magistrate, 19th Court, Calcutta.

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