No indication of malice if duplicate share certificate not issued by Company: Calcutta High Court
The Calcutta High Court (HC) in the case titled M/s. Avion Builders Pvt. Ltd. & Ors. (Petitioners) v. State of West Bengal & Anr. (Respondents) has quashed a criminal case of Cheating instituted against a company and its Directors over non-issuance of duplicate share certificates to the one claiming to be a shareholder in the company.
The single bench of the HC Justice Suvra Ghosh held that if the company does not issue duplicate share certificates on being misplaced by an alleged shareholder, it does not indicate malice on part of the company from the inception of the transaction.
The HC noted that "The equity shares were admittedly issued against consideration and loss or misplacement of such shares by the opposite party is a subsequent event which was not contemplated by the parties at the time of issuance of the shares."
The factual background of the case is that the petition was filed for quashing of proceedings of a complaint registered against the petitioner company and its Directors under Sections 406, 420, and 120B of the Indian Penal Code (IPC) that was pending before the Metropolitan Magistrate.
The respondent alleged that it held 27,000 equity shares of the company and it refused to issue duplicate share certificates despite intimation that the original share certificates were misplaced.
The petitioner-company sought quashing of FIR primarily on the ground that dispute, is squarely governed by the Companies Act, 2013. It referred to Section 46 of the Companies Act that deals with the issuance of duplicate certificate of shares.
It was submitted that the dispute pertains to non-issuance of duplicate share certificates which cannot be termed as an offence under Sections 420 or 406 of the IPC.
The HC noted that the annual return of the Petitioner-company for financial year 2016-2017 indicates that 27,000 shares were transferred by the respondent in favour of the petitioner.
Regarding the contention of misplacement of the share certificate the bench stated that the allegations made against the petitioners are bereft of any intention of cheating or misappropriation at the inception of the transaction. It further noted that no prima facie case of entrustment with or dominion over property or dishonest misappropriation of property or even ingredient of cheating has found place within the four corners of the complaint.
The bench added that "No prima facie case of entrustment with or dominion over property or dishonest misappropriation of property or even ingredient of cheating has found place within the four corners of the complaint."
The Court concluded that "If the 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 is found at the inception of the transaction."
The HC held, "No prima facie case of criminal intent at the inception having been made out against the petitioners in the complaint, I am inclined to hold that no criminal offence, far less an offence under Section 420/406 of the IPC is disclosed in the complaint and allowing the proceedings to continue shall amount to abuse of the process of law."