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CHAPTER-9
Misrepresentation and Malpractices –
Civil and Criminal Trial Procedure
(1) INTRODUCTION

The NCLT consolidates the corporate jurisdiction of:

➢ Company Law Board, [CLB]
➢ Board of Industrial and Financial Reconstruction, [BIFR]
➢ Appellate Authority for Industrial and Financial Reconstruction [AAIFR] and
➢ Jurisdiction and powers relating to winding up, restructuring and other provisions as vested with
the High Courts
resulting the Reduction of the burden on courts and will help companies facing issues related to
winding up, mismanagement and insolvency of businesses and to Eliminates the overlap the conflicting
rulings and minimize the delays in the resolution of disputes.

The proceedings before the NCLT or NCLAT are DEEMED to be JUDICIAL PROCEEDINGS
and The Tribunal and the Appellate Tribunal shall be DEEMED to be CIVIL COURT.

Section 408 and 410 of Companies Act, 2013 deals with the provisions of constitution of National
Company Law Tribunal (“NCLT” or “the Tribunal) and National Company Law Appellate
Tribunal (“NCLAT” or “the Appellate Tribunal”).

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(2) PROCEDURE BEFORE TRIBUNAL AND APPELLATE TRIBUNAL

SECTION 424 of the Companies Act, 2013 provides that:

(1) The Tribunal and the Appellate Tribunal shall not, while disposing of any proceeding before it or,
as the case may be, an appeal before it, be bound by the procedure laid down in the Code of
Civil Procedure, 1908, but shall be guided by the:
▪ Principles of Natural Justice, and
▪ Subject to the other provisions of this Act or of the Insolvency and Bankruptcy Code, 2016
and of any rules made thereunder,
the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure.

(2) The Tribunal and the Appellate Tribunal shall have, for the purposes of discharging their
functions under this Act or under the Insolvency and Bankruptcy Code, 2016, the same powers as
are vested in a civil court under the Code of Civil Procedure, 1908.

(3) Any order made by the Tribunal or the Appellate Tribunal may be enforced by that Tribunal in
the same manner as if it were a decree made by a court in a suit pending therein, and it shall
be lawful for the Tribunal or the Appellate Tribunal to send for execution of its orders to the
court within the local limits of whose jurisdiction,-
(a) in the case of an order against a company, the registered office of the company is situate; or
(b) in the case of an order against any other person, the person concerned voluntarily resides or
carries on business or personally works for gain.

(3) CODE OF CRIMINAL PROCEDURE, 1973

Code of Criminal Procedure, 1973 [CrPC] is a procedural law which came into force from 1st April 1974.

CrPC applies to every offence punishable under the IPC or any other special or local law.

The substantive law relating to offences could be any other law under which any commission or
omission may create offences of various categories such as the Indian Penal Code, I860 [IPC], the
Prevention of Food Adulteration Act etc. However, for offences under the Companies Act, 2013 or the
Companies Act, 1956, the substantive law is that Act itself.

While the substantive law creates and defines offences and prescribes penalties for commission of
offences, CrPC contains a complete procedural code for trial of offences.

CrPC is the law in relation to trial procedure and is applicable universally to the criminal
activities, UNLESS there is any express provision that introduces a non obstante clause to
override CrPC.

The trial procedure for offences under any law in India will be only in accordance with the
provisions of CrPC, UNLESS the law concerned has a different provision that provides a different
procedure in any respect.
For instance, the Companies Act, 2013 provides whether an offence is cognizable or not. It enables
even the special courts to try the offences summarily.
In other words, the nature of offence and the persons who are liable for the offence as well as
punishment thereto have been prescribed under the Companies Act, 2013. However, the trial
procedure is contained in the CrPC only.

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CrPC provides a clear mechanism for investigation and trial of offences through an effective
administrative and judicial process enabling a speedy and less costly trial of offences.

(4) OBJECT OF TRIAL

The main object of a trial is to find out the truth and determine the innocence or the guilt of the
accused.

The concept of criminal justice system is to ensure that not even one innocent gets punished, though
due to various reasons, many offenders would have escaped the clutches of law.
Defaulters and offenders who have committed the default and the offence should not be spared
[PARDON] even while providing a free and fair trial procedure.
Article 21 of the Constitution of India provides that no person shall be deprived of his life or
personal liberty except according to procedure established by law.
The OBJECT of Article 21 is to prevent encroachment upon personal liberty of a person save in
accordance with law and in conformity with the provisions thereof. Hence, depriving the personal
liberty of a person should be strictly in accordance with the provisions of natural justice and such
deprivation should be in accordance with the procedure established by law.

Except with respect to offences involving fraud or mens rea the general criminal law system of
deeming that the accused is innocent UNTIL prosecution proves the guilt, does not apply.

As rightly held by Supreme Court in Chairman, SEBI v. Shriram Mutual Fund and Anor.,
AIR 2006 SC, penalty is attracted as soon as the contravention of the statutory obligation
as contemplated by the act and the regulation is established and hence, the intention of
the parties committing such violation becomes wholly irrelevant.

Though the above decision was rendered in the context of securities laws such as the SEBI Act which
provides for levy of penalty, it must be understood that levy of penalty has no criminal connotation
and it is certainly different from a sentence or fine that a criminal court may pass within the limits
of the penal clause of the Companies Act, 2013.

Most of the offences under the Companies Act, 2013 invite strict liability for the company and also for
its Officers in Default without any proof of guilty frame of mind. Therefore, there is no role for the
principle that the accused is innocent until proved guilty by the prosecution.

FINANCIAL STATUS OF DEFAULTING PARTIES DOESN’T REDUCE THE

MINIMUM FINE OBLIGATION
The general principle that the pecuniary circumstances or as the case may be the solvency or
financial status of the company and its directors and officers in default do not matter as the penal
provision seeks to impose a minimum fine in many cases.
However, If a director or officer deserves relief, he has to apply to the Court as enabled under section
463 of the Companies Act, 2013. [Power of court to grant relief in certain cases]
In exercise of powers under section 463 of the Companies Act, 2013, it is possible for the Court
trying the offence to reduce the fine to an amount which is less than the minimum fine prescribed
under the relevant penal clause of the Companies Act.

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TWO TYPES OF CASES

CIVIL SUITS CRIMINAL PROCEEDINGS

REGULATED BY REGULATED BY
ONE LAW TWO LAW

CIVIL PROCEDURE
CODE 1908
INDIAN CRIMINAL
PENAL PROCEDURE
THE CODE CONSIST CODE, 1860 CODE, 1973
OF 2 DIVISIONS

Consist of 23 Consist of 484

chapter and Sections and
more than 511 divided into 37
2nd PART Sections Chapters
st CONTAINING
1 PART
CONTAINING (51 ORDERS) each
(158 Sections) of which contains
SUBSTANTIVE PROCEDURAL
several Rules.
LAW LAW

SUBSTANTIVE PROCEDURAL
LAW LAW

The Substantive law is the law which determines the rights and obligations of the parties to a
dispute.

The procedural law is the law which prescribes the procedure for the enforcement of rights and
obligation of the parties to the disputes.

Procedural law is intended to facilitate and not to obstruct the course of substantive justice.

(5) CRIMINAL PROCEEDING VIS-A-VIS CIVIL PROCEEDING

A civil proceeding is concerned with a civil right, whether with reference to common law or a law
created by any statute.
A civil proceeding is distinguished from a criminal proceeding by the fact that:
➔ if the criminal proceeding is taken to a logical conclusion and if the accused is found guilty,
there may be imposition of a sentence of fine or imprisonment or both including a capital
punishment, if the statute so provides.
➔ In civil proceeding there may be an award of compensation and damages.
A criminal proceeding includes all proceedings which are capable of being instituted under ordinary
criminal law of land and is not confined to proceedings under CrPC.

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(6) PUBLIC PROSECUTORS AND COMPANY PROSECUTORS

❖ A ‘Public Prosecutor’ is the counsel for the State in criminal trials. He stands for the State in
whose name all prosecutions are conducted.
❖ All offences affect the public as well as the individual injured, and in all prosecutions the state is
the prosecutor.
❖ A public prosecutor should not appear on behalf of the accused.
❖ Further, his duty is to represent not the police but the state. However, he can give advice to the
police or other government departments with regard to the prosecution of any person if his advice
is so sought.

Section 24(7) of CrPC states that a person shall be eligible to be appointed as a Public Prosecutor or
an Additional Public Prosecutor only if he has been in practice as an advocate for not less than 7
years.
Section 24(8) of CrPC states that the Central Government or the State Government may appoint, for
the purposes of any case or class of cases, a person who has been in practice as an advocate for not
less than 10 years as a “Special Public Prosecutor”.

In S Thamizharasan v. The State of Tamil Nadu, 2010, the Madras High Court held that –
The Public Prosecutor is not a Police Prosecutor in the sense that he is not a mouthpiece
of the Police, Therefore, the Prosecutors cannot be allowed to be controlled either
administratively or in any other mode by the Police Department”.

As held by the Supreme Court, in Balwant Singh and Ors. v. State of Bihar, SC that
“the Criminal Procedure Code is the only matter of the public prosecutor”.

Under the newly inserted SECTION 443 of the Companies Act, 2013 it has been provided that
notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Central
Government may appoint generally, or for any case, or in any case, or for any specified class of cases
in any local area, one or more persons, as COMPANY PROSECUTORS for the conduct of
prosecutions arising out of this act and the persons so appointed as company prosecutors shall have
all the powers and privileges conferred by the Code on Public Prosecutors appointed under section 24
of the Code.

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(7) CLASSES OF COURTS IN INDIA AND THEIR HIERARCHY

SUPREME COURT
OF INDIA

HIGH COURTS

Subordinate or lower
Courts in District

Civil Criminal Revenue

Courts Courts Courts

District District Judge& Board of revenue

Judges Sessions Judge

Principal Senior Additional/Assistant Commissioner,

Civil Judge Court Session Judge District Collector

Principal Junior Chief Judicial Sub Divisional

Civil Judge Court Magistrate & Officer
Metropolitan Magistrate

Junior Civil Judge 1st Class Judicial Tehsildar

Court Magistrate

Small Cause Court, 2nd Class Judicial Asst. Tehsildar

Lok Adalat Magistrate

(8) CRIMINAL COURTS AND CIVIL COURTS

The Gujarat High Court in Natvarlal A.Jani v. N.N Jain, Chairman and Managing
Director, Prestige Foods Limited [1999] (Guj), observed as follows:
➢ The civil court, ordinarily is to be understood with reference to the Civil Procedure Code and whenever there
is a reference to a PRINCIPAL court of original jurisdiction, it would be a District Court and that was
originally known in the Act.
➢ Very rarely the High Court came into the picture as the court of first instance.
➢ Once it is an OFFENCE, obviously, no civil court can exercise its jurisdiction and the punishment has to be
awarded by a competent court established under CrPC.
➢ It is not to say that the statute creating an offence may not provide for a forum duly empowered to deal
with penal provisions.

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(9) SAVING OF INHERENT POWERS OF COURT [Section 151]
[LATEST INSERTION FOR JUNE 2021 ATTEMPT]

Section 151 of the Civil Procedure Code says ‘Nothing in this Code shall be deemed to limit or
otherwise affect the inherent power of the Court to make such orders as may be necessary for the
ends of justice or to prevent abuse of the process of the Court.’
Though it does not confer any specific power to the Courts, it is one of the most used sections of the
Code in litigation. Any situation that is not covered under the Code can be brought under this Section.

The scope of Section 151 CPC has been explained by the Supreme Court in the case K.K. Velusamy
v. N. Palanisamy (2011) as follows:

(a) Section 151 CPC is not a substantive provision which creates or confers any power or jurisdiction
on courts. It merely recognises the discretionary power inherent in every court as a necessary
corollary [CONSEQUENCE] for rendering justice in accordance with law.
(b) As the provisions of the Code are not exhaustive, Section 151 recognises and confirms that if the
Code does not expressly or impliedly cover any particular procedural aspect, the inherent power
can be used to deal with such situation or aspect, if the ends of justice warrant it.
(c) A court has no power to do that which is prohibited by law or the Code, by purported exercise
of its inherent powers.
In other words, the court cannot make use of the special provisions of Section 151 of the Code,
where the remedy or procedure is provided in the Code.
(d) The inherent powers of the court being complementary to the powers specifically conferred.
(e) While exercising the inherent power, the court will be doubly cautious, as there is no legislative
guidance to deal with the procedural situation and the exercise of power depends upon the discretion
and wisdom of the court, and in the facts and circumstances of the case.
(f) The power under Section 151 will have to be used with circumspection [CAUTION] and care,
only:
➔ Where it is absolutely necessary,
➔ When there is no provision in the Code governing the matter,
➔ When the bona fides of the applicant cannot be doubted,
➔ When such exercise is to meet the ends of justice and to prevent abuse of process of court.

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(10) CRIMINAL COURTS AND THEIR POWERS

Courts of Magistrates are the basic courts for conducting trial of criminal offences. In Metropolitan
Cities such as Mumbai, Kolkata and Chennai, respectively the capitals of the States of Maharashtra,
West Bengal and Tamil Nadu, have special category of Magistrates called Presidency Magistrates /
Chief Metropolitan Magistrates.
The following are the powers of Criminal Courts [Section 28 and 29 of CrPC]

Name of the Court Power

High Court [Section 28(1)]
Sessions Judge / Additional Sessions Judge
[Section 28(2)]
Assistant Sessions Judge [Section 28(3)]
Chief Judicial / Chief Metropolitan
Magistrate [Section 29(1) & (4)]
Judicial Magistrates of 1st Class/ Metropolitan
Magistrates/ Sub- divisional Judicial
Magistrates [Section 29(2) & (4)]
Judicial Magistrates of 2nd Class [Sec. 29(3)]
To award any sentence as authorized by a substantive law.
To award any sentence authorized by a substantive law;
But a Sentence of death should be subject to
confirmation by High Court.
To award imprisonment up to 10 years and/or fine. For
fine, no upper limit has been prescribed.
To award imprisonment up to 7 years and / or fine. For
fine, no upper limit has been prescribed.
To award imprisonment up to 3 years or fine up to INR
10,000/-, or both.
To award imprisonment up to 1 years or fine up to INR
5,000/-, or both.

Deviating from CrPC, section 435 of the Companies Act, 2013 states that offences that are punishable with:
➢ IMPRISONMENT OF 2 YEARS OR MORE: shall be tried by special courts consist of single
holding office of Session Judge or Additional Session Judge and
➢ OTHER OFFENCES: shall be tried by special courts consist of Metropolitan Magistrate or a
Judicial Magistrate of the First Class.

PAST EXAMINATION QUESTIONS

Q. Explain the various types of Criminal courts under the Criminal Procedure Code, 1973 and
their powers in brief?

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(11) SPECIAL COURTS UNDER COMPANIES ACT, 2013

A. Establishment of Special Courts [Section 435]

(1) The Central Government may, for the purpose of providing speedy trial of offences EXCEPT
UNDER SECTION 452 under this Act, by notification, establish or designate as many Special
Courts as may be necessary.
(2) A Special Court shall consist of –
(a) A single judge holding office as Session Judge or Additional Session Judge, in case of
offences punishable under this Act with imprisonment of 2 years or more; and
(b) A Metropolitan Magistrate or a Judicial Magistrate of the First Class, in the case of other
offences,
who shall be appointed by the Central Government with the concurrence of the Chief Justice of the
High Court within whose jurisdiction the judge to be appointed is working.

B. Offences Triable by Special Courts [Section 436]

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

(a) All offences specified in section 435(1) shall be triable only by the Special Court established
for the area in which the registered office of the company in relation to which the offence is
committed or where there are more Special Courts than one for such area, by such one of them
as may be specified in this behalf by the High Court concerned; and
(b) Where a person accused of, or suspected of the commission of, an offence under this Act is
forwarded to a Magistrate under section 167(2) or section 167(2A) of the Code of Criminal
Procedure, 1973, such Magistrate may authorise the detention of such person in such custody
as he thinks fit for a period not exceeding 15 days in the whole where such Magistrate is a
Judicial Magistrate and 7 days in the whole where such Magistrate is an Executive
Magistrate.
Provided that where such Magistrate considers that the detention of such person upon or before
the expiry of the period of detention is unnecessary, he shall order such person to be forwarded
to the Special Court having jurisdiction.
(c) The Special Court may exercise, in relation to the person forwarded to it under clause (b), the
same power which a Magistrate having jurisdiction to try a case may exercise under
section 167* of CrPC in relation to an accused person who has been forwarded to him under
that section; and
(d) A Special Court may, upon perusal of the police report of the facts constituting an offence
under this Act or upon a complaint in that behalf, take cognizance of that offence without the
accused being committed to it for trial.

(2) When trying an offence under this Act, may also try an offence other than an offence under this
Act with which the accused may, under CrPC be charged at the same trial.

(3) Notwithstanding anything contained in CrPC, the Special Court may, if it thinks fit, try in a
summary way any offence under the Companies Act which is punishable with imprisonment for
a term not exceeding 3 years.
Provided that in case of any conviction in a summary trial, no sentence of imprisonment for a
term exceeding 1 year shall be passed.

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Provided further that when at the commencement of, or in the course of, a summary trial, it
appears to the Special Court that the nature of the case is such that the sentence of imprisonment
for a term exceeding 1 year may have to be passed or that it is, for any other reason,
undesirable to try the case summarily, the Special Court shall, after hearing the parties, record
an order to that effect and thereafter, recall any witnesses who may have been examined and proceed
to hear or rehear the case in accordance with the procedure for the regular trial.

Author’s Note: It is clear that any offence under this Act which is punishable with imprisonment not
exceeding 3 years may be tried in a Special Court in a summary way.

C. Special Court should be deemed to be a Court of Session [Section 437]

Section 437 of the Companies Act, 2013 makes it clear that the High Court may exercise, so far as may
be applicable, all the powers conferred by Chapters XXIX and XXX of the CrPC on a High Court,
as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Session
trying cases within the local limits of the jurisdiction of the High Court.

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The Code of Criminal Procedure, 1973 (CrPc)
Section Heading
4 Trial of offences under the Indian Penal Code and other laws.
5 Saving
28 Sentences which High Courts and Sessions Judges may pass.
29 Sentences which Magistrates may pass
30 Sentence of imprisonment in default of fine
31 Sentence in cases of conviction of several offences at one trial.
32 Mode of conferring powers.
33 Powers of officers appointed
34 Withdrawal of powers.
35 Powers of Judges and Magistrates exercisable by their successors-in-office.
61 Form of summons
62 Summons how served
63 Service of summons on corporate bodies and societie
64 Service when persons summoned cannot be found
154 Information in cognizable cases
155 Information as to non-cognizable cases and investigation of such cases.
Prosecution for contempt of lawful authority of public servants, for offences against public
195 justice
and for offences relating to documents given in evidence
197 Prosecution of Judges and public servants
204 Issue of process
205 Magistrate may dispense with personal attendance of accused
206 Special summons in cases of petty offence
220 Trial for more than one offence
225 Trial to be conducted by Public Prosecutor
226 Opening case for prosecution
227 Discharge
228 Framing of charge
229 Conviction on plea of guilty
230 Date for prosecution evidence
231 Evidence for prosecution
232 Acquittal
233 Entering upon defence
234 Arguments
235 Judgment of acquittal or conviction
236 Previous conviction
237 Procedure in cases instituted under section 199(2).
238 Compliance with section 207
239 When accused shall be discharged
240 Framing of charge
241 Conviction on plea of guilty

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242 Evidence for prosecution
243 Evidence for defence
244 Evidence for prosecution
245 When accused shall be discharged
246 Procedure where accused is not discharged
247 Evidence for defence
248 Acquittal or conviction
249 Absence of complainant
250 Compensation for accusation without reasonable cause
251 Substance of accusation to be stated
252 Conviction on plea of guilty
253 Conviction on plea of guilty in absence of accused in petty cases
254 Procedure when not convicted
255 Acquittal or conviction
256 Non-appearance or death of complainant
257 Withdrawal of complaint
258 Power to stop proceedings in certain cases
259 Power of Court to convert summons-cases into warrant-cases
260 Power to try summarily
261 Summary trial by Magistrate of the second class
262 Procedure for summary trials
263 Record in summary trials
264 Judgment in cases tried summarily
265 Language of record and judgment
273 Evidence to be taken in presence of accused
274 Record in summons-cases and inquiries
279 Interpretation of evidence to accused or his pleader
300 Person once convicted or acquitted not to be tried for same offence
313 Power to examine the accused
314 Oral arguments and memorandum of arguments
340 Procedure in cases mentioned in section 195
372 No appeal to lie unless otherwise provided
374 Appeals from convictions
375 No appeal in certain cases when accused pleads guilty
376 No appeal in petty cases
378 Appeal in case of acquittal
386 Powers of the Appellate Court
395 Reference to High Court.
397 Calling for records to exercise powers of revision
398 Power to order inquiry
401 High Court's powers of revision
421 Warrant for levy of fine
482 Saving of inherent power of High Court

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CRIMINAL PROCEEDINGS

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