# Prashant Singh v. State of U.P. & Anr

- **Citation:** (2024) 1 ILRA 914
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-01-16
- **Case number:** Application U/S 482. No. 10730 of 2023
- **Bench:** Subhash Vidyarthi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/prashant-singh-v-state-of-u-p-anr-51393
- **Pages:** 14

## Headnote

G.A.,
Aditya
Vikram
Singh,
Nadeem
Murtaza

Criminal Law - Companies Act, 2013 -
Sections 56(1), 179 - Indian Penal Code,
1860 - Sections 409 & 420 - Code of
Criminal Procedure, 1973 - Section 482 -
Applicant
challenged
charge-sheet
and
cognizance order for offences under Sections
409, 420 I.P.C., alleging unauthorized transfer of
98% shares of subsidiary company (JBTCPL)
held by PPTPL. Court held: (1) Transfer without
Board resolution under Section 179 or transfer
deed under Section 56(1) of Companies Act
violated statutory requirements, prima facie
constituting criminal breach of trust and
cheating (Rathish Babu Unnikrishnan Vs St. of
NCT of Delhi, 2022 SCC OnLine SC 513). (2)
Applicant's claim of adjustment for prior
proprietorship interest was a factual dispute for
trial,
not
quashment
under
Section
482
(Harshendra Kumar D. Vs Rebatilata Koley,
(2011) 3 SCC 351). (3) Dispute not purely civil;
allegations of forgery and unauthorized transfer
as company director established cognizable
offences (Pratibha Vs Rameshwari Devi, (2007)
12 SCC 369). (4) Delay in FIR (three years) did
not
vitiate
proceedings,
as
investigation
substantiated allegations (Mahesh Chaudhary Vs
St. of Raj., (2009) 4 SCC 439). (5) No material
beyond
suspicion
disproved
allegations;
quashing
unwarranted.
Charge-sheet
and
cognizance order upheld; application dismissed.
(Paras 18-40)

Application Dismissed.

List of Cases cited:

## Text

_Characters 0–39,621 of 45,054. This is a partial read: ask again with offset=39621 for what follows._

914 INDIAN LAW REPORTS ALLAHABAD SERIES

16. In view of the aforesaid facts and
circumstances of the case, I find no merit in
the application and the same is accordingly
dismissed.

17. It is made clear that the learned
trial court shall proceed to decide the case
expeditiously in accordance with law
without
being
influenced
by
any
observations made in this order.
----------
(2024) 1 ILRA 914
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 16.01.2024

BEFORE

THE HON'BLE SUBHASH VIDYARTHI, J.

Application U/S 482. No. 10730 of 2023

Prashant Singh ...Applicant
Versus
State of U.P. & Anr. ...Opposite Parties

Counsel for the Applicant:
Lalta Prasad Misra, Prafulla Tiwari

Counsel for the Opposite Parties:
G.A.,
Aditya
Vikram
Singh,
Nadeem
Murtaza

Criminal Law - Companies Act, 2013 -
Sections 56(1), 179 - Indian Penal Code,
1860 - Sections 409 & 420 - Code of
Criminal Procedure, 1973 - Section 482 -
Applicant
challenged
charge-sheet
and
cognizance order for offences under Sections
409, 420 I.P.C., alleging unauthorized transfer of
98% shares of subsidiary company (JBTCPL)
held by PPTPL. Court held: (1) Transfer without
Board resolution under Section 179 or transfer
deed under Section 56(1) of Companies Act
violated statutory requirements, prima facie
constituting criminal breach of trust and
cheating (Rathish Babu Unnikrishnan Vs St. of
NCT of Delhi, 2022 SCC OnLine SC 513). (2)
Applicant's claim of adjustment for prior
proprietorship interest was a factual dispute for
trial,
not
quashment
under
Section
482
(Harshendra Kumar D. Vs Rebatilata Koley,
(2011) 3 SCC 351). (3) Dispute not purely civil;
allegations of forgery and unauthorized transfer
as company director established cognizable
offences (Pratibha Vs Rameshwari Devi, (2007)
12 SCC 369). (4) Delay in FIR (three years) did
not
vitiate
proceedings,
as
investigation
substantiated allegations (Mahesh Chaudhary Vs
St. of Raj., (2009) 4 SCC 439). (5) No material
beyond
suspicion
disproved
allegations;
quashing
unwarranted.
Charge-sheet
and
cognizance order upheld; application dismissed.
(Paras 18-40)

Application Dismissed.

List of Cases cited:

1. Rathish Babu Unnikrishnan Vs St. of NCT of
Delhi, 2022 SCC OnLine SC 513 (Para 23)

2. Harshendra Kumar D. Vs Rebatilata Koley,
(2011) 3 SCC 351 (Para 31)

3. Anita Malhotra Vs Apparel Export Promotion
Council, (2012) 1 SCC 520 (Para 32)

4. Rajiv Thapar Vs Madan Lal Kapoor, (2013) 3
SCC 330 (Para 34)

5. Anand Kumar Mohatta Vs St. (NCT of Delhi),
(2019) 11 SCC 706 (Para 36)

6. Pratibha Vs Rameshwari Devi, (2007) 12 SCC
369 (Para 35)

7. Mahesh Chaudhary Vs St. of Raj., (2009) 4
SCC 439 (Para 36)

8. Priti Saraf Vs St. (NCT of Delhi), (2021) 16
SCC 142 (Para 37)

9. St. of Har. Vs Bhajan Lal, 1992 Supp (1) SCC
335 (Para 18)

(Delivered by Hon'ble Subhash Vidyarthi,
J.)

1. Heard Dr. L. P. Mishra, and Sri
Prafulla Tiwari Advocates, the learned
counsel for the applicant, Smt. Parul Kant,
1 All. Prashant Singh Vs. State of U.P. & Anr.
915
the learned A.G.A. for the State and Sri
Vikas Tiwari and Sri Aditya Vikram Singh
Advocates, the learned counsel for the
opposite party No.2.

2. By means of the instant application
filed under Section 482 Cr.P.C., the
applicant has sought quashing of the
charge-sheet
dated
04.02.2023
for
commission of offences under Section 409
and 420 I.P.C., filed in furtherance of F.I.R.
No. 572 dated 26.10.2021 under Sections
406, 420 IPC, Police Station Vibhuti
Khand, District Lucknow and the order
dated 13.02.2023 passed by the Additional
Chief Judicial Magistrate-II, Lucknow in
Criminal Case No.18415 of 2023, whereby
the Court has taken cognizance of the
offences and summoned the applicant to
face the trial.

3. Opposite party No.2 had lodged the
FIR alleging that he is a major shareholder
of M/S Piscesia Power Transmission
Private Limited (hereinafter referred to as
'PPTPL') and he holds 24% shares of the
aforesaid company. A firm - M/s Bigha
Infraventures Private Ltd., controlled by the
informant holds 26% shares of PPTPL.
Thus, the informant has 50% shares in
PPTPL. PPTPL holds 98% shareholdings
in a company called J. B. Test and
Commissioning
Private
Limited
(hereinafter referred to as 'JBTCPL'),
which is a subsidiary company of PPTPL.
The applicant - Prashant Singh misused his
position as a Director of JBTCPL and
fraudulently transferred 98% of its shares
in
his
favour
without
giving
any
information of the share transfer to the
Board of Directors of PPTPL and without
execution of any transfer deed against the
provisions of the Companies Act, 2013.The
applicant forged signatures of the share
holders of PPTPL, committed forgery,
criminal breach of trust and he committed
theft of the shares.

4. Although the FIR was registered
for offences under Sections 406 and 420
IPC, after investigation, a charge-sheet was
submitted for offences under Sections 409,
420 IPC on 26.10.2021 and on 13.02.2023,
learned
Additional
Chief
Judicial
Magistrate
passed
an
order
taking
cognizance of the offences and summoning
the applicant to face trial.

5. The case set up by the applicant in
the application under Section 482 Cr.P.C. is
being briefly stated in the following
paragraphs: -

5.1 The applicant had formed
JBTCPL
in
the
year
2002
as
a
proprietorship concern. PPTPL was formed
in the year 2012. The applicant and one
Vandana Yadav had 50% shares each in the
said company and they were the Directors
of the Company.

5.2 On 06.11.2015, proprietorship
concern JBTCPL was converted to a
private limited company with Vandana
Yadav holding 25% shares and her husband
Vikas Yadav holding 25% shares and the
applicant Prashant Singh holding 50%
shares and all of them were Directors of the
Company.

5.3 On 01.03.2016, 98% shares of
JBTCPL were transferred to PPTCL and
merely 1% shares remained with the
applicant and 1% shares remained with
Vandana Yadav. However, no transfer deed
was executed for transfer of 98% shares of
JBTCPL.

5.4 The first informant, Manoj
Kumar Singh was inducted as General
916 INDIAN LAW REPORTS ALLAHABAD SERIES
Manager (Finance) in PPTPL in the year
2016. He was the head of the Finance
Department of the company and he was
responsible to facilitate the accounts and
finance
related
transactions
of
the
company. Being the General Manager of
PPTPL,
the
informant
was
equally
responsible for any transaction of the
company like the Directors, Chartered
Accountant and the Company Secretary of
the Company.

5.5 At the time of lodging of the
FIR, the informant was holding 24% shares
in PPTPL in his individual capacity
whereas M/S Bigha Infraventure Private
Ltd., a company owned and managed by
the informant, had 26% shares, which it
had acquired in March, 2020.

5.6. Vivek Yadav was arrested in
the year 2017 in Case Crime No. 639 of 2015
under Sections 364, 384 and 506 IPC, Police
Station Kalyanpur, District Kanpur Nagar
and his bail application was rejected by
means of an order dated 10.04.2017 passed
by this Court sitting at Allahabad in Criminal
Misc Bail Application No.11587 of 2017 and
he remained in jail for a period of one year.
From the aforesaid judgment and order dated
10.04.2017, the applicant came to know that
Vivek Yadav had been falsely using the bank
statement of JBTCPL by claiming that
JBTCPL had given a loan of Rs.50,00,000/-
to Neharpit Construction and Vivek Yadav
and his brother-in-law, Shailendra Yadav had
been implicated in the false case due to the
aforesaid reason. The applicant claims that
the loan had been repaid in the year 2012
itself.

5.7 Upon coming to know about
the aforesaid facts, the applicant decided to
severe his business relations with Vivek
Yadav and he instructed the company's
Chartered Accountant Tushar Nagar to
prepare the necessary documents for share
transfer and change in Directorship of
PPTPL and JBTCPL. CA Tushar Nagar
and his team had prepared a draft document
including a share transfer agreement and
had sent the same to the applicant through
e-mails dated 25.11.2017 and 27.11.2017
and the same were also forwarded to Vivek
Yadav for transferring 98% shares of
JBTCPL held by PPTPL to the applicant.
Draft
documents
were
modified
in
February, 2018 when Vivek Yadav was
released from custody and thereafter the
same were signed and handed over to the
company's CA Tushar Nagar for further
compliance on the web portal of the
Ministry of Corporate Affairs. After
February, 2018, shareholdings of PPTPL
and
JBTCPL
were
altered
and
the
following changes were incorporated on the
portal of the Ministry of Corporate Affairs,
balance sheet of both the companies and
other relevant e-forms by the Chartered
Accountant
Tushar
Nagar
and
the
Company Secretaries of PPTPL and
JBTCPL:-

Changes in PPTPL: -

i. Vivek Yadav was appointed as
Director of PPTPL on 15.02.2018.

ii. 98% shares of JBTCPL held
by PPTPL were transferred to the applicant
on 16.02.2018 and JBTCPL seized ceased
to be a subsidiary of PPTPL.

iii. Vandana Yadav resigned from
Directorship of PPTPL on 16.02.2018 as
she has sold away her shareholdings in
PPTPL to Vivek Yadav.

iv. Vandana Yadav's shares were
transferred to Vivek Yadav on 16.02.2018,
1 All. Prashant Singh Vs. State of U.P. & Anr.
917
without execution of any share transfer
deed.

Changes in JBTCPL: -

i. Vivek Shankar Singh was
appointed as Director of the Company.

ii. 98% shares of PPTPL were
transferred to the applicant on 16.02.2018
and JBTCPL ceased to be subsidiary of
PPTPL.

iii. Vandana Yadav resigned as a
Director of the company on 16.02.2018 as
he had sold away her 1% shareholding in
JBTCPL to Vivek Shankar Singh for a
consideration of Rs.70,000/- paid though
cheque.

5.8 In the annual return of
PPTPL submitted for the financial year
2017-18 under Section 92(1) of the
Companies Act and sub rule 11(1) of the
Companies
(Management
and
Administration) Rules, 2014, as against
the particulars of holding subsidiary and
associate companies, the number zero is
mentioned.

5.9 Thus, with effect from
16.02.2018, the applicant held 99%
shares of JBTCPL and Vivek Shankar
Singh held 1% shares of the company and
since then no company remained a
subsidiary of any other company. All the
documents uploaded on the portal of the
Ministry of Corporate Affairs are public
documents.

6. Dr L.P. Mishra, the learned
counsel for the applicant has submitted
that the investigating officer had sent a
letter to the Ministry of Corporate Affairs
seeking some documents and it is
recorded in CD Parcha No.17 that the
Registrar of Companies had informed the
investigating officer that e-forms, namely
MGT-7 and AOC-4 filed by PPTPL and
JBTCPL are available on the web portal of
the Ministry of Corporate Affairs and the
same can be looked into by any person.
However, the investigating officer did not
consider the aforesaid documents available
on the portal of the Ministry of Corporate
Affairs and he conducted the investigation
defectively.

7 . It has also been submitted by the
learned Counsel for the applicant that the
investigating officer had issued a notice
under Section 41 Cr.P.C., and the applicant
had sent replies dated 24.09.2022 and
27.09.2022 stating that the documents had
been prepared by the C.A./C.S. of JBTCPL
and PPTPL, but the same were not
considered by the Investigating Officer. It
is recorded in CD-28 that a registered
envelop was received in the police station
containing some documents without any
applications submitted by the applicant and
without attestation of the documents by the
applicant. The documents were attached to
the case diary and it was recorded that the
same will be verified/perused when the
applicant appears and gives his statement,
but it was not done.

8. Further submission of the learned
counsel for the applicant is that the dispute
between the parties is a purely commercial
dispute regarding transfer of shareholdings
of the Company and the only allegation that
can be established against the applicant is
that shares were transferred in his favour
without execution of share transfer deed.
Consequence whereof is directed under
Section 56 (6) of the Companies Act and
the institution of criminal proceedings is
abuse of the process of criminal law and
918 INDIAN LAW REPORTS ALLAHABAD SERIES
the criminal proceedings are liable to be
quashed.

9. The learned counsel for the
applicant has submitted that the applicant
had dully filled up form SH-4 and handed it
over to the company's CA Tushar Nagar
and thereafter it was the responsibility of
the CA to upload the documents on the web
portal of the Ministry of Corporate Affairs.
Failure of the Company's Chartered
Accountant to upload the share transfer
deed on the web portal of the Ministry of
Corporate Affairs would not make the
applicant liable for commission of any
offence.

10. Dr. L.P. Mishra has further
submitted that the shares were transferred
on 18.02.2018 whereas the FIR has been
lodged on 26.10.2021 and the delay in
lodging the FIR clearly indicates that the
FIR has been lodged maliciously.

11. In support of his submissions, the
learned Counsel for the applicant has relied
upon the judgments in the cases of State of
Haryana and others versus Bhajan Lal
and others, (1992) Supp. (1) SCC 335,
Harshendra Kumar D. versus Rebatilata
Koley and others, (2011) 3 SCC 351,
Anita Malhotra versus Apparel Export
Promotion Council and another, (2012) 1
SCC 521, Rajiv Thapar and others
versus Madan Lal Kapoor, (2130) 3 SCC
330 and Anand Kumar Mohatta and
another versus State (NCT of Delhi),
Department of Home and another,
(2019) 11 SCC 706.

12. Per contra, Sri. Vikas Tiwari, the
learned counsel for opposite party No. 2
has submitted that the opposite party No.2
had effectively 50% shares in PPTPL. 98%
shares of JBTCPL were held by PPTPL and
thus JBTCPL was subsidiary of PPTPL. In
this manner, opposite party No.2 indirectly
held 49% of JBTCPL. The company's CA
'Tushar Nagar & Co.' had sent an e-mail
dated 25.11.2017 to the applicant, attaching
therewith some documents regarding share
transfer and stating that the holding and
subsidiary papers will be provided on
Monday. On 27.11.2017, the CA had sent
another e-mail to the applicant annexing
therewith draft of minutes of Board
Meeting of JBTCPL to be held on
27.11.2017 for giving consent of the Board
of Directors of the company for transfer of
6,86,000 shares of PPTPL to the applicant.
However, the draft resolution was never
approved by the Board of Directors of the
Company and yet shares were transferred
illegally on 18.02.2018, without any
transfer deed having been executed and
without any consideration having been paid
for the alleged transfer.

13. The learned counsel for opposite
party No. 2 has further submitted that Form
No. SH4, which is the Form for transfer of
securities
under
Section
56
of
the
Companies Act, 2013 and Rule 11(1) of the
Companies (Share Capital and Debentures)
Rules, 2014 was also prepared, which
mentions consideration payable for the
transfer to be Rs.68,60,000/-, at the rate of
Rs.10/- per share. The aforesaid documents
have been annexed by the applicant himself
alongwith the application under Section
482 Cr.P.C., which indicates that the
applicant was fully aware about the legal
position, that the shares could have been
transferred only after a resolution of the
board of Directors of the company,
execution of a transfer deed and payment of
consideration amounting to Rs.68,60,000/-,
yet
the
shares
were
transferred
surreptitiously without any of the aforesaid
acts having been done.
1 All. Prashant Singh Vs. State of U.P. & Anr.
919

14. The learned Counsel for the
opposite party No.2 has also submitted that
the applicant, being a director of the
company, was the custodian of its assets,
including the shares of the company and he
surreptitiously transferred the shares to
himself, which makes out the commission
of offences under Section 409 and 420 IPC.

15. The learned counsel for the
opposite party No.2 has submitted that
when Vandana Yadav had transferred
10,00,000 shares of PPTPL to her husband,
Vivek Yadav, it was done only after a
resolution to this effect was passed by the
Board of Directors of Company in its
meeting held on 16.02.2018, and a copy of
the Board resolution dated 16.02.2018 has
been
annexed
with
the
application.
However, the applicant transferred the
company's shares in his own favour without
any
resolution
having
been
passed
authorising the transfer.

16. In reply to the submission of the
learned Counsel for the opposite arty no. 2
regarding non payment of consideration,
the learned counsel for the applicant has
submitted that the payment of consideration
is required only in case of sale of shares.
Consideration can be in many a form and it
should not necessarily be in the form of
payment of money. JBTCPL was a
proprietorship concern of the applicant
prior to 16.11.2013 and its 98% shares had
been transferred to PPTPL on 01.03.2016
without execution of any document and by
transferring shares, the applicant has
merely adjusted the value of JBTCPL
which belonged to the applicant.

17. Before proceeding to examine the
submissions made by the learned Counsel
for the parties, it would be appropriate to
mention the law regarding the scope of
interference in exercise of jurisdiction
under Section 482 of the Cr.P.C. as
explained by the Hon'ble Supreme Court in
its various judgments.

18. In State of Haryana v. Bhajan
Lal, 1992 Supp (1) SCC 335, the Hon'ble
Supreme Court held that: -

"102. In the backdrop of the
interpretation of the various relevant
provisions of the Code under Chapter XIV
and of the principles of law enunciated by
this Court in a series of decisions relating
to the exercise of the extraordinary power
under Article 226 or the inherent powers
under Section 482 of the Code which we
have extracted and reproduced above, we
give the following categories of cases by
way of illustration wherein such power
could be exercised either to prevent abuse
of the process of any court or otherwise to
secure the ends of justice, though it may not
be possible to lay down any precise, clearly
defined and sufficiently channelised and
inflexible guidelines or rigid formulae and
to give an exhaustive list of myriad kinds of
cases wherein such power should be
exercised.

(1) Where the allegations made in
the
first
information
report
or
the
complaint, even if they are taken at their
face value and accepted in their entirety do
not prima facie constitute any offence or
make out a case against the accused.

(2) Where the allegations in the
first
information
report
and
other
materials, if any, accompanying the FIR do
not disclose a cognizable offence, justifying
an investigation by police officers under
Section 156(1) of the Code except under an
order of a Magistrate within the purview of
Section 155(2) of the Code.
920 INDIAN LAW REPORTS ALLAHABAD SERIES

(3) Where the uncontroverted
allegations made in the FIR or complaint
and the evidence collected in support of the
same do not disclose the commission of any
offence and make out a case against the
accused.

(4) Where, the allegations in the
FIR do not constitute a cognizable offence
but constitute only a non-cognizable
offence, no investigation is permitted by a
police officer without an order of a
Magistrate as contemplated under Section
155(2) of the Code.

(5) Where the allegations made in
the FIR or complaint are so absurd and
inherently improbable on the basis of
which no prudent person can ever reach a
just conclusion that there is sufficient
ground for proceeding against the accused.

(6) Where there is an express
legal bar engrafted in any of the
provisions of the Code or the concerned
Act (under which a criminal proceeding is
instituted)
to
the
institution
and
continuance of the proceedings and/or
where there is a specific provision in the
Code or the concerned Act, providing
efficacious redress for the grievance of the
aggrieved party.

(7) Where a criminal proceeding
is manifestly attended with mala fide
and/or where the proceeding is maliciously
instituted with an ulterior motive for
wreaking vengeance on the accused and
with a view to spite him due to private and
personal grudge.

103. We also give a note of
caution to the effect that the power of
quashing a criminal proceeding should be
exercised
very
sparingly
and
with
circumspection and that too in the rarest
of rare cases; that the court will not be
justified in embarking upon an enquiry as
to the reliability or genuineness or
otherwise of the allegations made in the
FIR or the complaint and that the
extraordinary or inherent powers do not
confer an arbitrary jurisdiction on the
court to act according to its whim or
caprice."

(Emphasis supplied)

27. The expression "rarest of rare
cases" used by the Hon'ble Supreme Court
in Bhajan Lal (Supra) has been explained
in
Som
Mittal
(2) v. State
of
Karnataka (2008) 3 SCC 574 in the
following words: -

"9. When the words "rarest of
rare cases" are used after the words
"sparingly and with circumspection" while
describing the scope of Section 482, those
words merely emphasise and reiterate what
is intended to be conveyed by the words
"sparingly and with circumspection". They
mean that the power under Section 482 to
quash proceedings should not be used
mechanically or routinely, but with care
and caution, only when a clear case for
quashing is made out and failure to
interfere would lead to a miscarriage of
justice. The expression "rarest of rare
cases" is not used in the sense in which it is
used with reference to punishment for
offences under Section 302 IPC, but to
emphasise
that
the
power
under
Section 482 CrPC to quash the FIR or
criminal proceedings should be used
sparingly and with circumspection."

28. In Dineshbhai Chandubhai
Patel v. State of Gujrat, (2018) 3 SCC
104, it was held that in order to examine as
1 All. Prashant Singh Vs. State of U.P. & Anr.
921
to whether factual contents of FIR disclose
any cognizable offence or not, the High
Court cannot act like the Investigating
agency nor can exercise the powers like an
Appellate Court. That question is required
to be examined keeping in view the
contents of FIR and prima facie material, if
any, requiring no proof. At such stage, the
High Court cannot appreciate evidence nor
can it draw its own inferences from
contents of FIR and material relied on. It is
more so, when the material relied on is
disputed. In such a situation, it becomes the
job of the Investigating Authority at such
stage to probe and then of the Court to
examine questions once the charge-sheet is
filed along with such material as to how far
and to what extent reliance can be placed
on such material.

29. In the case of Dhruvram
Murlidhar
Sonar
versus
State
of
Maharashtra, (2019) 18 SCC 191 the
Hon'ble Supreme Court held that exercise
of powers under Section 482 Cr. P.C. to
quash the proceedings is an exception and
not a rule. The inherent jurisdiction under
Section 482 Cr. P.C., though wide, is to be
exercised sparingly, carefully and with
caution, only when such exercise is
justified by tests specifically laid down in
the section itself. Appreciation of evidence
is not permissible at the stage of quashing
of proceedings in exercise of powers under
Section 482 Cr. P.C.

30. In Kaptan Singh v. State of
Uttar Pradesh, (2021) 9 SCC 35, the
Hon'ble Supreme Court was pleased to
hold that while deciding an application
under Section 482 Cr. P.C., the High Court
is not required to go into the merits of the
allegations and/or enter into the merits of
the case as if the High Court is exercising
the appellate jurisdiction and/or conducing
the trial. The Hon'ble Supreme Court
referred to its earlier pronouncements

31. In CBI v. Aryan Singh, 2023
SCC OnLine SC 379, the Hon'ble Supreme
Court held that: -

"10. ...As per the cardinal
principle of law, at the stage of discharge
and/or
quashing
of
the
criminal
proceedings, while exercising the powers
under Section 482 Cr. P.C., the Court is
not required to conduct the mini trial. The
High Court in the common impugned
judgment and order has observed that the
charges against the accused are not
proved. This is not the stage where the
prosecution/investigating
agency
is/are
required to prove the charges. The charges
are required to be proved during the trial
on the basis of the evidence led by the
prosecution/investigating
agency.
Therefore, the High Court has materially
erred in going in detail in the allegations
and the material collected during the
course of the investigation against the
accused, at this stage. At the stage of
discharge and/or while exercising the
powers under Section 482 Cr. P.C., the
Court has a very limited jurisdiction and is
required
to
consider
"whether
any
sufficient material is available to proceed
further against the accused for which the
accused is required to be tried or not."

19. When we examine the facts of the
present case in light of the law regarding
the scope of interference under Section 482
Cr.P.C., it appears that the applicant claims
that he had formed JBTCPL as a
proprietorship concern in the year 2002 and
it was converted to a company on
06.11.2015 with the applicant holding 50%
shares in it and he was a Director of the
Company. PPTPL was formed in the year
922 INDIAN LAW REPORTS ALLAHABAD SERIES
2012 and the applicant and Vandana Yadav
each had 50% shares in the company. On
01.03.2016, 98% shares of JBTCPL were
transferred to PPTCL without execution of
any transfer deed and merely 1% shares
remained with the applicant and 1% shares
remained with Vandana Yadav.

20. The informant was holding 24%
shares in PPTPL in his individual capacity
whereas M/S Bigha Infraventure Private
Ltd., a company owned and managed by
the informant, had 26% shares. Thus the
informant had effective control over 50%
shares of PPTPL, and PPTPL had 98%
shares of JBTCPL.

21. A draft resolution of the Board of
Directors of the Company for transfer of
shares and a draft deed for transfer of 98%
shares of JBTCPL held by PPTPL to the
applicant were prepared by the company's
CA and those had been sent to the applicant
through e-mails dated 25.11.2017 and
27.11.2017. Neither any resolution to this
effect was passed by the Board of Directors
of the company, nor any transfer deed was
executed, yet the 98% shares of JBTCPL
held by PPTPL were transferred to the
applicant on 18.02.2018.

22. Section 56 (1) of the Companies
Act, 2013 provides that a company shall
not register a transfer of securities of the
company unless a proper instrument of
transfer, in such form as may be prescribed,
duly stamped, dated and executed by or on
behalf of the transferor and the transferee
has been delivered to the company by the
transferor or the transferee within a period
of sixty days from the date of execution.
The shares were transferred in violation of
this statutory mandate. The submission of
the learned Counsel for the applicant is that
the consequence of non-execution of a
transfer deed is provided in Sub-section (6)
of Section 56, which provides that where
any default is made in complying with the
provisions of sub-section (1), the company
shall be punishable with fine which shall
not be less than twenty-five thousand
rupees but which may extend to five lakh
rupees and every officer of the company
who is in default shall be punishable with
fine which shall not be less than ten
thousand rupees but which may extend to
one lakh rupees. In the past also, the
company had transferred shares without
execution of any transfer deed. Therefore,
the submission of Dr. Mishra is that no
criminal proceedings can be drawn against
the applicant for the alleged violation of the
provisions of Section 56 (1) of the
Companies Act.

23. In Rathish Babu Unnikrishnan
v. State (NCT of Delhi), 2022 SCC
OnLine SC 513, the Hon'ble Supreme
Court explained the steps for share transfer
as follows: -

"A bare perusal of Section 56(1)
of the Companies Act, 2013 indicates that a
transfer of securities of a company can take
place only when a proper instrument of
transfer is effectuated. The operation of
legally transferring shares involves several
distinct steps. At first, a contract of sale
needs to be entered upon. The nature of
transaction in this contract logically then
requires payment of the price by the
prospective
transferee
to
fulfil
their
promise first. In exchange, transferor
would move to fill Form SH-4 and thus,
effectuate a valid instrument. Depending on
the nature of the company and its Articles
of Association, then upon the presentation
of the instrument of transfer to the board of
the company and its acceptance by the
board, the entry of the transferee in the
1 All. Prashant Singh Vs. State of U.P. & Anr.
923
register of the company in place of the
transferor, takes place. Thus, the transfer
of share is complete."

24. Therefore, it is clear that the
shares could not have been legally
transferred without execution of a transfer
deed and all other steps mentioned by the
Hon'ble Supreme Court in Rathish Babu
Unnikrishnan (Supra). The mere fact that
shares had been transferred at a previous
occasion without execution of a transfer
deed, will not cure the illegality of the
offending act.

25. While dismissing the appeal and
upholding the High Court's order rejecting
the application under Section 482 Cr.P.C.,
the Hon'ble Supreme Court held in
Rathish Babu Unnikrishnan (Supra) that:
-

"the Court should be slow to
grant the relief of quashing a complaint at
a
pre-trial
stage,
when
the
factual
controversy is in the realm of possibility
particularly
because
of
the
legal
presumption, as in this matter. What is also
of note is that the factual defence without
having to adduce any evidence need to be
of an unimpeachable quality, so as to
altogether disprove the allegations made in
the complaint."

26. It is to be noted that nonexecution of a transfer deed is not the sole
ground of prosecution of the applicant. As
per the provision contained in Section 179
of the Companies Act, 2013, the power to
act on behalf of the company vests in the
Board of Directors and, therefore, the
decision to transfer 98% shares of JBTCPL
held by PPTPL could be taken by the
Board of Directors of PPTPL. The
documents filed by the applicant himself
reveal that on 24.08.2021, the company's
CA had sent an email to the applicant
annexing therewith a draft resolution to be
passed in a meeting of Board of Directors
of the company. A draft transfer deed on
Form SH-4 was also prepared and it has
been annexed with the application under
Section 482 Cr.P.C. It mentions that: -

"FOR THE CONSIDERATION
stated below the "Transferor(s)" named do
hereby transfer to the "Transferee(s)" the
named the securities specified below
subject to the conditions on which the said
securities
are
now
held
by
the
Transferor(s) and the Transferee(s) do here
by agree to accept and hold the said
securities
subject
to
the
conditions
aforesaid."

27. The consideration for transfer of
68,000 shares of JBTCPL mentioned in
Form SH-4 is Rs.6,86,000/-, at the nominal
value of Rs.10/- per share. The transferor is
Piscesia
Power
Transmission
Private
Limited and the transferee is Prashant
Singh (the applicant).

28. The allegation against the
applicant is that acting as a Director of the
company PPTPL, he got 68,000 shares of
JBTCPL held by PPTPL transferred to
himself without any resolution to this effect
having been passed by the Board of
Directors of PPTPL, although a draft
resolution was prepared and sent through
email,
and
without
payment
of
consideration of Rs.6,86,000/- mentioned
in the draft resolution of the Board of
Directors and in the draft transfer deed.

29. No material has been annexed
with the application or the affidavit filed in
support thereof to rebut the allegations. The
contention of the learned Counsel for the
924 INDIAN LAW REPORTS ALLAHABAD SERIES
applicant is that being a Director of the
company, the applicant was authorised to
act on behalf of the company. However,
Section 179 of the Companies Act, 2013
provides that the power to act on behalf of
the company vests in the Board of
Directors. Therefore, in absence of a
resolution
having
been
passed,
the
applicant had no authority to transfer the
shares held by the company to himself and
the aforesaid contention of the learned
Counsel for the applicant is without any
force.

30. The next contention of the learned
Counsel for the applicant is that JBTCPL
was a proprietorship concern of the
applicant prior to 16.11.2013 and its 98%
shares had been transferred to PPTPL on
01.03.2016
without
payment
of
any
consideration that that the applicant has
merely adjusted the value of JBTCPL
which belonged to the applicant. This
factual contention raised by the accused -
applicant cannot be examined by this Court
by holding a mini trial while deciding the
application under Section 482 Cr.P.C. It
can only be decided by the trial Court after
the parties have the opportunity to lead
evidence.

31. In Harshendra Kumar D. v.
Rebatilata Koley, (2011) 3 SCC 351
placed by the learned Counsel for the
applicant, the Hon'ble Supreme Court held
that: -

"25...It is fairly settled now that
while exercising inherent jurisdiction
under
Section
482
or
revisional
jurisdiction under Section 397 of the Code
in a case where complaint is sought to be
quashed, it is not proper for the High
Court to consider the defence of the
accused or embark upon an enquiry in
respect of merits of the accusations.
However, in an appropriate case, if on the
face of the documents - which are beyond
suspicion or doubt - placed by the
accused, the accusations against him
cannot stand, it would be travesty of justice
if the accused is relegated to trial and he is
asked to prove his defence before the trial
court. In such a matter, for promotion of
justice or to prevent injustice or abuse of
process, the High Court may look into the
materials which have significant bearing
on the matter at prima facie stage."

32. In Anita Malhotra v. Apparel
Export Promotion Council, (2012) 1 SCC
520 also, the Hon'ble supreme Court held
that: -

"20. As rightly stated so, though
it is not proper for the High Court to
consider the defence of the accused or
conduct a roving enquiry in respect of
merits of the accusation, but if on the face
of the document which is beyond suspicion
or doubt, placed by the accused and if it is
considered that the accusation against her
cannot stand, in such a matter, in order to
prevent injustice or abuse of process, it is
incumbent on the High Court to look into
those document/documents which have a
bearing on the matter even at the initial
stage and grant relief to the person
concerned by exercising jurisdiction under
Section 482 of the Code."

33. In the present case, the applicant
could not produce any document which
may establish his defence beyond suspicion
or doubt and, therefore, the proceedings
cannot be quashed in the present case.

34. In Rajiv Thapar v. Madan Lal
Kapoor, (2013) 3 SCC 330, the Hon'ble
Supreme
Court
has
delineated
the
1 All. Prashant Singh Vs. State of U.P. & Anr.
925
following steps to determine the veracity of
a prayer for quashment raised by an
accused by invoking the power vested in
the High Court under Section 482 CrPC: -

"30.1. Step one: whether the
material relied upon by the accused is
sound, reasonable, and indubitable i.e. the
material is of sterling and impeccable
quality?

30.2. Step two: whether the
material relied upon by the accused would
rule out the assertions contained in the
charges levelled against the accused i.e.
the material is sufficient to reject and
overrule the factual assertions contained in
the complaint i.e. the material is such as
would persuade a reasonable person to
dismiss and condemn the factual basis of
the accusations as false?

30.3. Step three: whether the
material relied upon by the accused has not
been
refuted
by
the
prosecution/complainant;
and/or
the
material is such that it cannot be justifiably
refuted by the prosecution/complainant?

30.4.
Step
four:
whether
proceeding with the trial would result in an
abuse of process of the court, and would
not serve the ends of justice?

30.5. If the answer to all the steps
is in the affirmative, the judicial conscience
of the High Court should persuade it to
quash
such
criminal
proceedings
in
exercise of power vested in it under Section
482 CrPC. Such exercise of power, besides
doing justice to the accused, would save
precious court time, which would otherwise
be wasted in holding such a trial (as well
as proceedings arising therefrom) specially
when it is clear that the same would not
conclude in the conviction of the accused."

35. In the present case it cannot be
said that the material relied upon by the
applicant is sound and indubitable or that it
would rule out the assertions contained in
the charges levelled against him. It cannot
be said that the material is such as cannot
be
justifiably
refuted
by
the
prosecution/complainant.
Therefore,
it
cannot be said that the applicant's case
fulfils all the conditions mentioned in Rajiv
Thapar
(Supra)
for
quashing
the
proceedings.

36. In Anand Kumar Mohatta v.
State (NCT of Delhi), (2019) 11 SCC 706

"16. There is nothing in the
words of this section which restricts the
exercise of the power of the Court to
prevent the abuse of process of court or
miscarriage of justice only to the stage of
the FIR. It is settled principle of law that
the High Court can exercise jurisdiction
under Section 482 CrPC even when the
discharge application is pending with the
trial court. Indeed, it would be a travesty to
hold that proceedings initiated against a
person can be interfered with at the stage
of FIR but not if it has advanced and the
allegations
have
materialised
into
a
charge-sheet. On the contrary it could be
said that the abuse of process caused by
FIR stands aggravated if the FIR has taken
the
form
of
a
charge-sheet
after
investigation. The power is undoubtedly
conferred to prevent abuse of process of
power of any court."

37. There can be no dispute against
the aforesaid proposition, but it is of no
help to the applicant in the present case.
926 INDIAN LAW REPORTS ALLAHABAD SERIES

32. Prima facie it appears that transfer
of 98% shares of JBTCPL held by PPTPL,
made by the applicant acting as a director
of the company, in his own favour, without
any resolution to this effect having been
passed by the Board of Directors of the
company, makes out a case for trial of the
applicant for the alleged offences.

33.

The
contention
that
the
investigating officer has failed to take some
material into consideration also does not
make out a case for quashing of the
proceedings when the material placed
before this Court prima facie makes out
commission of cognizable offences by the
applicant.

34. So far as the next submission of
the earned Counsel for the applicant, that
the dispute between the parties is purely
civil in nature, the investigation has
established
that
the
applicant
has
committed criminal breach of trust the
cheating against the informant.