The Supreme Court allowed the criminal appeal and set aside the impugned order of the Delhi High Court dated 5 May 2021, which had recalled its earlier judgment and directed the reopening of prosecution proceedings under Section 340 CrPC against the appellants for alleged perjury. The Supreme Court held that such recall was impermissible under Section 362 CrPC and that the dispute should be adjudicated by the competent Company Law Board (now NCLT) as per earlier directions.
The appeal arises from a protracted corporate dispute between two groups, the Khosla Group and the Bakshi Group, involving allegations of mismanagement and forgery linked to Montreaux Resorts Private Limited (MRPL), a company formed for a resort project in Himachal Pradesh. Ms. Sonia Khosla of the Khosla Group had alleged that certain minutes of the Annual General Meeting (AGM) of MRPL were forged and filed a criminal complaint under Section 340 CrPC seeking prosecution for perjury against the Bakshi Group members. Initial proceedings were directed to be resolved by the Company Law Board (CLB), now the NCLT.
Despite earlier orders restraining the High Court from entertaining criminal prosecution applications related to the dispute pending before the CLB/NCLT, the Delhi High Court, via its order dated 5 May 2021, recalled an earlier dismissal and reopened the criminal proceedings, leading to the appellants filing this appeal.
The original Company Petition, lodged by Ms. Sonia Khosla alleging oppression and mismanagement against the Bakshi Group, was pending before the CLB. In 2014, the Supreme Court directed that both the Company Petition and the related perjury application under Section 340 CrPC be decided by the CLB (later NCLT), thereby restraining the High Court from proceeding with the criminal matter.
The High Court in August 2020 had declined to interfere in the criminal proceedings in view of the Supreme Court’s direction but later, in May 2021, it reviewed and recalled that judgment, reopening the criminal case against the appellants. The appellants challenged this recall order, arguing that it violated Section 362 CrPC regarding the finality of criminal court orders.
The Bench comprising Chief Justice B.R. Gavai and Justice Augustine George Masih observed that Section 362 CrPC prohibits a criminal court from altering or reviewing its judgment or final order except to correct clerical/arithmetic errors. The Court emphasized the distinction between procedural review, which is limited and exceptional, and substantive review, which is generally barred in criminal cases.
The Court discussed various precedents to clarify the limited scope of review in criminal proceedings under CrPC. It held the recall order by the Delhi High Court was a substantive review of its earlier judgment and thus barred by Section 362 CrPC.
It also upheld the binding effect of its 2014 order directing the CLB/NCLT to decide the Company Petition and connected criminal applications, thereby restraining the High Court from proceeding further in criminal contempt and related applications.
In conclusion, the Supreme Court set aside the High Court order dated 5 May 2021, thereby restoring the earlier dismissal of the criminal miscellaneous application. The appeal was allowed, effectively reinforcing the primacy of the CLB/NCLT in resolving the corporate disputes and related criminal allegations.
Cases relied on:
- State of Kerala vs M.M. Manikantan Nair, (2001) 4 SCC 752
- Hari Singh Mann vs Harbhajan Singh Bajwa and Ors., (2001) 1 SCC 169
- Sanjeev Kapoor vs Chandana Kapoor and Ors., (2020) 13 SCC 172
- Grindlays Bank Ltd. vs Central Government Industrial Tribunal and Ors., 1980 Supp SCC 420
- Budhia Swain and Others vs Gopinath Deb and Ors., (1999) 4 SCC 396
- Ganesh Patel vs Umakant Rajoria, 2022 SCC OnLine SC 2050