Special Court Cannot Hear Private Complaints In Companies Act Fraud Cases; Only SFIO Can File: Supreme Court

The Supreme Court on Friday held that a special court cannot entertain a private complaint in cases involving fraud under the Companies Act. It ruled that where an offence attracts punishment under the fraud provision, cognisance can be taken only on a complaint filed by the Serious Fraud Investigation Office or an authorised officer of the Central government.

A Division Bench of Justice J K Maheshwari and Justice K Vinod Chandran held that offences under Section 448 of the Companies Act, which deals with false statements in company filings and records, are inseparably linked to Section 447, the provision that prescribes punishment for fraud.

Since Section 212(6) bars courts from taking cognisance of fraud-related offences except on a complaint by the SFIO or an authorised government officer, the Special Court could not have acted on a private complaint.

“That is to say, even if, after trial, an offence under Section 448 is proved to have been committed by a 'person', it is only with the aid of Section 447 of the Companies Act that the punishment for the said offence may be imposed. Section 448 of the Companies Act, therefore, cannot be read in isolation and must be read along with Section 447 of the Companies Act. Therefore, the offence under Section 448 is an offence 'covered under Section 447' of the Companies Act mentioned in Section 212(6), since the offence under Section 448 is inextricably linked to the punishment for 'fraud' as mentioned in Section 447 and as such, the second proviso to Section 212(6) of the Companies Act is attracted,” the bench said.

The case arose from a prolonged dispute within Shreemukh Namitha Homes Private Limited. The company was promoted by the complainant and his wife, who were also its directors and majority shareholders. Two other directors were inducted between 2015 and 2016 under a memorandum of understanding that involved substantial investment in a real estate project.

Differences later surfaced over the management and control of the company. Amendments to the Articles of Association followed, and at an extraordinary general meeting in November 2021, resolutions were passed that led to the removal of the inducted directors with effect from November 30, 2021. That removal is already under challenge before the National Company Law Tribunal in Hyderabad.

After the NCLT proceedings were initiated, the promoter filed a private criminal complaint alleging that the removed directors had illegally convened meetings, appointed third parties as directors, fabricated board and shareholder resolutions, and uploaded forged documents on the MCA portal. Acting on this complaint, the Special Court for Economic Offences in Hyderabad took cognisance of offences under Sections 448 and 451 of the Companies Act, along with several provisions of the Indian Penal Code. The Telangana High Court refused to quash the proceedings.

Before the Supreme Court, the appellants argued that the Special Court had no jurisdiction to take cognisance of the Companies Act offences on a private complaint. They pointed out that Section 448 itself makes a person “liable under Section 447” and that Section 212(6) expressly restricts cognisance of fraud-related offences to complaints filed by the SFIO or an authorised government officer. Allowing private complaints, they said, would defeat the safeguard built into the law.

Agreeing with this view, the Supreme Court said the restriction under Section 212(6) was intended to prevent frivolous criminal cases by disgruntled shareholders or competitors.

“If the intention of the legislature were to bar the Special Court from taking cognizance of only the offence under Section 447 of the Companies Act, there would be no need to mention offences 'covered under' Section 447 in Section 212(6) of the Companies Act.” the bench observed.

The court also noted that the Telangana High Court had earlier taken the same view on an identical legal issue but failed to consider that ruling in this case. Since cognisance under Section 448 itself was barred, the Supreme Court held that the charge of repeated default under Section 451 could not survive either.

The private complaint was accordingly quashed to the extent it related to Sections 448 and 451 of the Companies Act. As for the IPC offences, the court said they could proceed, but only before the court having proper territorial jurisdiction, and not before the Special Court for Economic Offences.

Case Title: Yerram Vijay Kumar v. The State of Telengana and Anr

Citation: 2026 LLBiz SC 2

Case Number: SLP (Crl.) No. 11530 OF 2024 

For Petitioners: Senior Advocate Shailesh Madhiyal, along with Advocates Awanish Kumar, Anchit Singa and Garima, instructed by Dharmaprabhas Law Associates.

For Respondents: Advocates Kumar Vaibhaw and Devina Sehgal, along with Advocate Dhananjay Yadav; Senior Advocate Jayanth Muth Raj, instructed by Advocate Sadineni Ravi Kumar.