Only SFIO Can Initiate Prosecution for Fraud Under Companies Act, Private Complaint Barred: Supreme Court [Read Judgment]
The court rules that only SFIO or an authorised government officer can initiate prosecution for fraud under the Companies Act and private complaints are not maintainable.
![Only SFIO Can Initiate Prosecution for Fraud Under Companies Act, Private Complaint Barred: Supreme Court [Read Judgment]](https://images.taxscan.in/h-upload/2026/01/15/2119862-fraud-under-companies-act-taxscan.webp "Only SFIO Can Initiate Prosecution for Fraud Under Companies Act, Private Complaint Barred: Supreme Court [Read Judgment]")
The Supreme Court ruled that prosecution for fraud under the Companies Act can be initiated only by the Serious Fraud Investigation Office (SFIO) or by an officer authorised, not through a private criminal complaint. The case comes from the dispute over management of Shreemukh Namitha Homes Private Limited, a real estate company started in 2015. The complainant and his...
The Supreme Court ruled that prosecution for fraud under the Companies Act can be initiated only by the Serious Fraud Investigation Office (SFIO) or by an officer authorised, not through a private criminal complaint.
The case comes from the dispute over management of Shreemukh Namitha Homes Private Limited, a real estate company started in 2015. The complainant and his wife was original promoters and majority shareholders. The appellants was appointed as directors between 2015 and 2016. Later disputes happen about control of company.
In 2021, the changes made to Articles of Association, after which appellants not reappoint as directors in Annual General Meeting. The complainant then alleged that appellants illegally hold a meeting, appoint new directors without authority, make fake resolutions and upload false filings on Ministry of Corporate Affairs portal.
Based on these allegations, the complainant filed private criminal complaint. The Special Court for Economic Offences takes cognizance of offences under Sections 448 and 451 of Companies Act, along with offences under Indian Penal Code. The High Court refused to quash the proceedings, so appellants approached the Supreme Court.
The appellants’ counsel argued that Section 448 does not operate independently and makes a person liable for punishment under Section 447, which deals with fraud. Since Section 447 can be prosecuted only on a complaint by the SFIO or an authorised officer, cognizance on a private complaint was barred under Section 212(6). They argued that the criminal case was an attempt to give a criminal colour to a corporate dispute.
They argued that the second proviso to Section 212(6) creates an express bar on courts taking cognizance of such offences unless a complaint is filed by the SFIO or an authorised officer. The appellants also argued that the statutory procedure under the Companies Act had been bypassed and that the criminal complaint was an attempt to give a criminal colour to a corporate dispute.
The State and the complainant argued that there was no bar on taking cognizance of offences under Sections 448 and 451 on a private complaint. They argued that the 2015 amendment to Section 212(6) restricted the bar only to offences under Section 447. They further argued that the allegations involved serious acts of false statements and forgery which required trial.
A Bench comprising Justice J.K. Maheshwari and Justice K. Vinod Chandran examined the statutory scheme of the Companies Act. The Court observed that Section 448 does not prescribe punishment on its own, but expressly states that a person making a false statement “shall be liable under Section 447.”
The court observed that “Anything that cannot be done directly, also cannot be done indirectly.” The court further observed that Section 448 and Section 447 are inextricably linked and cannot be read in isolation. It observed that “The offence under Section 448 of the Companies Act is an ‘offence covered under Section 447’ as mentioned in Section 212(6) of the Companies Act.”
The court explained that where allegations of fraud in the affairs of a company are made, the complainant must follow the procedure laid down under the Companies Act including approaching the Registrar of Companies and where necessary, the SFIO. It pointed out that a private complaint is not the legally prescribed route for prosecuting fraud under the Companies Act.
The Supreme Court partly allowed the appeals. It quashed the criminal proceedings insofar as they related to offences under Sections 448 and 451 of the Companies Act.
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