Companies Act | Offence Under Section 448 Is Covered Under Section 447: Supreme Court Bars Private Complaint Without SFIO Nod

"Cognizance of Offence Under Section 448 Cannot Be Taken Without Complying With the Statutory Bar Under Section 212(6)", Delivering a significant ruling on the interplay of fraud provisions under the Companies Act, 2013, the Supreme Court on 9th January 2026 held that no private complaint can invoke Section 448 of the Companies Act without triggering the bar under Section 212(6), which requires a written complaint by the SFIO or a Government-authorised officer. The Court ruled that “offence under Section 448 is an offence covered under Section 447”, and therefore cognizance taken by a Special Court on a private complaint was without jurisdiction and illegal.

The judgment came in the case of Yerram Vijay Kumar vs. State of Telangana & Anr., arising out of company-related criminal allegations, where the complainant—a former promoter—had alleged that the appellants fabricated resolutions, conducted unauthorised appointments, and uploaded false filings to the Ministry of Corporate Affairs.

The Supreme Court decisively quashed the proceedings under Sections 448 and 451 of the Companies Act, while allowing IPC-based charges to continue in a regular court.

"Section 448 Creates Liability, But Only Section 447 Provides Punishment": Court Clarifies Legislative Design

The central legal issue revolved around whether a private complaint can sustain charges under Section 448 of the Companies Act, when that section does not carry any independent punishment but makes the accused “liable under Section 447”.

The Bench, comprising Justice J.K. Maheshwari and Justice K. Vinod Chandran, held:
“Section 448 of the Companies Act, 2013, cannot be read in isolation and must be read along with Section 447. Therefore, the offence under Section 448 is an ‘offence covered under Section 447’.”

The Court rejected the complainant’s contention that post the 2015 Amendment, Section 448 no longer attracts the bar under Section 212(6). On the contrary, the Court held:
“If the intention of the legislature were to bar cognizance only under Section 447, there would be no need to use the phrase ‘offence covered under Section 447’. The phrase is wider and includes offences that attract its punishment.”

It was clarified that Section 448 does not independently prescribe any sentence, and once the act of making a false statement is proved, punishment flows only from Section 447, making both provisions legally inseparable.

"Special Court Took Cognizance Without Jurisdiction" – Apex Court Strikes Down Proceedings

The Supreme Court found fault with the Special Court’s order taking cognizance under Section 448 on a private complaint without any sanction or complaint from SFIO. The Court categorically ruled:
“The Special Court’s decision to take cognizance under Section 448 without invoking Section 447 and without compliance of the second proviso to Section 212(6) cannot be countenanced.”

It observed that this amounted to indirectly doing what is directly barred. The Court emphasized that the legislative intent was clear—to create a safeguard against frivolous criminal prosecutions in corporate matters by requiring an SFIO-led or authorised investigation before proceeding with fraud charges.

It further observed:
“The bar on taking cognizance by the Special Court... was a safeguard to prevent filing of frivolous complaints by disgruntled company members or shareholders.”

Earlier High Court Judgment on Same Issue Ignored—SC Criticises Lack of Judicial Discipline

Interestingly, the Telangana High Court had previously ruled in Sumana Paruchuri v. Jakka Vinod Kumar Reddy that a private complaint invoking Section 448 was not maintainable in absence of SFIO involvement. However, the High Court failed to consider this binding precedent in the present case.

Criticising this lapse, the Supreme Court stated:
“The High Court ought to have considered its previous judgment which is on an identical question of law. Principles of judicial comity and stare decisis are applicable to the High Court.”

This failure to follow coordinate bench rulings was flagged as judicial impropriety.

“Section 451 Cannot Survive Once Section 448 Fails” – Repeated Default Provision Also Quashed

Since Section 451 of the Act punishes repeated default in relation to a substantive offence, its applicability stands or falls with the parent offence. The Court made it clear that:
“Cognizance of ‘repeated default’ under Section 451 is not made out when the principal offence under Section 448 itself cannot be taken cognizance of.”

Consequently, the entire complaint under the Companies Act provisions—Sections 448 and 451—stood quashed as being without jurisdiction.

“IPC Allegations Stand on Independent Footing” – Supreme Court Allows Criminal Trial To Proceed Before Proper Court

Though the Companies Act offences were quashed, the Court refused to interfere with the criminal case under IPC Sections 420, 406, 468, 471, and 120B. It clarified that the Special Court could not try these IPC charges now, as its jurisdiction is confined to cases involving Companies Act offences.

Quoting Section 436(2), the Bench held:
“Once the offences under the Companies Act are quashed, it is the Court of appropriate territorial jurisdiction which would have jurisdiction to try the complaint.”

The Court therefore directed the Special Court to transfer the case to the regular criminal court within four weeks.

Rejecting the argument that the case was purely civil in nature, the Court held:
“Mere pendency of civil proceedings cannot be a ground to quash criminal proceedings. The allegations of falsification and fabrication disclose prima facie criminality requiring trial.”

"Proper Recourse Is Section 213 Before NCLT, Not Criminal Complaint Without Mandate"

Recognising the possibility of genuine grievances, the Court reminded shareholders and complainants of the correct legal channel. It stated:
“It is not to say that the complainant is left absolutely remediless. The right recourse is to file an application under Section 213 of the Companies Act before the NCLT.”

Section 213 allows for investigation into a company’s affairs upon application to the Tribunal, ensuring that proper procedure and regulatory oversight is maintained in allegations of fraud.

Corporate Criminal Allegations Must Follow Statutory Route—No Shortcuts Via Private Complaints

Summing up, the Supreme Court laid down a crucial principle:
“Where the Special Court is taking cognizance of an offence under a section in the Companies Act which, if proved, makes the person liable under Section 447, it must also invoke Section 447 and comply with the bar under Section 212(6).”

Accordingly, the appeals were partly allowed, and the criminal proceedings under the Companies Act were quashed, with the IPC trial directed to continue before a competent court.

The Court made it clear that:
“We have not expressed any views on the merits of the complaint under IPC... the trial court may examine all relevant objections during trial.”

Date of Judgment: 9 January 2026