Companies Act Section 439

Companies Act, Section 439: Offences Under the Companies Act to Be Non-Cognizable

Section 439 of the Companies Act, 2013 establishes the prosecutorial framework for offences committed under the Act. 

It defines how such offences are classified, how courts may take cognizance, and who may file complaints. 

The section ensures that criminal action under the Act is undertaken with proper authorization and oversight, preventing misuse of prosecution and safeguarding corporate governance.

1. Offences Under the Act Classified as Non-Cognizable

This provision clearly states all offences under the Companies Act are non-cognizable.

Except those specifically mentioned under Section 212(6), which relate to serious fraud cases investigated by the Serious Fraud Investigation Office (SFIO). Meaning of non-cognizable:

Police cannot arrest without a warrant, and Police cannot investigate without the permission of a Magistrate.

This protects companies and officers from arbitrary criminal actions and ensures judicial oversight.

2. Requirement of a Written Complaint to Initiate Prosecution

A criminal case under the Act can be initiated only when a written complaint is made by:

The Registrar of Companies (RoC), a shareholder or member of the company, a person authorized by the Central Government.

This ensures that frivolous or malicious criminal complaints are avoided. Special Provisions:

For offences relating to issue and transfer of securities, non-payment of dividends. A complaint may be filed by a person authorized by SEBI.

Thus, regulatory bodies retain the authority to enforce securities-related compliance. Exception:

A company is allowed to prosecute its own officers without following this sub-section. This helps companies take internal legal action against wrongdoing within the organization.

3. Exemption From Personal Attendance of Government Officers

If the complainant is Registrar of Companies or a person authorized by the Central Government, then such officials need not personally appear before the court during trial proceedings, unless specifically directed by the court.

This provision avoids unnecessary disruption to official duties, allowing smooth continuation of legal proceedings.

4. Liquidator’s Authority to Initiate Prosecution

The restrictions in Sub-section (2) do not apply to Complaints filed by a liquidator, regarding offences related to winding up of companies, as governed by Chapter XX, or any provision relating to winding up

The law recognizes that liquidators are critical in exposing misconduct during closure of companies.

A liquidator is not treated as an officer of the company for purposes of Sub-section (2).

This clarifies and reinforces the liquidator’s authority to initiate legal action without limitation.

5. Purpose and Importance of Section 439

Prevents harassment of companies through arbitrary criminal cases.

Ensures only legally authorized and interest-holding stakeholders can initiate prosecution.

Maintains a clear and fair criminal justice process in corporate matters.

Strengthens regulatory oversight by RoC, SEBI, and the Government.

Ensures timely legal action during liquidation and fraud investigations.

It creates a structured criminal enforcement system aligned with the nature and complexity of corporate offences.