NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

INTERLOCUTORY APPLICATION NO. 61907 OF 2018  

IN

MISCELLANEOUS APPLICATION NO. 1301 OF 2018  

IN  

SPECIAL LEAVE PETITION (CIVIL) NO. 3309 OF 2018

M/s New Era Fabrics Ltd. …Petitioner

Versus  

Bhanumati Keshrichand Jhaveri & Ors. …

Respondents  

IN THE MATTER OF

Nikhilesh Keshrichand Jhaveri …Applicant/  Respondent No. 4

J  U  D  G  M  E  N  T

MOHAN M. SHANTANAGOUDAR, J. :

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1. This application has been filed under Section 340 read

with  Section  195(1)(b)  of  the  Criminal  Procedure  Code,  1973

(‘CrPC’)  seeking  institution  of  criminal  proceedings  against  the

Petitioner in SLP (Civil) No. 3309/2018 for giving false evidence

before this Court.

2. The facts giving rise to this application are as follows:

The Respondents/plaintiffs claim to be the lessors of suit premises

being C.S. No. 560 and 561, final Plot No. 268, T.P.S. III of Mahim

Division, Ward No. 6/North 5546 (1-1A) situated at Mogul Lane,

Tulsi Pipe Road, known as Senapati Bapat Marg, Mahim, Mumbai-

400  016.  The  Petitioner/defendant  Company  was  a  monthly

tenant  of  the  suit  premises.  The  Respondents  terminated  the

tenancy  by  notice  to  quit  dated  11.02.2009  and  subsequently

filed  Suit  No.  48/62/2009  before  the  Court  of  Small  Causes,

Mumbai (‘Trial Court’) for possession and injunction against the

Petitioner.  The  Respondents  averred  in  their  suit  that  the

Petitioner  is  a  public  limited  company  having  a  paid-up  share

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capital of more than Rs. 1 crore; hence it would not be protected

under the Maharashtra Rent Control Act, 1999.1

The Petitioner  claimed in  its  written  statement  that  as  of

31.02.2007,  it  had a  paid  up share capital  of  Rs.  1,03,64,000;

however, by resolution dated 01.03.2007, it had reduced its share

capital to Rs. 93,74,000. Hence it raised a preliminary objection to

the jurisdiction of the Trial Court to try the suit.

2.1 Consequently, the matter was directed to be heard on

the preliminary issue of whether the Trial Court had jurisdiction to

entertain, try and decide the suit. The Respondent relied on the

income  tax  return  filed  by  the  Petitioner  Company  for  the

assessment year 2008-2009 (i.e. pertaining to the financial year

2007-2008), which showed that the paid-up share capital of the

company as on the date of termination of the tenancy was Rs.

1,03,64,000.  A  revised  return  showing  the  share  capital  to  be

Rs.93,74,000/-  was  filed  only  on  4.04.2009,  which  was

subsequent to the notice for termination of the tenancy.  

1  Section 3(1)(b) of the Maharashtra Rent Control Act, 1999 provides that the Act shall not apply to any premises let or sub-let to private limited and public limited companies having a paid up-share capital of more than one crore rupees.

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2.2 Per contra, the Petitioner argued before the Trial Court

that the share capital had been reduced by way of ‘buy-back’ of

shares on 1.03.2007, and hence the paid-up share capital for the

financial  year  2007-2008,  ending  on  31.03.2008,  was  Rs.

93,74,000. Mr. R.K. Agarwal, who is the Director of the Petitioner

Company, was examined as D.W. 1 in this regard. He deposed

that  the  Registrar  of  Companies  had  been  informed  of  the

aforesaid  reduction  in  share  capital;  that  the  assistant  of  the

Company’s internal auditing firm had inadvertently entered the

share capital of the Company as Rs. 1,03,64,000/- while preparing

the income tax return for the assessment year 2008-2009; and

upon discovery of the error, the revised return dated 4.04.2009

(supra) was filed. That the audit report and the balance sheet for

the  year  2007-2008  showed  that  the  share  capital  had  been

reduced, and the same had been submitted to the Central Excise

and Sales  Tax Departments.  The audit  report  and the  balance

sheet dated 19.9.2008, as prepared for the financial year 2007-

2008, and as produced in the evidence of D.W. 1, were marked as

Exhibits 81 and 82 respectively.  

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Additionally, D.W. 3 Mr. Gautam Nemani, who was stated to

be  a  shareholder  of  the  Company,  deposed  that  he  had

surrendered 18,000 shares at the rate of Rs. 10 per share, though

he admitted that the book value of a single share was Rs. 73.46.

D.W. 5,  the internal  auditor  of  the Company deposed that  the

Company had bought back 99,000 shares of face value of Rs. 10

each,  and  therefore  the  Petitioner’s  share  capital  for  the  year

2007-2008 was Rs. 93,74,000/-.  

D.W.  6,  the  statutory  auditor  of  the  Company,  similarly

deposed  that  he  had  prepared  the  balance  sheet  dated

19.09.2008,  for  the  financial  year  2007-2008  (as  mentioned

supra) showing the reduced share capital as Rs. 93,74,000/-. He

also certified that the figure stated in Column 12 of the balance

sheet,  showing  the  basic  and  diluted  earning  per  share

(hereinafter ‘EPS’) as Rs. 15.91 per share, was correct.  

2.3 However,  the  Trial  Court  rejected  the  Petitioner’s

contentions, finding that there were material discrepancies in the

evidence  of  their  witnesses,  which  made  their  case  regarding

‘buy-back’ of shares improbable. That there was no record of the

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letters  dated  09.03.2007  and  25.03.2007  which  the  Petitioner

contended  it  had  filed  before  the  Registrar  of  Companies  as

returns relating to the buy-back, and electronic return was filed

only on 05.09.2009, though filing of electronic returns has been

made mandatory from 16.09.2006 onwards. Hence the Petitioner

had not complied with the procedure for buy-back of shares as

prescribed under Sections 77A, 77B and 159 of the Companies

Act, 1956.   

Importantly, it was pointed out that there was a significant

discrepancy  in  the  audit  report  and  the  balance  sheet  dated

19.09.2008, inasmuch as the weighted average number of shares

for  the  financial  year  2007-2008 in  Column 12 of  the  balance

sheet was stated to be the same as that for the year 2006-2007,

i.e.,  10,36,400,  even though the share capital  of  the Petitioner

Company had been reduced.2 Therefore it was evident that the

revised  income  tax  return  filed  by  the  Petitioner  was  a

subsequent act, post notice of termination of tenancy served by

2  The Trial Court had erroneously stated that the ‘EPS’ was 10,36,400, perhaps because the heading of Column 12 states ‘EPS’, however the same does not have any bearing on the merits of the case.  

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the Respondent, and that the actual paid-up share capital of the

Petitioner Company as on the date of termination of the tenancy

was  Rs.  1,03,64,000/-.  Hence  the  Trial  Court  would  have

jurisdiction to try the Respondent’s suit.  

2.4 The Trial Court’s findings were affirmed by the Court of

Small  Causes (Appellate  Bench).  The High Court  dismissed the

revisional  application  filed  by  the  Petitioner.  Subsequently,  on

09.04.2018, a three-Judge Bench comprising one of us dismissed

SLP (Civil) No. 3309/2018 filed by the Petitioner before this Court,

out  of  which the present application arises.  Therefore it  is  not

disputed that the finding on the preliminary issue of jurisdiction

has attained finality, and the trial of the suit on merits is presently

pending before the Trial Court.  

2.5 However  it  is  the  case  of  Respondent  No.  4  in  the

aforesaid SLP (Civil) No. 3309/2018 (hereinafter ‘Applicant’) that

the  Petitioner  in  the  aforesaid  SLP  deliberately  made  false

interpolations in the auditor’s report and the balance sheet dated

19.9.2008, while submitting these documents before this Court.

The Applicant’s  contention is  that  these documents have been

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revised/interpolated for  the  first  time in  the course of  the SLP

proceedings, for the purpose of misleading this Court. Hence the

present application has been moved on 24.04.2018, soon after

the  dismissal  of  the  SLP,  seeking  institution  of  criminal

proceedings against the Petitioner for the offence of perjury.  

3. Learned  Senior  Counsel  Mr.  Amit  Sibal,  arguing  on

behalf of the Applicant, submitted that the Petitioner/defendant,

in its reply to the application for interim injunction filed by the

Applicant before the Trial Court, had annexed the audited balance

sheet dated 19.09.2008 for the financial year 2007-2008 (supra).

In  the  version  filed  before  the  Trial  Court,  the  paid-up  share

capital of the Petitioner/defendant was shown as Rs. 1,03,64,000/-

as on 31.03.2007, and Rs. 93,74,000/- as on 31.03.2008.  

Therefore as per the Petitioner’s stand, the buy-back process

was completed in April 2007. If that was the case, the number of

Weighted Average shares and the EPS for the financial year 2007-

2008 ought  to  have been computed accordingly.  However,  Mr.

Sibal pointed out that the number of Weighted Average shares in

the   

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balance sheet was stated to be 10,36,400 for both financial years

2006-2007 and 2007-2008, even though it should have changed

to 9,37,400 for  the year 2007-2008. Further,  the EPS was also

calculated  on  the  basis  of  the  original  share  capital  of  Rs.

1,03,64,000, and not the reduced share capital as claimed by the

Petitioner.   

Mr.  Sibal  argued that  it  was  on  account  of  this  failure  to

manipulate the balance sheet that the Trial Court declined to rely

on  the  document,  and  held  that  the  Petitioner  had  failed  to

establish that its share capital had been reduced. Hence, in order

to overcome this omission at the stage of hearing of the SLP, the

Petitioner for the first time made a handwritten interpolation in

Column 12 of the balance sheet, by which the words ‘Weighted

Average’ were crossed out, and the document was manipulated

(by interpolation) to show that the number of equity shares ‘as on

1/4/07’ was 10,36,400.  

Mr. Sibal also pointed out that there were four instances in

the  Trial  Court  record  wherein  D.W.  1  Mr.  R.K.  Aggarwal  had

referred to the original balance sheet dated 19.09.2008, which did

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not contain any handwritten interpolation. Therefore the first time

that the Petitioner sought to place reliance on the contents of the

manipulated balance sheet was before this Court, which clearly

showed that the document was forged specifically to mislead this

Court.  Had  the  interpolated  document  been  authentic,  the

Petitioner  would  have  naturally  placed  reliance  on  the  same

before the Courts below.

3.1 Per  contra,  learned  senior  counsel  for  the

Petitioner/Non-Applicant, Mr. Basava Prabhu Patil submitted that

the auditor’s  report  and balance sheet  dated 19.09.2008 were

exhibited  multiple  times  as  part  of  the  evidence  of  different

parties.  In  the  Petitioner’s  reply  to  the  application  of  the

Respondent/Applicant for interim injunction, the auditor’s report

together with the balance sheet had been marked as Exhibit 13.

Mr.  Patil  highlighted  that  the  advocate  appearing  for  the

Petitioner before the trial Court had obtained a certified copy of

the  aforesaid  Exhibit  13.  In  the  certified  copy  of  Exhibit  13,

Column 12 of the balance sheet states that the ‘number of Equity

Shares as on 1/4/07’ is 10,36,400 shares. It can be seen that the

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words  ‘Weighted  average’  have  been  crossed  out,  and  ‘as  on

1/4/07’ has been added, by hand.  

Mr. Patil also placed on record a certified copy of Exhibit 82,

which is  the balance sheet dated 19.9.2008, as marked in  the

evidence of D.W. 1. Column 12 of the certified copy of Exhibit 82

contains  the  same  handwritten  interpolation.  Therefore  it  was

strenuously  contended  that  the  handwritten  corrections  in  the

balance sheet were present since the beginning of the trial. The

Applicant ought to have raised any grievance regarding forgery in

the  document  at  the  stage  of  trial  itself.  However,  no  cross-

examination of the Petitioner’s witnesses was conducted on this

aspect  before  the  Trial  Court,  and the  perjury  application  was

moved only after the SLP had been dismissed.  

It was further contended that the Petitioner’s advocate had

not relied upon Column 12 of the balance sheet while arguing the

SLP before this Court, and as such the contents of Column 12 had

no bearing on the dismissal of the SLP. Hence it was submitted

that  there was no merit  in  the Applicant’s  contention that  the

Petitioner had committed perjury.  

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4. Be that as it may, having perused the original copies of

the Trial Court record, we find prima facie merit in the Applicant’s

case  that  the  Petitioner  has  committed  perjury.  We  have

compared  the  original  copies  of  the  auditor’s  report  and  the

balance sheet, as exhibited before the Trial Court, with the copies

filed before this Court in SLP (Civil) No. 3309/2018. We find that in

the  Trial  Court  record,  Column 12 of  the  balance  sheet  dated

19.09.2008,  marked  as  Exhibit  82,  has  tabulated  the  EPS  as

follows:

2007-08 2006-07

a)  Net  profit  available  for  Equity Shareholders

1648667 3

13577864

b) Weighted average number of Equity Shares

1036400 1036400

c) Basic and Diluted earning per share of Rs. 10 each  

15.91 13.10

Whereas in the copy of the balance sheet submitted before

this Court, the words ‘Weighted average’ have been struck out,

and ‘as on 1/4/07’ has been added after ‘Equity Shares’, as shown

below:

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2007-08 2006-07

a)  Net  profit  available  for  Equity Shareholders

1648667 3

13577864

b) Weighted average number of Equity Shares as on 1/4/07

1036400 1036400

c) Basic and Diluted earning per share of Rs. 10 each  

15.91 13.10

(emphasis supplied)

4.1 We further find that wherever the auditor’s report and

the balance sheet have been marked as evidence before the trial

Court,  no such handwritten interpolation is  present.  Exhibit  13,

which  is  the  Petitioner’s  reply  to  the  application  for  interim

injunction, Exhibit 92, which is the audited copy of the balance

sheet  as  filed  with  the  Superintendent  of  Central  Excise,  and

Exhibit 93, which is the audited copy of the balance sheet as filed

with the Assistant Commissioner of Sales Tax, do not contain the

handwritten  modifications  as  present  in  the  documents  filed

before  this  Court.  Hence  we  find  no  merit  in  the  Petitioner’s

submission that the handwritten interpolations were present right

from the stage when the documents were exhibited before the

Trial Court, and the certified copies produced by it in this regard

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are patently unreliable. It is apparent from a comparison with the

original  copies  in  the  Trial  Court  record  that  the  handwritten

modifications  to  Column  12  appear  for  the  first  time  in  the

documents filed before this Court.  

5. We  find  it  useful  to  briefly  delve  into  the  terms

‘Weighted  Average’  and  ‘EPS’  for  understanding  why  the

aforesaid  interpolation  in  the  balance  sheet,  is  a  significant

deviation from the original document submitted before the Trial

Court. ‘EPS’ is used as a common tool for gauging the profitability

of  a  company.  It  indicates  the  benefit  reaped  per  individual

shareholding  of  a  company.  The  auditor’s  report  provides  the

formula for calculating EPS as follows:

Basic  and  diluted  earnings  per  share=Net

Profit  for  the  Financial  Year/Weighted

Average Number of Shares

The  term  ‘Weighted  Average’  of  shares  in  commercial

parlance refers to the number of shares in a company calculated

after  adjusting  for  any  change  in  shareholding  over  a  given

financial reporting period. This is as opposed to the ‘outstanding’

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number of shares, which merely shows the number of shares as

existing  with  a  company  on  a  given  date.  Therefore,  if  the

company  has  increased  its  share  capital  by  purchasing  new

shares,  or  reduced its  share capital  through buy-back or  other

means, the ‘Weighted Average’ would change accordingly.  

5.1 As mentioned supra, it was noticed by the Trial Court

that  even  though  Column  7  of  the  balance  sheet  dated

19.09.2008 stated that the Petitioner Company had bought back

99,000 equity shares in the financial year 2007-2008, Column 12

showed that the ‘Weighted Average’ number of shares continued

to be the same, i.e., 10,36,400, for the financial years 2006-2007

and 2007-2008.  Hence the Trial  Court  found that  the auditor’s

report was unreliable as evidence to conclude that the Petitioner

Company had reduced its share capital.  

It  can  be  further  noticed,  as  pointed  out  by  the  learned

senior  counsel  for  the  Applicant,  that  if  the  EPS  had  been

calculated on the basis of the reduced share capital, i.e. 9,37,400

shares  it  would  have been 17.59.  However,  the  EPS has been

calculated as 15.91 on the basis of the same Weighted Average

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number of shares as was held in the Petitioner Company in 2006-

2007, i.e. 10,36,400 shares.  

5.2 It is pertinent to note that the Petitioner, for the first

time in the SLP, raised a ground that since the buy-back process

was not complete as on 01.04.2007, the EPS as shown in Column

12 of the auditor’s report was calculated on basis of the original

share capital of Rs 1,03,64,000/-.  Therefore it appears that the

Petitioner, in order to overcome the discrepancy between Column

7 and  Column 12  of  the  Auditor’s  Report  at  the  stage  of  SLP

proceedings  before  this  Court,  changed  the  words  ‘Weighted

average number of Equity Shares’ to ‘number of Equity Shares as

on  1/4/07’  by  hand.  This  would  indicate  that  the  number  of

outstanding  equity  shares  held  in  the  Petitioner  Company

continued  to  be  the  same  as  of  1.04.2007,  and  the  revised

‘Weighted Average’ and EPS were not calculated as the buy-back

process had not yet been completed by that date.

5.3 We do not wish to comment in detail upon the intention

behind making the aforesaid interpolations. At this juncture, all

that is required to be assessed is whether a prima facie case is

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made out that there is a reasonable likelihood that the offence

specified in Section 340 read with Section 195(1)(b) of the CrPC

has been committed, and it is expedient in the interest of justice

to take action. From the above discussion, it is evident that the

handwritten modification made by the Petitioner in Column 12 of

the  balance  sheet  dated  19.09.2008  is  a  significant  alteration

from the terms as used in the original document. Hence we find

that  a  prima  facie  case  is  made  out  that  the  Petitioner  has

fabricated evidence for the purpose of the SLP proceedings before

this Court.  

We  further  find  that  prima  facie  case  is  also  made  out

against Mr. R.K. Agarwal, for having sworn in his affidavit before

this Court as to the veracity of the facts stated and documents

filed in SLP (Civil) No. 3309/2018, even though he had relied upon

the  original  auditor’s  report,  which  did  not  contain  any

handwritten interpolation, in his evidence before the Trial Court.  

6. In  similar  circumstances,  a  three-Judge Bench of  this

Court in In Re: Suo Motu Proceedings against R. Karuppan,

Advocate,  (2001)  5  SCC  289  had  authorized  the  Registrar

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General of this Court to depute an officer to file a complaint for

perjury against the respondent therein. Accordingly, we direct the

Secretary General of this Court to depute an officer of the rank of

Deputy Registrar or above of the Court to file a complaint under

Sections 193 and 199 of the Indian Penal Code, 1872 against the

Petitioner  Company  in  SLP  (Civil)  No.  3309/2018  and  Mr.  R.K.

Agarwal, before a Magistrate of competent jurisdiction at Delhi.

The officer so deputed is directed to file the aforesaid complaints

and  ensure  that  requisite  action  is  taken  for  prosecuting  the

complaints.

7. Thus, the present application is allowed in the above

terms.  

……………………………………………J.            [MOHAN M. SHANTANAGOUDAR]

       ……………………………………………J.         [R. SUBHASH REDDY]

NEW DELHI; MARCH 03, 2020

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