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Section 445: Compensation for accusation without reasonable cause

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Section 444 All 470 Sections of Companies Act Section 446
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 445

Section 445 incorporates the compensatory mechanism of Section 250 of the CrPC, empowering Special Courts and Magistrates to order payment of compensation to accused persons subjected to frivolous or malicious corporate prosecutions.

  • Groundless Accusation Threshold: Applies where a Magistrate or Special Court discharges or acquits an accused and finds that the accusation was instituted without reasonable and probable cause.
  • Show Cause Notice Requirement: Mandates that the court must record reasons and call upon the complainant or informant to show cause why compensation should not be awarded to the discharged or acquitted accused.
  • Recovery as a Fine: Directs that compensation awarded under this section shall be recovered as if it were a fine, subject to default imprisonment.
Key Landmark Precedents:
  • Subrata Roy Sahara v. Union of India, (2014) 8 SCC 470: Condemned frivolous, vexatious, and motivated litigation, affirming the inherent duty of courts to impose exemplary costs and compensatory penalties on abusive complainants.
  • Ramaswamy Ayyar v. King-Emperor, AIR 1922 Mad 448: Established that statutory provisions awarding compensation for groundless accusations are intended to serve as a severe deterrent against malicious prosecution and abuse of criminal procedure.
  • State of Maharashtra v. Som Nath Thapa, (1996) 4 SCC 659: Affirmed that judicial power to screen out vexatious accusations operates at the threshold to prevent harassment of corporate executives.
Courtroom Practice & Strategic Litigation Guidance:

In defending directors against vindictive complaints filed by disgruntled minority shareholders or ousted management, pray explicitly in the discharge application for compensatory orders under Section 445 read with Section 250 CrPC to hold malicious complainants financially accountable.

Section 444 All 470 Sections of Companies Act Section 446