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2011 Supreme(Cal) 1034
High Court Of Calcutta
I.P.Mukerji, J.
Sanjay Somani – Appellant
Versus
Registrar Of Companies, West Bengal – Respondent
CP. No. 330 of 2010
Decided on : Aug 03, 2011
Manju Bhutoria, Bhaskar Prasad Banerji
The High Court has the jurisdiction to dismiss the complaint and discharge the accused under section 633(2) of the Companies Act, 1956, if it finds that the apprehension of prosecution was genuine and that there was no offence committed.
Headnote:
COMPANIES ACT, 1956 - SECTION 295(1)(D) - LIMITATION - SECTION 468 OF THE CRIMINAL PROCEDURE CODE - KNOWLEDGE OF OFFENCE - SECTION 469(1)(A) AND (B) OF THE CODE OF CRIMINAL PROCEDURE, 1973 - SECTION 633(2) OF THE COMPANIES ACT, 1956 - JURISDICTION OF HIGH COURT - SECTION 190 OF THE CRIMINAL PROCEDURE CODE - INFORMATION - ORDER 3, ORDER 6 AND ORDER 29 OF THE CODE OF CIVIL PROCEDURE - SIGNING AND VERIFICATION OF PLEADINGS.
Fact of the Case:
The petitioners, directors of a company, were issued a show cause notice for allegedly violating section 295(1)(d) of the Companies Act, 1956 by advancing money to another company without obtaining permission from the Central Government. The petitioners claimed that the alleged offence was time-barred and that they had acted reasonably and honestly.
Finding of the Court:
The court held that the alleged offence was time-barred as the show cause notice was issued more than a year after the Registrar of Companies had knowledge of the offence. The court also held that it had the jurisdiction to dismiss the complaint and discharge the petitioners under section 633(2) of the Companies Act, 1956.
Issues: 1. Whether the alleged offence was time-barred? 2. Whether the court had the jurisdiction to dismiss the complaint and discharge the petitioners under section 633(2) of the Companies Act, 1956?
Ratio Decidendi: 1. The period of limitation for taking cognizance of an offence under section 295 of the Companies Act, 1956 is one year from the date of its commission or knowledge by the person aggrieved. 2. Knowledge by the office of the Regional Director is knowledge of the Registrar of Companies. 3. The High Court has the jurisdiction to dismiss the complaint and discharge the accused under section 633(2) of the Companies Act, 1956, if it finds that the apprehension of prosecution was genuine and that there was no offence committed.
Final Decision: The court dismissed the complaint against the petitioners and discharged them from the offence with which they were charged by the show cause notice.
Based on the provided legal document, the key points are as follows:
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Jurisdiction of the Court: The High Court has the authority to dismiss a complaint and discharge accused persons under section 633(2) of the Companies Act, 1956, if it finds that the apprehension of prosecution was genuine and that no offence was committed (!) .
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Nature of the Application: The application was made under section 633(2) of the Companies Act, 1956, seeking relief for directors charged via a show cause notice related to alleged violations of company law provisions (!) .
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Alleged Violations and Facts: The case involved allegations that directors of a company advanced money to another company without requisite government permission, which was claimed to be time-barred and based on the company's reasonable and honest conduct (!) (!) .
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Limitation Period: The court held that the period of limitation for cognizance of an offence under the relevant section is one year from the date of the offence or from the date the relevant authorities gained knowledge of the offence. In this case, the offence was deemed time-barred because the complaint was filed beyond this period (!) (!) .
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Knowledge of Offence: Knowledge by the office of the Regional Director is considered knowledge of the Registrar of Companies, which triggers the limitation period. The date of knowledge was deemed to be when the Registrar became aware, not the date of the alleged offence itself (!) .
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Discharge of Accused: Since cognizance was barred by limitation, the Court was justified in dismissing the complaint and discharging the petitioners, without conducting a detailed factual enquiry into the control or shareholding specifics of the companies involved (!) (!) .
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Nature of the Court's Power: The High Court, when acting under section 633(2), functions akin to a criminal court, with the authority to exonerate or discharge accused persons if it concludes that no offence was committed (!) .
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Procedural Validity: The application was properly signed and verified according to civil procedure rules, and the Court considered the information in the application as sufficient to dismiss the complaint (!) (!) .
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Final Decision: The Court dismissed the complaint against the petitioners and discharged them from the charges, primarily on the grounds that the offence was time-barred and that there was no substantive basis to proceed further (!) .
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Additional Notes: The Court emphasized that it did not need to undertake a detailed factual investigation into the control or shareholding of companies or the nature of the financial transactions, as the limitation period barred the proceedings.
I.P. Mukerji, J.
1. THIS is another application under section 633(2) of the Companies Act, 1956 (hereafter, "the Act"). It is made by three persons. The first is the Managing Director of the company, Hindustan National Glass and Industries Ltd. The second is its Chairman. The third is the Joint Managing Director. They are the first, second and third petitioners respectively in this application. They seek an order from this Court relieving them from the alleged offence with which they are charged by the show cause notice dated 14th July, 2010 issued by the Assistant Registrar of Companies, West Bengal.
2. TWO usual points are taken. The first is that the alleged offence has become time barred and no Court can take cognizance of it. The second is that considering the show cause and the answer given to it, it is possible for the Court to hold that the petitioners had acted reasonably and honestly and that they should be let off under section 633(2).
It appears that the office of the Regional Director had conducted an inspection under section 209A of the Companies Act, of the books, papers, other documents and records of the company. The date of inspection is not available from the records. But, on 22nd December, 2008 that office wrote a letter to the company with copies inter alia, to the petitioners. In Item No. 5 of the subjects mentioned in that letter it was alleged that the Board of Directors of the company at a meeting held on 16th May, 2006 had decided to buy 10,000 equity shares of Rs. 10 each of a company M/s. H.N.G. Float Glass Ltd. The shares were purchased. A sum of Rs. 30 crores was advanced to M/s. H.N.G. Float Glass Ltd. by the company as application money for shares. Subsequently, further sums were advanced. Rs. 3.50 crores was refunded to the company by M/s. H.N.G. Float Glass Ltd. and 42, 000, 000 equity shares of that company were issued and allotted to this company. According to the Central Government the said amount paid by the company to M/s. H-N.G. Float Glass Ltd. was loan and advance. Now according to them the Directors of the company were holding 30% of the paid up share capital of the other company and for advancing money permission of the Central Government was required, which was not obtained. Therefore, there was violation of section 295 (1) (d) of the Act. In the letter dated 22nd December, 2008 other alleged violations by the company were also alleged.
3. THE company by its letter dated 6th January, 2009, discussed the provision of, inter alia, section 295 (d) and (e) of the Act which are copied below: 295. Loans to Directors, etc.- (1) Save as otherwise provided in subsection (2), no company (hereinafter in this section referred to as "the lending company") make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by,- (a)................................................ (b)................................................ (d) Any body corporate at a general meeting of which not less than twenty- five per cent of the total voting power may be exercised or controlled by any such Director or by two or more such Directors together; or (e) Any body corporate, the Board of Directors, Managing Director, or Manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any Director or Directors, of the lending company.'
4. IT was said that their Directors did not hold more than 4% of the share capital of M/s. H.N.G. Float Glass Ltd. Furthermore, it was said that M/s. H.N.G. Float Glass Ltd. had three Directors on their Board. These were non-executive Directors in that Court. Hence they did not control the company, M/s. H.N.G. Float Glass Ltd. Moreover they said that the sum advanced by the company, M/s. H.N.G. Float Glass Ltd was not loan but share application money for purchase of shares by the company and its Directors.
The office of the Registrar of Companies (West Benga
