Point of Law: Directors and/or Promoters of Company have committed breach of provisions contained in Sections 63, 68 & 628 of Act, he should not have waited for long ten years. Such commission or omission on their part would have come to forefront immediately. The action taken after ten years itself suggests that it was based on the instruction issued by Director of Inspection and Investigation to initiate actions against Vanishing Companies. While issuing notices, respondent authority has not pointed out any specific instances stating that which false or deliberate statements were made in the Prospectus or that such statements were made to induce public for subscribing shares of Company. If any action is sought to be taken without any basis, Court has every power to entertain an application under Section 633(2) of Act

JUDGMENT :

1. Heard learned Senior Advocate Shri B.B. Naik with learned Advocate Shri Vijay Patel on behalf of the applicant, learned Additional Solicitor General Shri Devang Vyas on behalf of respondent no.1 and learned Additional Public Prosecutor Ms. Maithili D. Mehta on behalf of the respondent no.2-State.

2. By way of this application, the applicant prays for following relief:

“8. (A) That this Hon’ble Court may be pleased to quash and set aside the order dated 30.01.2013 passed by the learned Additional Chief Metropolitan Magistrate, Ahmedabad in the order below Exh. 4 in Criminal Case No.325 of 2002 and be further pleased to allow application at Exh. 4 praying for discharge filed by the petitioner.

(B) That pending hearing and final disposal of this petition, this Hon’ble Court may be pleased to stay further proceedings of Criminal Case No.325 of 2002 insofar as it concerns the petitioner.

3. Facts in brief leading to filing of the present application are stated as hereunder:

A company named Shri Makalaxmi Agricultural Developments Ltd. ( hereinafter referred to as the “company”) was incorporated under the provisions of the Companies Act, 1956 on 25.02.1993 and whereas the present applicant had been appointed as a Director with the company. According to the applicant he had been appointed as a Director in his capacity as an Advocate to assist the company on legal issues. The company had come out with public issue of equity shares vide prospectus dated 25.06.1996 for an amount of Rs.370 lacs. It is stated by the applicant that soon thereafter i.e. on 20.03.1997 the applicant had submitted his resignation which was accepted by the company and Form No. 32 in the said regard had been filed with the office of the Registrar of the Companies, Gujarat. That the Assistant Registrar of Companies vide notice dated 11.07.2002 had issued a notice for default of Sections 63, 68 and 628 of the Companies Act, 1956 against the company and its Directors including the present applicant more particularly with regard to the public issue of equity shares for Rs.370 lacs vide prospectus dated 25.06.1996. It is stated in the notice that while the prospectus mentioned that the main object of the public issue was to part finance the cost of project for producing agriculture product like fruits, cash-crops, coarse grains etc. and the commercial production was to be commenced by October, 1996 from the Balance sheet of 31.03.1997, 31.03.2000 and 31.03.2001 it could be seen that the purpose for which the public issue had been made was not implemented by the company and the entire amount received through the public issue had been deployed in loans and advances etc. Thus the Directors including the applicant were called upon to explain why the penalty action under Sections 63, 68 and 628 of the Companies Act, 1956 should not be taken against the Directors for making false deceptive, misleading and dishonest statement/promise. The applicant vide communication dated 15.07.2002 had replied to the said notice inter alia submitting that he was never actively involved in day to day management and affairs of the company and furthermore he did not have any knowledge of the alleged contravention. It was further submitted that in any case the applicant had tendered his resignation as Director vide letter dated 20.03.1997 which had been received and accepted by the company and Form No. 32 has already been filled up at the office of Assistant Registrar at Ahmedabad. It was further stated that the applicant was not an officer of the Company within the meaning of Section 5 of Companies Act and that procurement of finance and its utilizations were never entrusted to the applicant. The applicant thus requested that the proceedings qua the applicant may be dropped. It appears that the reply of the applicant had not been accepted and criminal case being criminal case No. 325 of 2002 came to be filed before the learned Additional Chief Metropolitan Magistrate, Ahmedabad again