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2011 Supreme(Mad) 2739
High Court of Judicature at Madras
VINOD K. SHARMA
Dilip Kapur & Others
Versus
The Registrar of Companies, Ministry of Corporate Affairs
C.P.No.3 of 2011 & Comp. A.No.38 of 2011
Decided on : 14-06-2011
For the Petitioners:V. Ramakrishnan, Advocate.
For the Respondent:S. Manohar Ponraj, Advocate.
Typographical error in Form 23AC, without mis-statement or concealment of fact in the balance sheet, does not constitute an offense under Sec.628 of the Companies Act.
Headnote:
Sec.628 of the Companies Act allows for prosecution of directors for misleading statements in the balance sheet. Sec.633 provides for the High Court to assume jurisdiction in such cases. Sec.220 requires the balance sheet to be signed by the Managing Director/Director of the Company. The court interpreted these provisions and concluded that typographical error in Form 23AC, without mis-statement or concealment of fact in the balance sheet, does not constitute an offense under Sec.628. The court also referred to the judgment of the Calcutta High Court which held that there was no mis-declaration or false/misleading statement in a similar case.
Fact of the Case:
Directors of M/s.Auberge Hotels Private Limited filed a petition to quash proceedings initiated against them for alleged contravention of Sec.628 of the Companies Act. The allegation was that the directors gave wrong information in Form 23AC by showing that the balance sheet was signed by all four directors, when it was actually signed by only two directors. The petitioners argued that this does not constitute an offense under Sec.633 and that there was no motive to mislead the public. They also relied on a judgment of the Calcutta High Court which held that there was no mis-declaration or false/misleading statement in a similar case. The court agreed with the petitioners and quashed the notice and subsequent proceedings, stating that typographical error cannot be a ground for prosecution under Sec.628 without specific allegation of mis-statement with due knowledge.
Finding of the Court:
The court analyzed the provisions of Sec.628 and Sec.633 of the Companies Act and interpreted that false material particulars in the balance sheet should be with regard to its contents, and there should be a motive to mislead the public. The court also considered the judgment of the Calcutta High Court which held that there was no offense committed in a similar case. The court concluded that the notice and proceedings against the directors were a misuse of powers under the Companies Act and ordered them to be quashed.
Ratio Decidendi: Typographical error in Form 23AC, which does not involve mis-statement or concealment of fact in the balance sheet, cannot be a ground for prosecution under Sec.628 of the Companies Act. The directors can only be prosecuted for misleading statements in the balance sheet if there is a motive to mislead the public.
Result: The petition is allowed and the show cause notice and subsequent proceedings are quashed.
1. This Petition under Section 633(2) of the Companies Act, 1956 read with Rule 11(a) (23) of the Companies (Court) Rules, 1959 has been filed by the Directors of M/s.Auberge Hotels Private Limited, for quashing the proceedings initiated against the directors for the alleged contravention of Sec.628 of the Companies Act, in pursuance to the show cause notice No.DN/884/ 209A/628/2010 dated 16th November, 2010 issued by the respondent.
2. The petitioners are the directors of M/s.Auberge Hotels Private Limited, engaged in the business of a hotel. Sri.Dilip Kapur is the Managing Director of the Company. The other two directors are also his family members.
3. The Company filed a balance sheet duly approved by the Board of Directors in the Annual General Meeting, with the Registrar of Companies. The requirement of Sec.220 was fulfilled as the requisite documents were filed and the balance sheet was signed by two of the Directors. The balance sheet was required to be accompanied by e-form 23AC as the balance sheet was filed electronically with the Registrar of Companies.
4. Though there is no allegation of any mis-statement or mis-leading information in the balance sheet, the allegation against the petitioners is that they have given wrong information in Col.3 of Form 23AC which reads as under:
"3(a) Date of balance sheet as at 31/03/2009
(b) Date of Board of directors meeting in which balance sheet was approved 31/03/2009.
(c) Details of director(s), Managing Director, Manager, Secretary of the company who have signed the balance sheet.
Following details are to be entered only in case date of balance sheet is on or after 1st July 2007 Provide Director identification number (DIN) in case of director, Managing Director and Income-tax permanent account number (Income-tax PAN) in case of Manager, Secretary
(i) DIN or Income-tax PAN 01303958 Pre-fill Designation Director
Name DILIP KAPUR DWARKNATH KAPUR
Date of signing of balance sheet 02/09/2009
(ii) DIN or Income-tax PAN 01944844 Pre-fill Designation Director Name JAQELINE CHRISTIANE KAPUR
Date of signing of balance sheet 02/09/2009
(iii) DIN or Income-tax PAN 01944791 Pre-fill Designation Director Name AKASH KEYES KAPUR
Date of signing of balance sheet 02/09/2009
(iv) DIN or Income-tax PAN Pre-fill Designation Director
Name
Date of signing of balance sheet
(v) DIN or Income-tax PAN Pre-fill Designation Director
Name
Date of signing of balance sheet
5. The allegation are that though balance sheet was signed by two of the directors only, but in Form 23AC, it was shown to have been signed by all the four directors.
6. The learned counsel for the petitioners challenged the notice and subsequent proceedings thereto, primarily on the ground, that the allegation even if we taken to be correct on their face value, it does not constitute an offence under Sec.633 of the Companies Act.
7. It is contended that in order to attract the provisions of Sec.633, false material particulars should be with regard to contents in the balance sheet, so that the third party be not misled with regard to status of the company.
8. Furthermore, false information so disclosed should be as such which should be known to the directors, who sign the balance sheet. The purpose of using the word 'knowing it to be false' in the section clearly shows that there should be a motive with the directors to mislead the public at large with regard to the status of the Company.
9. The fact that instead of two directors, name of the four directors are mentioned in form 23AC cannot be a ground to prosecute the directors of the Company by alleging it to be a violation of Sec.628 of the Companies Act.
10. It is also the contention of the learned counsel for the petitioners that under Sec.220 of the Companies Act, the balance sheet is required to be signed by the Managing Director/Director of the Company. It is not disputed that the balance sheet is duly signed by the directors and filed with the Registrar of Companies. In the absenc
