1. Proceeding to quash criminal complaint for submitting false balance sheets under Section 628, Companies Act. (Para 1 , 3 )
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2026 Supreme(Online)(Tel) 7570
IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
Tirumala Devi Eada, J
Prathap Reddy Puttamreddy – Appellant
Versus
State of Telangana – Respondent
CRIMINAL PETITION No.726 OF 2020
Advocates:
For the Appellants/Petitioners: Eruganti Sudhanshu Rao
For the Respondents: Abdul Mateen Qureshi
For the Appellants/Petitioners: Eruganti Sudhanshu Rao
For the Respondents: Abdul Mateen Qureshi
The court held that issues regarding the period of limitation are mixed questions of fact and law triable during trial, and the lack of detailed reasoning in a cognizance order does not warrant quashing if prima facie material exists, especially in serious economic offences.
Headnote:(A) Criminal Procedure - Quashing of Proceedings - Limitation - Where the date of knowledge of the alleged offence is disputed and depends on a supplementary inspection report, the issue of limitation is a mixed question of fact and law and is triable in nature, thus not a ground for quashing the proceedings. (Para 7)
(B) Criminal Procedure - Cognizance Order - Absence of detailed reasoning - While a trial court may assign reasons for taking cognizance, the mere absence of detailed reasons in the cognizance order does not entitle the accused to quashing of proceedings if there is prima facie material on record to sustain the case. (Para 8)
(C) Economic Offences - Submission of false Balance Sheets - Allegations involving the submission of false statutory statements to the Registrar of Companies constitute a serious economic offence requiring a full-fledged trial to determine truth or falsity. (Para 8)
Issues: Whether the criminal proceedings under Section 628 of the Companies Act, 1956 should be quashed on the grounds of limitation and lack of reasoning in the cognizance order.
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2. Petitioners argue complaint barred by limitation and cognizance order lacks reasoning. Respondent contends complaint within limitation. (Para 4 , 5 )
3. Limitation is a mixed question of fact and law, triable in nature. Absence of reasoning in cognizance order does not warrant quashing. (Para 7 , 8 )
4. A complaint cannot be quashed solely on grounds of limitation or defective cognizance order when a prima facie case exists. (Para 7 , 8 )
5. Criminal petition disposed of; attendance of accused dispensed with, provided they are represented by counsel and appear when required. (Para 9 )
6. Can a criminal complaint be quashed solely on the ground that it is barred by limitation?
No, as limitation is a mixed question of fact and law that is triable in nature and cannot be the sole basis to quash proceedings. (Para 7 )
7. Can proceedings be quashed solely because the cognizance order lacks reasoning?
No, the absence of reasoning in a cognizance order alone does not warrant quashing if ample material establishes a prima facie case. (Para 8 )
ORDER:
This Criminal Petition is filed by the petitioners-accused Nos.1 to 6 and 8 seeking to quash the proceedings against them in C.C.No.167 of 2019 on the file of learned Special Judge for Economic Offences, Hyderabad, registered for the offence under Section 628 of the Companies Act, 1956.
2. Heard Sri Eruganti Sudhanshu Rao, learned counsel for the petitioners and Sri Abdul Mateen Qureshi, learned counsel, representing learned Deputy Solicitor General of India, for respondent No.2.
3. The case of the prosecution is that the petitioners have violated Section 628 of the Companies Act by submitting false statements i.e., Balance Sheets for the years 2007-08 and 2008-09 through online to the office of respondent No.2-de facto complainant i.e., Registrar of Companies for the State of Telangana and thus, are punishable for the violation of Section 628 of the Companies Act.
4. Learned counsel for the petitioners submitted that the petition is barred by limitation. The de facto complainant has knowledge about the alleged offence on 09.11.2012 itself, when the first inspection report was submitted, but by suppressing the same, to cover up the limitation aspect, the de facto complainant claims to have gained knowledge on 12.04.2018, on which date the supplementary inspection report has been filed. He further submitted that there is no difference between the first inspection report and the supplementary inspection report, however, it has been brought into existence just to overcome the limitation aspect. He further submitted that the cognizance order passed by the trial Court does not disclose any reasoning and that without application of mind, the trial Court has passed the cognizance order, which is not maintainable. He, therefore, prayed to quash the proceedings in the present C.C. against the petitioners.
5. Learned counsel for respondent No.2 has submitted that the department had called for a supplementary report to clarify certain points and hence, on receiving the supplementary report on 12.04.2018, they gained knowledge and thus, the complaint has been lodged. Thus, the complaint is well within limitation. He, therefore, prayed to dismiss the Criminal Petition.
6. Perused the record.
7. It is borne out by record that respondent No.2 has filed a complaint before the Special Judge for Economic Offences at Hyderabad, which was registered as C.C.No.167 of 2019 under Section 628 of the Companies Act. Petitioner Nos.1 to 5 are the Directors and petitioner No.6 is the Company Secretary of petitioner No.8-Company and they are the signatories to the Balance Sheets as on 31.03.2008 and 31.03.2009. The said complaint is filed based upon the findings that were concluded by the Inspecting Officer under Part-A of the Supplementary Inspection Report that was submitted to the Government of India, Ministry of Corporate Affairs on 12.04.2018. The office of Central Bureau of Investigation (for short, 'CBI') vide letters, dated 04.02.2012, 14.05.2012, 07.02.2013 and 24.05.2013, addressed to the Regional Director (South East Region), Hyderabad, sought for clarifications/answers on the questionnaire that was submitted, which led to the Government of India, Ministry of Corporate Affairs to answer such questionnaires. It was pointed out that subsequent to the answers that were submitted to the CBI, the Government of India, Ministry of Corporate Affairs, vide letter, dated 24.07.2013, has directed the Inspecting Officer to point out specific violations of the provisions of the Companies Act noticed during the inspection of the subject Company. Further, the supplementary inspection by the appointed inspecting officer led to several observations and finally, it was advised to launch prosecution under Section 628 of the Companies Act. When the date of knowledge is 12.04.2018, the period of limitation has to be reckoned from the said date. However, the aspect of limitation is a mixed question of fact and law and is triable in nature. Thus, the contentio
