Karnataka High Court
The Registrar Of Companies vs Fair Growth Agencies Limited on 12 April, 2006
Equivalent citations: [2006]133COMPCAS314(KAR), [2006]71SCL18(KAR), 2006 (3) AIR KAR R 572
Author: A.C. Kabbin
Bench: A.C. Kabbin
ORDER A.C. Kabbin, J.
1. These five revision petitions have been filed by the Registrar of Companies in Karnataka challenging the dismissal of his complaints against the respondent-company for contravention of certain provisions of the Companies Act, on the point of limitation.
2. The respondent-company M/s. Fairgrowth Agencies Limited was incorporated on 25-10-1990. Suspecting its involvement in a security scam, books of accounts, other books and proceedings of the Company for the period from 11-1-1993 to 29-3-1993 were inspected by the Inspecting Officer of the Department of Company Affairs, Madras, during the end of March and the first part of April 1993. On the basis of his report, the Regional Director, Department of Company Affairs, Southern Region, Madras, wrote to the Registrar of Companies in Karnataka, bringing to the latter's notice, certain commissions and omissions on the part of the respondent company, in furtherance of which, complaints were filed by the revision petition numbers are as follows:
__________________________________________________________________________ C.C. Contravention Concerned Concerned Number alleged provisions Crl.Rev. Petn.
__________________________________________________________________________ 1286/1993 Loose leaf minutes Section 193(6) 710/2000 books of Board and General body meetings had been maintained without binding them and without locking device and without serially numbering them.
1287/1993 Not maintaining the Section 301(4) 711/2000 register of contracts and not entering in such register the transactions of the Company with firms in which directors were interested. 1288/1993 Transferring its Section 205(2-A) 712/2000 annual profits to read with General reserve in excess Section 629-A of the permissible limits. 1289/1993 Printing and issuing Section 84(4) 713/2000 Share Certificates without read with the resolution of Board Sec. 629-A of Directors prior to 25-9-1992 Entries in the Rules 7 and 8 Register of members of the Companies had not been (issue of share duly authenticated certificate) Rules, by the Secretary 1960 read with of the Company Sec. 629-A 1290/1993 Selling without the Sec. 297(1) 714/2004 consent of the Board read with of Directors certain Sec. 629-A goods on credit to two firms in which some of the directors of the Company were partners. 1291/1993 Borrowing unsecured Sec. 58-A(b) 715/2000 loans far in excess of read with the limit permissible Sec. 58-A(i) under rule 2(b) of deposit rules.
_____________________________________________________________________________ A preliminary objection was taken on behalf of the accused in each case that the complaint was barred by time. The offences were disclosed at the time of inspection and with regard to the omission and commission of acts of the Company as alleged, a notice had been issued by the Inspecting Authority on 18-2-1993. The reply of the Company was received on 3-3-1993. Since the explanation of the Company was not satisfactory, a report was submitted by the Inspecting Officer on 15-4-1993 to the regional director of company affairs. It was therefore contended on behalf of the accused in all these cases that the department had the knowledge of the offence atleast from 18-2-1993 when the notice had been issued by the Inspecting Authority and that therefore the complaints filed on 20-10-1993 were barred by time.
3. It is not disputed that every offence alleged is punishable only with fine and the period of limitation for filing the complaint was six months. It was contended on behalf of the complainant that in view of the provisions of Section 621 of the Companies Act, the complaint could be filed only by the Registrar of the Companies and that he having come to know of the commission of the offences only on 14-7-1993 when he received the portion of inspecting report sent by the Regional Director, Department of Company Affairs, the limitation started to run only from 14-7-1993. It was therefore contended that all five complaints were within time. After hearing both the sides, the Learned Presiding Officer, Special Court for Economic Offences, Bangalore, passed an order in each case on 18-5-2000 holding that atleast the date of notice by the Inspecting Officer, i.e., 18-2-1993 and the date of reply by the accused to the notice, i.e., 3-3-1993 can be taken as starting point for limitation and that therefore all these complaints were barred by time. Consequently all the complaints were dismissed on the ground of limitation, challenging which these revision petitions have been filed.
4. It is contended by Sri Urval N. Ramanand, Learned Senior Standing Counsel for the Central Government representing the revision petitioner in each revision petition that the contravention of the provisions of the Companies Act many a times is disclosed when the inspection of books of accounts and other books of the Company is conducted and it is only when the matter is verified with the company and it is confirmed that contravention disclosed during inspection has in fact been committed, that the limitation for such offence starts to run. Referring to Section 469(1)(b) of the Code of Criminal Procedure he submits that where the commission of the offence is not known to the aggrieved person, the first day on which such offence comes to the knowledge of such person has to be taken as the starting point for limitation in an offence against the provisions of the Companies Act. In this regard he places reliance on the following two decisions:
5. In the first decision, i.e., P.D. Jambhekar v. State of Gujarat AIR 1973 Supreme Court 309 one Chandrakanth Jethalal was a worker in the factory in question of which the accused was the Manager. On 27-2-1968 a worker met with an accident while cleaning the clip stentering machine with a rag near the delivery side. The allegation was that the dangerous parts of the machine had not been properly secured. In respect of the accident, a report was sent by police to the Inspector factories, who received the same on 28-2-1968. The Inspector visited the factory on 30-7-1968 and made an enquiry with regard to the accident and thereafter filed a complaint on 20-9-1968 for the offence punishable under the Factories Act. When the question of limitation was raised, the Learned Magistrate held that the report of the Inspector of Factories conveyed the knowledge of the commission of offence and that as the starting point for limitation. The High Court held that the Inspector did not get any knowledge about the commission of offence under the Factories Act from the report, but that knowledge of the commission of the offences came to him only on the date of enquiry by him. On appeal to the Supreme court, the view taken by the High Court was upheld.
6. The second decision is in State of Rajasthan v. Sanjay Kumar and Ors. AIR 1998 Supreme Court 1919. The offence alleged in that case was regarding manufacture, storage and sale of adulterated sub-standard, misbranded spurious drugs. The question that arose was whether the knowledge of the Drugs Inspector Commenced from the date of taking the sample by him or from the date of the receipt of the report by the Government Analyst. It was held that the limitation started to run from the date of the receipt of the Government Analyst's report. On the basis of these two decisions, it is argued by the Learned Senior Standing Counsel for the Central Government that it is the date of the knowledge of the offence that has to be taken as the starting point and the Learned Trial Judge committed mistake in taking the knowledge of the Inspecting Officer as the knowledge of the Registrar of companies.
7. Replying to this contention of the complainant/revision petitioner, it is submitted by Sri. Jayavittal Rao Kolar, Learned Counsel for the respondent/accused that the inspection of the company by the Inspector of Companies was on behalf of the Registrar of the Companies and therefore the knowledge of the Inspector has to be considered as the knowledge of the Registrar of the Companies. In this regard he places reliance on three decisions.
8. In the first decision, i.e., Assistant Registrar of Companies v. H.C. Kothari and Ors. (1992) 75 Company Case 688 the balance-sheets of the Company of which the accused were the directors revealed that the investments made by the Company for certain years were in excess of 30 per cent limit prescribed under Section 372(2) of the Companies Act, for which approval of the Central Government had not been obtained. There was also no required resolution. On a complaint, the Learned Magistrate dismissed the complaint on the ground of limitation. On appeal, it was held that the balance sheets having been duly filed each year with the Registrar of the Companies, it was deemed that he had the knowledge of the contents of the balance sheets and of the offence upon receipt thereof. In that view of the matter, the complaint was held to have been barred by limitation.
9. In the second decision, i.e. ITC Agro-Tech Limited and Ors. v. Registrar of Companies and Anr. (1996) 86 Company case 170 based on similar fact of the balance sheets of the Company being received by the Registrar, it was held that the Registrar being an authority enjoyed under the Act to see that the provisions of the Act are properly followed by the Companies, was expected to scrutinize the accounts filed before him, with the assistance of his competent officers, and find out the irregularities committed by the petitioner-Company, from the date of the filing of the balance sheets and therefore at least from the date of the receipt of the reply to the notice, the knowledge of the commission of offence could be presumed, if not from the date of notice.
10. The third decision is Mishra Dathu Nigam Limited v. State (1998) 92 Company case 730. In that case, the Joint Director of Inspection in the Department of Company Affairs issued notice of inspection to the petitioner, a Government Company on 19.8.1994 under Section 209A of the Companies Act calling for certain particulars to which the petitioner replied on 16-9-1994, furnishing all the particulars required. On 3.5.1995 the Registrar of Companies issued a show-cause notice to the Company listing the lapses on the part of the Company to which the Company replied on 29-5-1995 denying the allegations. The complaint was filed on 28-9-1995 six months beyond the date of the knowledge of the offence, i.e, 14-10-1991 and 19-10-1992, the dates on which the Company had filed balance sheet before the Registrar of Companies. Under these circumstances, the following observations were made in the said decision:
(ii) That the Registrar of Companies who was part of the Department, must be deemed to have knowledge of the offences on the date when the Department had knowledge. Alternatively, as the Registrar was the agent of the Department which launched the prosecution through its agent, the knowledge of the principal had to be taken into account. Accordingly, if the date of receipt of the reply given by the company to the Department (September 19, 1994) was taken as the date of knowledge of theoffence, the limitation expired by March 19, 1995, and the complaints which were filed on September 28, 1995, were barred by limitation.
11. I have carefully considered the points urged by both the sides and the decisions cited on behalf of each party. As rightly pointed out by Sri Urval N. Ramanand, Learned Senior Standing Counsel for the Central Government, the principles laid down in the above mentioned three decisions cited by the Learned Counsel for the respondent may not be helpful in view of an authoritative pronouncement by the Supreme Court in Registrar of Companies v. Rajshree Sugar And Chemicals Limited and Ors. 2000 AIR SCW 1833. The question of limitation under Section 469(1)(b) of the Code of Criminal Procedure was the point in issue in that case; and the following observations have been made in the said decision:
The phrase 'person aggrieved' has not been defined in Criminal Procedure Code. However, as far as offences under the Companies Act are concerned, the words must be understood and construed in the context of Section 621. If the words 'person aggrieved' are read to mean only' the person affected' by the failure of the Company to transfer the shares or allot the shares, then the only 'person aggrieved' would be the transferee or the allottee, as the case may be. Under Section 621, no Court can take cognizance of an offence against Companies Act except on the complaint of a shareholder, the Registrar or the person duly authorised by the Central Government. Where the transferee or allottee is not an existing shareholder of the Company, if the words 'person aggrieved' is read in such a limited manner, it would mean that Section 469(1)(b) of Criminal Procedure Code would be entirely inapplicable to offences under Section 113 of the Act. There is, in any event, no justification to interpret the words 'person aggrieved' as used in Section 469(1)(b) restrictively particularly when, as in this case, the statute creating the offence provides for the initiation of the prosecution only on the complaint of particular persons. Having regard to the clear language of Section 621 the Registrar of Companies would be a 'person aggrieved' within the meaning of Section 469(1)(b) of Criminal Procedure Code in respect of offence (except those under Section 545) against the Companies act.
1998 (94) Comp Cas 713 (Mad), Reversed.
(C) Criminal Procedure Code (2 of 1974), Section 469(1)(b) - Limitation-Complaint for offences under Section 113 of Companies Act-Registrar of Companies being aggrieved person would be entitled to benefit of provisions of Section 469(1)(b) Commencement of period of limitation of six months for initiating prosecution would have to be calculated from the date, he came to know of the offences.
12. On a perusal of all these decisions, the following principle of law can be culled out for computing the period of limitation. In a case registered on the complaint lodged by the Registrar of Companies in respect of an offence against the Companies Act, one has to consider the date on which such offence came to his knowledge. In one case, it may be that the Registrar may have come to know about the offence on the date when the Inspecting Officer detects the contravention of the Act. In another case, he may not be aware of offence until a report is made by the Inspecting Officer to him. Determination of this date of knowledge of the Registrar depends on facts of each case. In cases where the inspection of books of accounts and other books of the Company is done under Clause (ii) of Section 209-A(1) of the Companies Act, a report of the inspection will have to be made to the Central Government under Sub-section (6) of Section 209-A of the Companies Act and the Registrar of Companies may come to know about the commission of such offence against the Companies Act only when he receives a communication from the concerned officer of the Department of Company Affairs. In such cases, the date on which he receives communication in this regard will have to be taken as the starting point for limitation under Section 469(1)(b) of the Code of Criminal Procedure."
13. In the present case, the records show that the inspection was done by the Department of company affairs and there is nothing to show that at that time, the Registrar of Companies had been informed of the inspection. The result of the inspection came to the knowledge of the Registrar only when he received the report on 14-7-1993. That date has to be taken as the starting point for limitation. If it is so, all the complaints were within time.
14. It is next submitted by Sri Jayavittal Rao Kolar, Learned Counsel for the respondent that the revival of these complaints, which were of the year 1993 would not be worthwhile since charges mainly relate to certain technical omissions or commissions. He submits that the Company has been wound up by the order dated 8-2-2006 passed by this Court in Company Petition No. 224/2003 and if at all the complaints have to continue against the Company, they have to be continued against the official liquidator. In view of the provisions of Section 446 of the Companies Act that has to be done after the complainant obtains permission of the Company Court to continue the prosecution against the official liquidator.
15. The omissions or commissions by the Company noticed in C.C, Nos. 1286/1993 and 1287/1993 are only technical and no purpose would be served in restoring the complaints in those cases. As regards other complaints, as rightly brought to the notice of the Court by the Learned Counsel for the respondent, the Company having been wound up, there appears to be no necessity of continuing the proceedings against the Official Liquidator.
16. For the above said reasons, though the contention of the revision petitioner regarding limitation is upheld and it is held that all the complaints were within limitation, the orders of dismissal of the complaints are not being set aside for the above said reasons. With these observations the revision petitions are dismissed.