Orissa High Court
Nalco And Ors. vs Registrar Of Companies And Ors. on 22 August, 2003
Equivalent citations: 96(2003)CLT592
Author: P.K. Mohanty
Bench: P.K. Mohanty
JUDGMENT P.K. Mohanty, J.
1. In all these three petitions, the petitioners assail the order dated 1.12.1994 of the learned Addl. Chief Judicial Magistrate-cum-Special Judge, Cuttack, taking cognizance of the offence under Section 211 of the Companies Act and issuing process.
2. The petitioners are, the National Aluminium Company Limited, a Government of India undertaking, its Chairman-cum-Managing Director, the Company Secretary and the present Chairman-cum-Managing Director.
3. The order of cognizance is challenged mainly on the ground of lack of sanction against the petitioners, the Managing Director-cum-Chairman and the Company Secretary and on the ground of limitation. Sri I. Mohanty, learned counsel for the petitioners submitted that the petitioners 2 and 4 having been appointed by the President of India initially as Directors and then, Chairman-cum-Managing Director, initiation of a criminal proceeding as against them without prior sanction of the appropriate authority as required under Section 197 of the Cr.P.C. is illegal and liable to be quashed. Submission is made that in view of Section 21 of the IPC, these officers being public servants, for their prosecution sanction under Section 197, Cr.P.C. was the basic requirement, which having not been complied with, the order of cognizance is bad and liable to be set aside.
4. The learned counsel has made a reference to Clause 12 of Section 21 of IPC to contend that every person in the service or pay of Government remunerated by fees or commission for performance of any public duty by the Government or in the service or pay by local authority, corporation established by or under a central provincial or State Act or a Government Company as defined under Section 617 of the Companies Act, 1956 comes under definition of a public servant and, therefore, these petitioners being officers of the Government Company i.e. M/s. NALCO, as defined under Section 617 of the Companies Act, they come under the ambit and purview of the public servant and hence the order of cognizance without sanction of the appropriate authority that is the Central Government is bad in law and the cognizance is liable to be quashed. In support of his contention, the learned counsel made a reference to a decision of the Apex Court in Md. Hadi Raja v. State of Bihar; J.T. 1998(3) SC 507, but the decision does not support the plea of the petitioners. The Apex Court in the aforesaid decision held that it is not necessary that a person falling under any of the description given in various clauses under Section 21 of the IPC need to be appointed by the Government. If a person falls under any of the description as contained in various clauses of Section 21 of the IPC such a person must be held to be a public servant. But, however, the protection under Section 197 of the Cr.P.C, is not available to a public servant unless other conditions indicated in that Section are fulfilled. The orders of appointment in respect of petitioners 2 and 4 are in Annexures 1, 2 and 3, The Hon'ble President of India appears to have appointed Sri S. N. Sohri, Executive Director (Personnel and administration), as Director (Personnel and Administration). NALCO in Schedule-B scale of pay of Rs. 4000/- -- 4500/- for a period of five years from the date, he takes over charge in terms of Articles of the Association of the NALCO, Limited. Similarly, Sri S. K. Tamotia, petitioner No. 4 was appointed as Director (Project and Technical) in Schedule-13 in scale of pay from the date he assumed charges. In order dated 18.6.1992, the Hon'ble President of India appointed Sri S. N. Johri, Acting Chairman-cum-Managing Director (Personnel and Administration) as Chairman-cum-Managing Director of the said Company in Schedule-A for a period of five years with immediate effect. In Annexure-3/1, Dr. Tamotia, Director (Project and Technical) was appointed as Chairman-cum-Managing Director of NALCO in addition to his own duty with immediate effect vice Sri S. N. Johri. The appointments are not in dispute. There cannot, therefore, be any doubt that the petitioner Nos. 2 and 4 are covered under the definition of public servant as contemplated under Section 21, IPC. But that does not serve the purpose nor does it help the petitioner in any where since all public servants are not covered under the protection envisaged in Section 197 of the Cr.P.C.
5. Section 197(1) of the Code of Criminal Procedure is quoted hereunder for better appreciation :
"197. Prosecution of Judges and public servants : (1) When any person who is or was a judge or Magistrate or a public servant not removable from his office save by or with the sanction of the Government is accused of any offence alleged to have been committed by him while acting or purporting to act in the discharge of his official duty, no Court shall take cognizance of such offence except with the previous sanction:
(a) in the case of a person who is employed or, as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of the Union, of the Central Government;
(c) in the case of a person who is employed or, as the case may be, was at the time of commission of the alleged offence employed, in connection with the affairs of a State, of the State Government. Provided that where the alleged offence was committed by a person referred to in Clause (b) during the period while a proclamation issued under Clause (1) or Article 356 of the Constitution was in force in a State, Clause (b) will apply as if for the expression "State Government" occurring therein, the expression "Central Government" were substituted."
6. In the case of K. Ch. Prasad v. Smt. J. Vanalatha Devi and Ors.; AIR 1987 Supreme Court 722, the Apex Court, while considering as to whether sanction under Section 197 of the Cr.P.C. was necessary in case of an officer of a Nationalised Bank, held the sanction under Section 197, Cr.P.C. is attracted only in case, where the public servant is such who is not removable from his office save by or with the sanction of the Government. An employee of the Nationalised Bank does not hold a post wherefrom he could not be removed from his service except by or with the sanction of the Government. In such view of the matter, even if the petitioners 2 and 4 are public servants in terms of Section 21 of the IPC, there is nothing on record that the petitioners were holding post from where they could not be removed from service except by or with the sanction of the Government and as such, the contention of the learned counsel that for prosecution, a sanction was necessary under Section 197 of the Cr.P.C. has to be rejected.
7. The next submission of the learned counsel is that, the prosecution lodged against the petitioners are barred by law of limitation. It is contended that the offence complained of under Section 211 of the Companies Act provides for a penalty of an imprisonment of a maximum period of six months or with a fine which may extend to Rs. 1000/- or both. In such a case, in view of Section 368 of Cr.P.C. one year is the prescribed period of limitation. According to the petitioners, the prosecution having been lodged much after, one year period of limitation, the learned Magistrate could not have taken cognizance of the offences alleged. The learned counsel has given a chart showing the date on which balance sheet of the company was filed before the Registrar of the Companies, the period when the limitation expires and the date when the complaint was filed in each case and the date when cognizance was taken. The chart may be quoted hereunder :
Balance sheet year date of filing before the Registrar of Companies One year Limitation for initiation of Proceeding. Punishment imprisonment of 6 months or fine Rs. 1000/- Complaint petition filed Date of cognizance.
1988-89 19.10.89 10.10.90 1.12.94 1.12.94 1989-90 10.10.90 19.10.90 1.12.94 1.12.94 1990-91 14.10.91 14.10.92 1.12.94 1.12.94 1991-92 22.10.92 22.2.93 1.12.94 1.12.94 1992-93 19.10.93 19.10.94 1.12.94 1.12.94 Contention, therefore, is made that the limitation for filing complaint runs from the date of receipt of the balance sheet since the Registrar of Companies gets knowledge of the affairs of the companies gets knowledge of the affairs of the companies and deviation or offences, if any, committed by it when the balance sheet is filed. The Registrar is deem to have knowledge of the contents of the balance sheet upon receipt thereof and thus complaint filed beyond one year of receipt of the balance sheet could not be entertained nor could the learned Magistrate take cognizance of the offence alleged.
8. Section 468 of the Code of Criminal Procedure reads thus :
"468. Bar to taking cognizance after lapse of the period of limitation :
(1) Except as otherwise provided elsewhere, in this Code, no Court shall take cognizance of an offence of the category specified in Sub-section (2), after the expiry of the period of limitation.
(2) The period of limitation shall be :
(a) Six months, if the offence is punishable with fine only;
(b) One year, if the offence is punishable with imprisonment for a term not exceeding one year;
(c) Three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years.
(3) For the purpose of this Section, the period of limitation, in relation to offences which may be tried together, shall be determined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most severe punishment."
Under Clause (b) of Sub-section (2) of Section 468, Cr.P.C. if the offence is punishable with imprisonment for a term not exceeding one year, in that event the period of limitation is prescribed as one year. The offence under Section 211 of the Companies Act is punishable with simple imprisonment for a period of six months or a fine which may extend to Rs. 1,000/- or both. It is not in dispute that the balance sheets were filed by the petitioner-Company on the dates mentioned in the schedule. In view of the position that the Company had filed the balance sheet, exception to which had been taken, the prosecution was to be lodged within one year thereof. If the date of filing of the balance sheet is to be construed as the date of knowledge then, the prosecution can be safely said to be beyond the period of limitation. But it has to be determined as to whether the date of filing of balance sheet before the Registrar of Companies can be construed as the date of knowledge or the day when the offence alleged comes to the knowledge of the aggrieved person that is the Registrar of Companies.
9. The Apex Court in case of R. Aghoramurthy, Registrar of Companies, Bombay v. Bombay Dyeing & Mf. Co. Ltd. and Ors.; JT 1991 (5) S.C. 432 had the occasion to consider the question of limitation in case of a prosecution against a Company for violation of Sections 205 and 211 of the Companies Act is date of knowledge of the Registrar of Companies. It was held that knowledge as per Section 468 of the Cr.P.C. is that of the complainant that is the Registrar of Companies. The Apex Court in a recent decision in case of Registrar of Companies v. Rajshree Sugar & Chemicals Ltd.; AIR 2000 S.C. 1643, while considering the period of limitation as against the Companies in terms of Section 469(1)(b) of the Cr.P.C. have laid down that the complaint for offence under Section 113 of. the Companies Act, the Registrar of Companies being the aggrieved person would be entitled to the benefits of the provision. Offence of the period of limitation of six months for initiating the prosecution was to be calculated from the date he came to know of the offence. Under Section 621 of the Companies Act, no Court is to take cognizance of an offence against a Company except on the complaint of a share holder, the Registrar or a person authorised by the Central Government.
10. In the case at hand, the prosecution was lodged by the Registrar of Companies under Section 211 of the Companies Act which is punishable with simple imprisonment for a period of six months or fine of Rs. 1,000/- or both and thus the period prescribed for limitation, the prosecution and taking cognizance thereof by a competent Magistrate would be one year. The admitted position is that the Company had filed the balance sheet in respect of the year, 1992-93 was filed on 19.10.1993, exception to which has been taken by the Registrar of Companies and necessary complaint have been, lodged before the learned Magistrate on 1.12.1994. If the date of Knowledge is the starting point of the period of limitation of one year as contemplated under Section 468(2) Cr.P.C. undisputedly the complaint has been lodged beyond a period of one year. However, according to the Registrar of Companies, the offence came to his knowledge on receipt of the letter of the Regional Director, Eastern Region, Calcutta, Department of Company Affairs in his letter dated 12.11.1993 and he was intimated of the order of the Government of India for an inspection under Section 209 of the Companies Act of the books of accounts and other records of NALCO Ltd. and for that purpose, an Assistant Inspecting Officer accompanied with a Sr. technical Assistant were deputed to conduct the inspection on 19.11.1993. The Inspecting Officer noticed the defects/violation, of the provisions of the Act and the Regional Director sent the report to the petitioner-Company for giving its view and explanation by letter dated 19.11.1993, Ultimately, the Registrar of Companies in letter dated 8.9.1994 called upon the petitioner-Company and its officials to show cause within 15 days as to why prosecution should not be lodged against the Company and its Directors being the Officers who are in default under the provision of Section 211(7) of the Companies Act and ultimately the complaint was filed on 1.12.1994.
11. The complaint petition discloses that on an inspection carried by an Officer authorised by the Central Government under Section 209(A) of the Companies Act, the Company was found to have disclosed its deposits with some private Companies under the head "other current assets" instead of "loans and advances" and thus contravened provision of Section 211 and the requirements under Schedule - 6 of the Companies Act, 1956. Further it has been stated in the complaint petition that the violation made by the Company was brought to the notice of the Company and its Officers on 8.9.1994 and its Officers on 8.9.1994 and since, the Registrar of Companies came to know of the violation on receipt of the letter from the Regional Director. The prescribed period of limitation of one year is to be calculated from the date of receipt of such intimation. On a perusal of Annexure-6, the letter of the Regional Director dated 12.11.1993 addressed to the petitioner-Company, it clearly reveals that the Department of Company Affairs, New Delhi ordered for an inspection under Section 209(A) of the Companies Act of the books of accounts and other records of the Company. The inspecting Officer in his letter dated 19.11.1993, copy of which is Annexure-7 addressed to the petitioner-Company pointed out that the disclosures made in the books of accounts and other record does not confirm to the requirement of Section 211 read with Schedule - 6 of the Companies Act and as such, the petitioner should give full justification thereof and to confirm as to why these deposits should not be treated as port-folio management transactions. It was also indicated that from the balance sheet as on 31.3.1990, the Company had invested a magnum to the extent of Rs. 92272 (in thousand) and Rs. 164450 (in thousand) and as to whether such investment should be treated as port-folio management scheme transactions and are covered under the main object of the memorandum of association of the Company. The Company gave its reply on 20.11.1993. Subsequent correspondences were also made. However, the inspecting Officer deputed by the Government of India came to know of the irregularity on 19.11.1993 for the first time. Even if the date of filing of the balance sheet is not to be taken as the date of knowledge of the Registrar of Companies, the anamolies, defects and violation having come to the knowledge of the inspecting Officer on 19.11.1993, that has to be construed as the date of knowledge and the period of limitation has to start from that date. If that is taken as the date of knowledge then, the prosecution is clearly beyond the period of limitation having been filed on 1.12.1994. It is also relevant to note that the balance sheets of different years were filed on different dates, the last being is 10.10.1993.
12. In such view of the matter, the knowledge of the Registrar of Companies can be attributed as on the date when the inspecting Officer on inspection found the anamolies and the Regional Director asked the Company to clarify the anamoly that is on 12.11.1993 vide Annexure-6. So computed the prosecution having been lodged on 1.12.1994 is beyond the period of limitation of one y.ear and, therefore, the learned Magistrate could not have taken cognizance of the offence even without an application for condonation.
13. Mr. Indrajeet Mohanty, learned counsel for the petitioners has raised contentions that the alleged violation is misconceived inasmuch as construed in the light of the provisions of the Companies Act, there was no violation of any of the provisions of law. However, since it has already been held that prosecution was lodged beyond the period of limitation and, therefore, no cognizance could be taken, I need not delve into such question and determine such a question at the stage which would be more or less academic.
In the result, the petitions are allowed, the orders of the learned Additional Chief Judicial Magistrate-cum-Special Judge, Cuttack dated 1.12.1994 in all the three cases, taking cognizance of the offences and issuing process against the petitioner are quashed.