Delhi District Court
Roc vs M/S Mideast Integrated Steels 1-14 on 5 March, 2012
IN THE COURT OF SH. GORAKH NATH PANDEY
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts): CENTRAL
TIS HAZARI COURTS, DELHI
Registrar of Companies
NCT of Delhi & Haryana
Versus
M/s Mideast Integrated Steels Ltd.
CC No.1687/3
JUDGEMENT
(a)Serial no. of the case : 02401R0047952000
(b)Date of commission of offence : In the year 199899
(c)Name of complainant : Registrar of Companies,
NCT of Delhi & Haryana
(d)Name, parentage, residence: M/s Mideast Integrated Steels Ltd.
having its registered office
at HI Zamudpur Community Centre,
Kailash Colony, New Delhi
Smt. Rita Singh
D3A, Satwari, Ansal Villa,
New Delhi
(e)Offence complained of/ proved : U/s 209A(8) of Companies Act, 1956
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 05.03.12 Date of institution : 22.08.2000 Date of Reservation of Judgment : 03.03.12 Date of Pronouncement of Judgment : 05.03.12 Brief statement of the reasons for the decision:
1. The Registrar of Companies NCT of Delhi & Haryana (hereinafter called the complainant) filed the present complaint u/s 209A(8) of the Companies Act, 1956 (hereinafter to be called as Act) against the above mentioned accused ROC vs M/s Mideast Integrated Steels 1-14 alleging that M/s Mideast Integrated Steels Limited (hereinafter to be called as company) is a company incorporated with the office of Registrar of Companies and accused is the officer in default of the company as per the particulars filed/available with the office of the complainant and is responsible for compliance to the provisions of section 209A(8) of the Companies Act, 1956.
2. It is stated that the paidup capital of the company as on 31.10.98 was Rs. 13,787.50 lacs. In pursuance to letters dated 19.08.98 and 02.09.99 Sh. Onkar Nath Pandey, Asstt. Director (Inspection), office of the Regional Director, Northern Region, Kanpur was empowered to carry out the inspection of the company. However, in spite of best efforts of the inspecting officer, the company did not produce the books of accounts/vouchers and other important records, registers including statutory registers for the inspection. It was stated that the records as called for the inspection have been sent to Bhubneshwar at the company office and/or at Jajpur where the plants are in the process of being installed for getting the same audited. Thereafter, the inspecting officer issued summons to the accused for production of books of accounts on 11.11.99 at 11.00 am at Kanpur office. Instead of producing the books of accounts a Telegram dated 09.11.99 was received in Kanpur office that due to super cyclone in Orissa, the accused cannot appear at Kanpur on 11.11.99 and some more time was requested by the accused for producing the books of accounts vide letter dated 09.11.99 and 11.11.99. Thereafter, second summons were issued for production of books of accounts and other records on 21.12.99 at Kanpur office. Vide letter dated 22.12.99 the company informed the ROC vs M/s Mideast Integrated Steels 2-14 inspecting officer that all the data feeded in the computer have got damaged in the cyclone and requested time upto 20.03.2000 for producing the books of accounts. It is alleged that from the replies of the company, it is evident that the company is very evasive in responding to the summons of the inspecting officer and one pretext or other is seeking time for producing of records. The accused being officer in default of the company has rendered herself liable for the penal action as contemplated u/s 209A(8) of the Act. Accordingly a show cause notice for the aforesaid contravention was issued to the accused on 17.07.2000. It is stated that section 209A(8) provides that if default is made in complying with the provisions of this section, every officer of the company who is in default shall be liable with fine which shall not be less than five thousand rupees and also with imprisonment for a term not exceeding one year. Thus, it is prayed that accused may be summoned and punished in accordance with law.
3. The accused was summoned and a notice u/s 251 Cr.P.C. was served upon the accused for the offence punishable u/s 209A(8) of the Act to which she pleaded not guilty and claimed trial.
4. In order to substantiate its allegations, the complainant examined three witnesses i.e Sh. S.L. Gandhi, JTA office of ROC as PW1, Sh. T.P. Shammi, the then Deputy Registrar of Companies as PW2 and Sh. O.N. Pandey, the then Deputy Director (inspection) as PW3. PW1 deposed that company is duly registered with the office of ROC and accused Reeta Singh is/was Managing ROC vs M/s Mideast Integrated Steels 3-14 Director of the company and proved on record certificate of incorporation Ex. PW1/1, copy of annual return as Ex. PW1/2 regarding proof of directorship, authority letter/direction vide Ex. PW1/3 through which Mr. Onkar Nath Pandey was authorised to conduct inspection of the company and show cause notice issued to the accused Ex. PW1/4.
PW2 Sh. T.P. Shammi reiterated the facts as mentioned in the complaint and proved on record the sanction to launch prosecution against the company Ex. PW2/1 against director of the accused company along with copy of letters dated 16.01.01 and 20.06.2000 and complaint as Ex. PW2/3.
PW3 Sh. O.N. Pandey also reiterated the facts of the complaint and proved on record the letter vide Ex. PW3/1 through which he was directed to inspect the records of the company. The witness visited the registered office of the company on 11.10.99 and 12.10.99 and met one Ms. Seema Thapar and requested to produce the books of accounts and other records. He also deposed that one Mr. JK Singh, the chairman of the company also met, who informed that the record is not available at the office at H1, Zamrud Pur Community Centre, Kailash Colony and the books of account are being kept at Jajpur in Orissa. The witness further proved on record other relevant documents/correspondence i.e request letters by accused Ex. PW3/2, Ex. PW3/3A, Ex. PW3/6 to Ex. PW3/10, Ex. PW3/12 and Ex. PW3/13, photo copy of telegram Ex. PW3/4, copy of summons issued to accused as Ex. PW3/11 and photo copy of dossier as Ex. PW3/15.
5. The statement of accused Rita Singh was recorded u/s 313 read with section ROC vs M/s Mideast Integrated Steels 4-14 281 Cr.P.C. whereby she denied the allegations and stated that the records could not be produced due to the super cyclone that had struck Orissa. In support of her claim and contentions, accused examined Mr. N.S. Parmeshwaran, then secretarial and accounts officers with the accused as DW1 and Mr. SS Naik, the then Chief Manager of the company as DW2. DW1 deposed that the books of accounts and other records were at the Jajpur, Orissa on account of audit purposes since major/all activities of the company were in Jajpur. The witness further deposed that due to super cyclone in Orissa from September, 1999 till October, 1999 there was total damage to the books of accounts as well as to the whole property and even the back up files stored in the computers were destroyed. DW2 also deposed that in October, 1999, there was a massive super cyclone in Orissa causing extensive loss to the property, houses, communication and road networks as well as rail network. The company was in the project stage as such, all administrative buildings which were of temporary nature were completely damaged and flooded. The records of the company in the account section also got destroyed on account of flooding of the plant.
6. I have heard the arguments on behalf of both the parties and gone through the relevant records. I have also gone through the written arguments filed by the accused and considered the relevant provisions of law.
7. Present complaint pertains to failure by the company and officer incharge to produce the books of accounts/records for inspection by the registrar or by ROC vs M/s Mideast Integrated Steels 5-14 such competent officer in terms of section 209A of the Companies Act. Section 209A of the Companies Act is reproduced as below: [Section 209A. Inspection of books of accounts, etc. of companies. (1) The books of account and other books and papers of every company shall be open to inspection during business hours i. by the Registrar, or ii. by such officer of the Government as may be authorized by the Central Government in this behalf;
iii. by such officers of the Securities of Exchange Board of India as may be authorized by it:
Provided that such inspection may be made without giving any previous notice to the company or any officer thereof:
Provided further that the inspection by the Securities and Exchange Board of India shall be made in respect of matters covered under sections referred to in section 55A] (2) It shall be the duty of every director, other officer or employe of the company to produce to the person making inspection under subsection (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify.
(3) It shall also be the duty of every director, other officer of employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give.
(4) The person making the inspection under this section may , during the course of inspection,
(i) make or cause to be made copies of books of accounts and other books and papers; or
(ii) place or cause to be placed any marks of identification thereon in token of the inspection having been made.
(5)Notwithstanding anything contained in any other law for the time being in force or any contract to the contrary, any person making an inspection under this section shall have the same powers as are vested in a civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:
(i) the discovery and production of books of account and other documents, at such place and such time as may be specified by such person;
(ii) summoning and enforcing the attendance of persons and examining them on oath;
ROC vs M/s Mideast Integrated Steels 6-14
(iii) inspection of any books, registers and other documents of the company at any place.
(6) Where an inspection of the books of account and other books and papers of the company has been made under this section, the person making the inspection shall make a report of the Central Government [or the Securities and Exchange Board of India in respect of inspection made by its officers].
(7) Any officer authorized to make an inspection under this section shall have all the powers that Registrar has under this Act in relation to the making of inquiries.
(8) If default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which shall not be less than [fifty thousand rupees], and also with imprisonment for a term not exceeding one year.
(9) where a director or any other officer of a company has been convicted of an offence under this section he shall, on and form the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified for holding such office in any company, for a period of five years such date.]
8. Section 209A of the Act provides that the books of accounts and other books and papers of every company shall be open to inspection during business hours by the registrar or by any such officer of the government as may be authorized by the central government in this regard. Subsection 2 of this section provides that it shall be the duty of every director, other officer or employee of the company to produce to the person making inspection, all such books of account and other books and papers of the company in his custody or control and to furnish them with any statement, information or explanation relating to the affairs of the company as the said person may require at such time and at such place as he may specify. Subsection (3) of this Act mentioned that it shall also be the duty of every director, other officer of employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be ROC vs M/s Mideast Integrated Steels 7-14 reasonably expected to give. Subsection (8) of this Act contains that if default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which shall not be less than [fifty thousand rupees], and also with imprisonment for a term not exceeding one year.
9. It is not in dispute that the accused has failed to produce the relevant records despite services of the notices in this regard issued by the complainant. Rather the accused has taken a defence that the default in producing the record was due to the circumstance beyond the control of the accused. The testimony of the PW1 Mr. SL Gandhi is not much relevant for decision of this case, who produced the inspection report of Mr. ON Pandey, i.e. Ex. PW1/3. PW1 deposed that he has not conducted the inspection and he has no knowledge as to what transpired between the inspecting authority and the company at the time of inspection. The testimony of PW2 is also in line with the contentions as made in the complaint deposing that accused has not produced the relevant records despite notice and the accused has stated that the records have been sent to Bhuvneshwar, branch office of the company. The witness further deposed that as the records were not produced this complaint is filed. From the testimony of PW2 deposed during his cross examination it is also proved that accused has replied the notices issued by the complainant repeatedly taking the defence as mentioned and the accused even offered to clear the queries raised by the complainant vide notice dated 26.07.2000. The PW2 also failed to explain the grounds for grant of sanction to launch prosecution in this ROC vs M/s Mideast Integrated Steels 8-14 case. The testimony of PW2 is also of not much help as he was not concerned with the inspection/proceedings at all in this matter.
PW3 Mr. ON Pandey is the most relevant witness who conducted the inspection in this matter and deposed regarding the averment made into the complaint filed by the complainant. PW3 admitted during the cross examination that at the time of his visit for inspection on 11.10.99 and 12.10.99 at the office of the company, the managing director ie accused in this case was not present in the office and the request was received for grant of time to produce the account books by the accused when summons for production of the books of account was issued on 28.10.99. Similar request was also received by the witness from the accused even thereafter and he deposed that such request was to be considered by the Regional Director. The witness also deposed that the reason was also explained by the accused for not producing the record at the time of inspection. The accused during her examination u/s 313 Cr.P.C. detailed and explained the reasons for not producing the relevant records at the time of inspection which were stated to the inspecting officer and communicated to the complainant during various correspondence and the defence of the accused appears altogether the same throughout. The happening of the incident as explained by the accused is not even disputed by the complainant. It is not the case at all that accused not responded to this action of the complainant.
10.During the final arguments, learned company prosecutor argued that even if the offence u/s 209A(8) is not made out against the accused, the offence u/s ROC vs M/s Mideast Integrated Steels 9-14 163 of the Companies Act is made out against her. It is noted that no such allegation is made by the complainant in the complaint in this respect nor any evidence was led in this regard. The accused was not issued notice for the said offence. Therefore, the contentions of the learned company prosecutor appears to be baseless and without any ground and accused cannot be convicted for the offences for which she was neither alleged nor tried. Even nothing was deposed by the witnesses in this respect. Moreover, the correspondence of the accused was also admitted by the complainant during the examination of the prosecution witnesses and same itself shows that the accused had no custody/control of the records. It appears that the accused failed to produce the documents due to the reasons as stated. Subsection (2) of the Act provides that it shall be the duty of every director, other officer or employee of the company to produce to the person making inspection under subsection (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify. It is clear that accused proved that the required records were not under her custody/control.
Complainant's witnesses deposed that despite receipts of summons/letters accused failed to produce the books of accounts/other records for inspection. It is clear from the records that in compliance of letters/direction Ex. PW3/1 dated 19.08.98 and 02.09.99, PW3 visited the ROC vs M/s Mideast Integrated Steels 10-14 office of the company on 11.10.99 and 12.10.99 for the purpose of inspection of the records and he was informed by Mr. JK Singh that the books of accounts are at registered office at Jajpur, Orissa. Thereafter, the accused has taken a specific stand that company could not produce the records for inspection due to super cyclone in Orissa. It is admitted fact that the catastrophe i.e super cyclone came in Orissa in October, 1999 and several parts of the Orissa was affected due to super cyclone and in this regard accused has written number of letters as well as telegrams vide Ex. PW3/2, PW3/6, PW3/7 and Ex. PW3/12. Thus, it appears that accused has proved and explained the reasons for nonproduction of the documents at the time of inspection. Admittedly it is not the case of the complainant at all that the records were in the custody and control of the accused and she refused to produce the same.
11.Perusal of testimony of PW3 and materials available on record clearly shows the cause for the nonproduction of the books of accounts of the company not only during the visit of PW3 for inspection but also within the time specified by him. Reason has been explained by the accused for not producing the relevant records as required. Since the accused was not in the custody/control of any of books of accounts, she cannot be held liable for not producing the same. In this regard this court is supported with the case law reported as "1996 85 Comp Cas 572 Mad" which is squarely applicable in the fact of this case.
12.It is also relevant to note that the complainant appeared to be in a hurry to file this complaint, as this complaint was filed prior to grant of sanction for ROC vs M/s Mideast Integrated Steels 11-14 prosecution. The complaint was filed on 28.08.2000 though the sanction for launching the prosecution by the Joint Director, ROC to prosecute the accused was given only 21.03.01 and the reason for same was not explained by the complainant at all. The accused in her statement also offered and deposed that the records have been reconstructed and are available for inspection, therefore, the nonproduction of the record by the accused for inspection, by no stretch of imagination can be considered as voluntary.
13.Besides, present complaint appears to be time barred. It is relevant to note that that section 209A(2) does not contemplate that that the inspecting authority may call upon the director to give information or produce documents within such time or within the extended time. If the director of the company does not comply with the demand within the period prescribed in the first notice, show cause notice Ex. PW3/3A, the offence must be deemed to have been committed and, therefore, limitation would start only from that date. Thus, the period of limitation starts from the expiry of period mentioned in the notice Ex. PW3/3A. As per show cause notice Ex. PW3/3A dated 28.10.99, accused was granted time till 10th November, 1999 to comply with the show cause notice, thus, period of limitation starts from the expiry of 10th of November, 1999 and as per settled law the complaint was to be filed within period of limitation. Present complaint was filed on 28.08.2000, after expiry of more than two months and the reason for condonation of delay in filing the present complaint was not explained by the complainant at all. Therefore, the present complaint is also barred by limitation as held in the judgment reported as ROC vs M/s Mideast Integrated Steels 12-14 "1986 60 Comp Cas 889 Mad".
14.Vicarious liability cannot be imputed merely on the ground that accused was director of the company. The complainant was required to prove its case beyond reasonable doubt. The burden of proof in a criminal trial never shifts and it is always the burden of the prosecution to prove its case beyond reasonable doubt. It is held in the following case laws: "JT 2001 (4) SC 92".
"10. The presumption under Section 4(1) in reference to an offence under section 161 IPC is, as already noticed, a rebuttable presumption. The only evidence led in this case is to establish charge under Section 161 IPC, of appellant having received gratification other than legal reward, as a motive or reward for doing or forbearing to do any official act in the exercise of his official functions to favour the prime mover is the statement of the contractor, PW2. As already noticed, the contractor has given different versions of the occurance in his statement before the vigilance wing and in the court. At the trial, he has not supported the prosecution case fully. On the other hand, the explanation given by the appellant both during the crossexamination of prosecution witnesses and in his own statement, recorded under section 313 Cr.P.C. is quite plausible. Where an accused sets up a defence or offers an explanation it is well settled that he is not required to prove his defence beyond a reasonable doubt but only by preponderance of probabilities. On prosecution's own showing, in this case, that onus can be said to have been duly discharged by the appellant, more particularly, when the prosecution did not lead any evidence to show as to who made the payment to Kamalasanan who had removed the bump from the road which bump was otherwise required to be removed by PW2 for getting refund of his earnest money and security. May be, the allegation that the appellant accepted the amount as bribe to process his refund application is true but the court cannot convict an accused only on such probability or suspicion, howsoever strong it may be. 'Between may be true and must be true, there is a long distance to travel' and in this case the prosecution has failed to travel that distance through any unimpeachable, evidence. The case of the prosecution has not been established beyond a reasonable doubt".
2003 [3] JCC 1358 "It is no doubt a matter of regret a foul coldblooded and cruel murder should go unpunished. There may also be an element of truth in the prosecution story ROC vs M/s Mideast Integrated Steels 13-14 against the accused. Considered as a whole, the prosecution story may be true; but between 'may be true' and must be true' there is inevitably a long distance to travel and the whole of this distance must be covered by the prosecution by legal, reliable and unimpeachable evidence before an accused can be convicted." 2007(1) Crimes 181 (SC)
15..."153. A close analysis of this decision would show that the following conditions must be fulfilled before a case against an accused can be said to be fully established.
(1) The circumstances from which the conclusion of guilt is to be drawn should be fully established.
It may be noted here that this Court indicated that the circumstances concerned "must or should" and not "may be" established. There is no only a grammatical but a legal distinction between "may be proved" and must be or should be proved" as was held by this court in Shivaji Sahabrao Bobade vs. State of Maharashtra where the observations were made:[SCC para 19, p.807: SCC (Cri) p.1047] "Certainly, it is a primary principle that the accused must be not merely may be guilty before a court can convict and the mental distance between 'may be' and 'must be' is long and divides vague conjectures from sure conclusions".
15.Thus, mulling over the foregoing discussions and facts and circumstance of the case, it is held that as the accused was not in custody/control of the books of account and other books and papers, she failed to produce the same. Therefore, accused cannot be held guilty for the offence punishable u/s 209 A(8) of the Companies Act. Accordingly, accused is acquitted of charges leveled against them. File be consigned to the record room.
(GORAKH NATH PANDEY) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 05.03.12 ROC vs M/s Mideast Integrated Steels 14-14