Delhi District Court
All Appeals From S.No.1 To vs The Registrar Of Companies on 11 December, 2012
IN THE COURT OF MRS. SUNITA GUPTA:
DISTRICT & SESSIONS JUDGE: DELHI
1. CA No.01/12
Unique ID No. 0240IR0404392012
(arisen out of complaint case No.1237/03)
2. CA No.2/12
Unique ID No. 0240IR0404432012
(arisen out of complaint case No.1232/03)
3. CA No.3/12
Unique ID No. 0240IR0404472012
(arisen out of complaint case No.1227/03)
4. CA No.5/12
Unique ID No. 0240IR0404572012
(arisen out of complaint case No.1234/03)
5. CA No.6/12
Unique ID No. 0240IR0404602012
(arisen out of complaint case No.1231/03)
6.. CA No.7/12
Unique ID No. 0240IR0404622012
(arisen out of complaint case No.1236/03)
7. CA No.9/12
Unique ID No. 0240IR0404662012
(arisen out of complaint case No.1233/03)
8. CA No.10/12
Unique ID No. 0240IR0404672012
(arisen out of complaint case No.1128/03)
9. CA No.11/12
Unique ID No. 0240IR0404682012
(arisen out of complaint case No.1239/03)
10.CA No.12/12
Unique ID No. 0240IR0404702012
(arisen out of complaint case No.1238/03)
11. CA No.13/12
Unique ID No. 0240IR0404722012
(arisen out of complaint case No.1129/03)
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 1 of 26)
All Appeals from S.No.1 to 11, titled as:
Surender Yadav,
8647/14-B, Shidipura,
Karol Bagh, New Delhi. ....Appellant
Versus
The Registrar of Companies,
NCT of Delhi & Haryana.
4th Floor, IFCI Tower,
61, Nehru Place,
New Delhi 110019
...Respondent
Date of institution of appeals : 29.08.2012
Date when final arguments were heard: 03.12.2012
Date of pronouncement of judgments : 11.12.2012.
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12.. CA No.14/12
Unique ID No. 0240IR0449282012
(arisen out of complaint case No.1232/03)
13 CA No.15/12
Unique ID No. 0240IR0449322012
(arisen out of complaint case No.1236/03)
14. CA No.16/12
Unique ID No. 0240IR0449382012
(arisen out of complaint case No.1234/03)
15. CA No.17/12
Unique ID No. 0240IR0449422012
(arisen out of complaint case No.1233/03)
16. CA No.18/12
Unique ID No. 0240IR0449442012
(arisen out of complaint case No.1239/03)
17. CA No.19/12
Unique ID No. 0240IR0449502012
(arisen out of complaint case No.1235/03)
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 2 of 26)
18. CA No.20/12
Unique ID No. 0240IR0449542012
(arisen out of complaint case No.1238/03)
19. CA No.21/12
Unique ID No. 0240IR0449572012
(arisen out of complaint case No.1230/03)
20. CA No.22/12
Unique ID No. 0240IR0449652012
(arisen out of complaint case No.1227/03)
21. CA No.23/12
Unique ID No. 0240IR0449692012
(arisen out of complaint case No.1231/03)
22 CA No.24/12
Unique ID No. 0240IR0449712012
(arisen out of complaint case No.1129/03)
23. CA No.25/12
Unique ID No. 0240IR0449722012
(arisen out of complaint case No.1128/03)
24. CA No.26/12
Unique ID No. 0240IR0450752012
(arisen out of complaint case No.1237/03)
All Appeals from S. No.12 to 24 titled as:
Rita Kala,
883, Laxmi Bai Nagar,
New Delhi 110023. ....Appellant
Versus
The Registrar of Companies,
NCT of Delhi & Haryana.
4th Floor, IFCI Tower,
61, Nehru Place,
New Delhi 110019. ...Respondent
Date of institution of appeals : 21.09.2012
Date when final arguments were heard: 03.12.2012
Date of pronouncement of judgments : 11.12.2012.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 3 of 26)
JUDGEMENT :-
Vide this common judgement, I shall dispose of aforesaid 24 appeals, as all the appeals are between the same parties and substantial common question of law and fact are involved. Needless to mention that 11 appeals have been preferred by appellant/convict Surender Yadav and 13 appeals have been preferred by the appellant/convict Rita Yadav.
2- Briefly stated facts giving rise to the filing of present appeals are as follows. Registrar of Companies filed 13 separate complaint cases against six accused persons namely M/s Gomukh Finance & Investment Ltd., K.C.Mishra, S.L. Mishra, Dinesh Negi, Surender Yadav and Rita Kala, alleging that accused No.2 to 6 are the Directors/officers of the Company M/s Gomukh Finance & Investment Ltd, and were responsible for compliance of various provisions of Companies Act. Inspection of the books of accounts and other records of the accused company was carried out under Section 209-A of the Companies Act by Shri P.K. Malhotra, the then Ex.Asstt.Director (Inspection) and during the course of inspection it was found that certain breaches had been made by the accused persons. As such, 13 separate complaint cases were filed against the accused persons. During the course of trial, accused No.1 -the company, accused no.2 K.C. Mishra, accused no.3 S.L.Mishra and accused No.4 Dinesh Negi (Crl Appeal No.01/12 & 23 other connected appeals) (Page 4 of 26) compounded the matter with the complainant and accordingly they were discharged by the Trial Court vide order dated 28/4/2004. However, accused Surender Yadav and Rita Kala (appellants herein) were summoned and claimed trial. Complainant examined two witnesses namely P.K. Malhora , the then Joint Director, Ministry of Corporate Affairs as PW1 and P.K. Batta, the then Deputy Registrar of Companies as PW2.
3- Statement of the accused under Section 313 read with Section 281 Cr.P.C. was recorded wherein all incriminating questions put to them were claimed to be incorrect and hence denied. While denying that they being Director were responsible for affairs of the company at any point of time, they admitted that they were served with the show cause notice dated 18.7.2001 issued by ROC, to which proper reply was given by them. According to them, they had been falsely implicated in the case. They never gave any consent to be appointed as Additional Director/Director of the company. They have neither acted as Director of the company, nor they attended meeting of the Board of Directors. They were investors in the company alongwith other investors and when they saw the affairs of the company being not conducted in fair manner and some bungling was there, then they made a complaint against the Directors of the company and company and on their complaint, inspection was ordered by the (Crl Appeal No.01/12 & 23 other connected appeals) (Page 5 of 26) department and consequent upon inspection, action was taken against the company but they had been falsely implicated in the case. They claimed to be innocent and were never responsible for the affairs of the company, nor they have ever acted as Director of the Company. They opted not to lead any evidence in defence. After hearing learned Counsel for parties, accused were held guilty of the offences complained of and convicted in all the complaint cases vide judgement dated 17.8.2012 Breaches complained of against the accused are as follows.
(i) Board's approval was not obtained before borrowing money of Rs.1 lac from M/s Dopsiiudha Investment Ltd. And Rs.1,50,000/- from Raj Kumar Finance Ltd, thereby rendering themselves liable for penal action as contemplated under Section 292 of the Companies Act. For that complaint case No.1237/03 was filed.
4- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 292 of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8/2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to (Crl Appeal No.01/12 & 23 other connected appeals) (Page 6 of 26) Rs.91,750/- (500 + 365 days x 10 years x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(ii) Though the company was incorporated on 17.11.92 and made its first allotment of 700 shares of Rs.10/- each, however the company increased its subscribed Capital by allotment of further shares to persons other than the existing shareholders on private placement and company increased the subscribed capital by allotment of shares without passing Special Resolution in the general meeting of shareholders and as such, accused rendered themselves for penal action as contemplated under Section 629-A of the Companies Act. For that complaint case No.1128/03 was filed 5- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 81(1) of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8/2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500 + 365 days x 10 (years) x Rs.25) for the aforesaid offence. In default, they were directed to undergo (Crl Appeal No.01/12 & 23 other connected appeals) (Page 7 of 26) simple imprisonment for one month.
(iii) Company gave an advance of Rs.4.36 lacs on various dates between 16.9.95 to 18.6.96 to M/s Gomukh Hotels Pvt.Ltd., to set up a Hotel in Srinagar, Garhwal UP and it was gathered that Hotel Business if covered other objects of company's memorandum of Association, for which neither the company passed Special Resolution before commencing Hotel Business nor Form No.23 and 21A of the Act with ROC and as such accused rendered themselves liable for penal action as contemplated under Section 149(6) of the Companies Act. For that complaint case No.1129/03 was filed.
6- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 149(2-A) of the Companies Act, which is punishable under Section 149(6) of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.250 per day each which comes to Rs.9,12,500/- (500x365 days x 10 years x Rs.250) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(iv) That the company was not maintaining proper books of (Crl Appeal No.01/12 & 23 other connected appeals) (Page 8 of 26) accounts in respect of deficiencies/irregularities and as such accused rendered themselves liable for penal action as contemplated u/Section 209(5) of the Companies Act. For that complaint case No.1231/03 was filed.
7- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 209 of the Companies Act. Accordingly vide order dated 24.8/2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500x365 days x 10 years x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(ii) Balance sheet of the company as on 31.3.97, 31.3.98 and 31.3.99 did not reflect true and fair view of the state of affairs of the company as at the end of the financial year. As such accused rendered themselves liable for penal action in respect of balance sheet for the aforesaid years as contemplated u/Section 211(7) read with Schedule VI of the Companies Act, 1956. For that complaint case No.1227/03 was filed.
8- Considering the evidence adduced on record, trial Court (Crl Appeal No.01/12 & 23 other connected appeals) (Page 9 of 26) vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 211 of the Companies Act, which is punishable under Section 211(7) of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to undergo simple imprisonment for a period of three months alongwith a fine of Rs.500/- each for offence under Section
211. In default, they were directed to undergo simple imprisonment for one week.
(iii) That the company did not produce any documentary evidence for dispatch of copies of the notice alongwith annual accounts for the year 1994-95, 1995-96 of its members before 21 days of the annual general meeting and as such accued rendered themselves liable for the penal action as contemplated under Section 219(3) of the Companies Act. As such, complaint case No.1230/03 was filed.
9- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section (Crl Appeal No.01/12 & 23 other connected appeals) (Page 10 of 26) 219 of the Companies Act, which is punishable under Section 219(2) of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 each for offence under Section 219. In default, they were directed to undergo simple imprisonment for one month.
(ii) That additional directors appointed on 2.4.94 and 1.5.95 under Section 260 of the Companies Act have not been reappointed as Directors in the general meeting and as such accused rendered themselves liable for the penal action as contemplated under Section 257 of the Companies Act. For that complaint case No.1238/03 was filed.
10- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 257 of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8/2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500x365 days x 10 (years) x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 11 of 26)
(iii) That company was not maintaining register of contracts in which the Directors were interested. As such accused rendered themselves liable for the penal action as contemplated under Section 295 of the Companies Act. For that complaint case No.1235/03 was filed.
11- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 301 of the Companies Act, which is punishable under Section 301(4) of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 each for the offence under Section 301 of the Companies Act. In default, they were directed to undergo simple imprisonment for one week.
(ii) That Ms.Usha Mishra, S.L.Mishra, S.P. Kothari and Rita Kala were appointed as additional Directors with retrospective effect from 1.3.98 in the board meeting held on 11.7.98 and since the Board cannot appoint director with retrospective effect. As such accused rendered themselves liable for the penal action as contemplated under Section 260 of the Companies Act. For that complaint case No.1239/03 was filed.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 12 of 26) 12- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 260 of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8/2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500x365 days x 10 years x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(x) That company did not obtain prior approval of the Central Govt. before granting loan of Rs.4.36 lacs to M/s Gomukh Hotels Pvt.Ltd. on various dates between 16.9.95 and 28.6.96 which was in the excess of the prescribed limit of 30% of its paid up capital and free reserve of Rs.6.16 lacs as on 31.3.96. As such accused rendered themselves liable for the penal action as contemplated under Section 370 of the Companies Act. For that complaint case No.1233/03 was filed.
13- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to (Crl Appeal No.01/12 & 23 other connected appeals) (Page 13 of 26) comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 370 of the Companies Act, which is punishable under Section 371 of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to undergo Simple Imprisonment for three months alongwith a fine of Rs.2500/- each for offence under Section 370. In default, they were directed to undergo simple imprisonment for two weeks.
(x) That prior approval of the Central Govt. was not obtained before granting loan of Rs.436 lacs to M/s Gomukh Hotels Pvt. Ltd., during 16.8.95 to 31.3.99 in which two directors of the company namely K.C. Mishra and S.L. Mishra were interested as Directors. As such accused rendered themselves liable for the penal action as contemplated under Section 295 of the Companies Act. For that complaint case No.1234/03 was filed.
14- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 295 of the Companies Act, which is punishable under Section 295(4) of the the Companies Act. Accordingly vide order (Crl Appeal No.01/12 & 23 other connected appeals) (Page 14 of 26) dated 24.8.2012 convicts (appellants herein) were sentenced to Simple Imprisonment for three months alongwith a fine of Rs.2500/- each for offence under Section 370. In default, they were directed to undergo simple imprisonment for two weeks.
(xi) That 2/3rd of total number of Directors were appointed on 2.4.94 and 1.5.95 under Section 250 of the Companies Act did not retire by rotation and reappointment in General meeting held on 26.9.98 & 1999. As such accused rendered themselves liable for the penal action as contemplated under Section 255 of the Companies Act. For that complaint case No.1236/03 was filed.
15- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 255 of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500x365 days x 10 (years) x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month.
(xii) Ms.Usha Mishra, S.L.Mishra, S.P.Kothari and Rita Kala were appointed as additional directors with retrospective effect (Crl Appeal No.01/12 & 23 other connected appeals) (Page 15 of 26) from 1.3.98 in the board meeting held on 11.7.98 but their consent to act as a Director in form No.29 were not filed with the office of ROC. As such accused rendered themselves liable for the penal action as contemplated under Section 264 of the Companies Act. For that complaint case No.1232/03 was filed.
16- Considering the evidence adduced on record, trial Court vide judgement dated 17.8.2012 held that accused Surender Yadav and Rita Kala were also directors and responsible for the affairs of the company and they were under obligation to comply with the provisions of the Companies Act. As such, both the accused were held guilty for the offence under Section 264 of the Companies Act, which is punishable under Section 629-A of the the Companies Act. Accordingly vide order dated 24.8.2012 convicts (appellants herein) were sentenced to pay a fine of Rs.500 + Rs.25 per day each which comes to Rs.91,750/- (500x365 days x 10 (years) x Rs.25) for the aforesaid offence. In default, they were directed to undergo simple imprisonment for one month 17- Feeling aggrieved by the aforesaid orders passed by Shri Gorakh Nath Pandey, Addl. Chief Metropolitan Magistrate, Tis Hazari Courts, Delhi, each of the convicts (appellants herein) filed 13 separate appeals.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 16 of 26) 18- Notice of the appeals was given to the respondent. Trial Court record was summoned. During the pendency of appeals, the appellant Surender Yadav had not pressed his two appeals bearing No.Crl.A. No.4/12 and 8/12 as he claimed to have paid fine and had undergone simple imprisonment for one week and as such those two appeals were accordingly dismissed vide order dated 3.12.2012.
19- I have heard Shri Nagender Yadav, Advocate for the appellant, Shri Sanjay Aggarwal, Advocate for respondent and have perused the records.
20- It has been submitted on behalf of the appellants that the appellant Surender Yadav is High School fail, whereas appellant Rita Yadav is a housewife and they have fallen to the conspiracy of unscrupulous persons namely K.C.Mishra and S.L. Mishra who were managing the affairs of the Company M/s Gomukh Finance & Investment Ltd. In fact the appellants were never called for any Board Meeting, nor they were served with any such notice, nor did they attend any such meeting. Ld.ACMM failed to appreciate that complaints were sent by the Appellant to the Chairman of the Company with respect to the convening Extra Ordinary Meeting, which was not considered by the respondent while instituting the complaint. Learned ACMM failed to appreciate that inspection was conducted at the behest of the appellant who was one of the (Crl Appeal No.01/12 & 23 other connected appeals) (Page 17 of 26) shareholders in the company and had worked towards the beneficial interests of investors. It has been submitted that complainant had not placed on record any document to show that the Appellant was the Director of the company during the years 1995-96, 1996-97 and 1998-99. It has further been submitted that the penalty imposed upon the appellant is very harsh, inasmuch as maximum penalty imposed in any matter upon the defaulters (viz. Company and three directors) who compounded the matter with complainant is Rs.4000/-, while the penalty upon the appellant is totalling Rs.14,65,800/-. As such, the impugned order is liable to be set aside.
21- Rebutting the submissions of learned Counsel for appellants, it was submitted by learned Counsel for the respondent that since name of the appellants appeared in the annual return of the Company as Directors, as such, they were taken as Directors of the Company. They were responsible for the affairs of the Company. Moreover, it was the duty of the appellant to get their names removed as Director of the Company and by not doing so, they were at fault. The impugned order does not suffer from any infirmity which calls for interference. Hence, appeals are liable to be dismissed.
22- I have given my considerable thoughts to the respective submissions of learned Counsel for the parties and have gone through the trial Court record.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 18 of 26) 23- It is the case of the appellants that they have subscribed for shares in the Company. However, the Company failed to issue share certificates in lieu of shares subscribed, to the Appellants and other subscribers. Thereupon the Appellants alongwith other subscribers lodged a complaint dated 30.01.1999 with the Registrar of Companies and pointed out various anomalies in the working and mis-management of the Company. Inspection into the affairs of Company was ordered by the Department and inspection was carried out between the period 02.12.1999 to 16.12.1999. The inspection report dated 08.05.2001 was submitted by the Assistant Registrar of the Companies, alleging contraventions/ violations/ irregularities. The Joint Director (Inspection) for Regional Director forwarded the inspection report to the Registrar of Companies vide office letter dated 20.06.2001 with the request to file prosecution for violation of Sections 81(A), 149 (2A), 209, 211 read with Schedule VI, 219, 292, 301, 257, 260 and 264 of the Companies Act after issuance of the show-cause notice. Show- cause notice dated 18.07.2001 and 27.08.2001 was issued by the Dy. Registrar of the Companies, NCT of Delhi and Haryana to the Company and five persons including the appellants herein, allegedly Directors of the Company. Thereafter 13 complaints were filed against appellant Rita Kala and 11 complaints against appellant Surender Yadav for violations. Appellants had submitted reply to the show-cause (Crl Appeal No.01/12 & 23 other connected appeals) (Page 19 of 26) stating therein that they were never Directors of the company nor any notice of the Board of the Meeting was received by them nor they attended any meeting. As such, otherwise, they ceased to be the Directors of the Company under Section 283(1)(g) of the Act.
24- In order to substantiate its case, the Complainant examined two witnesses PW1 Shri P.K. Malhotra, Secretary CLB, Paryavaran Bhawan, CGO Complex, Lodhi Road, New Delhi deposed that in the year 1996 to 2001, he was an Assistant Director in the Ministry of Corporate Affairs. Thereafter, in 2001, he was posted as an Assistant Registrar of Company in the Office of Registrar of Companies, Delhi & Haryana. He carried out an inspection of Gomukh Finance in the year 1999 and submitted the inspection report on 08.05.2001, copy of which is Ex.PW1/A. He further deposed that he had also given preliminary finding letter dated 31.01.2000 based on his inspection to the Company, M/s. Gomukh Finance & Investment Limited and its director and filed on record a copy of the same, which is Mark-A. He also proved on record the replies submitted by Accused Surender Yadav and Rita Kala as Mark-B and Mark-C. During cross- examination this witness admitted that a letter was received from Ministry of Corporate Affairs, ordering inspection of M/s. Gomukh Finance Limited on the basis of complaint received against the affairs of the Company. He admitted that the (Crl Appeal No.01/12 & 23 other connected appeals) (Page 20 of 26) complaint was received from shareholders/ directors. He submitted the inspection report to the Ministry. According to him, he named Surender Yadav and Rita Kala in his report as Directors on the basis of annual return and balance sheet filed by the Company with Registrar of Company. However, he admitted that he did not file copy of any such document alongwith his inspection report. He further admitted that document Ex.PW2/2 filed with the complaint which is an annual return for the year 2001 does not bear signatures of Surender Yadav and Rita Kala. He denied the suggestion that at the relevant time of inspection and thereafter Surender Yadav and Rita Kala were not the directions of the Companies.
25- PW2 Shri P.K. Batta, has deposed that M/s. Gomukh Finance Limited is a company registered with the Office of Registrar of Company, Delhi & Haryana. Surender Yadav and Rita Kala are the persons responsible for day-to-day affairs of the company alongwith three other Directors. The inspection of the books of account and other records of the company was carried out by Shri P.K. Malhotra, the then Assistant Director Inspection who pointed out various contraventions of Section 209 of the Companies Act. The Regional Director, vide letter dated 03.05.2002 - Ex.PW2/3, directed the Office of Registrar of Companies to file the complaint. A show-cause notice dated 18.07.2001 was issued to the Company which reveals that the Company is not maintaining the proper books of accounts. In (Crl Appeal No.01/12 & 23 other connected appeals) (Page 21 of 26) respect of deficiencies/ irregularities as noticed by the Inspecting Officer, the complaint was filed. In cross- examination, he deposed that Surender Yadav and Rita Kala were impleaded on the basis of annual return as on 28.09.2001 filed by the Company. He admitted that there is no document placed in the judicial file which confirms or establishes that Surender Yadav and Rita Kala were Directors in the year 1995- 96, 1996-97, 1997-98 and 1998-99. He also admitted that the annual return Ex.PW2/2 does not bear signatures of either accused Surender Singh or Rita Kala. According to him, except the annual return, there is no document on record to establish that accused Surender Yadav and Rita Kala were Directors of the Company and were responsible for the conduct of business of the Company. He further admitted that he did not go through the explanation given by the accused persons pursuance to the show-cause notice served upon them and he only considered the reply filed by the Company. He could not say if inspection was conducted on the basis of complaint of shareholders or the appellants were signatory to the said complaint. He could not say, if the accused were not called for any meeting of the Board of Directors by the Company or they never attended any meeting of the Board of Directors. No document of consent of accused Surender Yadav and Rita Kala to act as Directors of M/s. Gomukh was annexed or has been filed on record. No form 32, regarding Directorship of accused Surender Yadav and Rita Kala has been placed on record. As (Crl Appeal No.01/12 & 23 other connected appeals) (Page 22 of 26) stated above, it is the case of the appellants that they never gave any consent to be appointed as Director/ Addl. Director of the Company. They never acted as Director of the Company nor attended any meeting of the Board of the Directors. They have subscribed for shares in the Company. However, the Company failed to issue share certificates in lieu of shares subscribed, to the Appellants and other subscribers. Then they alongwith other subscribers made a complaint against the Directors of the Company. Inspection into the affairs of Company was ordered by the Department and subsequent thereupon, inspection was carried out. However, they were falsely implicated in this case. They were served with show- cause notice and proper reply was given stating that they were neither Directors of the Company nor responsible for the affairs of the Company.
26- The complaints were filed against the appellants on the presumption that they being the Directors of the Company were responsible for day-to-day affairs of the company and they committed various violations of the provisions of the Companies Act. Therefore, core issue was whether the Appellants were Directors of the Company or responsible for day-to-day affairs of the Company. The onus of proving this fact was upon the Company. The complainant is basically relying upon the annual return Ex.PW2/2 for the year 2001 for alleging that the appellants were Directors of the Company.
(Crl Appeal No.01/12 & 23 other connected appeals) (Page 23 of 26) Reliance was also placed on certain letters where the appellants had admitted that they were the Directors of the company in the year, 1995. However, they are various other letters on record wherein the appellants had clearly stated that they had never received any notice of the board meeting nor attended any meeting of the Board of Directors. Under the circumstances, they ceased to be Directors of the Company under Section 283(1)(g) of the Companies Act. The inspection is on the basis of annual return as on 28.09.2001 filed by the Company. However, the irregularities were for the year, 1995 till 1999. Therefore, it was incumbent upon the complainant to prove that during this period, the appellants were directors of the Company and were responsible for day-to-day affairs of the Company. Absolutely, no document to prove this fact has been filed by the company. So much so, when show-cause notice was served upon the appellant, they replied to the show-cause notice, but the same was not even considered by the Competent Authority. This was in gross-violation of principle of natural justice. Before launching prosecution against the appellants, it was incumbent upon the complainant to have gone through the submissions made in the reply to the show-cause notice as giving of show-cause notice was not a mere formality. If the reply was not required to be considered, why the same was at all given to the Appellants. The fact remains that at the very first instance, the appellants had informed the Competent Authority that they are neither the Directors of the Company (Crl Appeal No.01/12 & 23 other connected appeals) (Page 24 of 26) nor responsible for day-to-day affairs of the the Company and in fact, they were the persons on whose complaint, inspection was carried out and ultimately, the complaints were made. The annual return Ex.PW2/2 does not even bears signatures of both the appellants and except that document, admittedly no other document has been filed by the complainant to prove that the Appellants were Directors of the Company during the relevant period or responsible for the affairs of the Company. Therefore, even if certain violations were carried out, the other Directors, who were responsible for violation/ mis- management of the Company, already have compounded the matter and paid the fine.
27- To my mind, learned Addl. Chief Metropolitan Magistrate went wrong in observing that had the Appellants resigned from the Company, they should have filed form 32 in this regard and in the absence of doing so, it cannot be held that they were not Directors or responsible for affairs of the Company. Form-32 is required to be filed by the Company and not by individual Director. The onus of proving the averments made in the complaint was upon the complainant and only after it had proved the allegations against the appellants, then the onus shifted upon the appellants. However, in view of the discussion made above, the complainant has failed to prove that for the relevant period, Appellants were Directors of the Company or responsible for day-to-day affairs of the (Crl Appeal No.01/12 & 23 other connected appeals) (Page 25 of 26) Company. That being so, they were not liable for violation or mis-management of the affairs of the Company for which prosecution were launched.
28- The result of the aforesaid discussion is that the impugned order dated 17.08.2012 is set-aside. The appeals are allowed and the Appellants are acquitted of the offences alleged against them. The fine deposited by them, be refunded to them as per rules. Copy of the order be placed in each file.
A copy of this order be sent to the Court concerned while returning the records.
Appeal files be consigned to the record room.
Announced in open court ( SUNITA GUPTA ) on 11.12.2012. District & Sessions Judge:Delhi (Crl Appeal No.01/12 & 23 other connected appeals) (Page 26 of 26)