Delhi District Court
Roc vs Jasmine Singh on 3 February, 2014
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL. CHIEF METROPOLITAN MAGISTRATES (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELHI
ROC vs Jasmine Singh
CC No.1943/3
JUDGMENT
(a)Serial no. of the case : 02401R0185722002
(b)Date of commission of offence : During the year 199596
(c)Name of complainant : Registrar of Companies,
NCT of Delhi & Haryana
(d)Name, parentage, residence: 1)Jasmine Singh
(HD), 538, Mt. Kailash Towers,
East of Kailash, New Delhi
2)Sahinder Kaur Bedi (expired)
3)Bhupinder K. Singh
538, Mt. Kailash Towers,
East of Kailash, New Delhi
(e)Offence complained of/ proved : U/s 63/628 of Companies Act, 1956
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 03.02.2014 Date of institution: 31.05.2002 Arguments heard/order reserved: 28.01.2014.
Date of Judgment: 03.02.2014 Brief statement of the reasons for the decision: 1 The complainant Sh. JK Jolly, the then Deputy Registrar of Companies NCT of Delhi & Haryana filed the present complaint u/s 63/628 of the Companies Act, 1956 (for short the 'Act') against the above mentioned accused persons for making a false statement in the prospectus. Making false statement in the prospectus is punishable u/s 63/628 of the Act.
ROC vs Jasmine Singh CC No.1943/3 1 of 14 2 During the course of trial, accused no.2 Sahinder Kaur Bedi has expired and accordingly, proceedings were abated against her vide order dated 08.09.2008. Now this judgment is directed against the accused no.1 and 3 who are facing trial.
3 The brief facts, as stated in the complaint, are that accused no.1 to 3 were the signatory of prospectus dated 01.11.1995 and were responsible for conduct of affairs of the company M/s Tactful Investments Limited (hereinafter referred to as Company) registered with the office of ROC. The said company came up with a public issue of 24,00,000/ equity shares of Rs.10/ each aggregating to Rs.240 lacs. In the said prospectus, the accused made an offer to the public issue with following objects of the issue: 1 To augment the long term resources for the working capital requirements for leasing and investments, 2 To get shares of the company listed on stock exchange; and 3 To meet the expenses of public issue.
4 However, it was observed from the prospectus and the post public issue Annual Accounts of the company that the company did not deploy the funds as promised in the prospectus and it was revealed that the company made huge investments in unproductive shares & securities amounting to Rs.3.13 crores & Rs.7.18 crores during 199596 & 199697 respectively much beyond the limit of Rs.90 lacs and Rs.100 lacs set out for this purpose in the prospectus and which continued to remain blocked till 31.03.2001. The company did business of investment/trading of shares only and did not do any leasing & consultancy services activity as promised in the prospectus. As a result of not properly ROC vs Jasmine Singh CC No.1943/3 2 of 14 utilizing the public issue funds for the specific purposes promised in the prospectus, the company failed to achieve the profitability projections, the promises made by the accused in the prospectus were untrue/misleading and made with wilfull intention to induce the investors into the equity capital of the company and put the investors to loss. Hence, present complaint. 5 The accused were summoned. Copies of complaint and of documents were supplied. Thereafter, a notice was framed against accused no.1 and 3 on 07.06.2012 for the offence punishable u/s 63 & 628 of the Act to which they pleaded not guilty and claimed trial.
6 In order to substantiate its allegations made in the complaint, the prosecution examined Sh. J.K. Jolly, the complainant as PW1.
PW1 Sh. J.K. Jolly reiterated the facts of the complaint and stated that the Company M/s Tactful Investment Limited is registered with the office of ROC vide Certificate of Incorporation i.e Ex.PW1/1. The company is stated to be a vanishing company. The witness further deposed regarding the allegations in the complaint and proved on record several documents like prospectus dated 01.11.95 as Ex.PW1/2, copies of balance sheets for the year 199596, 199697 and 199798 and 199899, 19992000 and 200001 as Ex. PW1/3 to Ex.PW1/8 respectively. The witness also proved on record show cause notice dated 26.04.02 as Ex.PW1/9, sanction for launching prosecution as E.PW1/10, reply to show cause notice as Ex.PW1/11 and the complaint as Ex.PW1/2. The witness was cross examined at length on behalf of the ROC vs Jasmine Singh CC No.1943/3 3 of 14 accused.
7 The statements of accused no.1 and 3 were recorded u/s 313 Cr.P.C r/w section 281 Cr.P.C separately.
In their statements, both accused no.1 Jasmine Singh and no.3 Bhupinder K. Singh refuted the material allegations and stated that they have been falsely implicated in this case. Both accused stated that the tenure of their directorship was from 12.09.1994 to 01.07.1996 which is evident from Form 32 filed on record with ROC and during their tenure there were no irregularities. The management's decision were beyond their control and after their cessation, they were not aware about the operations and affairs of the company as they were not associated with the company in any manner/capacity. Accused further stated that nonutilization of the funds in leasing business, which was a future event, does not amount to any untrue statement in the prospectus. Since, at the time of issuance of prospectus of the company leasing was one of the business activities proposed by the company alongwith the investments activity, the company has to take decision which should be prudent and commercial. No untrue statement was made in the prospectus. Accused also stated that present complaint is barred u/s 468(2) of Cr.P.C where the limitation for trial of above offence is provided as three years. As the present complaint was filed in the year 2002, therefore, same as hopelessly time barred.
8 In support of their claim and contentions, accused Jasmine Singh examined ROC vs Jasmine Singh CC No.1943/3 4 of 14 herself as DW2 and one Mr. RK Saini, Sr. Technical Assistant as DW1.
In his statement, DW1 Sh. RK Saini proved the Form 32 dated 01.07.96 and stated that accused no. Jasmine Singh and accused Bhupinder K. Singh resigned on 01.07.96.
Accused Jasmine Singh as DW2 deposed that the documents Ex.PW1/3, PW1/4 and Ex.PW1/5 neither bears her signature nor that of Bhupinder Kaur and taken same defence as stated in the statement recorded u/s 313 Cr.P.C.
9 I have given my thoughtful consideration to the submissions advanced on behalf of both the parties and gone through the relevant records. I have also gone through the written arguments filed on behalf of accused persons and considered the relevant provisions of law.
10 Relevant provisions of section 63/628 of the Act are reproduced below for ready reference.
63. Criminal liability for misstatement in prospectus. (1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorized the issue of the prospectus shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to [fifty thousand rupees], or with both, unless he proves either that the statement was immaterial or that he had reasonable ground to believe, and did up to the time of the issue of the prospectus believe, that the statement was true.
628. Penalty for false statements. If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purpose of any of the provisions of this Act, any person makes a statement
(a) which is false in any material particular, knowing it to be false; or ROC vs Jasmine Singh CC No.1943/3 5 of 14
(b) which omits any material fact knowing it to be material, he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to two years and shall also be liable to fine.
A) Learned defence counsel argued that prosecution has failed to prove its case against the accused beyond reasonable doubt. It is further argued that Both accused stated that the tenure of their directorship was from 12.09.1994 to 01.07.1996 which is evident from Form 32 filed on record with ROC and during their tenure there were no irregularities. The management's decision were beyond their control and after their cessation, they were not aware about the operations and affairs of the company as they were not associated with the company in any manner/capacity. This plea of the accused does not have any force as the prospectus Ex.PW1/2 is alleged to be signed on 01.11.95 and as per DW1, accused resigned on 01.07.96. Thus, merely resigning as a director, does not absolve them from the liability as the prospectus was singed in the month of November, 1995 and opened on 29.01.96 and closed on 08.02.1996 much prior to the resignations of accused persons.
B) Learned defence counsel has vehemently relied upon three arguments firstly that present complaint is prospectus based prosecution, however, the prosecution has miserably failed to produce and prove on record original prospectus dated 01.11.1995 nor was able to produce any power of attorney allegedly executed in favour of Sh. Harmit Singh who is alleged to have signed the prospectus on behalf of the accused persons. The prosecution has also failed to examine the said Harmit Singh to prove the allegations. The ROC vs Jasmine Singh CC No.1943/3 6 of 14 prosecution has produced on record only printed copy of the prospectus which does not bear signature of any of the accused. Secondly, it is argued that the present complaint is hopelessly time barred as limitation prescribed u/s 468(2) r/w section 63 & 628 is three years. The prospectus dated 01.11.95 filed and registered with the ROC on the same day, however the present case has been filed on 31.05.2002. There is no explanation as required u/s 470 Cr.P.C. for exclusion of limitation period on record. Thus, present complaint is hopelessly barred by limitation. In this regard, reliance is placed upon the judgment reported in "Rajiv Kumar & Ors. Vs ROC Crl. MC 23/2005 High Court of Delhi". C) Lastly, it is argued that sanction letter dated 13.03.02 Ex.PW1/10 is no sanction in the eyes of law as it does not mention the name of accused company nor the name of any of the accused. It is also argued that there is no complaint from any shareholder/investors regarding deployment of funds against either company or any accused at the time of filing of the present complaint. On these grounds learned counsel for accused prayed for acquittal of the accused persons.
D) Per contra, learned company prosecutor argued that the case of the prosecution has been proved beyond reasonable doubt in view of the testimony of the witnesses. She further argued that the complaint was filed within limitation as the limitation period commenced from the date the Central Government gave its approval for sanction. Therefore, accused may be convicted for the alleged offence.
ROC vs Jasmine Singh CC No.1943/3 7 of 14 E) The allegations against the accused are that the accused raised certain funds from the public by floating public issue with objects mentioned in the prospectus Ex.PW1/2 but the funds received through public issue were diverted in the activities other than the objects of public issue. Before discussing the case on merits, it would be appropriate to deal with the arguments advanced by the learned defence counsel first as the same are legal issues.
F) Firstly, the short point involved in this case is as to whether the complaint filed by the complainant against the accused for making a misstatement in the prospectus Ex.PW1/2 and for making a false statement in the prospectus, is within limitation.
G) Learned defence counsel vehemently argued that the present complaint has been filed solely on the basis of sanction letter Ex.PW1/10 but mandatory requirements of sanction letter was not complied with. As per sanction letter Ex.PW1/10, the complainant was required to file the complaint within 30 days and a report was required to be sent to the Department latest by 1st week of April, 2002. Present complaint was to be filed latest by the end of April, 2002, however, same was filed on 31.05.02, therefore, present complaint is time barred being not filed within the time prescribed in the sanction letter. In this regard, reliance may be placed upon the judgment reported in "2009 (III) DRJ 204 and 2009 (109) DRJ 545 (supra)."
ROC vs Jasmine Singh CC No.1943/3 8 of 14 H) This arguments of the learned defence counsel appears to have force. Neither in the complaint nor in his statement PW1 has disclosed as to when commission of aforesaid offence was noticed. It is simply stated that perusal of prospectus revealed violation of offences u/s 63/628 of the Act but PW1 has not disclosed the date, month or year when he came to know about the commission of aforesaid offence by the accused. The case of the complainant is that as per the prospectus Ex.PW1/2 and the balance sheets Ex.PW1/3 to Ex.PW1/5, it was observed that the accused failed to deploy the funds as promised in the prospectus Ex.PW1/2 but it is not disclosed in the entire complaint or by the prosecution witnesses examined as to when the complainant noticed alleged nonutilization of funds as per the objects of issue. As per section 469 Cr.P.C, the period of limitation commences on the date of commission of offence or where commission of the offences was not known to the aggrieved, the first date on which such offence comes to the knowledge of such person, which ever is earlier. Admittedly, in the case in hand, the company in question was regular in filing of its balance sheet after the issue of the prospectus and this fact is apparent from the testimony of prosecution witnesses. Thus, the complainant should have the knowledge of any violation of section 63 of the Act much prior i.e. immediately after filing of balance sheet for the financial 19951996, 199697 and 199798 which was filed by the company but the complainant department kept mum till sanction letter Ex.PW1/10 was received from the Ministry of Law, Justice & Company, Department of Company Affairs, New Delhi. The contention of learned ROC vs Jasmine Singh CC No.1943/3 9 of 14 company prosecutor that the complaint was filed within the period of limitation as the limitation period starts from the date the Central Government accords sanction, can not be accepted as there is no embargo u/s 234 of the Act for the complainant to seek approval from the Central Government before initiating the prosecution against the accused. The period of limitation commences when the knowledge of the commission of offence is gained by the prosecuting agency. In this regard reliance may be placed upon the judgment in Cr.M.C. No. 3579/2009 in case titled as Jiyuan Ali vs. Registrar of Companies.
I) It is admitted position of fact that the cause of action arose in a case like in hand only when a prospectus containing untrue statement is filed which in present case was filed in November, 1995. Admittedly, no complaint of investor against the company was received by the ROC. Thus, it appears that the present complaint was filed merely on the basis of sanction letter Ex.PW1/10. Had, the ROC not been received the sanction letter, present complaint would have not been filed. No explanation for delay in filing the present complaint has been given in the complaint nor any condonation of delay application was filed. It is no where mentioned in the complaint as to when the alleged offence came to the knowledge of the complainant for the first time. The complaint also no where finds mention as to when the limitation period stars. It is so held in the judgment reported in "2009 INDLAW Del 422". that Practice and Procedure Corporate - Companies Act, 1956, ss. 63, 628 - Limitation - Petitioner ROC vs Jasmine Singh CC No.1943/3 10 of 14 made misstatement in prospectus and false statement in prospectus - Public prospectus containing misstatement fiiled on 11.04.1997 and complaint filed on 14.01.2004 - Respondents submitted that delay had been caused because of obtaining sanction etc. from department concerned - Whether complaint filed by respondents against petitioners for making a misstatement in prospectus and for making a false statement in prospectus offence punishable u/s 63 and 628 of the Companies Act, 1956 is within limitation? Held, once the respondents having come to know about violation, i.e., on filing of balance sheet, no where it is stated as to when the said balance sheet was filed - It is no where stated in complaint as to from which date limitation starts as to bring complaint within limitation, thus for prospectus being filed on 11.04.97, filing of the complaint in the year 2004 can not be justified. In this case also, the prospectus appears to have been issued on 01.11.1995 and present complaint was filed on 31.05.2002 In view of the aforesaid discussions, it is held that present complaint is liable to be dismissed being barred by limitation.
J) Furthermore, the sanction letter Ex.PW1/10 mentions that 70 companies are still not traceable but name of none of those 70 companies are mentioned therein. The sanction letter does not mention the name of the company involved in this case. Prima facie, sanction letter Ex.PW1/10 appears to be not a proper sanction as it does not mention the name of the company in question.
ROC vs Jasmine Singh CC No.1943/3 11 of 14 The sanction letter Ex.PW1/10 mentions about 70 companies which are still not traceable and 229 of vanishing company. The list of tabular name of those companies is a vital piece of document. But complainant has not filed list of those companies on record to establish that the company in question falls either in the category of 70 untraceable company or 229 vanishing company. It is admitted position of fact that the company was regular in filing its balance sheets and annual returns from the year 199899, 19992000 and 200001. PW1 have proved certified copy of the balance sheet Ex.PW1/3 to Ex.PW1/5 for the year 199596, 199697 and 199798 and Ex.PW1/6 to Ex.PW1/8 for the year 199899, 19992000 and 200001. Thus, by no stretch of imagination, it can be assumed that the company in question fall under the category of 70 untraceable companies or of 229 vanishing companies. In absence of copy of name of tabular name of company as mentioned in the sanction letter, the complainant would never be in a position to clarify as to in which category the company in question falls. Consequently, sanction Ex.PW1/10 is not a proper sanction in absence of list of aforesaid companies.
K) The prosecution has based its case solely on the prospectus dated 01.11.1995 but the prosecution has miserably failed to produce and prove on record original prospectus dated 01.11.1995 nor able to produce any power of attorney allegedly executed in favour of Sh. Harmit Sinigh who is alleged to have signed the prospectus. The prosecution has produced on record only printed copy of the prospectus which does not bear signature of any of the accused. Furthermore, in his cross examination, PW1 stated that accused no.1 to 3 ROC vs Jasmine Singh CC No.1943/3 12 of 14 being signatories to the prospectus were responsible for the conduct of the affairs of the company. On the other hand, the prospectus produced before the court showing the signature of one Mr. Harmit Singh constituted attorney who had signed on behalf of the accused persons. But, the original attorney has not been produced or proved on record by the prosecution. Thus, in absence of said attorney which is a vital piece of evidence and non examination of said Harmit Singh by the complainant, the prosecution can not be in a position to establish on record that the prospectus in dispute is, in fact, signed by the accused persons or by the socalled constituted attorney Mr. Harmit singh on behalf of the accused persons.
L) Further, mere issuance of prospectus or authorization of its issuance itself is not sufficient to constitute the offence. There must be something more i.e there must be authorization as well as some untrue statement in the prospectus. To be an offence under this section, there must be a false statement knowing it to be false and it must be a material statement. Without proof of mens rea or guilty mind, the accused persons cannot be punished. The burden is on the complainant to show that the statement in the document was untrue.
Thus, it is clear that the present complaint was filed on behalf of complainant without proper verification of facts and without proper investigation of the case. My view pertaining to utilization of funds is supported by the order passed by the Hon'ble High Court in "Criminal MC No.1759 of 2005 in case titled as Manju Yadav vs. ROC dated 02.05.05".
ROC vs Jasmine Singh CC No.1943/3 13 of 14 M)Thus, in view of the aforesaid discussions and facts and circumstance of the case, this court is of the considered opinion that present complaint is not maintainable being barred by limitation. Even otherwise, in absence of original prospectus, power of attorney executed in favour of Mr. Harmit Singh who is alleged to have signed the prospectus Ex.PW1/2 on behalf of the accused persons or nonexamination of said Mr. Harmit Singh, the prosecution would not be in a position to prove its case against the accused. Accordingly, it is held that the prosecution has failed to prove is case against the accused beyond reasonable doubt. Both accused no.1 and 3 are acquitted of charges leveled against them. Previous bail bonds stand cancelled. Previous sureties stand discharged. Original documents, if any, furnished with previous bail bonds be returned to the rightful claimant after endorsement cancelled thereupon. Accused are directed to furnish fresh bail bonds in terms of section 437A Cr.P.C. File be consigned to the record room.
Judgment be sent to the server www.delhidistrictcourt.nic.in.
(DEVENDRA KUMAR SHARMA) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 3rd February, 2014 (Total number of page 14 ) (One spare copy attached) ROC vs Jasmine Singh CC No.1943/3 14 of 14