Bangalore District Court
The Deputy Registrar Of Companies vs M/S. Igate Global Solutions Ltd on 9 May, 2018
1 CC.No.421/2010
BEFORE THE SPECIAL COURT FOR ECONOMIC
OFFENCES AT BANGALORE.
Dated this the 9th day of May 2018.
: Present:
Sri. SHANTHANNA ALVA M., B.A., LL.B.,
Presiding Officer, Special Court
for Economic Offences, Bangalore.
CC. No. 421-2010
Complainant: The Deputy Registrar of Companies,
2nd Floor, E-Wing, Kendrya Sadan,
Koramangala, Bangalore.
(By Sri. A.M.S. Adv,)
.Vs.
Accused: 1. M/s. iGate Global Solutions Ltd.,
No.158, 162(P) & 165(P), 170(P),
EPIP Phase-II, Whitefield, Bangalore.
2. Natesan Ramachandran, Major,
S/o. Mayuram Sadasivam Natesan,
No.602, Shobha Opal, 39th Cross,
18th Main, Jayanagar, 4th T Block,
Bangalore.
(The case against A.2 is abated)
3. Sekhar Mohan, S/o. S.V. Sekhar, Major,
No.A1-102, Shobha Opal, 39th Cross,
18th Main, Jayanagar, 4th T Block,
Bangalore.
4. Murthy Phaneesh, S/o. B.N.S. Murthy,
Major, No.33245, Larkway, Fremoni
CA, USA-094555.
2 CC.No.421/2010
5. Srinath Mukund, Major,
S/o. late. B.R. Srinath, No.8,
Rashmi Lakshmi Road, 1st Cross,
Shanthinagar, Bangalore.
(By A.1, 3 to 5 Sri. M. K., Advocate)
JUDGMENT
1. The complainant/Deputy Registrar of Companies (R.O.C.), Koramangala, Bangalore filed the complaint u/s. 200 of Cr.P.C. alleging that the accused No.1 to 5 have committed the offence u/s. 391 and 394, punishable u/s.629A of the Companies Act, 1956. (Herein after referred as the 'Act').
2. The complainant's case is that M/s. iGate Global Solutions Limited, Bangalore (A.1), was incorporated on 27.12.1993 under the Companies Act, 1956. It was incorporated under the name and style of Mascot Systems Private Limited and later, it was converted into a public company and name was changed as iGate Global Solution Limited. Accused No.2 and 3 are the Directors and Whole Time Directors, accused No.4 is the Director and Managing Director and accused No.5 is the company Secretary of accused No.1 company. Accused No.2 to 5 3 CC.No.421/2010 are the officers who are in default of the accused No.1 Company within the meaning of Sec.5 of the Act. Then the Deputy Registrar of Companies - Mr.A.M.Sridharan inspected accused No.1 company and on perusing the copy of the certificate dated: 08.01.2006 issued by the Secretary of the State of Bureau, U.S.A., and the certificate filed on 03.08.2005 with Pennsylvania Department of State Corporation Bureau revealed that M/s. Symphony Interactive, LLC, a company incorporated under Delware Limited Liability Company Act and iGate Global Solutions LLC, a Pennsylvania Limited Liability, were merged with accused No.1 company. M/s. iGate Global Solutions, LLC and M/s.Symphony Interactive, LLC subsidiaries of the accused No.1 company at the relevant time and were located in U.S.A. The merger of a body corporate with another company amounts to compromise/ arrangement contemplated u/s. 390 of the Act. Sec.394 (4)(b) of the Act says that transferee company, does not include any company other than the company within the meaning of the Act, but 'Transferor 4 CC.No.421/2010 Company' includes any body corporate, whether a company within the meaning of the Act or not. M/s. iGate Global Solutions LLC and M/s. Symphony Interactive LLC are the transferor companies and bodies corporate registered outside India within the meaning of Sec. 2(7) of the Act and merger/ amalgamation of these bodies corporate with the accused No.1 company amounts to compromise or arrangement u/s.390,391 and 394 of the Act. Accused No.1 company has not obtained the order of the Hon'ble High Court of Karnataka u/s.391 and 394 of the Act for the amalgamation/merger of the two foreign subsidiaries with accused No.1 company and this resulted in common of offences by accused No.1 company and its officers in default u/s.391 and 394 of the Act. Thus, liable for punishment as provided u/s. 629A of the Act. The Ministry of Corporate Affairs, Government of India vide its letter dated:23.04.2010 addressed to the Regional Director, Ministry of Corporate Affairs, Chennai asked to take action against accused No.1 company and he in turn vide letter dated:10.05.2010 communicated the 5 CC.No.421/2010 same to the Registrar of Companies to issue show cause notice and file the complaint. Then, the complainant has issued the show cause notice on 03.09.2010 to the accused giving 10 days time. The reply given by the Accused company not found convincing. The offence is still continuing, hence not barred by limitation. Thus, prayed to punish the accused for the offence punishable u/s. 629A of the Companies Act, 1956.
3. On the presentation of complaint, cognizance was taken for the offence punishable u/s.629A of the Companies Act, 1956. After registration of the case, summons was issued to accused person. The accused No.1, 3 to 5 appeared through their counsel and got released on bail. Copies of the complaint and other documents were furnished to them. The case against accused No.2 is abated vide order dated: 31.05.2011. The accusation was framed and read over. The accused persons denied the accusation leveled against them and pleaded not guilty and claimed to be tried. 6 CC.No.421/2010
4. To prove the case, the authorized person of the complainant got examined as P.w.1 and another person examined as P.w.2 and got marked the documents as Ex.p.1 to 11. While, the cross examining of P.w.1 and 2, the accused persons and other documents were confronted and they were marked as Ex.D.1 to 5.
5. After closure of the complainant's side evidence, the statements of accused No.1, 3 to 5 were recorded as provided u/s.313 of Cr.P.C. The accused persons denied incriminatory evidence found against them and they did not choose to lead any defence evidence.
6. Heard the arguments of the learned counsels of the complainant and accused. Perused the evidence on record and documents. The points that arise for consideration are:
Point No.1: Whether the complaint is barred by limitation?
Point No.2: Whether the merger of M/s. iGate Global Solutions LLC and M/s. Symphony Interactive LLC with accused No.1 company amounts to Compromise/ Arrangement as contemplated u/s.391 & 394 of the Act and thus merger without obtaining the order form the Hon'ble High 7 CC.No.421/2010 Court of Karnataka resulted in commission of offence punishable u/s. 629A of the Companies Act, 1956.?
Point No.3: What order?
7. My findings on the above said points are as under:
Point No.1: In the Affirmative, Point No.2: In the Negative, Point No.3: As per the final orders for the following:
REASONS
8. Point No.1: The accused have taken up the contention that the complaint is barred by limitation. It is contended that the offence alleged against the accused is punishable with fine only and the limitation provided u/s.468 of the Cr.P.C. is six months. It is argued that the accused No.1 Company reported about the merger and taking over the assets and liabilities of merged companies while submitting the balance sheet on 31.03.2006 and the cause of action arises from that date. It is argued that even otherwise, according to the complainant, the commission of the alleged offence was come to the notice 8 CC.No.421/2010 of the complainant at the time of inspection. Then the Deputy Registrar of Companies examine as P.w.2- Sri.A.M.Sridharan, in his cross examination stated that the inspection was carried out in the month of February and March-2009. The complaint was filed on 30.11.2010 i.e., after expiry of six months, hence the complaint is barred by limitation. The learned counsel of the complainant argued that the offence committed by the accused is continuing offence; hence the contention of the accused that the complaint is barred by limitation is not acceptable.
9. The learned counsel of the accused relied upon the ruling rendered by the Madras High Court, in the case of S. Govind Rajan and others Vs. M.O. Roy, reported in 2015-1-L.W.332, wherein it is held that "the cause of action to file the complaint for the offence punishable u/s. 629A of the Act arises from the date of occurrence and its notice and not from the date of according the permission to launch the prosecution." In the case of C.K. Ranganathan, Managing Director, Cavinkare Ltd., Vs. 9 CC.No.421/2010 Registrar of Companies, Government of India, reported in 2002 (1) CTC 321, wherein, it is held that "on receipt of balance sheet, it is not open to the Registrar to keep these balance sheets in cold storage, keep his eyes closed to them and then to deny knowledge of these contents, thereby defeating the law of limitation. When the balance sheet are received by the Registrar of Companies, he is deemed to have knowledge about the contents of the balance sheets and consequently, of the offence and limitation will start from that day onwards." The learned counsel relied upon the ruling rendered by the Hon'ble Apex Court in the case of Ramesh Chandra Sinha and others Vs. State of Bihar and others, reported in (2003) 7 SCC 254, wherein, it is held that "taking of cognizance when it is barred by S.468(2) of Cr.P.C., is not acceptable." In the case of Fortune Stones Ltd., and others Vs. Registrar of Companies, NCT of Delhi, reported in MANU/DE/0332/2008, wherein, it is held that "limitation period is six months for taking the cognizance for the offence punishable u/s.629A of the 10 CC.No.421/2010 Companies Act, 1956." In the case of Intercorp Industries Ltd., Vs. State of Delhi and Others, reported in 2007 (96) DRJ 378 similar view is taken.
10. The learned counsel relied upon the ruling rendered by Our Apex Court, in the case of State of Bihar Vs. Deokarannenshi and another, reported in (1972) 2 SCC 890, wherein, at Para No.5, it is held that "A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arise out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and reoccurs, there is the offence committed. The distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act or omission which constitutes, and therefore, constitutes a fresh offence every time or occasion on which it 11 CC.No.421/2010 continues. In the case of a continuing offence, there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all."
11. In the complaint, it was averred that the accused No.1 Company reported about the merger in its balance sheet as on 31.03.2006 and that itself has to be taken as the notice of merger. Even otherwise, according to the complainant, the merger came to notice at the time of inspection which taken place in the month of February and March-2009. The offence punishable u/s. 629A of the Act is punishable with fine. Thus time limit to file the complaint in six months as provided u/s. 468(2)(a) of Cr.P.C. The complaint is filed the beyond six months. However, if the offence is continuing one, then it is not barred by limitation. Sec. 472 of Cr.P.C., says that in the case of continuing offence, a fresh period of limitation begins to run at every moment of the time during which the offence continues. Thus, if the offence is continuing one, then complaint is not barred by limitation. 12 CC.No.421/2010
12. Learned counsel of the accused relied upon the ruling rendered by the Hon'ble Apex Court, in the case of Gokak Patel Volkart Ltd., Vs. Dundayya Gurushiddajah Hiremath and others, reported in (1991) 2 SCC 141, wherein, at Para No.25, it is held that "the question whether a particular offence is a 'continuing offence' or not must, therefore, necessarily depend upon the language of the statute which creates that offence, the nature of the offence and the purpose intended to be achieved by constituting the particular act as an offence." The Hon'ble Apex Court, in the case of Commissioner of Wealth Tax, Amritsar, Vs. Suresh Seth, reported in (1981) 2 SCC 790, wherein, at Para No.11, it is held that "the distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty. A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default." Our Hon'ble High Court, in the case of M/s. Chandra Spinning Vs. Registrar of Companies, 13 CC.No.421/2010 reported in ILR 1988 Kar. 149, wherein at Para No.53, it is held that "A continuing cause of action in civil law is a cause of action which arises from the repetition of acts or omission of the same kind as that for which the action was brought. Similarly, it is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the injury or wrong. If the wrongful act or omission causes an injury which is complete, there is no continuing wrong even though the damage resulting from the wrong may continue."
13. The sum and substance of the discussion made in the above rulings is that the nature of the offence and its effect is to be considered while deciding the aspect as to whether the particular offence is continuing one or not. The offence alleged against the accused that the merger of two subsidiaries companies with accused No.1 was given effect without the order of the Hon'ble High Court of Karnataka as required u/s. 394 of the Act. The alleged 14 CC.No.421/2010 offence got completed as soon as merger is taken place and there is no provision to rectify that non-compliance. Sec. 391 of the Act deals with power to compromise or make arrangements with creditors and members. Sec.394 deals with provisions for facilitating reconstruction and amalgamation of the companies. The non-compliance of the requirements envisaged under these sections, results in commission of offence at once. Its compliance is not possible there afterwards and no remedy is provided under the Act to rectify the non-compliance. From this, it is clear that the offences said to have been committed by the accused is not the continuing one. Consequently, it is to be held that the complaint is barred by limitation. Accordingly, this point is answered in affirmative.
14. Point No.2: The complainant come up with the case that the accused No.1 company got merged with two of its subsidiaries without obtaining the permission from the Hon'ble High Court of Karnataka and this resulted in commission of offence punishable u/s. 629A of the Act. To prove the case, the authorized person of the 15 CC.No.421/2010 complainant C.w.1-Smt.Nethravathi A.H., examined as P.w.1 deposed in line with complaint averments and produced documents the authorization letter, certified copy of the certificate of incorporation, certified copy of the certificate of incorporation consequent on change of names, certified copy of the annual returns of the Year- 2006 and 2007, certified copy of the extract of the balance sheet dated:31.03.2006 and 31.03.2007, certified copy of the show cause notice dated:03.09.2010 issued to accused No.1, 4 and 5 and true copies of the show cause notice dated:11.11.2010 issued to accused No.2 and 3 are marked as Ex.p.1 to 11. While cross examining the P.w.1, the notice of Inspection dated:11.0.2.2009, the reply dated:30.09.2010 given by accused No.1 company to the show cause notice, the letter dated:25.05.2005 addressed by R.B.I to accused No.1 company and Form No.23AC were confronted and marked as Ex.D.1 to 5. C.w.2-Mr.A.M.Sridharan, the then Deputy Registrar of Companies, who inspected the accused No.1 company 16 CC.No.421/2010 examined as P.w.2 deposed about the carrying out of inspection.
15. The documents disclose that the Regional Director of Ministry of Corporate Affairs directed the Registrar of Companies to file the complaint, but the complaint is filed by Deputy Registrar of Companies. There is no documents which authorized the Deputy Registrar of Companies to file the complaint. The answers given by P.w.1 disclose that she is not having any personal knowledge about the case. P.w.1 admitted that the explanation given by accused No.1 through the document marked as Ex.D.1 was not considered. The documents on record disclose that the Reserve Bank of India approved the WOS in the branch office of subsidiary companies in USA. P.w.2 admitted that either to open or to close the subsidiary companies in foreign countries, the permission of the Hon'ble High Court is not required.
16. It is admitted fact that two subsidiaries companies of accused No.1 i.e., M/s. iGate Global Solutions LLC and M/s.Symphony Interactive LLC located in U.S.A. were 17 CC.No.421/2010 merged with accused No.1 company. It is also admitted fact prior permission of the Hon'ble High Court of Karnataka was not obtained for the merger. Learned counsel of the argued that merged companies located in U.S.A., and the law regarding winding up of the companies and merger are different in that country and the law of this country cannot be made applicable. Here, the transferor company is incorporated in India and the companies were merged with it. Thus, for merger with accused No.1 company, the requirement envisaged under the provisions of the Act is to be followed. Sec.2 (7) of the Act defines that 'body corporate' or 'corporation' includes a company incorporated out side India. Thus, contention of the accused that the provision of the Act is not applicable for merger of subsidiaries companies cannot be accepted. The question involved is to whether the merger of subsidiaries companies with main company amounts to compromise/arrangement.
17. As stated above, the contentious issue involved is whether the merger of subsidiaries companies with parent 18 CC.No.421/2010 company amounts to compromise/arrangement coming within the purview of Sec. 391 of the Act. The learned counsel of the accused argued that the merged companies are subsidiary companies of accused No.1 Company; hence there is no need of following the procedure contemplated u/s. 391 and 394 of the Act. It is also argued that the transferring of assets of the subsidiary company to the parent company not amounts merger. In support of these lines of argument, the learned counsel of the accused relied upon the rulings rendered by the Bombay High Court, in the case of Bank of India Vs. Ahmedabad Manufacturing and Calico Printing Co., Ltd., reported in (1972) 42 Comp Cas 211 (Bom), wherein, it is held that "if a scheme by way of transfer of under taking does not affect the rights of the members or creditors of the transferee company, as between themselves and the company, or does not involve a reorganization of the share capital of the transferee company, no application by the transferee company u/s.391 or Sec.394 would be necessary." The Bombay 19 CC.No.421/2010 High Court followed this ratio in the case of Mahaamba Investments Ltd., Vs. IDI Limited., reported in (2001) 105 Comp Cas 16 (Bom), and held that "since no new shares were sought to be issued to the members of the transferor-company by the transferee-company, the scheme would not affect the members of the transferee- company. The creditors of the transferee-company were not likely to be affected by the scheme as the transferor- company had an excess of assets over liabilities to the extent of Rs.508 lakhs and the transferee -company had an excess of assets over liabilities to the extent of Rs. 6,900 lakhs. Therefore, the filing of a separate petition by the transferee-company was not necessary."
18. The Madras High Court, in the case of Santhanalakshmi Investments P., Ltd., In re, reported in (2006) 129 Comp Cas 789 (Mad.), wherein, it is held that "since the transferor company was a wholly owned subsidiary of the transferee company a single application at the instance of the transferor company would be sufficient." The Andhra Pradesh High Court, in the case 20 CC.No.421/2010 of Andhra Bank Housing Finance Ltd., In re, (A.P.), reported in (2004) 118 Comp Cas 295, wherein, it is held that "so long as the scheme of amalgamation does not affect the rights of the members of the transferee company, or its creditors and it does not involve a reorganization of the share capital of the transferee company, the transferee company need not file an application u/s.391 or 394 of the Act." In the case of Matter of Sharat Hardware Industries P., Ltd., In re (Delhi.), reported in (1978) 48 Comp Cas 23, it is held that "the petitioner-company at Delhi, a wholly-owned subsidiary of the transferee company at Caluctta, had applied to the Delhi High Court for sanction of a scheme of arrangement and amalgamation whereby all the assets and liabilities of the petitioner company were to be transferred to the holding company. The transferee company had in a meeting of its shareholders agreed to and approved of the scheme." It is further held that "on the facts, it was not necessary for the transferee company to obtain approval of its creditors or subsequent sanction 21 CC.No.421/2010 of the court having jurisdiction over its place of registration for the scheme, as the scheme did not affect the members or creditors of the transferee company."
19. Learned counsel relied upon the ruling by our Hon'ble High Court, rendered in the case of Nokia Siemens Network India Private Limited, Bangalore Vs. Nil, reported in 2009 SCC Online Kar.17, wherein, at Para No.28, it is held that "if in the proposed scheme reorganization of share capital is absent and when the 100% subsidiary company is seeking to amalgamate with its holding company and where the scheme is not detrimental in any manner to the interests of members or creditors of the transferee company, there is no need examine the scheme by the Court within its territorial jurisdiction the transferee company is situate. In such a case, the sanctioning court which has been approached by the transferor company can examine the scheme and see whether it does affect the rights of the members or creditor of the transferee company either because it involves reorganization of its share capital or otherwise 22 CC.No.421/2010 and if the rights of the members of the transferor company has not been touched upon then there is no need for the transferee company to approached the court separately for necessary sanction of the scheme."
20. In the case of Vibank Housing Finance Ltd., Vs Nil, reported in ILR 2006 KAR 255, wherein, it is held that "the holding company being the holder of 100% of shares of its subsidiary company, in the meeting of the shareholders of the Transferor company convened as directed by this court under section.391 of the Act, the very same shareholders of the Transferee company having participated in the said meeting and approved the scheme of amalgamation, it cannot be said that the decision cannot blind the transferee company, its members and creditors. The Board of Directors of the Transferee Company in the meeting held approved and adopted the scheme of amalgamation. The Reserve Bank of India permitted the Transferee Company to enter into a contract to take over its subsidiary. The scheme of Transfer does not affect the rights of the members or 23 CC.No.421/2010 creditors of the Transferee company as between themselves and the company. No new shares are issued, there being no reorganization of the share capital of the Transferor Company. In these circumstances, this court is of the considered opinion, that there is no need for the Transferee company to file an application and a petition under Sections.391 to 394 of the Act."
21. Learned counsel relied upon the various Judgments rendered by the National Company Law Tribunal, Bangalore, wherein by relying on the above cited rulings, it is held that "where a 100 percent subsidiary companies are going to be merged with its holding company by virtue of the scheme of Amalgamation and if there is no restructuring of share capital of the holding company or issuing of any fresh shares pursuant to the scheme then there is no need for the Transferee company to file separate application for sanction of the scheme. As rightly contended by Learned Counsel that the petitioner/ transferor companies are the wholly owned subsidiaries of Prestige Estates Projects 24 CC.No.421/2010 Limited, the Transferee Company, then there is no need for the Transferee company to file separate application for sanction of the scheme."
22. The sum and substance of the ratio laid down in the above cited rulings is that the filing of the petition before the respective Hon'ble High Court seeking the approval to the merger is not necessary when a 100 percent subsidiary is merging with its parent company without involving only compromise for creditor or alteration of the capital structure. The filing of the application u/s. 391 and 394 of the Companies Act, 1956 arises only when the transfer of under taking affects the rights of the members or creditors of the transferee company, either between themselves and the company or involves the reorganization of the share capital of the transferee company. Here, in this case, there is no evidence to the effect that the merger has followed the above consequence. It is not the case of the complainant that the merger of subsidiary companies involved in issuance of new shares to RIL nor was any compromise called for 25 CC.No.421/2010 on the part of any share holder or creditor of the transferor company.
23. The learned counsel of the complainant would argue that it is for the accused to prove that the merger has not followed by the above referred events. In the criminal trial, the burden is upon the complainant and for the reason of accused's silence, it cannot be held that the criminal charge held proved. The learned counsel of the accused relied upon the ruling rendered by the Hon'ble Apex Court, in the case of Govindaraju @. Govinda Vs. State by Srirampuram Police Station and another, reported in (2012) 4 Supreme Court Cases 722, wherein it is held that "it is settled canon of appreciation of evidence that a presumption cannot be raised against the accused either of fact or in evidence. Equally true is the rule that evidence must be read as it available on record." The Hon'ble Apex Court, in the case of Dr. S.L. Goswami Vs. State of Madhya Pradesh, reported in (1972) 3 SCC, 22, wherein, at Para No.6, it is held that "the onus of proving all the ingredients of an offence is 26 CC.No.421/2010 always upon the prosecution and at no stage does it shift to the accused. It is no part of the prosecution duty to somehow hook the crook. Even in cases where the defence of the accused does not appear to be credible or it is palpably false that burden does not become any the less. It is only when this burden is discharged that it will be for the accused to explain or controvert the essential elements in the prosecution case which would negative it. It is not however for the accused even at the initial stage to prove something which has to be eliminated by the prosecution to establish the ingredients of the offence with which he is charged, and even if the onus shifts upon the accused and the accused has to establish his plea, the standard of proof is not the same as that which rests upon the prosecution. Where the onus shifts to the accused and the evidence on his behalf probabilises the plea, he will be entitled to the benefit of reasonable doubt." In the case of Phankari and others Vs. the State, reported in AIR 1965 J & K 105, wherein, at Para No.40, it is held that "in a criminal case where the onus is 27 CC.No.421/2010 on the prosecution to prove its case affirmatively, no question of presumption would naturally arise in respect of facts which the prosecution has to prove by evidence; nor can it be said that the prosecution has proved a fact merely because the accused has chosen not to cross examine a particular witness or because the accused remains silent or gives no defence. It is not for the accused to fill up lacuna left in the prosecution evidence, by cross examination. Indeed, if such a presumption is allowed to be drawn by the courts, it would amount; to asking the accused to prove the prosecution case - a principle which is against the fundamental tenets of criminal jurisprudence. Presumption can certainly be drawn when existence of certain facts has actually been proved, but existence of the facts themselves cannot be presumed unless the case comes within the purview of Sec.144 of the Evidence Act."
24. In the above cited, it is reiterated that in a criminal trial, the burden is on the prosecution. The complainant has not produced the evidence so as to raise any 28 CC.No.421/2010 presumption against the accused. In the civil proceedings, the onus may get shifted on the accused to prove that the merger of subsidiaries companies not required to follow the procedure contemplated u/s.391 and 394 of the Companies Act, 1956. However, this being the criminal proceedings, the burden is upon the complainant. The complainant failed to prove that merger of subsidiary company with A1 company required the permission of the Hon'ble High Court. Thus, the court is of the considered view that the complainant failed to prove that the accused No.1 by not taking the permission from the Hon'ble High Court for the merger of its subsidiary companies, committed the offence punishable u/s. 629A of the Act.
25. The learned counsel of the accused argued that even if, it is held that the accused No.1 committed the offence, the other accused persons cannot be held liable. P.w.1 in the cross examination, admitted that the accused No.3 was appointed on 11.04.2006 and from this, it is clear that he was not the officer in default at the relevant point of time. Thus, he cannot be held liable for the act of 29 CC.No.421/2010 accused No.1 company earlier to the date of his appointment. Learned counsel of the accused relied upon the ruling rendered by the Hon'ble Calcutta High Court, in the case of Srikumar Menon Vs. Registrar of Companies, West Bengal, reported in 2011 SCC Online Cal.1144 and in the case of Bithal D. Mundhra and others Vs. The Registrar of Companies, West Bengal, reported in 2011 SCC Online Cal.3554, wherein by referring to Sec.630 of the Companies Act, it is held that "the discretion provided in the Sec.630 to relieve the accused is also vested with the criminal court to relieve the offender, when no cause of action against him is disclosed. It is also confers the powers on High Court to exonerate the accused if it appeared to it that he may be liable but had acted "honestly and reasonably".
26. Here, the accused No.3 is entitle for discharge, even if, the case against accused No.1 is held proved. However, it cannot be so, in case of other accused persons. They being the officers in default coming within the purview of Sec.5 of the Act, they would have liable for 30 CC.No.421/2010 the punishment, had complainant succeed in proving that the accused No.1 committed the charged offence. But, the complainant has not succeeded in proving the criminal charge leveled against the accused No.1. Accordingly, this point is answered in negative.
27. Point No.3: In view of my findings on Points No.1 and 2, I proceed to pass the following :-
ORDER By exercising the power conferred u/s. 255 (1) of Cr.P.C, the accused No.1, 3 to 5 are acquitted from the offence punishable u/s 629A of the Companies Act, 1956.
Bail bonds of accused No.1, 3 to 5 shall stand cancelled.
(Dictated to the Stenographer, directly on computer, typed by her, corrected and then th pronounced by me, in open court on this the 9 day of May - 2018.) PRESIDING OFFICER.31 CC.No.421/2010
ANNEXURE:
ON BEHALF OF THE COMPLAIN ANT: WITNESSES:
P.w.1 - Smt. Nethravathi A.H., P.w.2 - A.M. Sridharan.
DOCUMENTS:
Ex.p.1 - Authorization Letter, Ex.p.2 - C/c of Certificate of Incorporation, Ex.p.3 - C/c of Certificate of Incorporation Ex.p.4 - C/c of Certificate of Incorporation Ex.p.5 - C/c of Annual Returns for Year-2006, Ex.p.6 - C/c of Annual Returns for Year-2007, Ex.p.7 - C/c of Extract of Balance sheet dtd: 31.03.06, Ex.p.8 - C/c of Extract of Balance sheet dtd: 31.03.07, Ex.p.9 - C/c of Show cause notice dtd: 03.09.2010, Ex.p.10 - T/c of Show Cause Notice dtd: 11.11.10, Ex.p.11 - T/c of Show Cause Notice dtd: 11.11.10.
ON BEHALF OF THE ACCUSED: WITNESSES: Nil.
DOCUMENTS:
Ex.D.1 - Inspection Notice, Ex.D.2 - Reply, Ex.D.3 - Letter by RBI approving of WOS, Ex.D.4 - Form No.23AC, Ex.D.5 - Form No.23AC.
(SHANTHANNA ALVA. M) PRESIDING OFFICER, SPL.COURT FOR ECONOMIC OFFENCES, BANGALORE.32 CC.No.421/2010
09.05.2018 Complt., - ROC A.1 Co., A.2 - Abated, A.3 to 5 - M.K., For Judgment. (Judgment pronounced in open court vide separate order) ORDER By exercising the power conferred u/s. 255 (1) of Cr.P.C, the accused No.1, 3 to 5 are acquitted from the offence punishable u/s 629A of the Companies Act, 1956.
Bail bonds of accused No.1, 3 to 5 shall stand cancelled.
PRESIDING OFFICER.