Gujarat High Court
Nirmalsingh Dirubha Rana vs State Of Gujarat on 4 May, 2018
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/SCR.A/2828/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION NO. 2828 of 2018
==========================================================
NIRMALSINGH DIRUBHA RANA
Versus
STATE OF GUJARAT
==========================================================
Appearance:
MR. RAHUL R DHOLAKIA(6765) for the PETITIONER(s) No. 1,2
PUBLIC PROSECUTOR(2) for the RESPONDENT(s) No. 1
MR DEVANG VYAS, ASSISTANT SOLICITOR GENERAL for the
RESPONDENT(s) No. 2
==========================================================
CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 04/05/2018
ORAL ORDER
By this writ application under Article 226 of the Constitution of India the writ applicant has prayed for the following reliefs : "(A) This Hon'ble Court be pleased to admit and allow the present petition;
(B) This Hon'ble Court be pleased to quash Criminal Case No.98 of 2012 pending before the Court of Ld. Addl. Chief Metropolitan Magistrate, Ahmedabad, qua the petitioners, in the interest of justice;
(C) Pending hearing, admission and final disposal of this petition this Hon'ble Court be pleased to stay further proceedings of Page 1 of 28 R/SCR.A/2828/2018 ORDER Criminal Case No.98 of 2012 pending before the Court of Ld. Addl. Chief Metropolitan Magistrate, Ahmedabad, qua the petitioners, in the interest of justice.
(D) To pass any other and further orders as may be deemed, fit and proper in the interest of justice."
The respondent No.2, Registrar of Companies lodged a private complaint in the Court of the learned Additional Chief Metropolitan Magistrate at Ahmedabad for the offence punishable under Sections 63, 68 and 628 of the Companies Act, 1956. The filing of the complaint culminated in the Criminal Case No.98 of 2012. The complaint filed by the respondent No.2 is extracted hereunder: "The complainant most respectfully sheweth as under :
1. That M/s.Gujarat Fun'N Water Park Ltd., (herein after called "the Company" is incorporated on 14/07/1995 under the Companies Act, 1956 ( hereinafter referred to as "the ACT"). The registered office of the company is situated at Vidhya Villa, Nr.Swati Apartment, Ambawadi, Ahmedabad Page 2 of 28 R/SCR.A/2828/2018 ORDER 380006.
2. That the Accused No.1 to 5 are the Whole time / Director of the company during the relevant period & signatory to the prospectus to which the complaint relates and are liable for defaults/violation of the Act.
3. That the company came out with a public issue of Rs.850 Lakhs Equity shares Rs.10/ each vide prospectus dated 02/07/1996. Annexed herewith marked as 'Annexure A'. The details of public issue, objects of the issue, and the statement/ forecast made, by the signatories to the prospectus on page No.22 to 29 and 94, 95 of the Prospectus and observation of the complainant are stated, in brief, as per show cause notice on 18072012 annexed herewith marked as 'Annexure B' to this complaint and as per Balance sheet at 3103 1997 and 31031998 Annexed herewith and marked as 'Annexure B1 & B2'
4. That the signatories to the prospectus being Directors of the company, have failed to implement the project for which public Page 3 of 28 R/SCR.A/2828/2018 ORDER issue was made and/or failed to fulfill the promises / statements so made, by mis utilization of the issue proceeds for the purpose other than those for which it was raised.
5. That since the company did not implement the projects and/or did not fulfill the statement/forecast/promises made in the prospectus, for which public issue was made, which amounts to deceptive and misleading statement made knowingly and/or recklessly inducing public/investors to subscribe its shares offered through the said prospectus. By doing so, the Accused No.1 to 5 have committed default u/s.63, 68 and 628 of the Act and have rendered themselves liable to be punished under the said provisions of the Act.
6. That the violations/contraventions as aforesaid were taken up with directors of the company vide this office Show Cause Notice (SCN) dated 18.07.2012. A copy of said SCN is attached as 'Annexure B'. The accused No.1, 3, 4 and 5 have replied vide letter dated 30/07/2012, 31/07/2012 (two), 03/08/2012, 09/08/2012, 23/08/2012 and 09/09/2012 are annexed herewith marked as Page 4 of 28 R/SCR.A/2828/2018 ORDER Annexure C, C1, C2, C3, C4, C5 & C6 which are found not satisfactory by the complainant, because as per section 06 of the Companies Act, every signatory to the prospectus is liable in above offences. However, the other Directors and signatories to the prospectus thereof did not respond to the show cause notice.
7. That the Complainant submit that in view of the facts as referred to herein above in para 3 to 6 of this complaint the accused no.1 to 5 have violated the provisions of Section 63, 68 and 628 of the Act and rendered themselves liable to be punished under Section 63, 68 and 628 of the said Act.
8. That the Ministry of Corporate Affairs, New Delhi and Regional Director (NWR) Ahmedabad, vide their letters No.1/42/2010CLII dated 13.06.2011 and letter No.RD (NWR) Inspection 209 A/168/201112/836 dated 12.06.2012 respectively accorded sanction for filling prosecutions under Section 63, 68 and 628 of the Act. Copies of the said sanction letters are attached herewith and marked as AnnexureD & D1 (Collectively). The said Page 5 of 28 R/SCR.A/2828/2018 ORDER sanction was received by complainant's office on 16.06.2011 and 12.06.2012 respectively. Therefore, the complaint is well within the limitation period under Section 468 as well under Chapter XXXXVI of Criminal Procedure Code, 1973.
9. The registered office of the company is situated at Vidhya Villa, Nr. Swati Apartment, Ambawadi Bazar, Ambawadi, Ahmedabad - 380006 and thus this Hon'ble Court has competent jurisdiction to try the offence.
10. That this complaint is filed on the basis of the prospectus and subsequent balance sheets filed by the company with the office of complainant and the directions of the Ministry of Corporate Affairs, New Delhi and Regional Director (NWR) Ahmedabad by the complainant in the capacity of public servant and in the public interest.
11. That the accused have committed offences punishable u/s.63, 68 and 628 of the Companies Act, 1956 arising out of same transaction and therefore this single complaint is filed for all the three offences u/s. 220 of the Criminal Procedure Code, 1973 and therefore the complainant Page 6 of 28 R/SCR.A/2828/2018 ORDER prays that the accused may be tried at one trial for the offences committed u/s.63, 68 and 628 of the Companies Act, 1956 in terms of the provisions of Section 220 of the Criminal Procedure Code, 1973.
12. That complainant therefore prays as under :
(a) That the Hon'ble Court may be pleased to take complaint on record and punish the accused No.1 to 5 according to law in the interest of justice.
(b) That the process may be issued against all the accused and they may be dealt with according to law.
(c) That according to the due procedure laid down under Chapter - VI of the Cr.P.C. 1973 the service of Summons / B.W. / N.B.W etc., on the accused No.1 to 5 may be effected by serving it at the given office/residential address as accused being the company's principal officer.
(d) That the complainant's cost of and incidental to these proceeding may be provided under Section 626 of the Act.
Page 7 of 28 R/SCR.A/2828/2018 ORDER
(e) That the complainant may be granted
exemption from the personal appearance in the Hon'ble Court on each and every day of hearing u/s.256 of Cr.P.C. 1973 r/w Section 621(1A) of the Act as the complaint is being filed by the complainant as public servant which is necessary to do in the interest of justice. The same is mainly based on the records maintained in the office of the complainant.
(f) That the Hon'ble Court may grant such other and further relief as may be deemed fit and proper under the circumstances of the case.
(V.S.HAJARE) ASSTT.REGISTRAR OF COMPANIES, GUJARAT"
The Court below took cognizance upon the complaint and issued process to the accused persons for the offences enumerated above. Being dissatisfied with the issue of the order of process, the applicants - original accused Nos.1 and 2 are here before this Court with a prayer that the complaint as well as order of process be quashed.
Mr.Dholakia, the learned counsel appearing Page 8 of 28 R/SCR.A/2828/2018 ORDER for the applicant submitted that the complaint on the face of it is not maintainable in law. It is submitted that the Court below could not have taken cognizance because according to Mr.Dholakia for the offence under Section 68 of the Act, 1956 there has to be valid sanction granted by the appropriate authority. According to Mr.Dholakia, there is no valid sanction, so far as the case at hands is concerned. The argument proceeds further on the footing that if the Court below could not have taken cognizance for the offence under Section 68 of the Act, 1956, then the complaint would be time barred so far as the offence under Sections 63 and 628 of the Act, 1956 is concerned.
In such circumstances referred to above, Mr.Dholakia prays that there being merit in this application, the same be allowed and order of process be quashed.
On the other hand, this application has been vehemently opposed by Mr.Devang Vyas, learned Assistant Solicitor General of India appearing for the Union of India. According to Mr.Vyas, the plain reading of the complaint lodged by the Registrar of the Companies, do disclose commission of an offence under the Companies Act. Mr.Vyas would submit that the valid sanction is Page 9 of 28 R/SCR.A/2828/2018 ORDER on record. He would further submit that the complaint is not time barred.
In such circumstances referred to above, Mr.Vyas prays that there being no merit in this application, the same be rejected.
Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the Court below was justified in taking cognizance of the offence.
Let me first deal with the contention as regards the absence of valid sanction for the purpose of taking cognizance so far as the offence under Section 68 of the Companies Act, 1956, is concerned. The sanction on which reliance is placed by the respondent no. 2 is at page 130. The sanction is extracted hereunder: "Government of India Ministry of Law, Justice & Company Affairs Department of Company Affairs New Delhi Dated 13th March, 2002
1. Please refer to the meeting held in my room on 04.12.2001 regarding action to be taken against vanishing companies. A copy of the minutes is sent for your ready Page 10 of 28 R/SCR.A/2828/2018 ORDER reference.
2. Attention is invited particularly to the tabular statements showing the status of the vanishing companies.
3. It is noted with deep regret and no action has been taken in pursuance of the decision taken in the meeting and not a single prosecution under Sections 62/63 read with Section 628 seems to have filed till
4. In case there is any lingering doubt about the action to be taken, it is once again clarified as follows:
(i) From the tabular statement, it is clear that there are 70 companies which are still not traceable. Naturally, a report with the concerned police station, with copies to the Superintendent of Police of the concerned District and the DG Police and to the Secretary of the concerned State has to be made. The information to the Police may state the name of the company, the fact that it has raised money from public, and that it has disappeared and is not traceable at the address given. The request should be for the police to take appropriate action under the relevant laws including the relevant sections of the IPC. Where information has already been given to the Police, a reminder along with a request for early action under the relevant laws be issued. All R Ds are expected to compete this action in respect of the 70 - companies within 10 days and a report should reach the Department latest by Tuesday, the 19th March, 2002.
(ii) With regard to these 70 companies, a decision has already been taken to launch prosecution against them under Section 62/68/628 of the Act for making false statement in the prospectus, on the basis of the record available with the concerned R O Page 11 of 28 R/SCR.A/2828/2018 ORDER C and, if necessary, SEBI, all Rds are now required to ensure that these prosecutions are launched within next 30 days, and a report sent to the Department latest by 1st Week of April, 2002.
(iii) Once the above two actions have been completed, in respect of the remaining 159 companies, action will be taken as already decided in the meeting held on 04.12.2001, including coordination with Official Liquidator. It is hereby reiterated that even though these companies no longer are "Vanishing Companies", they may still have committed offences under Sections 62/68/628 and will also need to be prosecuted. A report on prosecution launched against these companies is to be submitted to the Department latest by 1st week of 2002 after completing the action required by the end of April, 2002.
(iv) In case of companies who have taken action to implement the project as per prospectus and RD feels prosecution is not called for because there is no violation, a report, separately for each company, may be sent to the Department latest by 1st week of May, 2002.
5. It is clarified that when violation of Sections 62/63/628 are found, no further reference may be made to the Department before launching prosecution. Permission to launch prosecution in such cases is hereby accorded, in respect of all the 229 vanishing companies identified originally."
It is brought to my notice that the very same sanction referred to above was a subject matter of consideration before the Delhi High Court in the case of Rajiv Kumar and Others Vs. Page 12 of 28 R/SCR.A/2828/2018 ORDER Registrar of Companies, NCT of Delhi and Another, [2009] 151 Company Case 434 (Delhi). I shall refer to and rely upon the Delhi High Court Judgment a little later.
Mr.Dholakia, the learned counsel appearing for the respondent no. 2 also invited my attention to the show cause notice which was issued by the Assistant Registrar of Companies, Gujarat. The same is extracted hereunder:
"SHOW CAUSE NOTICE FOR VIOLATION OF SECTIONS 63, 68 AND 628 OF THE COMPANIES ACT, 1956 WHEREAS M/s. Komeon Communications Limited. (hereinafter referred to as the company) is a company registered under the provisions of the companies Act, 1956 (hereinafter referred to as the Act) in the State of Gujarat.
AND WHEREAS it is seen from the records of this office that the company came out with public issue of 35,00,000 Eq. Shares of Rs. 10/ for cash at per aggregating to Rs. 350 lacs vide Prospectus dated 19.6.1996.
AND WHEREAS it is seen from the Prospectus dated 19.6.1996 that the object of the issue was to part finance the cost of setting up extension of High bend Umatic & Brtacam film studio at 2 & 3 Basement, Hiraniya Apartment, Opp: Doordarshan Kendra, Thaltej, Ahmedabad54. Further as forecasted in the Page 13 of 28 R/SCR.A/2828/2018 ORDER schedule of implementation, the trial run / Commercial production were required to be commenced w.e.f. August 1996 and September 1996 respectively.
AND WHEREAS it is seen from the company's Balance sheet as at 31.3.1995 to 31.3.2000 that the company has not diployed its funds in the Plant and Machineries and other assets as projected in the Prospectus and further that hugh funds have been invested in Loans and Advances given for capital expenditure which is due to be recovered till Financial year ended 31.3.2000.
All the Directors of the Company and all the signatories to the prospectus dated 19.6.1996 are therefore hereby called upon to explain and show cause within 7 (seven) days from the date hereof as to why penal action u/s. 63, 68 and 628 of the Companies Act, 1956 should not be taken against them for making false, deceptive and misleading dishonest statements/promises and forecasts in the prospectus.
A copy of this notice be served upon all the signatories to the prospectus dated 1961996 under intimation to this office and in the meantime please acknowledge the receipt hereof immediately.
(P. Meena) ASSTT. REGISTRAR COMPANIES, GUJARAT."
Mr.Dholakia submitted that the complaint could be said to have been filed within the period of limitation because, it has been Page 14 of 28 R/SCR.A/2828/2018 ORDER specifically averred in paragraph 8 of the complaint that the complaint has been filed on the basis of the prospectus and the subsequent balancesheets filed by the company with the office of the complainant. However, Mr. Desai has not been able to show anything from the materials on record as to on which date such balancesheets were filed. This issue has also been considered by the Delhi High Court Judgment in the case of Rajiv Kumar (supra).
Let me now straightway go to the decision of the Delhi High Court. The short point involved in the case before the Delhi High Court was, whether the complaint filed by the respondent against the petitioners therein for making a misstatements or false statements in the prospectus was within the period of limitation. The Delhi High Court observed as under: "2. The complaint has been filed only on 14.01.2004. According to the petitioners this complaint has been filed by the petitioner for making a misstatement in the public prospectus which was filed by the petitioners on 11.04.1997 is barred by limitation. It is submitted that the punishment for making a misstatement in a prospectus is punishable under Section 63 of the Companies Act which provides punishment of two years. The said Section for the sake of reference is reproduced hereunder:
63. Criminal liability for misstatements Page 15 of 28 R/SCR.A/2828/2018 ORDER in prospectus: (1) Where a prospectus issued after the commencement of this Act includes any untrue statement, every person who authorised 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 1[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.
(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a prospectus by reason only of his having given
(a) the consent required by section 58 to the inclusion therein of a statement purporting to be made by him as an expert, or (b) the consent required by subsection (3) of section 60.
3. Section 628 of the Companies Act which is the other provision for which the petitioners are sought to be prosecuted also provided punishment of two years only. The said provision also reads as under:
628. PENALTY FOR FALSE STATEMENTS:If in any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purposes 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
(b) which omits any material fact Page 16 of 28 R/SCR.A/2828/2018 ORDER 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.
4. It is submitted by the petitioners that for any offence punishable for up to two years the period of limitation is only three years as per the provisions of Section 468 of the Cr.P.C. As such the complaint which has been filed after seven years of the filing of the prospectus is barred by limitation.
5. The petitioners have also relied upon a judgment delivered by this Court in Crl.M.C.1777/2005 titled as Sunair Hotels Ltd. and Anr. Vs. The Registrar of Companies and Anr. decided on 18.03.2009 wherein in a similar circumstance also a complaint was filed beyond period of limitation, this Court has held:
6. Section 374 of the Companies Act reads as under:
374 Penalty for contravention of section 372 or 373: If default is made in complying with the provisions of1[section 372 [excluding subsections (6) and (7)] or section 373], every officer of the company who is in default shall be punishable with fine which may extend to2[fifty thousand rupees.
7. Similarly, it will also be appropriate to take note of Section 468 of Cr.P.C.1973.
468. Bar to taking cognizance after lapse of the period of limitation.
(1) Except as otherwise provided Page 17 of 28 R/SCR.A/2828/2018 ORDER elsewhere in this Code, no court, shall take cognizance of an offence of the category specified in subsection (2), after the expiry of the period of limitation.
(2) The period of limitation shall be
(a) Six months, if the offence is punishable with fine only;
(b) One year, if the offence is punishable with imprisonment for a term not exceeding one year;
(c) Three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years.
(3) For the purposes of this section, the period of limitation, in relation to offences which may be tried together, shall be determined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most severe punishment.
6. It was further held (page 207 of 151 Comp Cas):
8. In view of the aforesaid it is apparent that the limitation to take cognizance of the offence alleged to have been committed by the petitioner expired long ago before the filing of the compliant which has been filed sometimes in 2004.
9. The only explanation given by the respondents to justify the delay is that the sanction for lodging the prosecution against the petitioner company was required to have obtained prior to the filing of this complaint which was received from the Department Page 18 of 28 R/SCR.A/2828/2018 ORDER of Company Affairs, Shastri Bhawan, New Delhi. They have also relied upon the provisions of Section 470(3) of the Code of Criminal Procedure and submits that in the circumstances, the period taken by them in obtaining the prior sanction which they say has to be excluded from the period of limitation as provided under Section 468 of the Cr.P.C. Since the sanction was received only on 13.04.2004 and, therefore, filing of the complaint within 6 months thereafter is justified and brings the complaint within limitation.
10. Coming to the judgments which have been relied upon by the petitioner I find that in the case of Vinod Kumar Jain (supra) it has been held:
(4) The petitioner appeared in the trial Court in obedience to the process issued to him but he has challenged the legality and validity of the summoning order through this petition.
(5) The learned counsel for the petitioner has at the outset assailed the cognizance of the complaint by the learned Additional Chief Metropolitan Magistrate on the ground that the complaint was hopelessly barred by time on the date it was presented and the learned Magistrate could not take cognizance of the same without first condoning the delay as envisaged in Section 473 of the Code and that too after notice to the petitioner. Hence, the impugned order, according to him, is vocative of principles of natural justice. Moreover, it betrays total nonapplication of judicial mind with regard to the facts spelt out by the respondentcomplainant in the application made by him under Section Page 19 of 28 R/SCR.A/2828/2018 ORDER 473 of the Code for condensation of delay. As pointed out by him, the cryptic order" and find prima facie grounds to proceed against the accused under Section 473 Criminal Procedure Code .......", does not disclose whether the learned Additional Chief Metropolitan Magistrate condoned the delay and if so, on what ground.
(6) SUBSECTION (1) of Section 468 of the Code lays down that except as otherwise provided elsewhere in the Code, no court shall take cognizance of an offence of the category specified in Subsection (2) thereof after the expiry of the period of limitation prescribed in clauses (a), (b) & (c) of the Subsection. Obviously the bar of limitation operates before the court takes cognizance of an offence. Under clause (a). Subsection (2) of Section 468, the period of limitation is six months if the offence is punishable with fine only as is admittedly the position in the instant case. Section 469 of the Code prescribes the terminus a quo for the commencement of period of limitation. It is the date of the offence or where the commission of the offence was not known to the person aggrieved by the offence, the first day on which such offence cones to the knowledge of such person whichever is earlier. In the instant case, the contention of the respondent complainant is that he came to know of the commission of offence on 24th January 1981 when he perused the report of the Inspecting Officer Shri O.P. Chadha. Obviously, therefore, the complaint was hopelessly barred by time on the date of its institution.
(7) Section 473 of the Code, however, provides that notwithstanding anything Page 20 of 28 R/SCR.A/2828/2018 ORDER contained in the foregoing provisions the court may take cognizance of an offence after the expiry of period of limitation provided therefore if it is satisfied on the facts and in the circumstances of the case that
(i) the delay has been properly explained; or that
(ii) it is necessary so to do in the interests of justice.
(8) It is thus manifest that if a complaint is prima facie barred by time when it is filed, it becomes necessary for the prosecuting agency to explain the delay and seek condensation of the same. Unless the delay is condoned the court cannot take cognizance of the complaint. In other words, the Magistrate has to apply his mind to the question of limitation at the pre cognizance stage and satisfy himself that delay has been properly explained or that it is necessary to condone the delay in the interests of justice. The Magistrate cannot hasten to issue the process without first recording his satisfaction that the delay was satisfactorily explained to him or that he was of the view that the condensation of delay was in the interests of justice. It 19 highly doubtful that the court can condone the delay and thus extend limitation subsequent to the taking of cognizance of the offence. Of course, the condensation of delay may be implied from the act of the Magistrate in taking cognizance after the expiry of the period of limitation and proceeding with the case but the order must be clear and categorical in this respect. He has no power or authority to condone the delay provisionally or ex facie as Page 21 of 28 R/SCR.A/2828/2018 ORDER has been seemingly done in the instant case.
(9) In State of Punjab v. Sarwan Singh, AIR 1981 SC1054, the accused Sarwan Singh was convicted of an offence under Section 406, Indian Penal Code, by the trial Court. However, on appeal having been preferred by him, the High Court set aside his conviction and acquitted him mainly on the ground that the prosecution launched against him was clearly barred by limitation under sections 468 & 469 of the Code. The State went in appeal by special leave to the Supreme Court but the same was dismissed with the following observations which are very pertinent to notice:.
"The object of Criminal Procedure Code in putting a bar of limitation on prosecutions was clearly to prevent the parties from filing cases after a long time, as a result of which material evidence may disappear and also to prevent abuse of the process of the court by filing vexatious and belated prosecutions long after the date of the offence. The object which the statute seeks to subserve is clearly in consonance with the concept of fairness of trial as enshrined in Article 21 of the Constitution. It is, therefore, of the utmost importance that any prosecution, whether by the State or a private complainant must abide by the letter of law or take the risk of the prosecution failing on the ground of limitation."
(10) Obviously an accused person acquires a valuable right the moment his prosecution is barred by limitation. Hence, that right cannot be taken away except in accordance with Page 22 of 28 R/SCR.A/2828/2018 ORDER the provisions of law. It is, therefore, imperative for the court taking cognizance of the offence to apply its judicial mind as to whether the prosecution has satisfactorily explained the delay in launching prosecution at the precognizance stage i.e. when the Magistrate applies his mind for the purpose of proceeding under Section 200 and the succeeding Sections in Chapter 15 of the Code. Since the discretion vesting in the Magistrate to condone the delay or not has to be judicially exercised, the principles of natural justice require that the accused must be afforded an opportunity before he is called upon to face the prosecution in a time barred matter. As observed by a Division Bench of this Court in State ( Delhi Administration) v. Anil Puri and others ILR 1979 Delhi 350 In the present case, the respondents have submitted that it is only when a balance sheet was filed by the petitioners for the year ending 31.03.2001 that they came to know that the statement made in the prospectus was not correct and accordingly they gave a show cause notice which was given on 21.05.2002 and then they have filed a complaint dated 14.01.2004. It is submitted that the delay had been caused because of obtaining sanction etc. from the department concerned.
Even if one takes the case of the respondents at the highest and apply the provision of Section 473 of the Cr.P.C. to the facts of this case, then also once the respondents having come to know about the violation, i.e, on filing of the balance sheet, no where it is stated as to when the said balance sheet was filed, it is also not Page 23 of 28 R/SCR.A/2828/2018 ORDER stated as to whether prior to 31.03.2001 any balance sheet was filed by the petitioner or not and in case such balance sheet was filed then what was the status shown in that balance sheet. It is hard to believe that the petitioner had not filed any balance sheet prior thereto though balance sheet as per the petitioners were filed on year to year basis. Moreover, it is nowhere stated in the complaint as to from which date the limitation starts so as to bring the complaint within limitation. As a matter of fact, the averments made in the response by the respondents are not even forming part of the complaint.
Thus, even the averments made in the complaint are per se false to the knowledge of the respondents and therefore the plea taken by the respondents that this is a case where neither there was any continuing wrong and that the limitation period was continuing till the respondents filed the complaint cannot be sustained. Even otherwise the law has been already discussed by this Court in the judgment quoted above. No contrary judgment has been cited.
Taking into consideration that the prospectus in this case was filed on 11.4.1997, filing of the complaint in this case in the year 2004 cannot be justified at all. Thus, the complaint as well as the summoning order issued in this case is set aside and the complaint filed by the respondents is quashed. Consequently, allthe proceedings emanating therefrom are hereby quashed.
Petition stands disposed of. "
Page 24 of 28R/SCR.A/2828/2018 ORDER In the case at hand also, even if one takes the case of respondent no. 2 at the highest and apply the provisions of Section 473 of the Code of Criminal Procedure to the facts of this case, then also once the respondents, having come to know about the violation, i.e. on filing of the balancesheets, nowhere it is stated as to when the said balancesheet was filed, and in case such balancesheet was filed, then what was the status shown in the balancesheet. Moreover, it is nowhere stated in the complaint as to on which date the limitation started so as to bring the complaint within the period of limitation.
So far as the issue of validity of the sanction is concerned, as noted above, the very same sanction was considered by the High Court of Delhi in the case of Dharmendra Kumar Lila Vs. Registrar of Companies, [2011] 161 Company Case 301 (Delhi). The Delhi High Court took the view that the sanction which was sought to be relied upon was no sanction in the eyes of law. It was just a general permission granted for initiating prosecution in respect of the violations of certain provisions of the Act, 1956. I may quote the entire decision of the High Court in the case of Dharmendra Kumar Lila (supra): "2. Learned Senior counsel for the Page 25 of 28 R/SCR.A/2828/2018 ORDER petitioners has contended that no criminal complaint can be filed under Section 62 of the Act as this provision deals with the "civil liability" for making misstatement in the prospectus. With regard to the complaint under Section 68 of the Act, it has been submitted that for filing of a complaint under this section, prior sanction of competent authority was required. Neither such sanction was obtained by the Registrar of Companies prior to filing of the complaint nor had the same been placed on record. In nutshell, it has been canvassed that the complaint under Section 62 read with Section 68 of the Act was liable to be quashed. Reliance has also been placed on Rajeev Shukla & Anr. vs. Registrar of Companies 135 (2006) Delhi Law Times 599 and Manju Yadav vs. Registrar of Companies 2007 (98) DRJ 312.
Section 62 of the Act reads as under: "62. Civil liability for misstatements in prospectus. (1) Subject to the provisions of this section, where a prospectus invites persons to subscribe for shares in or debentures of a company, the following persons shall be liable to pay compensation to every persons who subscribes for any shares or debentures on the faith fo the prospectus for any loss or damage he may have sustained by reason of any untrue statement included therein, that is to say, .......... "
Bare perusal of the aforesaid provision clearly indicates that violation thereof entails civil liability inasmuch as, it provides payment of compensation in case of misstatement in the prospectus. In my view, the compensation in respect of violation of Section 62 of the Act can be claimed by filing appropriate civil suit and no criminal complaint under Section 62 of the Act would be maintainable in this regard.Page 26 of 28
R/SCR.A/2828/2018 ORDER Similar view has been expressed in Rajiv Shukla [2006] 135 DLT and Manju Yadav's cases [2007] 98 DRJ 312.
As regards the complaint under Section 68 of the said Act is concerned, learned counsel for the respondent has not disputed that prior sanction of the competent authority is required before launching prosecution under the said provision. However, he contends that such sanction was granted for initiating prosecution by the Department of Company Affairs vide its letter dated 13th March, 2002. I have perused the copy of so called sanction letter and find that the same is general permission granted to the Regional Director by the Department of Law & Justice for initiating prosecution in respect of violations of Sections 62, 63 read with 628 of the said Act. This sanction nowhere includes launching of prosecution under Section 68 of the Act. In Rajiv Shukla's case (supra) also this very sanction letter was involved and was adversely commented upon. No other sanction letter has been placed on record. In absence of any such sanction, the only presumption which can be drawn is that no sanction was obtained for launching prosecution under Section 68 of the Act against the petitioners. In absence of prior sanction, the complaint under Section 68 of the said Act would also be not maintainable.
For the foregoing reasons, petitions are allowed and complaint case bearing no. 805/2002 pending before the ACMM and all further proceedings arising therefrom qua the petitioners are hereby quashed.
All the abovementioned petitions are disposed of in the above terms."
Thus, in view of above, I have reached to the Page 27 of 28 R/SCR.A/2828/2018 ORDER conclusion that on both the counts the contention of the learned counsel appearing for the applicant deserves to be accepted.
In the result, this application succeeds and is hereby allowed. The proceeding of Criminal Case No.98 of 2012 pending in the Court of the learned Additional Chief Metropolitan Magistrate, Ahmedabad, and the consequential order of issuance of process is hereby quashed. Rule is made absolute. Direct service is permitted.
(J.B.PARDIWALA, J) K.K. SAIYED Page 28 of 28