Delhi District Court
Roc vs J.K. Singh Etc. on 6 June, 2014
IN THE COURT OF SH. DEVENDRA KUMAR SHARMA
ADDL. CHIEF METROPOLITAN MAGISTRATES (Spl. Acts) CENTRAL
TIS HAZARI COURTS, DELH
ROC vs J.K. Singh etc.
CC No.1317/3
U/s 207 of the Companies Act, 1956
JUDGMENT
(a)Serial no. of the case : 02401R0166522000
(b)Date of commission of offence : During the year 199495
(c)Name of complainant : Registrar of Companies,
NCT of Delhi & Haryana
(d)Name, parentage, residence: 1)JK Singh
2)Rita Singh,
3) D.K. Singh
4) Natasha Singh, all resident of
D3A, Ansal Villa, Satbari, New Delhi
(e)Offence complained of/ proved : U/s 207 of Companies Act, 1956 (f)Plea of accused : Pleaded not guilty (g)Final order : Accused no.2 Rita Singh convicted. Accused no.1, 3 and no.4 acquitted. (h)Date of such order : 06.06.2014 Date of institution: 11.08.2000 Arguments heard/order reserved: 20.05.2014 Date of Judgment: 06.06.2014 Brief statement of the reasons for the decision:
1 The complainant Sh. T.P. Shami, the then Deputy Registrar of Companies Delhi & Haryana filed the present complaint against the aforesaid accused persons for contravention of provision of section 207 of the Companies Act, 1956 (for short the 'Act') ROC vs JK Singh etc. CC No.1317/3 1 of 21 2 It is alleged in the complaint that M/s Mid East India Limited is/was a company of which accused no.1 to 4 are/were the directors and responsible for compliance to the provisions of section 207 of the Act. The inspection of books of accounts and other records of the company was conducted and as per inspection report the dividend for the year 199495 has not been paid to most of the shareholders as required under the Act. Hence, present complaint. 3 The accused were summoned for the said offence. After appearance, copy of complaint and of documents were supplied. A notice u/s 251 Cr.P.C was framed against the accused persons on 30.07.2001 for the offence punishable u/s 207 of the Act to which they pleaded not guilty and claimed trial. 4 In order to substantiate its allegations made in the complaint, the prosecution examined Sh. S.L. Gandhi, JTA from the office of ROC as PW1, Sh. P.K. Bansal the then Joint Director (Inspection) with Ministry of Company Affairs as PW2 and the complainant Sh. T.P. Shami as PW3.
PW1 Sh. S.L. Gandhi deposed that the company was primarily incorporated with the name of Mideast Shipping Company (India) Limited and changed its name to Mid East (India) Limited w.e.f 28.03.1990 and proved Incorporation Certificate Ex.PW1/1 and Ex.PW1/2. The witness also proved copy of memorandum of association Ex.PW1/3 and stated that accused Rita Singh is /was the Managing Director and other accused are/were directors of the company and were responsible for compliance of the Act on behalf of the Company. The witness further proved on record copy of Annual Return made ROC vs JK Singh etc. CC No.1317/3 2 of 21 upto 23.02.1999 Ex.PW1/4, copy of sanction/direction to launch prosecution Ex.PW1/5, copy of the inspection report Ex.PW1/6 and copy of show cause notice Ex.PW1/7.
PW2 is Mr. P.K. Bansal who conducted inspection of books of accounts of the company from 01.04.1999 to 10.05.1999, deposed regarding the allegations in the complaint. The witness stated that during inspection, he found various contraventions under the Act and observed that the dividend for the year 199495 has not been paid to most of the shareholders as required u/s 207 of the Act. The witness further deposed that he issued a preliminary finding letter dated 10.05.1999 Ex.PW2/5 to the company and its directors asking for their clarifications regarding nonpayment of dividend declared for the financial year 199495. The witness further deposed that in response to the said letter, accused sent their reply Ex.PW2/6 that they had already issued the dividend warrants but they could not show the details as to how the payment was made and how the total amount was transferred to special account opened for the purpose. The witness also proved on record copy of inspection report Ex.PW2/7 and annual report with its Annexure as Ex.PW2/8.
PW3 Sh. T.P. Shami is the complainant who filed the present complaint Ex. PW3/B. This witness also deposed regarding the allegations in the complaint and relied upon documents proved by PW1 and PW2. All witnesses were cross examined on behalf of the accused persons at length. 5 The statements of all four accused persons were recorded u/s 313 Cr.P.C r/w ROC vs JK Singh etc. CC No.1317/3 3 of 21 section 281 Cr.P.C.
In his statement, accused DK Singh denied the allegations stating that he was the sleeping director of the company and was not responsible for day to day affairs of the company. No show cause notice was served upon him. He was nonfunctional director of the company as such he was not in a position to know about the said notice. None of the complaints of shareholders as stated by the ROC are part of judicial file and none of the shareholders have been examined before the court regarding nonpayments of dividends.
Accused JK Singh admitted that he was the chairman of the company but stated that he was not looking after the day to day affairs of the company. His role was restricted to laying down policies of the company as well as to ensure its implementation. He is/was not responsible for day to day affairs of the company, same was looked after by various executives appointed by the company. No show cause notice was served upon him as he was in judicial custody in some other matter from 22.05.2000 to 06.12.2000 in some other case. None of the complaints of shareholders as stated by the ROC are part of judicial file and none of the shareholders have been examined before the court regarding nonpayments of dividends.
Though, in his statement accused Natasha Singh admitted that she was one of the director of the company but she stated that she was not not responsible for the compliance of the provisions of companies Act. The company had various officials like Company Secretary and Secretariat Department who were responsible for the performance of various acts in ROC vs JK Singh etc. CC No.1317/3 4 of 21 furtherance of such compliance. The accused also admits receipt of show cause notice stating that a detailed pointwise reply was given wherein the reasons and various circumstances which had resulted in hampering of the business of the company, had been stated and the ROC was requested to take compassionate view of the situation. The accused further stated that on account of a fire incident and income tax raids the majority of records of the company including record pertaining to disbursal of dividend, had either been destroyed or seized by the Income Tax authorities. None of the shareholders have been personally examined who had allegedly not been paid the dividends by the company.
Accused Rita Singh admitted that she was the Managing Director of the company but denied the material allegations stating that she is/was not responsible for the compliance of the provisions of Companies Act and has taken almost same defence taken by other accused in their statements. 6 In support of claim and contentions, accused examined two witnesses namely Shri N.S. Parmeshwaran as DW1 and Shri S.K. Srivastava as DW2, in their defence.
DW1 has stated that he is working as Group Company Secretary since 1998 at Bhubneshwar and Delhi. The witness further stated that they had distributed the dividends in the year 199495. The information regarding non distribution of dividend to the office of ROC was provided that there was a fire in the company in the year 1995 due to which all the documents were destroyed which included the register maintained by the company for ROC vs JK Singh etc. CC No.1317/3 5 of 21 distribution of dividends. The witness also stated that there was income tax raid in the company in the year 1997 and all the employees left the company and subsequently there is no business/trade in the company since 1998.
DW2 Shri S.K. Srivastava has stated that he is working as Assistant Manager (Personal & Admn) in the accused company since 1993. The complaint pertains to nondistribution of dividends in the year 199495. The dividends pertaining to the said year was distributed to the shareholders and this fact was also informed to ROC Ex.PW2/6 at para no.8 of internal page 4. The witness has also corroborated the testimony of DW1 regarding catching fire in the company and income tax raid. The witness also proved on record copy of Panchnama pertaining to income tax raid Ex.DW2/1 and Ex.DW2/2. Both witnesses were cross examined on behalf of complainant. 7 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 both the parties as well as relevant provisions of law and case laws.
8 The relevant provisions of section 207 of the Companies Act are reproduced below for ready reference: "[207. Where a dividend has been declared by a company but has not been paid, within fortytwo days from the date of declaration, to any shareholder entitled to the payment of the dividend, every director of the company, its managing agent or secretaries and treasurers, and where the managing agent is a firm or body corporate, and where the secretaries and treasurers are a firm, ROC vs JK Singh etc. CC No.1317/3 6 of 21 every partner in the firm and where they are a body corporate, every director thereof, shall if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days 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. None of the shareholders have been personally examined who had allegedly not been paid the dividends by the company. In the notice no detail was given or any investor has been examined. It is also argued that present complaint is not maintainable being barred by limitation. In support of claim and contentions, learned defence counsel has relied upon the following judgments:
1. Chandy Mathew vs. Asst. ROC, Crl. MC No. 349 of 2005
2. Webcity Infosys vs. ROC 2007 (98) DRJ 710
3. State of Bihar vs. Deokaran Nenshi 1972 (2) SCC 890
4. National Cotton Mills vs. Asst. ROC 1984 (56) Comp. Cases 222
5. Sublok Clinic vs. State of Delhi 1985 (27) DLT 171
6. M/s Intercorp Industries Ltd. vs State of Delhi 2007 (6) AD Delhi 562
7. H.C. Bhasin vs. ROC 2008(142) Comp. Cas 518
8. V. Karthikeyan vs. ROC 2001 (106) Comp Cases 685
9. Vinod Kr. Jain vs. ROC 1985(28) DLT 474
10. State (Delhi Admn.) vs. Anil Puri and ors. ILR (1979) II Delhi315
11. Sanjay Suri vs. State (Cr. MC 531/2009 decided on 29.01.2010
12. Asst. ROC vs HC Kothari (1992(75) Comp Cases 688 Mad)
13. Samarpan Agro & Livestock Ltd. vs. SEBI [2011(165) Comp. Cases 169) inter alia other judgments filed in three volumes also.
On the other hand, 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 also argued that the present complaint is not barred by the limitation as the offence is continuing until it is proved by the ROC vs JK Singh etc. CC No.1317/3 7 of 21 accused that dividend declared was paid to the shareholders. Therefore, accused may be convicted for the alleged offence.
B) Since, the issue of limitation raised by the learned defence counsel is a legal issue, let me discuss it first, as the decision of this issue would affect the decision of the case. Thus, first and foremost it is required to be considered as to whether the offence u/s 207 of the Act is continuing offence or not. I have also perused the judgments relied upon by the learned defence counsel. C) The relevant para of the judgments "Webcity Infosys Ltd (supra) relied upon by the learned defence counsel is reproduced below: Para 5. Distinction between offences which take place when an act or remission is committed once for all and a continuing offence has been pithly drawn in the decision of the Supreme Court reported as AIR 1973 SC 908 State of Bihar v. Devokaran Nenshi & Anr.
Para 6. In para 5 of the judgment was opined as under:
"5.Continuing offence is one which is susceptible of continuance and is distinguishable from one which is committed once and for all. It is one of those offences which arises 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 noncompliance occurs and recurs, there is the offence committed. The distinction between the two kinds of offences is between an act or omission which continues and therefore constitute a fresh offence every time or occasion on which it 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 act or omission is committed once and for all.
Para 11. Interpreting Section 162 of the Companies Act, in para 14 of the decision of the Division Bench of the Calcutta High Court reported as "1984 Tax L.R. 2043 National Cotton Mills Ltd. vs Assistant Registrar of Companies", it was held as under: "14. On a careful review of the legal position, it is difficult for us to agree with the ROC vs JK Singh etc. CC No.1317/3 8 of 21 view expressed by a learned single Judge in the above case. As pointed out by the Supreme Court, in order to constitute a continuing offence, the offence must 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. Section 150 of the Companies Act does not impose any liability which so continues. The offence on the breach thereof is complete with the failure to furnish the return in the manner or within the time stipulated.
Such offence is committed once and for all as and when one commits the default. That provision does not contemplate that the obligation to submit such returns continues from day to day until the return is actually submitted nor does it provide that continuance of business without filing of such returns is prohibited so that nonfulfillment of a continuing obligation or continuing of business without filing of such returns becomes a continuing offence. When Section 162 of the Companies Act prescribed the penalty of fine' which may extend to fifty rupees for every day during which the default continues', it merely prescribed the measure of penalty - such a prescription being made with the object of enforcing strict compliance with the requirement of Section 159 under the threat of enhanced penalty and getting relief from such penalty on enhancing scale by early submission of returns even after the default. That does not render the initial default a continuous one. It can not be said that the offence is repeated or committed from day to day after the initial default. It is only where the offence is committed from day to day that it can be called a continuing offence. There being no express provision in Section 234, 598 etc. of the Companies Act it will not be proper to hold that the offence under Section 162 is a continuing offence. When the statute itself provides for continuance of offence irrespective of initial default in some cases but does not make similar provisions in respect of some other offences, it would not be correct to say that the later class of cases also would be continuing offences".
D) It has been held in the following judgment that: [2012] Comp Cas 335 (Patna) Binay Kishore Prasad and Anr. Vs UOI Para 13. "Nature of offence to be continuing one has also been considered by a Bench of this Court, as reported in [2004] 2 East Cr. C. 213, wherein at paragraph 12 it has been held "Applying the norms and guidelines given by the Supreme Court in Bhagirath Kanodia's case and all the more looking to the purpose which has been intended to be achieved by constituting a particular Act as the offence, it is held that the default in filing the balance sheet of the profit and loss of the companies within the prescribed statutory period was a continuing offence".
ROC vs JK Singh etc. CC No.1317/3 9 of 21 E) In an earlier judgment, the Hon'ble High Court of Delhi has held that the offences u/s 159, 162, 220 is continuing offence. The relevant para of the judgment is reproduced below: 74 (1998) DLT 537 titled as Anita Chadha vs ROC Para 6 "In so far as the first question is concerned, this Court in Kuldip Singh and Another v. State and Another, 34 (1988) DLT 11 held that considering the objects of the provisions of Sections 159 and 220 read with section 162 of the Act and the language used therein, the offences of which the accused were charged, namely nonfiling of annual return, balance sheet and profit & loss account, within the period prescribed, were continuing offences and therefore, the period of limitation provided by section 468 of the Code did not have any application. It was further held that the said offences will be governed by Section 472 of the Code, according to which a fresh period of limitation shall began to run at very moment of time during which the offences continue. This Court considered the following three decisions of the Supreme Court, which dealt with the question as to whether a particular offence was a continuing offence or not:
1.State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908;
2.Bagirath Kanoria v. State of MP, (1984) 3 Company Law Journal 49; and
3.Maya Rani Punj v. CIT, Delhi, (1986) 157 ITR 330 Para 7 "In Deokaran Nenshi (supra) the Supreme Court was of the view that when law requires submission of a return within a certain period and there is a failure to do so, such noncompliance is ordinarily complete on the expiry of the period and is not a continuing offence. This was a case under Section 66 of the Mines Act, 1952, which provides for filing of an annual return before the appropriate authority by owner, manager etc. of the Mine within the time prescribed. Since there was no provision postulating that the offence continues until the requirement of the statute is complied with, failure to file the return within the prescribed period was held not to be a continuing offence. As a sequitur, the inference which must be drawn from the decision of the Supreme Court in Deokaran's case, is that if the relevant law has not only made the default punishable as an offence, but has further provided that the penal liability therefor would be a continuing offence. In Bhagirath Kanoria's case (supra) the Supreme Court while construing the provisions of Section 14(2A) of the Employees Provident Fund and Family Pension Act, 1952, considered the question whether failure to pay the employees contribution to the provident fund withing the time prescribed therefor was a continuing offence. The Supreme Court viewed the offence of nonpayment of the employer's contribution to the provident fund to be continuing offence. The Supreme Court distinguished its ROC vs JK Singh etc. CC No.1317/3 10 of 21 earlier decision in Deokaran Nernshi's case as in that case there was no provision which laid down that the owner of a Mine would be guilty of an offence, if he continued to work the Mine without furnishing the return. The Supreme Court in Bhagirath Kanoria's case observed that the question whether a particular offence was a continuing offence depends upon the language of the statute which creates the offence, the nature of the offence and the purpose which was intended to be achieved by constituting the particular act as an offence. The Supreme Court in this regard observed as follows"
"The imposition of penalty not confined to the first default, but with reference to the continued default is obviously on the footing that non compliance with the obligation of making return is an infraction as long as the default continued. Without sanction of law, no penalty is impossible with reference to the defaulting conduct. The position that penalty is imposable not only for the first default, but as long as the default continues basis is indicative of the legislative intention in unmistakable terms that as long as the assessee does not comply with the requirements of law, he continues to be guilty of the infraction and exposes himself to the penalty proved by law."
Para 12 "Accordingly I hold that the offences under Section 159 and 220 read with Section 162 of the Act are continuing offences within the meaning of section 472 and Section 468 of the Code, is not attracted."
F) It is well settled law that upon an identical issue the judgment earlier in point of time would be considered to be precedent unless and until in the later judgment, earlier judgment has been referred/discussed and distinguished. In the present case the judgment reported in "74 (1998) DLT 537 titled as Anita Chadha vs ROC" the proposition that the offences u/s 159/220 read with section 162 is continuing in nature was passed prior in time than the judgment relied upon by the accused, therefore, is the authority to be followed. In view of the same, it is held that the present complaint is not barred by limitation. G) Further, it was held by the Hon'ble High Court in the judgment reported in (2010) 104 SCL, titled as "Samarpan Agro. and Livestock Ltd. Vs ROC vs JK Singh etc. CC No.1317/3 11 of 21 Securities and Exchange Board of India" as under: Para13: "In this case, under section 12 (1B) no person could have carried out a collective investment scheme unless he obtained a Certificate of registration from the Board in accordance with the Regulations framed under the Act. Regulations were framed in the year 1999 and notified to all concerned including the Petitioner. As per Regulation 68 any person operating a collective investment scheme at the commencement of the Regulations was under legal obligation to get the existing collective investment scheme registered with the Board and obtain a certificate of registration. If it failed to do so, it was a legal mandate to such person to wind up the existing collective investment scheme by following the procedure as prescribed under Regulation 73. Regulation 74 further provided that existing collective scheme which was not desirous of obtaining provisional registration from the Board was legally bound to formulate a scheme of repayment and make such repayment to the existing investors in the manner specified in Regulation 73. Nothing has been placed on record to suggest that Petitioners had taken any step to get registered with the Board or wound up the collective investment scheme and made the payment to the investors. The amount still continues to be retained by the Petitioner/s, thus, infringement of Regulations 73 and 74 is continuing in nature and limitation envisaged under Section 468 of Cr.PC would not be attracted." H) In view of the law laid down by the Hon'ble High Court of Delhi discussed herein above, it is held that offence in the present case is continuing offence in its nature as in the present case, as per the complaint, the accused declared dividend for the financial year 199495 but did not pay/distribute the dividend amounts to the respective shareholders eligible for the same within the stipulated time. Since the public money is involved and dividend amount has not been paid/distributed to the shareholders, thus, it is held that complaint is within limitation period. It is respectfully observed that the judgments relied upon by the learned defence counsel is not applicable to the peculiar facts and circumstances of the present case.
I) From the bare provision of section 207 of the Companies Act, it is clear that ROC vs JK Singh etc. CC No.1317/3 12 of 21 where a dividend has been declared by a company, every director/managing director of the company, its managing agent or secretaries and treasurers are under obligation to pay the dividend amount to the shareholder entitled to the payment of dividend within fortytwo days from the date of declaration. Failure to comply with these provisions is considered to be an offence and the company and every officer of the company who is in default is liable for punishment with simple imprisonment for a term which may extend to seven days and shall also be liable to fine.
J) In the present case, allegation is that the company and its directors have not paid/distributed dividend to the most of the shareholder within 42 days of the stipulated time. Accused JK Singh, DK Singh and Natasha Singh have taken almost similar defence that they were not actively involved in day to day affairs of the company and therefore, they are not liable for compliance of the Companies Act on behalf of company. They have also stated that various executives appointed by the company were looking after the affairs of the company. On the other hand, accused Rita Singh appears to have taken all responsibility on her shoulder stating that she is/was the Managing Director of the company at the relevant time. In her statement, accused Rita Singh has simply denied that she is/was not responsible for compliance of the provisions of the Companies Act as the company had various officials in the form of Company Secretary and Secretariat department who were responsible for the performance of various acts in furtherance of such compliance. However, with regard to declaration and nonpayment of dividend for the financial year ROC vs JK Singh etc. CC No.1317/3 13 of 21 199495, she did not specifically deny this fact and simply stated that it is matter of record.
K) Present case is a criminal proceedings and criminal responsibility cannot be fastened on a particular partner/director unless he/she was knowingly party to the default. For holding a particular partner/director liable, it has to be proved on record that he/she was knowingly party to the d efault and was also liable to comply with the provisions of the Act and in the absence of any such evidence, the complaint has to fail against that particular partner/director. This court does not find any evidence on record which could show that accused no. 1, 3 and 4 were knowingly party to the default and were responsible for complying of the provisions of Companies Act on behalf of the company at the relevant time.
L) It has been held by the Hon'ble Supreme Court in the following case which was a case u/s 10 of Essential Commodities Act that in the absence of any proof, no partner can be convicted and in this regard relevant para of the judgment reads as under: AIR 1989 SC 1982 Sham Sundar and others vs State of Haryana "9. It is, therefore, necessary to add an emphatic note in this regard. More often it is common that some of the partners of a firm may not even be knowing of what is going on day to day in the firm. There may be partners, better known as sleeping partners who are not required to take part in the business of the firm. There may be ladies and minors who were admitted for the benefit of partners. They may not know anything about the business of the firm. It would be a travesty of justice to prosecute all partners and ask them to prove under the proviso to subsection (1) that the offence was committed without their ROC vs JK Singh etc. CC No.1317/3 14 of 21 knowledge. It is significant to note that the obligation for the accused to prove under the proviso that the 'offence took place without his knowledge or that he exercised all due diligence to prevent such offence arises only when the prosecution establishes that the requisite condition mentioned in subsection (1) is established. The requisite condition is that the partner was responsible for carrying on the business and was during the relevant time in charge of the business. In the absence of any such proof, no partner could be convicted". M)Further, vicarious liability cannot be imputed merely on the ground that accused was director of the company. Law in this regard has been summarized by our own High Court in case titled as Sudeep Jain vs M/s ECE Industries Ltd in Cri. M.C. No. 1822/2013, order dated 06.05.2013. While discussing the vicarious liability of the director, it was observed that vicarious liability on the part of a person must be pleaded and proved and not inferred. Same view has been taken by the Hon'ble Apex court in "National Small Industries Corp. Ltd. vs. Harmeet Singh Paintal and Anr., 2010 (2) SCALE 372". Relevant para of the judgment is reproduced below: "24. ... if the accused is not one of the persons who falls under the category of "persons who are responsible to the company for the conduct of the business of the company" then merely by stating that "he was incharge of the business of the company" or by stating that "he was incharge of day to day management of the company" or by stating that "he was incharge of, and was responsible to the company for the conduct of the business of the company", he can not be made vicariously liable under Section 141(1) of the Act. To put it clear that for making a person liable under Section 141(2), the mechanical repetition of the requirements under Section 141(1) will be of no assistance, but there should be necessary averments in the complaint as to how and in what manner the accused was guilty of consent and connivance or negligence and therefore, responsible under Subsection (2) of Section 141 of the Act". N) The complainant was required to prove its case beyond reasonable doubt. The burden of proof in a criminal trial never shifts and it is always the burden of the ROC vs JK Singh etc. CC No.1317/3 15 of 21 prosecution to prove its case beyond reasonable doubt. It is held in the following case laws: "JT 2001 (4) SC 92".
"10. The presumption under Section 4(1) in reference to an offence under section 161 IPC is, as already noticed, a rebuttable presumption. The only evidence led in this case is to establish charge under Section 161 IPC, of appellant having received gratification other than legal reward, as a motive or reward for doing or forbearing to do any official act in the exercise of his official functions to favour the prime mover is the statement of the contractor, PW2. As already noticed, the contractor has given different versions of the occurance in his statement before the vigilance wing and in the court. At the trial, he has not supported the prosecution case fully. On the other hand, the explanation given by the appellant both during the crossexamination of prosecution witnesses and in his own statement, recorded under section 313 Cr.P.C. is quite plausible. Where an accused sets up a defence or offers an explanation, it is well settled that he is not required to prove his defence beyond a reasonable doubt but only by preponderance of probabilities. On prosecution's own showing, in this case, that onus can be said to have been duly discharged by the appellant, more particularly, when the prosecution did not lead any evidence to show as to who made the payment to Kamalasanan who had removed the bump from the road which bump was otherwise required to be removed by PW2 for getting refund of his earnest money and security. May be, the allegation that the appellant accepted the amount as bribe to process his refund application is true but the court can not convict an accused only on such probability or suspicion, howsoever strong it may be. 'Between may be true and must be true, there is a long distance to travel' and in this case the prosecution has failed to travel that distance through any unimpeachable evidence. The case of the prosecution has not been established beyond a reasonable doubt".
2003 [3] JCC 1358 "It is no doubt a matter of regret a foul coldblooded and cruel murder should go unpunished. There may also be an element of truth in the prosecution story against the accused. Considered as a whole, the prosecution story may be true; but between 'may be true' and must be true' there is inevitably a long distance to travel and the whole of this distance must be covered by the prosecution by legal, reliable and unimpeachable evidence before an accused can be convicted." 2007(1) Crimes 181 (SC)
15..."153. A close analysis of this decision would show that the following conditions must be fulfilled before a case against an accused can be said to be fully established.
14. The circumstances from which the conclusion of guilt is to be drawn ROC vs JK Singh etc. CC No.1317/3 16 of 21 should be fully established.
It may be noted here that this Court indicated that the circumstances concerned "must or should" and not "may be" established. There is not only a grammatical but a legal distinction between "may be proved" and must be or should be proved" as was held by this court in Shivaji Sahabrao Bobade vs. State of Maharashtra where the observations were made:[SCC para 19, p.807: SCC (Cri) p.1047] "Certainly, it is a primary principle that the accused must be not merely may be guilty before a court can convict and the mental distance between 'may be' and 'must be' is long and divides vague conjectures from sure conclusions".
O)Thus, it is clear that for holding a director responsible for a criminal offence, it has to be established by the prosecution that he/she was the person incharge for the day to day affairs of the firm during the relevant time. It is also clear from the law laid down by the Hon'ble Supreme Court that a partner/director cannot be made personally liable for the offences committed on behalf of the firm/company and the criminal liability can not be extended to another partner/director merely by virtue of his being partner in the firm/company unless something concrete is proved on record to show that he/she was the person incharge and responsible for the conduct of the business of the firm/company. Thus, in view of the aforesaid discussions, it is held that accused no.1 JK Singh, no.3 DK Singh and no.4 Natasha Singh are not liable for any offence allegedly committed on behalf of the company. Accordingly, accused no.1, 3 and 4 are acquitted of charges leveled against them. Their bail bonds stand cancelled. Surety stands discharged. Security, if any, be returned to the rightful claimant after endorsement cancelled thereupon. Fresh bail bond in the sum of Rs.10,000/ furnished by JK Singh, DK Singh and Natasha Singh in terms of section 437A Cr.P.C. and accepted for a period of six ROC vs JK Singh etc. CC No.1317/3 17 of 21 months.
P) There is no dispute that no declaration of dividend was made by the company. Now let us discuss the case of accused Rita Singh on merit. It is argued that that dividends have been paid to the respective shareholders but record qua the same could not be produced as there was a fire incident in the company in the year 1995 due to which all the documents were destroyed which included the register maintained by the company for distribution of dividends. However, this plea of the accused does not find any support from the testimony of defence witnesses. There are contradictions in the testimony of DW1 and DW2. In his cross examination, DW1 has categorically stated that the company does not have any acknowledgment about the payment/distribution of dividend to the shareholders of the company. He also admitted that fire did not take place at the registered office i.e H1, Zamrudpur, New Delhi. DW1 also stated in his cross examination that no dividend was declared for the year 199495. On the other hand, DW2 testified that there was a fire incident in the company in the year 1995 wherein all the documents pertaining to distribution was destroyed. All these facts create doubt over the testimony of DW1 and DW2. Q) So far as the fact of catching fire in the office of the company is concerned, this plea of the accused appears to have been taken just for the sake of defence. In para no.8 of the reply Ex.PW2/6, it is stated by the accused that in terms of section 207 of the Act, the dividend warrant/cheques for the year 199495 had been dispatched to the individual shareholders who were eligible ROC vs JK Singh etc. CC No.1317/3 18 of 21 for the same but not even a single document has been placed or proved on record to in support of claim and contention. Even if there was an incident of catching fire in the office, accused may prove the fact regarding payment of dividend amount which was alleged to have been paid through dividend warrant/cheques, by calling/examining the concerned bank official in which Special Dividend Account of the company was running. Further, the plea of the accused that dividend warrant/cheques for the year 199495 had been dispatched, appears to be incorrect. In the very said para 8 of the reply Ex.PW2/6, accused have admitted that in terms of section 205A of the Act, the company was/is required to transfer the unpaid dividend to Special Dividend Account within 7 days from the date of expiry of the period. However, from the bare perusal of reply, it appears that no such account was opened or being maintained on behalf of the company. In para no.8 of the reply, it is stated that during the fire in 1995 various secretariat documents/registers were totally destroyed and subsequently there was a dispute in distribution of dividend. The said fact was informed to the shareholders of the Company at the time of dispatching dividend warrants. Due to nonavailability of documents/register, it was very difficult for them to reconcile the dividend account. In these circumstances, it was not possible at that point of time to determine/access the amount of unpaid dividend and deposit the same in Special Dividend Account. Thus, in one way or the other, non payment/distribution of dividend to the respective shareholders eligible for the same, appears to have been admitted by the accused.
ROC vs JK Singh etc. CC No.1317/3 19 of 21 R) It is further stated that income tax raid was conducted in the company in the year 1997 and all the documents/records were seized by the income tax authority. In this regard reliance is placed upon the document/panchma Ex.DW2/1 and Ex.DW2/2 proved by DW2. However, bare perusal of panchnama Ex.DW2/1 and DW2 reveals that no such register/record regarding payment/distribution of dividend to shareholders was seized by the income tax department. Moreover, it has not been made clear that whether these documents are still in possession of income tax department or not or it was not available even at the time of leading of defence evidence. S) So far as nonexamination of shareholders are concerned, it is not necessary to examine the shareholders to prove the allegations as when it is admitted that dividend was declared by the company, the onus is upon the accused to disprove the allegation. If the prosecution has not examined any shareholders, accused ought to have disclose the details of total number of shareholders of the company, number of shareholders to whom the dividend amount was paid by the company, mode of payment of amount of dividend, if any, paid to the shareholders by the company, number shareholders left unpaid and if dividend amount was paid to all shareholders, accused ought to have brought some documents on record or to examine any official from the concerned bank in which Special Dividend Account was running for the purpose or to examine the shareholders/obtain NOC from the shareholders that dividend amounts have been paid to them. But accused failed to do so. From reply Ex.PW2/6, testimony of defence witnesses and statement of accused recorded u/s 313 ROC vs JK Singh etc. CC No.1317/3 20 of 21 Cr.P.C, itself it stands proved that the company had failed to pay/distribute the dividend amount to the respective shareholders eligible for the same within stipulated period. The defence taken by the accused that due to fire incident in the office of the company and due to income tax raid at registered office of company appears to be an afterthought. So far as details of allegation of commission of offence in notice is concerned, law does not even contemplate framing of formal notice u/s 251 Cr.P.C and present case is not a warrant case. T) Thus, in view of the aforesaid discussions and facts and circumstance of the case, this court is of the considered opinion that the prosecution has proved its case against the accused beyond reasonable doubt. Consequently, it is held that accused failed to pay/distribute the dividend amount to the respective shareholders eligible for the same within stipulated period. Accordingly, accused no.2 Rita Singh is held guilty for the offence punishable u/s 207 of Companies Act. Let accused be heard on sentence.
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 6th June, 2014 (Total number of page 21) (One spare copy attached) ROC vs JK Singh etc. CC No.1317/3 21 of 21