Delhi District Court
The Registrar Of Companies vs Shree Bankey Behari Exports Ltd on 24 August, 2023
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IN THE COURT OF ANURAG THAKUR
ADDL. CHIEF METROPOLITAN MAGISTRATE (Spl. Acts)
CENTRAL, TIS HAZARI COURTS, DELHI
Re: Registrar of Companies vs. Shree Bankey Behari Exports Limited & Ors.
U/s 204(4) of The Companies Act, 2013
CC No. : 2178/2021
CNR No. : DLCT02-005067-2021
Date of Institution : 16.08.2021
Name of the complainant : The Registrar of Companies,
its registered office NCT of Delhi & Haryana,
IFCI Tower, 4th Floor, 61,
Nehru Place, New Delhi.
Through: Mr. A.K.Singh (AROC)
Name of accused : (i) Shree Bankey Behari Exports Ltd.
his parentage and residence Regd. Address: 2647, Naya Bazar,
New Delhi-110006
(Proceedings stayed qua the company)
(ii) Raj Kumar
S/o Sh. Amar Chand Gupta,
R/o PU-105, Pitampura, Delhi-110088
(iii) Amar Chand Gupta
S/o Sh. Telu Ram,
R/o PU-105, Pitampura, Delhi-110088
(iv) Ram Lal Gupta
S/o Sh. Amar Chand Gupta,
R/o PU-105, Pitampura, Delhi-110088
Offence complained of : U/s 204 (4) of The Companies Act, 2013
Date of Judgment : 24.08.2023
Plea of accused : Not guilty
Final Judgment : Accused no. 2, 3 and 4 convicted.
Brief facts and reasons for decision of the case:-
1. The factual matrix of the case of complainant is that Shree Bankey Behari
Exports Limited is a company incorporated under the extant Companies Act
and accused no. 2, 3 and 4 were Directors of accused no. 1 and they were in
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charge of day to day affairs of accused no. 1 and were responsible for
compliance of the various provisions of The Companies Act, 2013 (hereinafter
referred to as 'The Act'). The gravamen of accusation against the accused
persons is that accused no. 1 company was under obligation to get conducted a
Secretarial Audit and to file the Secretarial Audit Report in compliance of sub-
section (1) of Section 204 of The Act, for the financial year ended on
31.03.2017, which it had failed to do. Hence, due to the said non-compliance,
the present complaint was filed alleging commission of offence by accused
persons under sub-section (4) of Section 204 of The Act.
2. The present complaint was filed by Sh. A.K.Singh, the then Assistant Registrar
of Companies, NCT of Delhi & Haryana, on behalf of the complainant. Since
the complaint was filed by a public servant while discharging his duties as a
public servant and in his official capacity, so his examination under Section
200 Cr.P.C was dispensed with in terms of proviso (a) of Section 200 Cr.P.C.
Cognizance of offence was taken and the accused were summoned vide order
dated 26.10.2021. Upon appearance, copies were supplied to the accused no. 2,
3 & 4. Accused no. 2, 3 & 4 were the only Directors of accused no. 1 and they
decided amongst themselves that accused no. 3 Amar Chand Gupta shall
represent accused no. 1 during trial. Notice of accusation for contravention of
provisions of Section 204 of The Act punishable under Section 204(4) of The
Act was served upon the accused no. 1 to 4 on 28.02.2023 to which they
pleaded not guilty and claimed trial.
3. Thereafter, the complainant was given opportunity to examine its witnesses to
substantiate the allegations made against the accused persons. The complainant
examined only one witness i.e. CW-1 Sh. A.K. Singh in post notice evidence.
The complainant evidence was closed on 29.05.2023. The examination of
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accused persons u/s 313 Cr.P.C concluded on 12.07.2023, wherein they stated
that they are victims of circumstances as the accused no.1 was declared NPA
and its assets were attached and sold by the banks. They also submitted that
the non-compliance, if any, was beyond their control and they should be
excused for any inadvertence on their part. The accused persons chose not to
lead defence evidence. Final arguments in the matter were heard on 21.08.2023
and on that same day, proceedings qua accused no. 1 were stayed as order
dated 13.12.2022 passed by NCLT, Principal Bench, New Delhi, was placed on
record by complainant which showed that accused no. 1 was in CIRP and a
moratorium in terms of Section 14 of Insolveny and Bankruptcy Code, 2016
was in force qua it.
4. Ld. Company prosecutor submitted that cogent documentary evidence has been
tendered by complainant, he claimed that the oral testimony of CW-1 is
credible, consistent and trustworthy as the same had withstood the rigour of
cross-examination. He stated that the case against the accused persons is
proved beyond reasonable doubt so they be convicted for the offence
punishable under Section 204(4) of The Act.
5. Per-contra, Ld. defence counsel submitted that the accused no. 1 is in CIRP, so
the proceedings against it cannot continue. He also submitted that the
complaint is not filed within the prescribed period of limitation. He submitted
that the show cause notice issued to the accused persons was not received by
them. He stated that the circumstances were beyond the control of his clients in
the year 2017, so they cannot be held accountable for any lapse on behalf of
the complainant. He claimed that the case against the accused persons is not
proved at all, so they are entitled to be acquitted of the offence punishable u/s
204(4) of The Act.
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6. I have cogitated over the rival submissions and perused the case file. It is
worthwhile to reproduce in verbatim Section 397 of The Act which reads as
under:-
397. Admissibility of certain documents as evidence.-Notwithstanding anything
contained in any other law for the time being in force, any document reproducing or
derived from returns and documents filed by a company with the Registrar on paper
or in electronic form or stored on any electronic data storage device or computer
readable media by the Registrar, and authenticated by the Registrar or any other
officer empowered by the Central Government in such manner as may be
prescribed, shall be deemed to be a document for the purposes of this Act and the
rules made there under and shall be admissible in any proceedings there under
without further proof or production of the original as evidence of any contents of the
original or of any fact stated therein of which direct evidence is admissible.
This section makes a departure from the rules of admissibility as laid down in
The Indian Evidence Act, 1872 as u/s 397 of The Act, (i) the Registrar of
Companies can authenticate any document filed by the company with it and (ii)
the ROC is also invested with the power to authenticate any document that is
derived from the returns and documents filed by company. In both cases the
authenticated documents are admissible per se. Moreover, the non-obstante
clause in this section also means that any print out of any electronic record
authenticated by ROC which comes under purview of section 397 of The Act
does not require a corresponding certificate u/s 65B of Indian Evidence Act,
1872. As per section 2(75) of The Act, Registrar includes Additional Registrar,
Joint Registrar, Deputy Registrar or Assistant Registrar. Section 204 of The Act
is reproduced below:-
204. Secretarial audit for bigger companies.-(1) Every listed company and a
company belonging to other class of companies as may be prescribed shall annex
with its Board's report made in terms of sub-section (3) of section 134, a secretarial
audit report, given by a company secretary in practice, in such form as may be
prescribed.
(2) It shall be the duty of the company to give all assistance and facilities to the
company secretary in practice, for auditing the secretarial and related records of the
company.
(3) The Board of Directors, in their report made in terms of sub-section (3) of
section 134, shall explain in full any qualification or observation or other remarks
made by the company secretary in practice in his report under sub-section (1).
(4) If a company or any officer of the company or the company secretary in practice,
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contravenes the provisions of this section, the company, every officer of the
company or the company secretary in practice, who is in default, shall be punishable
with fine which shall not be less than one lakh rupees but which may extend to five
lakh rupees.
Rule 9 of Companies (Appointment and Remuneration of Managerial
Personnel), Rules, 2014, prescribes the other class of companies which are
required to get Secretarial Audit conducted and to file a Secretarial Audit
Report in terms of Section 204(1) of The Act. Rule 9 reads as follows:-
9. Secretarial Audit Report.-(1)For the purposes of sub-section (1) of section 204,
the other class of companies shall be as under-
(a) everypublic company having a paid-up share capital offifty crore rupees or more;
or
(b) every public company havinga turnover oftwo hundred fifty crore rupees or
more.
(2) The format of the Secretarial Audit Report shall be in Form No.MR.3.
It is evident from perusal of Section 204 of The Act and Rule 9 of Companies
(Appointment and Remuneration of Managerial Personnel), Rules, 2014, that
(i) listed company, (ii) every public company having a paid up capital of fifty
crore rupees or more, (iii) every public company having a turn-over of two
hundred fifty crore rupees or more are required to get the Secretarial Audit
conducted and to file a Secretarial Audit Report. My observation on the facts
in issue are delineated hereinafter.
7. CW-1 Sh. Arun Kumar Singh, Assistant Registrar of Companies, testified that
accused no. 1 company was registered with the ROC, NCT of Delhi & Haryana
since 1994. The master data of accused no.1 company evidencing the same was
exhibited as Ex.CW1/1. It showed that the accused no. 2 to 4 were the
Directors of accused no. 1 in the year 2017 i.e. the time period of alleged
default. Ex.CW1/1 is duly certified by AROC Sh. A.K.Singh, therefore, the
same is admissible document in term of Section 397 of The Act. Similarly, the
signatory details of accused no.1 company evidencing the directorship of
accused no. 2 to 4 Ex. CW.1/2 was also certified to be true by CW-1, so this
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document is also admissible. This document also confirms that accused no. 2
to 4 were the Directors of accused no. 1 in the year 2017. A further perusal of
Ex.CW1/1 shows that the paid up capital of accused no. 1 company was Rs.
1,91,00,00,000/-. Hence, as per Rule 9 of Companies (Appointment and
Remuneration of Managerial Personnel), Rules, 2014, read with Section 204 of
The Act, the accused no. 1 was required to file a Secretarial Audit Report along
with the report of its Board of Directors.
8. CW-1 categorically testified that the requisite Secretarial Audit Report for FY
2016-17 was not attached with the Board's Report by accused no. 1. A
suggestion was given to CW-1 during his cross-examination that the Secretarial
Audit Report was filed with the ROC but this suggestion was not accepted by
the witness. He clarified that the Secretarial Audit Report for FY 2016-17 was
not filed even till the filing of the complaint. He denied the suggestion that the
Secretarial Audit Report filed by accused no. 1 was intentionally withheld by
the complainant and was deliberately not filed in this court.
9. Section 204(4) of The Act makes every officer of the company who is in
default to be liable for punishment for contravention of Section 204(1) of The
Act. The expression 'officer who is in default' is defined in Section 2(60) of
The Act. The accused no. 2 to 4 are covered in Section 2(60)(iii) of The Act
which makes all the directors of a company liable for the acts of the company.
From perusal of entire material available on record, it can be safely concluded
that Section 204(1) of The Act was violated by accused no. 1 and accused no. 2
to 4 were responsible for this violation.
10.The last issue left for consideration is the issue of limitation for filing the
present complaint. The offence u/s 204(4) of The Act is punishable with fine
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only, so in terms of Section 468(2)(a) Cr.P.C, the limitation for filing a
complaint is six months. The limitation period is to be reckoned in terms of
Section 469 Cr.P.C. It appears that this lapse of not filing the Secretarial Audit
Report was first discovered by Office of the Director General Corporate
Affairs, Ministry of Corporate Affairs, which issued a show cause notice dated
04.11.2019 to accused no.1. The information qua this offence first came to
knowledge of complainant when it received letter No.3/106/2020-CL-II(NR)
dated 13.03.2020 in its office. Assuming arguendo that the ROC received the
letter dated 13.03.2020 on that very day itself then the ROC could have
ordinarily made the complaint latest by 14.09.2020 excluding the first day of
limitation i.e. 14.03.2020. However, in SUO MOTU WRIT PETITION (C)
NO.3 OF 2020 disposed of on 10.01.2022, the Apex Court excluded the entire
period from 15.03.2020 till 28.02.2022 for computing the limitation for filing
of complaints. Since the complaint was filed in the year 2021, the same is held
to be filed within the prescribed period of limitation and no delay had occurred
in filing of the complaint.
11.So far as the reckoning of knowledge of violation by ROC from 13.03.2020 is
concerned, the same flows from the decision of the Delhi High Court in
Sanjay Suri & Ors. v. State & Anr. Crl.M.C. 531/2009 decided on
29.01.2010, wherein it observed as under:-
19. As against this, the learned counsel for the respondent has referred to decision
of Kerala High Court in Thomas Philip and Ors. Vs. Assistant of Registrar of Companies & Anr. 2006 (133) Company Cases, 842. In the case before Kerala High Court, a complaint was filed on October, 24, 2001 under Section 628 of Companies Act, 1956 alleging fictitious entries in the books of accounts and Balance Sheet of a company for the period 1995-1996. The petitioners, directors of the Company, filed a petition under Section 482 of the Code of Criminal Procedure, contending that the complaint was barred by limitation since the Balance Sheet was filed on December 24, 1996. The High Court considered the decision of Madras High Court in the case of H.C. Kothari (supra), but did not agree with the view taken in that case and preferred to go by the view taken by Andhra Pradesh High Court in Mishra Dhathu Nigam Ltd. vs. State, 1998 (92) Company Cases, CC No. 2178/2021 ROC vs. Shree Bankey Behari Exports Ltd. & Ors.
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730. During the course of judgment, the High Court observed that there may be patent as well as latent offences revealed from the Balance Sheet and that at least regarding latent offences, merely because a Balance Sheet comes into the hands of the Registrar, it cannot be assumed that the Registrar had come to know of all the offences revealed on a vetting of the Balance Sheet. The learned counsel for the petitioners, before the High Court, relied upon Regulation 17 of Companies Act to contend that Registrar, on receipt of a document like Balance Sheet, is required to examine the document or cause it to be examined and which further stipulates that if there be any defect or incompleteness in the document, it has to be returned within a period of 15 days. The High Court, however, felt that an offence like the one before it cannot be said to have come to the notice of the Registrar, actually or constructively, on the date when the Balance Sheet was delivered at his office, so as to hold that the period of limitation starts running from that date. It was noticed that Balance Sheets and Annexures thereto are usually voluminous documents and receipt of Balance Sheet or even a cursory perusal cannot and may not bring to the knowledge of the Registrar and his officials, information about the commission of the offence. The learned Judge of the High Court felt that detailed consideration and application of mind would be necessary and this was taken note of by law when it provided that limitation would start running only when commission of the offence is known to the person aggrieved. The apprehension of the petitioner that giving such an interpretation may enable the Registrar to file complaint at any time and claim that it had come to its knowledge only at a later date, the learned Judge of the High Court, inter alia, observed as under:
"The contention that if such an interpretation were placed on Section 469(1) (b) the complainants will be able to assert that the offence came to their knowledge only on a later point of time that suits them is disturbing. But the contra interpretation may result in graver injustice and prejudice. In an appropriate case the indictee will be able to contend and establish that the complainant did have actual knowledge or at least constructive knowledge about the offence and the period of limitation had started running from that day. That option will secure the interests of prevention of misuse of the provisions of Section 469(1)
(b). The Legislature advisedly has chosen to stipulate that in a case where the person aggrieved did not have knowledge of the commission of offence, not the date of offence but the date of knowledge of the offence alone must be reckoned as the date of commencement of limitation."
25. Even otherwise, in my view, it cannot be said that all the offences against Companies Act come to the knowledge of Registrar, on the date Balance Sheet or other relevant document is filed in his office. The number of companies, in our country, may be running into lakhs. It would be impractical and unrealistic to expect the Registrar or his office to carry out a detailed scrutiny and cross-checking of the Balance Sheets and other documents filed in his office, on the date the documents are filed or even soon thereafter. The Registrar does not possess the requisite infrastructure and manpower to carry out such an exercise. If he is to carry out a meticulous examination and verification of information provided in the Balance Sheet and other documents filed in his office, within a short period of say 10 or 15 days, he will require a huge infrastructure, including office space and CC No. 2178/2021 ROC vs. Shree Bankey Behari Exports Ltd. & Ors.
9 of 9 manpower, which no Government can provide to him. If the Court is to take a view that irrespective of infrastructural and other constraints of the Registrar, the offence is deemed to have come to his knowledge on the day the Balance Sheet or other document filed in his office or within a period of say 10- 15 days in terms of Regulation 17 of Companies Act, or any administrative instructions, the inevitable result would be that most of the persons, violating the provisions of Companies Act, would go scot-free on account of delay in filing of complaint of Registrar of Companies. If two views are possible, the Court must take the view which would advance the course of justice and discourage commission of offence such as contraventions of Companies Act. If the Directors, officers or employees of the company know that knowledge of offence would be attributed to Registrar of Companies from the date the Balance Sheet or other documents, as the case may be, is filed in his office, they would be encouraged to violate the provisions of the Act with impunity, since they would be knowing that it is neither possible nor practical for the Registrar or his office to come to know the offence committed by them, within a short period of filing of the documents in his office. Such a view, if taken, would only frustrate the legislative intent behind enactment of various penal provisions in the Companies Act and, therefore, should not be taken.
Thus, a distinction has been made between Patent (noticeable at once) offence and latent (noticeable on in depth scrutiny) offence. The offence alleged in the present case is a latent offence as it could have been discovered only upon in depth scrutiny of the filings. ROC was held to be a person aggrieved within the meaning of section 469(1)(b) Cr.P.C by Apex Court in Registrar of Companies v. Rajshree Sugar and Chemicals Limited AIR 2000 SC 1643. The period of limitation for filing the present complaint shall commence in terms of section 469(1)(b) Cr.P.C i.e. from the date ROC received knowledge of the offence and not from the date when the documents were uploaded on website of MCA for the same to become accessible to ROC. Consequently, accused no. 2 to 4 are hereby convicted for the offence punishable u/s 204(4) of The Act.
Announced in open court on this 24th August, 2023 ANURAG THAKUR ACMM (Spl. Acts), CENTRAL TIS HAZARI COURTS, DELHI This judgment consists of 9 pages and each and every page of this judgment is signed by me.
CC No. 2178/2021 ROC vs. Shree Bankey Behari Exports Ltd. & Ors.