Gujarat High Court
Vadibhai M Patel vs Registrar Of Companies on 16 June, 2017
Author: Biren Vaishnav
Bench: Biren Vaishnav
R/SCR.A/2841/2011 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CRIMINAL APPLICATION NO. 2841 of 2011
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of
the judgment ?
4 Whether this case involves a substantial question of
law as to the interpretation of the Constitution of
India or any order made thereunder ?
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VADIBHAI M PATEL....Applicant(s)
Versus
REGISTRAR OF COMPANIES....Respondent(s)
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Appearance:
MR NAVIN K PAHWA, ADVOCATE for the Applicant(s) No. 1
MR ANKIT SHAH, ADVOCATE for the Respondent(s) No. 1
MR KALPESH N SHASTRI, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 16/06/2017
ORAL JUDGMENT
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1. By way of this petition, the petitioner has prayed for an appropriate writ or a direction for quashing and setting aside the judgement and order dated 30.07.2011 passed by the learned City Sessions Judge, Ahmedabad in Criminal Revision Application No. 37 of 2008.
2. The facts giving rise to the present petition are as under:
2.1 The petitioner was a promoter and director of Marine Cargo Limited. On 19.01.1993, a prospectus was issued for a public issue of 2,50,000 equity shares of Rs. 10/- each. The petitioner was shown as a signatory to the prospectus in the capacity of promoter director. In the prospectus, it was stated that the project of Roro Ferry Services is expected to be operational in 1993. That the Roro Ferry services was a new kind of a project and involved a risk factor was also highlighted in the said prospectus. In view of the fact that it was being implemented in India for the first time, some permissions for such project were pending. For the purposes of the project, expenses were incurred by the Company and from 1990 to 1993-94 all accounts were submitted to the office of Registrar of Companies. The present petitioner who was Director at the time the prospectus was issued, subsequently resigned in August 1994. The resignation was informed as required under the statutory provisions by filling up Form 32 and sending it to the Registrar of Companies.
2.2 Almost nine years after the issuance of the prospectus, on 17.10.2002, on the basis of the complaint by the Registrar of Companies, a Criminal Case being 323 of 2002 was filed for violation of Sections 63, 68 and 628 of the Companies Act Page 2 of 10 HC-NIC Page 2 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT ('the Act' for short) wherein the petitioner was arraigned as accused no. 1. Several allegations were made in the complaint namely (a) that the signatories to the prospectus being directors had failed to implement the project and therefore failed to fulfill their promise (b) that the public issue was made in a manner which was deceptive and inducing the public to subscribe to shares and therefore the present petitioners and remaining six accused were alleged to have committed default under Sections 63, 68 and 628 of the Act.
2.3 Pursuant to the complaint so filed, the petitioner moved an application on 19.06.2007 for discharging him in view of the fact that he had resigned way back in the year 1994. On an application so made, the learned Additional Chief Metropolitan Magistrate, Ahmedabad by an order dated 22.01.2008 accepted the request of the petitioner that the implementation of the project was not during the tenure of the directorship of the petitioner and that there was sufficient material to show that no misstatement or misrepresentation was made so as to indicate invocation of provisions of Sections 63, 68 and 628 of the Act. By a reasoned order, therefore, the Magistrate discharged the petitioner.
2.4 Aggrieved by the order of discharge, the Registrar of Companies filed Revision before the learned Additional Sessions Judge. In the petition being Criminal Revision Application No. 37 of 2008, the learned Sessions Judge reversed the order discharging the petitioner and held that the alleged offence was within the period of limitation and therefore agreed with the contention of the Registrar of Companies that the complaint was not time barred and Page 3 of 10 HC-NIC Page 3 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT therefore the petitioner as a Director was liable to prosecution for the breach of the Sections invoked under the Act.
Aggrieved by the said order, the present petition has been filed.
3. Ms. Sangeeta Pahwa, learned advocate for the petitioner has contended that for a public issue and prospectus which were issued on 19.01.1993, more than nine years after the issuance of such prospectus, the machinery under the Act has invoked criminal liability of the petitioner. It is further contended by Ms. Pahwa that in view of the fact that the petitioner had resigned in August 1994 and the project had begun as per the audited balance sheet it was not the responsibility of the petitioner to complete the project and therefore he could not have been held liable for breach of provisions under the Act invoked by the complainant. It was further contended that while the petitioner was a Director, the project was already initiated and sufficient funds were spent for the implementation of the project and therefore no case was made out to invoke the provisions for criminal liability of the petitioner. The further contention of Ms. Pahwa was that the provisions of Section 63 of the Act were akin to the provisions of Section 245 of the Criminal Procedure Code and when no criminal liability prima facie was found against the petitioners no action should be taken so as to see that the petitioner faces criminal trial.
3.1 Ms. Pahwa contended that considering Section 468 of the Criminal Procedure Code the order of the learned Sessions Judge was bad. There was bar of limitation. Under section 63 of the Act, according to Mrs. Pahwa, the maximum Page 4 of 10 HC-NIC Page 4 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT punishment was two years wherein for the offence under section 68 of the Act the maximum punishment was five years. In accordance with the provisions of Section 468 of Cr.P.C, the limitation provided under the said section is three years when the offence is punishable with imprisonment for a term of one year but not exceeding three years. Drawing my attention to the provisions of Section 468 of Cr.P.C, Ms. Pahwa contended that on reading the provision of Section 468 of the Cr.P.C, it is apparent that the limitation that is prescribed is that when the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years, it is three years. In the present case, the complaint has been made in 2002 for an alleged offence pursuant to a misstatement in the prospectus which was released in 1993, apparently therefore the complaint is barred.
3.2 Ms. Pahwa, in support of her submissions, has relied upon the following decisions:
(I) Hafez Rustom Dalal vs. Registrar of Companies in Company Application No. 51 of 2003 with Company Application No. 52 of 2003 (II) Ramkrishna Raja vs. Registrar of Companies reported in [2005] 123 Comp Cas 319(Mad) (III) Hemendra Prasad Nag Chowdary and Others vs Registrar of Companies and Another reported in [2010] 158 Comp Cas 21 (AP) (IV) G. Ramesh and Others vs. Registrar of Companies reported in [2007] 135 Comp Cas 635 (Mad) Page 5 of 10 HC-NIC Page 5 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT
4. Mr. Ankit Shah, learned advocate appearing for respondent no. 1- Registrar of Companies has vehemently supported the findings of the learned Sessions Judge and contended that this court in its extraordinary jurisdiction should not reverse the order passed by the learned Sessions Judge when apparently there is no error of law and fact.
5. While admitting the petition, this court had on 25.01.2012 passed the following order:
"Heard the learned advocates for the parties. Upon consideration of the submissions made by the learned advocates for the parties and the case-law relied upon by the learned advocate for the applicant and annexed with the petition at Annexure "G" from page 83 onwards, the matter deserves consideration in the context of interpretation of Section 633 of the Companies Act, 1956 and the Magistrate exercising powers thereunder as well as under the Code of Criminal Procedure, 1973.
Rule.
Ad-interim relief granted earlier to continue as interim relief till final disposal of the application."
6. It is an admitted fact that the petitioner resigned as the Director of the Company in August 1994 which was duly informed as per the statutory procedures under the Act. The MOU signed by the petitioner and other Directors giving responsibility to the newly appointed Directors is also accepted by the shareholders. It appears that after a period of about nine years after the issuance of prospectus the complaint is filed. In this regard it shall be relevant to peruse the decision of this court in the case of Hafez Rustom Dalal (supra) wherein this court has held that merely because Page 6 of 10 HC-NIC Page 6 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT project is not completed, there is no offence and till the specific allegation is made for non compliance of Sections 63, 68 and 628 of the Act, the complaint under such provision has no substance. In the case of Hafez Rustom Dalal vs. Registrar of Companies in Company Application No. 51 of 2003 with Company Application No. 52 of 2003 where the case was regarding invocation of provisions of section 633 of the Act and where it was alleged that the signatories of the prospectus had made false and deceptive and misleading statements, this court after a detailed discussion on the facts and circumstances has held as under:
"28. The action of the opponent is not sustainable even on the ground that the Company in question is not a vanishing company and still the notices were issued on the applicants on assumption that the Company is a vanishing company. The Company does not fall in any of the criterias which are laid down for treating the Company as a vanishing company. The applicants have demonstrated before this Court in their pleadings that the applicants' name was not included in the list of Vanishing companies and there was no allegation against the Company that it did not comply with the listing requirement for two years or that it did not submit the required report to Regional Stock Exchange or that it did not correspond with Regional Stock Exchanges for two years or that it was not available at its Regd. office at the time of Stock Exchange Inspection. Since the Company is not a Vanishing Company and yet the action was sought to be taken against the Directors and/or Promoters of the Company on that basis, the said action is not justifiable on that count.
29. The action is unsustainable also on the ground of delay and latches as admittedly, the Prospectus was issued by the Company way back on 08.05.1992 and the notice under reference was issued by the opponent on 01.06.2002 i.e. after Page 7 of 10 HC-NIC Page 7 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT more than ten years. Even if one takes the view that law of limitation is not applicable to the proposed action, the same is clearly barred by delay and latches and the Court is certainly reluctant to take cognizance of alleged defaults after the expiry of period of more than ten years."
7. Having considered the facts and circumstances of the case referred to hereinabove relied upon by learned advocate for the petitioner, it is apparent that in the present facts too, for a prospectus issued in the year 1993, a complaint has been filed in the year 2002. Apparently, therefore, the complaint is hopelessly time barred and therefore on the facts of the case which are identical to the present one on that ground alone the contention of the petitioner deserves to be accepted.
8. Ms. Pahwa also relied upon a judgement of the Madras High Court in the case of Ramkrishna Raja vs. Registrar of Companies reported in [2005] 123 Comp Cas 319(Mad) and in the case of Hemendra Prasad Nag Chowdary and Others vs Registrar of Companies and Another reported in [2010] 158 Comp Cas 21 (AP), in cases where Sections 63, 68 and 628 of the Act were invoked on the ground that misstatement and false statements were made in the prospectus pursuant to which complaint was filed, the Madras and Andhra Pradesh High Courts respectively in the aforesaid cases, relying on the judgement of the Supreme Court in the case of State of Haryana vs. Bhajan Lal reported in [1992] Supp (1) SCC 335 which laid down the parameters for the court to enable it to exercise jurisdiction under section 482 of the Code held that this was a case where a legal bar operated in the case of the petitioner and therefore the complaint was quashed.
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R/SCR.A/2841/2011 JUDGMENT
9. In the case of Hemendra Prasad Nag (supra), the Andhra Pradesh High Court observed as under:
"...In the cases on hand, the prospectus was published on June 14, 1990 and the letter of offer was given on dated May 16, 1992. If any false statement or misstatement occurred in the prospectus or the letter of offer, then the first respondent should have filed complaints in the lower court within three years thereof. Now the first respondent wants to take shelter under section 469(1)(b) of the Code of Criminal Procedure and also the letter dated July 12, 2002, of the Regional Director, Southern Region, Chennai. Until the letter dated July 12, 2002, of the Regional Director, the first respondnet, viz., the Registrar of Companies, Hyderabad was sleeping over the matter and it is only after the Regional Director poked, the Registrar of Companies, Hyderabad woke up and filed the complaints in the lower court in August, 2003. Therefore, the first respondent wants this court to reckon the starting of period of limitation from July 12, 2002. In my considered opinion, the first respondent cannot take benefit under section 469(1)(b) of the Code of Criminal Procedure...."
9.1 The facts on hand are similar to the one in the case of Hemendra Prasad Nag Chowdary (supra). Even in the case of G. Ramesh and Others vs. Registrar of Companies reported in [2007] 135 Comp Cas 635 (Mad), the Madras High Court has in a case where the director had resigned observed that when a Director had resigned, he cannot be held responsible for the alleged omissions.
10. Having perused the judgements cited by learned advocate for the petitioner, in my view the issue therefore Page 9 of 10 HC-NIC Page 9 of 10 Created On Fri Aug 18 22:49:11 IST 2017 R/SCR.A/2841/2011 JUDGMENT stands concluded by the judgements relied upon by her. In a prospectus which was issued on 19.01.1993, nine years after the issuance of the prospectus and eight years after the Director had resigned in 1994, the Registrar of Companies through a complaint filed in January 2002 has sought to implicate the petitioner for offences under sections 63, 68 and 628 of the Act. Accordingly therefore on the twin principle of (1) that the complaint was hopelessly time barred that (2) that the director had resigned in 1994 after even having taken the steps to implement the project in his tenure, the complaint so lodged deserves to be quashed.
11. In view of the aforesaid reasons, the order dated 30.07.2011 passed in Criminal Revision Application No. 37 of 2008 under Ex. 9 by the learned City Sessions Judge, Ahmedabad is quashed and set aside qua the present petitioner. Petition is allowed accordingly. Rule is made absolute.
(BIREN VAISHNAV, J.) divya Page 10 of 10 HC-NIC Page 10 of 10 Created On Fri Aug 18 22:49:11 IST 2017