Delhi District Court
Registrar Of Companies vs M/S Twenty First Century Finance Ltd. on 30 January, 2013
IN THE COURT OF SH. GORAKH NATH PANDEY
ADDL CHIEF METROPOLITAN MAGISTRATE (Spl. Acts): CENTRAL
TIS HAZARI COURTS, DELHI
Registrar of Companies vs M/s Twenty First Century Finance Ltd.
CC No.727/3/10
JUDGEMENT
(a)Serial no. of the case : 02401R0048052000
(b)Date of commission of offence : In the year 1998
(c)Name of complainant : Registrar of Companies,
NCT of Delhi & Haryana
(d)Name, parentage, residence: M/s Twenty First Century Finance Ltd.
having its registered office
at HI Zamudpur Community Centre,
Kailash Colony, New Delhi
1)Jitender Kumar Singh
2) Rita Singh
3) DK Singh
all r/o D3A, Satwari, Ansal Village,
New Delhi30
(e)Offence complained of/ proved : U/s 209A(8) of Companies Act, 1956
(f)Plea of accused : Pleaded not guilty
(g)Final order : Acquitted
(h)Date of such order : 30.01.13 Date of institution : 02.03.2000 Date of Reservation of Judgment : 14.01.13 Date of Pronouncement of Judgment : 30.01.13 Brief statement of the reasons for the decision:
1. The Registrar of Companies NCT of Delhi & Haryana (hereinafter called the complainant) filed the present complaint u/s 209A(8) of the Companies Act, 1956 (hereinafter to be called as Act) against the above mentioned accused persons alleging that M/s Twenty First Century Finance Limited (hereinafter to ROC vs M/s Twenty First Century Finance Ltd. 1 of 14 be called as company) is a company incorporated with the office of Registrar of Companies and accused no.1 to 3 are the officers in default of the company as per the particulars filed/available with the office of the complainant and is responsible for compliance to the provisions of section 209A(8) of the Companies Act, 1956.
2. As contended, in pursuance to letters dated 18.08.98 Sh. P.K. Bansal, the then Joint Director (Inspection), office of the Regional Director, Northern Region, Kanpur was empowered to carry out the inspection of the company. It is alleged that despite handing over of letter dated 03.09.98, 25.09.98 and issuance of letter dated 19.11.98 and 10.12.98 to the accused for inspection and in spite of best efforts of the inspecting officer, the company did not produce the books of accounts/vouchers and other important records, registers including statutory registers for the inspection. The accuseds being officers in default of the company have rendered themselves liable for the penal action as contemplated u/s 209A(8) of the Act. Accordingly a show cause notice for the aforesaid contravention was issued to the accused on 01.09.99 which evoked no response. It is stated that section 209A(8) provides that if default is made in complying with the provisions of this section, every officer of the company who is in default shall be liable with fine which shall not be less than five thousand rupees and also with imprisonment for a term not exceeding one year. Thereafter, present complaint was filed by the complainant against the accused persons for the aforesaid offence.
ROC vs M/s Twenty First Century Finance Ltd. 2 of 14
3. The accused was summoned and a notice u/s 251 Cr.P.C. was served upon the accuseds for the offence punishable u/s 209A(8) of the Act to which they pleaded not guilty and claimed trial.
4. In order to substantiate its allegations, the complainant examined three witnesses i.e Sh. S.L. Gandhi, JTA office of ROC as PW1, Sh. T.P. Shammi, the then Deputy Registrar of Companies as PW2 and Sh. P.K. Bansal, the then Joint Director (inspection) as PW3 who was empowered to conduct inspection of the company.
PW1 did not take part in any proceeding and deposed only on the basis of record. PW1 stated that company is duly registered with the office of ROC and accused no.1 to 3 are/were officers incharge and responsible for the affairs of the company of the company and proved on record copy of certificate of incorporation and copy of annual return Ex. PW1/2 regarding proof of directorship. PW1 further proved on record direction/sanction received in the office of ROC to launch prosecution against the accused company u/s 209 A vide letter Ex.PW1/3, show cause issued to accused Ex.PW1/4 and complaint Ex.PW1/5.
PW2 Sh. T.P. Shammi also did not participate in the inspection proceeding and simply filed the present complaint Ex.PW1/5 on the basis of inspection report Ex.PW2/A. PW2 reiterated the facts as mentioned in the complaint and deposed on the basis of record available with them.
PW3 Sh. P.K. Bansal also reiterated the facts of the complaint and ROC vs M/s Twenty First Century Finance Ltd. 3 of 14 deposed that despite issuance of letters and efforts accused failed to produce the relevant documents/records/books of accounts for the purpose of inspection. On being satisfied that there is contravention of section 209A of the Act, he prepared inspection report Ex.PW3/2 and submitted the same with complainant department.
5. The statement of accused persons were recorded u/s 313 read with section 281 Cr.P.C. whereby all three accused denied the allegations and stated that relevant documents could not be produced as the books of accounts and other records of the company had been seized by the Income Tax authorities pursuant to raids conducted in February, 1997 and the income tax proceedings continued till 2004 and the same fact was brought to the notice of ROC. They had not received any notice individually for production of requisite documents for inspection. The complainant did not make any request to income tax authorities for furnishing books of accounts for the relevant period. Accused no.2 Rita Singh also stated that she is/was not personally and individually responsible or liable for compliance of section 209A of the Act as she cased to be director of the company at the relevant time.
In support of claim and contentions, accuseds examined one Mr. SK Srivastava the then Assistant Manager (personal and Admin) with group company of the accused as DW1 and Mr. N.S. Parmeshwaran, then secretarial and accounts officers with the group company of accused as DW2. DW1 deposed that in February, 1997, income tax raid was conducted at the company premises and all books of accounts and registers were seized and ROC vs M/s Twenty First Century Finance Ltd. 4 of 14 taken into possession by the income tax authorities DW2 also deposed that the books of accounts and other record of the copany was not provided to the ROC because there was income tax raid sometime in 1997, all the employees left the company and there was no transaction in the company M/s Twenty First Century Finance Limited. DW2 also proved on record one document i.e. panchnama Ex.DW2/A in support of his claim and contention. Said punchnama was provided by the income tax authorities pursuant to the raids conducted in February, 1997.
6. I have heard the arguments on behalf of both the parties and gone through the relevant records. I have also gone through the relevant provisions of law and considered the judgments reported judgments reported as "Criminal Revision Case No.88 of 1988, P.Venkatakrishna Reddy vs Registrar of Companies, and Criminal Appeal No.231234 of 2002, Mousam Singha Roy and ors. Vs State of West Bengal". Learned defence counsel argued that present the relevant documents could not be produced as the same were seized/sealed during raid conducted by the income tax authorities. Learned company prosecutor, on the other hand, argued that all the documents of the company were not seized and only accounts books were seized.
7. Present complaint pertains to failure by the company and officers incharge to produce the books of accounts/records for inspection by the registrar or by such competent officer in terms of section 209A of the Companies Act. Section 209A of the Companies Act is reproduced as below: ROC vs M/s Twenty First Century Finance Ltd. 5 of 14 [Section 209A. Inspection of books of accounts, etc. of companies. (1) The books of account and other books and papers of every company shall be open to inspection during business hours i. by the Registrar, or ii. by such officer of the Government as may be authorized by the Central Government in this behalf;
iii. by such officers of the Securities of Exchange Board of India as may be authorized by it:
Provided that such inspection may be made without giving any previous notice to the company or any officer thereof:
Provided further that the inspection by the Securities and Exchange Board of India shall be made in respect of matters covered under sections referred to in section 55A] (2) It shall be the duty of every director, other officer or employe of the company to produce to the person making inspection under subsection (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify.
(3) It shall also be the duty of every director, other officer of employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give.
(4) The person making the inspection under this section may , during the course of inspection,
(i) make or cause to be made copies of books of accounts and other books and papers; or
(ii) place or cause to be placed any marks of identification thereon in token of the inspection having been made.
(5)Notwithstanding anything contained in any other law for the time being in force or any contract to the contrary, any person making an inspection under this section shall have the same powers as are vested in a civil Court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:
(i) the discovery and production of books of account and other documents, at such place and such time as may be specified by such person;
(ii) summoning and enforcing the attendance of persons and examining them on oath;
(iii) inspection of any books, registers and other documents of the company at any place.
(6) Where an inspection of the books of account and other books and papers of the company has been made under this section, the person making the ROC vs M/s Twenty First Century Finance Ltd. 6 of 14 inspection shall make a report of the Central Government [or the Securities and Exchange Board of India in respect of inspection made by its officers].
(7) Any officer authorized to make an inspection under this section shall have all the powers that Registrar has under this Act in relation to the making of inquiries.
(8) If default is made in complying with the provisions of this section, every officer of the company who is in default shall be punishable with fine which shall not be less than [fifty thousand rupees], and also with imprisonment for a term not exceeding one year.
(9) where a director or any other officer of a company has been convicted of an offence under this section he shall, on and form the date on which he is so convicted, be deemed to have vacated his office as such and on such vacation of office, shall be disqualified for holding such office in any company, for a period of five years such date.]
8. Section 209A of the Act provides that the books of accounts and other books and papers of every company shall be open to inspection during business hours by the registrar or by any such officer of the government as may be authorized by the central government in this regard. Subsection 2 of this section provides that it shall be the duty of every director, other officer or employee of the company to produce to the person making inspection, all such books of account and other books and papers of the company in his custody or control and to furnish them with any statement, information or explanation relating to the affairs of the company as the said person may require at such time and at such place as he may specify. Subsection (3) of this Act mentioned that it shall also be the duty of every director, other officer of employee of the company to give to the person making inspection under this section all assistance in connection with the inspection which the company may be reasonably expected to give. Subsection (8) of this Act contains that if default is made in complying with the provisions of this section, every officer ROC vs M/s Twenty First Century Finance Ltd. 7 of 14 of the company who is in default shall be punishable with fine which shall not be less than [fifty thousand rupees], and also with imprisonment for a term not exceeding one year.
9. It is not in dispute that the accused has failed to produce the relevant records despite services of the notices in this regard issued by the complainant. Rather the accused has taken a defence that the default in producing the record was due to the circumstance beyond the control of the accused. The testimony of the PW1 Mr. SL Gandhi is not much relevant for decision of this case, who produced the copy of annual return Ex.PW1/2, letter regarding receipt of direction/sanction with the office of ROC vide Ex.PW1/4 and Ex.PW1/3. PW1 deposed that he has not taken part personally in the inspection and he has no knowledge as to what transpired between the inspecting authority and the company at the time of inspection. PW2 also did take part in the inspection proceeding and simply filed the present complaint Ex.PW1/5 on the basis of inspection report Ex.PW2/A. The testimony of PW2 is in line with the contentions as made in the complaint. The witness further deposed that as the records were not produced this complaint is filed. The testimony of PW2 is also of not much help as he was not concerned with the inspection/proceedings at all in this matter.
PW3 Sh. P.K. Bansal is the most relevant witness who conducted the inspection in this matter and deposed regarding the averment made into the complaint filed by the complainant. PW3 admitted during the cross ROC vs M/s Twenty First Century Finance Ltd. 8 of 14 examination that letters dated 25.09.98, 19.11.98, 10.12.98 and 03.09.98 have not been addressed to the directors of the company individually. PW3 also admitted that letters Ex.PW3/D1 and PW3/D2 were not served on the directors at their given address but same were received back unserved. PW3 further admitted that it was brought to his notice through letter Ex.PW3/D3 that income tax search and seizures had taken place in the company premises in the year 1997. The accuseds during their examination u/s 313 Cr.P.C. detailed and explained the reasons for not producing the relevant records at the time of inspection which were stated to the inspecting officer and also communicated to the ROC and the defence of the accused appears altogether the same throughout. The happening of the incident as explained by the accused is not even disputed by the complainant. It is not the case at all that accused not responded to this action of the complainant.
10.It is not the case that the accused had intentionally not produced the records for inspection u/s 209A of the Act. It is argued that the registered office of the company was raided by Income Tax Department and pursuant to the income tax raids the office was closed down, all the books of accounts were seized and taken away by the Income Tax Authorities vide Panchnama Ex. DW2/B. It is further argued that the the operations of the company was curtailed completely since there was no sales or production hence all the senior executives and employees left the company and there was nobody to attend the day to day work and the company. In view of the submissions and ROC vs M/s Twenty First Century Finance Ltd. 9 of 14 testimony of witnesses, the default in producing the record was due to the circumstance beyond the control of the accused and cannot be considered as willful.
11.Even nothing was deposed by the witnesses in this respect. Moreover, the correspondence of the accused was also admitted by the complainant during the examination of the prosecution witnesses and same itself shows that the accused had no custody/control of the records. It appears that the accused failed to produce the documents due to the reasons as stated. Subsection (2) of the Act provides that it shall be the duty of every director, other officer or employee of the company to produce to the person making inspection under subsection (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify. It is clear that accused proved that the required records were not under her custody/control.
Complainant's witnesses deposed that despite receipts of summons/letters accused failed to produce the books of accounts/other records for inspection. While in his cross examination PW3 admitted that in response to his letters issued to accused, he received letter Ex.PW3/D3 sent by the accused. Thereafter, the accused has taken a specific stand that company could not produce the records for inspection due to seal and seizure ROC vs M/s Twenty First Century Finance Ltd. 10 of 14 of records by the income tax department. Thus, it appears that accused has proved and explained the reasons for nonproduction of the documents at the time of inspection. Admittedly it is not the case of the complainant at all that the records were in the custody and control of the accused and she refused to produce the same.
12.Perusal of testimony of PW3 and materials available on record clearly shows the cause for the nonproduction of the books of accounts of the company not only during the visit of PW3 for inspection but also within the time specified by him. Reason has been explained by the accused for not producing the relevant records as required. Since the accuseds were not in the custody/control of any of books of accounts, they cannot be held liable for not producing the same. In this regard this court is supported with the case law reported as "1996 85 Comp Cas 572 Mad" which is squarely applicable in the fact of this case.
13.Learned defence counsel argued that present complaint is time barred as sanction to launch prosecution granted vide Ex.PW1/3 is not a sanction in the eyes of law and it is just an advisory letter. Learned company prosecutor, on the other hand, argued that the present complaint is not barred by the limitation as the offence is still continuing. She further argued that the present complaint is filed within limitation period after the sanction from the Central Government received and the ROC can only after the complaint after receipt of sanction from the Central Government. It is relevant to note that that section 209A(2) does not contemplate that that the inspecting authority may call upon ROC vs M/s Twenty First Century Finance Ltd. 11 of 14 the director to give information or produce documents within such time or within the extended time. If the director of the company does not comply with the demand within the period prescribed in the first notice mark A was issued on 03.09.98, the offence must be deemed to have been committed and, therefore, limitation would start only from that date. Thus, the period of limitation starts from the expiry of period mentioned in the notice mark A. Present complaint was filed on 02.03.2000. Therefore, the present complaint appears to be barred by limitation as held in the judgment reported as "1986 60 Comp Case 889 Mad".
14.Vicarious liability cannot be imputed merely on the ground that accused was director of the company. 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 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 ROC vs M/s Twenty First Century Finance Ltd. 12 of 14 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 cannot 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.
(1) The circumstances from which the conclusion of guilt is to be drawn 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 no 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".
15.Keeping in view of the foregoing discussions and facts and circumstance of the case, it is held that as the accuseds were not in custody/control of the books of account and other books and papers, they failed to produce the ROC vs M/s Twenty First Century Finance Ltd. 13 of 14 same. Therefore, accuseds cannot be held guilty for the offence punishable u/s 209A(8) of the Companies Act. Accordingly, accuseds are acquitted of charges leveled against them. File be consigned to the record room.
(GORAKH NATH PANDEY) ACMM(Special Acts) CENTRAL TIS HAZARI COURTS DELHI Announced in open court on 30.01.13.
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