Andhra HC (Pre-Telangana)
Itc Agro-Tech Ltd. And Ors. vs Registrar Of Companies And Anr. on 14 December, 1995
Equivalent citations: 1996(1)ALD(CRI)889, [1996]86COMPCAS170(AP)
Author: V. Rajagopala Reddy
Bench: V. Rajagopala Reddy
JUDGMENT V. Rajagopala Reddy, J.
1. On the complaint filed by the first respondent, the Special judge for Economic Offences, Hyderabad, has taken cognizance of the offence under section 371(1) of the Companies Act, 1956 (for short, "the Act"), in C.C. No. 63 of 1991 against the petitioners and issued process. This petition is filed to quash the said proceedings.
2. Counsel for the petitioners has raised three contentions : the first contention is that the taking of cognizance of the offence is barred by limitation prescribed under section 468 of the Code of Criminal Procedure, 1973 (for short, "the Code'), the other contentions are that all the offenders liable for the offence are not arrayed as accused in the case, therefore, the prosecution is vitiated; and that the clubbing of offences arising out of two financial years is unlawful.
3. I will take up the first contention which is a precondition for taking cognizance of the offence. It is contended that the offence under sub-section (1) of section 371 of the Act being punishable with a term of imprisonment of six months, the period of limitation for taking cognizance of the offence under section 468(2)(b) of the Code is one year. Since the offence has been committed on August 21, 1991, and August 19, 1992, the complaint ought to have been filed and the court ought to have taken cognizance of the offence within one year thereof. Since the complaint has been filed on September 26, 1994, the complaint is clearly barred by limitation and the prosecution is, therefore, unlawful. Sri Innayya Reddy; Standing Counsel for the Central Government, appearing for the first respondent, submits that the question of limitation is a mixed question of fact and law and this court cannot determine, at this stage, whether the complaint was barred by limitation, and the petitioner is entitled to raise this question before the Special judge and pray for dropping the proceedings.
4. Under sub-section (1) of section 370 of the Act, no company shall make any loan without prior authorisation by special resolution of the lending company or if the aggregate of the loans made to all bodies corporate exceeds 30 per cent. of the capital, the prior approval of the Central Government shall be obtained. The allegation, as disclosed in the complaint, against the petitioner-company is that the company violated the provisions of sub-section (1) of section 370 of the Act and is, therefore, liable for the offence punishable under sub-section (1) of section 371 of the Act. The case of the petitioners in this petition is that the company submitted its balance-sheet to the first respondent for the year ended March 31, 1991, on August 21, 1991. Similarly, for the year ended March 31, 1992, the balance-sheet was submitted to the first respondent on August 19, 1992. The Deputy Director (Inspection), Madras, conducted the inspection of the petitioners' company between March 10, 1993, and March 22, 1993. After conducting the Inspection a show-cause notice dated April 27, 1993 was issued alleging that the petitioner had contravened the provisions of sub-section (1) of section 370 of the Act, inasmuch as the petitioner had made intereorporate deposits in certain companies, in excess of the limits prescribed. The petitioner sent a reply dated May 24, 1993, justifying the deposits and denying the offence complained of. Thereafter, the petitioner had not heard anything from the Deputy Director (Inspection). However, by notice dated July 5, 1994, the first respondent asked the petitioner why prosecution should not be launched against the petitioners for the offence under section 370(1) of the Act, to which a reply was sent on May 24, 1993, reiterating the contents of the earlier reply dated May 4, 1993. Thereafter, the complaint was made on September 26, 1994, before the court.
5. It is seen that the complaint was admittedly made very much after the expiry of one year from the date of either the receipt of balance-sheets or the inspection by the Deputy Director (Inspection) on March 10, 1993, or from the date of reply given by the petitioners to the first respondent, i.e., May 24, 1993. The first respondent filed a detailed counter-affidavit to the allegations made in the affidavit filed in support of the petition and in that the dates given as stated above are admitted as true. The said dates can. therefore, be safely accepted as true without any further enquiry.
6. Section 468 of the Code clearly prohibits a court from taking cognizance of an offence after the period of limitation. It is, therefore, necessary for a court before taking cognizance of an offence, upon a satisfy, prima facie, that it was within the period of limitation. It is a pre-condition to take cognizance. It is true that under clause (h) of sub-section (1) of section 469 of the Code, the period of limitation shall commence :
"where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier."
Sri Innayya Reddy contends that the complainant came to know about the offence committed by the petitioners only on the letter received from the office of the Regional Director, Department of Economic Affairs, dated June 15, 1994, and, therefore, he can file a complaint within one year from that date. In fact this is the allegation made in the complaint as well as the averment in the counter-affidavit of the first respondent. It is seen from the above that the petitioners have admittedly filed balance-sheets before the complainant on August 21, 1991, and August 19, 1992, respectively, with regard to the two relevant financial years. The first respondent being an authority enjoined under the Act to see that the provisions of the Act are properly followed by the companies, is expected to scrutinize the accounts, with the assistance of his competent officers, that are filed before him and find out the irregularities committed by the company, at least from the date of the filing of the balance-sheets. The filing of balancsheets is a legal requirement and not a mere formality. It is also admitted that an inspection has been made by the inspection wing on March 10, 1993, and on detection of non-compliance with section 370(1) of the Act, a notice dated April 27, 1993, has been issued and the reply has been received by the first respondent on May 25, 1993. At least from the date of receipt of the reply, the knowledge of the commission of offence shall be presumed, if not from the date of notice. Knowledge is an inferential fact from the facts established, depending upon circumstances of each case. On coming to know of the violation of section 370(1) of the Act, by the petitioners, the inspection wing issued the show-cause notice dated April 27, 1993. This date should be treated as the "first day on which such offence comes to the knowledge", as mentioned in clause (b) of sub-section (1) of section 469 of the Code. From that day, the limitation started running. Therefore, as per the admitted events, the complaint is barred by limitation having been filed beyond one year after the complainant had knowledge of the offence. If long delays are entertained it would only lead to serious negligence on the part of the prosecuting agencies and unnecessary mental anguish to the person accused. The criminal system is supposed to be fair to the prosecution as well as to the accused. In the conspectus of the facts present in the case, which are not in dispute, the complaint is clearly barred by limitation and is liable to be quashed.
7. I can draw support to strengthen my view, from the decision of the, Madras High Court in Asst. Registrar of Companies v. H. C. Kotheri [1992] 75 Comp Cas 688; [1993] 10 Corporate Law Adviser 80, where it war observed that (at page 693 of 75 Comp Cas) :
"The Registrar of Companies is deemed to have knowledge of the contents of exhibits P-1 to P-3 and of the offence on the day when they are received by him. After receiving the balance-sheets, it is not open to the Registrar to keep these balance-sheets in cold storage, keep his eyes closed to them and then to deny knowledge of these contents, thereby defeating the law of limitation. The very object of the bar of limitation would be defeated if the contention of the appellant is accepted. When the balance-sheets are received by the Registrar of Companies, he is deemed to have knowledge about the contents of the balance-sheets and consequently, of the offence, and limitation will start running from that day onwards. The complaint relating to the year 1980 will have to be file within six months from the date of receipt of exhibit P-1, namely, June 9, 1981, the complaint for the offence relating to the year 1981 within six months from the date of receipt of exhibit P-2, namely, May 12, 1982, and the complaint relating to the year 1982, within six months from the date of receipt of exhibit P-3, that is, May 30, 1983. The present complaint is filed only on February 2, 1985, which is far beyond the period of limitation. The trial court had rightly held it to be so."
The court thus, holding, kept in mind the concept of limitation in criminal matters, expatiated by the Supreme Court in State of Punjab v. Sarwan Singh, , where it was ruled that (headnote) :
"The object of the Criminal Procedure Code in putting a bar of limitation on prosecutions was clearly to prevent the parties from filing cases after a long time, as a result of which material evidence may disappear and also to prevent abuse of the process of the court by filing vexatious and belated prosecutions long after the date of the offence. The object which the statutes seek to subserve is clearly in consonance with the concept of fairness of trial as enshrined in article 21 of the Constitution of India. It is, therefore, of the utmost importance that any prosecution, whether by the State or a private complainant must abide by the letter of law or take the risk of the prosecution failing on the ground of limitation."
8. In the light of the clear proposition of law that the "private complainant must abide by the letter of the law or take the risk of the prosecution failing on the ground of limitation" and in view of my finding that the complaint is barred by limitation under section 468 read with section 469 of the Code, I hold that the complaint is not maintainable.
9. It is contended by Sri Innayya Reddy that at rate, the trial court should be directed to decide this question and this court in the exercise of its powers under section 482 of the Code will not at the pre-trial stage, throw out the complaint. In view of the undisputed facts of the case on which I find that the complaint is clearly barred by limitation, I feel it is unnecessary for the petitioner to be directed to approach the court below; it will be also relieving the court below of Its heavy load of work.
10. In this view I do not propose to consider the other contentions raised by the counsel for the petitioner. The criminal petition 18 allowed and the proceedings in C.C. No. 63 of 1991 on the file of the Special judge for Economic Offences, Hyderabad, are quashed.