Bangalore District Court
The Registrar Of Companies vs V.V.Raghavalu on 30 January, 2016
1 CC.No.12-14
BEFORE THE SPECIAL COURT FOR ECONOMIC OFFENCES: AT
BANGALORE.
Dated this the 30th day of January 2016.
Present: Smt.PUSHPAVATHI V., B.A.L., LL.B.,
Presiding Officer, Special Court
for Economic Offences, Bangalore.
CC.No.12-2014.
Complainant: The Registrar of Companies,
2nd Floor, "E" Wing, Kendriyasadan,
Koramangala, Bangalore.
. vs .
Accused: 1. V.V.Raghavalu, Major,
No.H-41, New ASTC HUDLO, Hosur,
Dharmapuri, Tamil Nadu -635109.
2.Smt.M.P.Jayanthi, Major,
. No.H-41, New ASTC HUDLO, Hosur,
Dharmapuri, Tamil Nadu -635109.
3.J.Govindarajulu, Major,
No.41/23, PIPIDIC Industrial Area,
Sethirejpet, Pondicherry.
JUDGEMENT
1. This complaint is filed u/s.200 of Cr.P.C., by the complainant/Registrar of Companies, Bangalore against accused No.1 to 3 with a prayer to punish them for the offence u/s.217(4) which is punishable u/s.217(5) of the Companies Act, 1956
2. The brief facts of the complainant's case is that M/s.Srivari Hi-Tech Industries Limited (herein after referred to as "the company") was incorporated on 24.8.1977 under Companies Act, 1956 (hereinafter referred as "the Act") in the State of Karnataka originally with the name 2 CC.No.12-14 "Rahul Wires Limited" and subsequently changed to its present name with effect from 08.03.2001.
3. The Registered Office of the company is situated at No.71, I-Main, 6th Block, III Phase, Banashankari III Stage, Bangalore, accused were the Directors of the company at all relevant time to which this complaint relates and failed to take all reasonable steps to comply with S.217(4) of the Act.
4. An Inspection of the books of account and other books and papers of the company u/s.209A of the Act was ordered by the Ministry of Corporate Affairs, Government of India, accordingly Sri.V.C.Davey, formerly the Registrar of Companies, Karnataka was entrusted to carry out the inspection. The Inspecting Officer submitted his Inspection report to the Regional Director, Ministry of Corporate Affairs, Southern Region Chennai, pursuant to S.209A(6) of the Act. After considering the said Inspection Report, the Regional Director, Ministry of Corporate Affairs, Southern Region, Chennai has advised the Complainant to take further follow up action on the various violations reported therein. On perusal of the Inspection Report, it was observed that the company had violated the provisions of S.217(4) of the Act by not signed in accordance with requirement of Sec.217(4) r/w.s.215 of the Companies Act, 1956 the report dated:01.9.2007 attached to Annual report for the year ended 31.3.2007.
5. It was the duty of accused being the Directors of the Company to see that the company to take all reasonable steps to secure compliance by 3 CC.No.12-14 the company with the requirements of above provision of the Act. They failed & neglected to comply with the same & committed an offence punishable u/s.217(5) of the Act.
6. Thereafter, the complainant had issued show cause notice to the accused on 25.06.2009, no reply has been received for the same. With this, the complainant has prayed to take cognizance of the offence to issue process & to try the accused in accordance with law and punish them for the offence punishable u/s.217(5) of the Act. They have also prayed to pass an order as to the costs u/s.626 of the Act. Hence this complaint is filed.
7. On cognizance taken, the case has been registered, secured accused, enlarged on bail, the copies of complaint and other documents were furnished to them. Thereafter, plea has been recorded, they pleaded not guilty and claimed to be tried. Hence, the case was posted for complainant's evidence where Sr.Technical Assistant of ROC Smt.Shilavathi Kulkarni appeared before the court & gave evidence on behalf of the Registrar of Companies as P.w.1 & got marked Ex.p.1 to 9, she has been cross-examined by the other side, the complainant has closed their evidence. Thereafter, the statements of accused No.1 to 3 u/s.313 of Cr.P.C is recorded where accused have denied all the incriminatory evidence readover to them and submitted they have no evidence and nothing to say. They did not choose to lead any defence evidence. Hence, the matter was posted for arguments. 4 CC.No.12-14
8. Thereafter, heard the arguments, perused the entire records, the points that arise for my consideration are :
Point No.1: Whether the complainant proves beyond all reasonable doubt that accused No.1 to 3 being the Directors of M/s.Srivari Hi- Tech Industries Limited was during the relevant period of which this complaint relates & that they are the officer in default within the meaning of S.5 of the Act.?
Point No.2: Whether the complainant further proves beyond all reasonable doubt that the report dated:01.9.2007 attached to Annual report for the year ended 31.3.2007 of the company was not signed in accordance with requirement of Sec.217(4) r/w.s.215 of the Companies Act, 1956. Thereby committed an offence punishable u/s.217(5) of the Companies Act 1956.?
Point No.3: What order.?
9. My findings on the above said points are as under:
Point No.1: In the Negative, Point No.2: In the Negative, Point No.3: As per the final orders for the following:
REASONS
10. Points No.1 & 2: Both points involve common discussion, hence taken for discussion together.
11. P.w.1 Smt.Shilavathi Kulkarni, Sr.Technical Assistant, ROC, Bangalore during her chief examination has stated that she is working as Sr.Technical Assistant in ROC since 2009, this complaint is filed by ROC, she has been authorized by ROC, Karnataka to give evidence on behalf of Registrar of companies as per Ex.p.1 authorization letter, she 5 CC.No.12-14 know the facts of the case, she received the knowledge of the case out of records, her statement is based on the records maintained in the office, M/s.Srivari Hi-Tech Industries Limited was incorporated on 24.8.1977 as a Public Limited Company as per incorporation certificate Ex.p.2, the original name was M/s.Rahul Wires Limited and they changed its name to M/s.Srivari Hi-Tech Industries Limited on 8.3.2001 as per certificate of change of name as per Ex.p.3. The registered office of company is situated at No.71, 1st Main, 6th Block, 3rd Phase, Banashankari 3rd Stage, Bangalore. The accused No.1 to 3 are Directors of the company.
12. She has further stated that it was observed during inspection u/s.209A of Companies Act, 1956 that the company has violated the provisions of S.217(4), r/w.S.215 of Companies Act, 1956 by not signing the Board report as required under the said provision for the year 31.3.2007.
13. In support of oral evidence, they have filed attested copy of inspection report as per Ex.p.4, attested copy of balance sheet dated:31.3.2007 as per Ex.p.5, attested copy of annual return made upto 29.9.2007 as per Ex.p.6, attested copy of R.D., sanction letter dated:16.6.2009 as per Ex.p.7, attested copy of show cause notice dated:25.6.2009 as per Ex.p.8 and complaint is filed as per Ex.p.9.
14. During the cross-examination, P.w.1 has admitted that they have not received any complaint from the share holder as to accused have mis- managed the affairs of the company. Except inspection report, there is no other documents to show that ROC had inspected the company, 6 CC.No.12-14 they will give prior intimation in writing to accused before going to inspection, in this case, they have issued such intimation notice, they have not produced the copy of the same before this court. They have not produced receipt for having sent through RPAD or the acknowledgment for having served the show cause notice. They have not produced the directions of Ministry of Company Affairs to conduct inspection, as per the inspection report there were many number of violations, she do not know whether some provisions of violations have been struck out by the ROC himself where the prosecution has not recommended.
15. She has denied the suggestions that usually they take signatures of directors to the inspection report, they have not issued show cause notice & it is not served, they have not issued prior intimation notice before inspecting, they have not conducted any inspection, only on the basis of the balance sheet & profit & loss account fled before ROC they have filed this case and not for inspection, the accused have not violated any provisions of Companies Law including Sec.217(4) of Companies Act 1956, the case is barred by limitation.
16. No where the accused have disputed the case of the complainant that the accused No.1 to 3 are the Directors of M/s.Srivari Hi-Tech Industries Limited during the relevant period of which this complaint relates & that they are the officers in default within the meaning of S.5 of the Act. As same, it is not the case of accused that they have on 31.3.2007 submitted the Board's report dated:1.9.2007 with signatures in 7 CC.No.12-14 accordance with requirement of S.217(4), r/w.s.215 of Companies Act, 1956 to give true & fair view of the state of affairs of the company which reads as follows:
"S.217(4): Board's Report:
(4) The Board's report and any addendum thereto shall be signed by its chairman if he is authorized in that behalf by the Board; and where he is not so authorized, shall be signed by such number of directors as are required to sing the balance sheet and the profit and loss account of the company by virtue of sub-
section.(1) & (2) of Section.215"
17. Of course, the complainant has not filed before the court, the prior intimation letter of inspection or proof for show cause notice is served on accused. But only because of this case, the fact that the accused have not submitted the Board's report dated:1.9.2007 duly signed in accordance with requirement of S.217(4), r/w.s.215 of Companies Act,1956 for the year ended 31.3.2007 to give true & fair view of the state of affairs of the company cannot be ignored as it constitute the offence u/s.217(4) which is punishable u/s.217(5) of the Companies Act. 1956.
18. Further the admission of P.w.1 that ROC has struck out some provisions of violations also do not rescue the accused in this case in any way.
19. It is also case of the accused that the complaint is beyond limitation, they argue that the offence alleged in this case is punishable with imprisonment which may extend to 6 months or with fine or with both. According to S.468(2) of Cr.P.C., where the offence is punishable with 8 CC.No.12-14 imprisonment less than 1 year, the limitation is 1 year. According to S.469 of Cr.P.C., the limitation commences from the date of offence, if the date of offence is not known, from the date of knowledge. The balance sheet and profit & loss account have been filed on 31.3.2007, sanction is issued on 16.6.2009, the show cause notice is issued on 25.6.2009, but the complaint is filed on 24.1.2014 which is about more than 7 years delay. Hence, the complaint is barred by limitation. The accused is fit to be acquitted.
20. In support of his argument, the accused has relied upon the Judgement in Crl.A.No.829/2005 of Hon'ble Supreme Court of India in a case between Mrs.Sarah Mathew Vs. the Institute of Cardio Vascular Diseases by its Director Dr.K.M.Cherian & Ors., I have perused the Judgement, where the question arose for consideration is - "whether for the purpose of computing the period of limitation u/s.468 of Cr.P.C., in respect of criminal complaint the relevant date is the date of filing of the complaint or the date of institution of prosecution or the date on which a Magistrate takes cognizance of the offence" and it was held that for the purpose of computing limitation for the criminal complaint, it is the date of filing complaint or institution of prosecution and not the date of court taking cognizance. But the issue in this case is totally different that from when the limitation commences. So above Judgement is not applicable to the case on hand.
21. Sec.468 of Cr.P.C., reads as follows:
"S.468:Bar to taking cognizance after lapse of the period of limitation:-9 CC.No.12-14
1) Except as otherwise provided elsewhere in the Code, no Court shall take cognizance of an offence of the category specified in sub-
section(2), after the expiry of the period of limitation.
2) The period of limitation shall be:-
a) Six months, if the offence is punishable with fine only;
b) One year, if the offence is punishable with imprisonment for a term not exceeding one year;
c) Three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years.
3) For the purposes of this section, the period of limitation, in relation to offences which may be tried together, shall be determined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most sever punishment."
22. According to this Sec.468(2)(b), where the offence is punishable with imprisonment less than 1 year, the limitation is one year.
23. Sec.469 Cr.P.C., reads as follows:
"Sec.469: Commencement of the period of limitation:
1) The period of limitation, in relation to an offence, shall commence:-
a) on the date of the offence or
b) 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 or
c) where it is not known by whom the offence was committed, the first day on which the identity of the offender is known to the person aggrieved by the offence or to the police officer making investigation into the offence whichever is earlier.
2) In computing the said period, the day from which such period is to be computed shall be excluded.10 CC.No.12-14
24. So, according to this section, the date of commencement to the limitation is from the date of offence, if the date of offence is not known, from the date of knowledge, if the accused are not known, till their identification. In this case, the alleged offence is punishable u/s.217(5) of the Companies Act under which the offence alleged in this case is punishable with imprisonment which may extend to 6 months or with fine or with both. So, the limitation to this case is 1 year.
25. The learned counsel for the complainant argues that the offence is a continues, hence, the limitation is not applicable to the case on hand.
26. In support of his argument, the complainant has relied upon the case law reported in 2015 SC, Indian Kanoon - http/Indian Kanoon. org/doc/ 25029651 in a case between Chairman SEBI Vs. Roofit Industries Limited, wherein at Para No.9 it is held as follows:
"Para No.9: A continuing offence is one which is susceptible of continuance and is distinguishable from he 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 non-compliance occurs and recurs there is the offence committed. The distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act or omission which continues and therefore, constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing offence, thee is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all."
27. This Judgement is in connection to an offence u/s.15 of the Securities & Exchange Board of India Act, 1992 (SEBI Act) wherein it is of course 11 CC.No.12-14 held the continuous offence is where failure to comply with rule or its requirement involves penalty & liability of which continues. This made more clear in the same Judgement itself at Para No.10 which reads as follows:
"Para No.10: On the facts at hand, as in Deokaran Nenshi, the default was clearly complete on the failure to submit the requisite information by the date set by the Appellant, i.e., 16.9.2002. Had the Respondent furnished the information sought by the Appellant by that date, undoubtedly there would have been no culpability against it. Thus the penalty first became applicable under the pre-amendment section, which imposed a penalty not exceeding one lakh fifty thousand rupees for each such failure. The intention of the section as it then stood was clearly not to consider it a continuing default. Such an intention can be read into the provision as it currently stands, as it imposes a penalty for each day for which the breach continues, but this was not the case prior to 29.10.2002. Facially, this was the reason and necessity for the amendment."
28. According to this we can know whether offence is continuous or not by gathering intention of the section which imposes a penalty for each day for which the breach continues. The offence alleged in this case is under Section.217(5) of the Companies Act which reads as follows:
"S.217(5):Board's Report:
(5) If any such person, being a director of a company, fails to take all reasonable steps to comply with the provisions of sub-sections.(1) to (3), or being the chairman, signs the Board's report otherwise than in conformity with the provisions of sub-section (4), he shall, in respect of each offence, be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to twenty thousand rupees, or with both."
29. This shows in this offence the fine imposed is maximum Rs.20,000/-, there is no specific words that it will continue till breach continues, if at all this was the continues offence, the penalty should have been for 12 CC.No.12-14 each day till default continues. But here in this case, it is not so, this shows the offence alleged in this case is not continuous.
30. The learned counsel for the complainant has also relied upon the case law reported in AIR 1984 SC 1688 in a case between Bhagirath Kanoria & Others Vs. State of M.P., wherein it is held as follows:
"Criminal P.C. (2 of 1974) Ss.468, 472, 473 - Offence of non-payment of contribution by employer to provident fund - It is a continuing offence - Limitation u/s.468 does not apply - Controversy raised as to offence being not continuing offence - cognizance should be taken by applying provisions of S.472. 1978 Lab IC 868 (Bom), Overruled. (Employees' Provident Fund and Family Pension Fund Act (19 of 1952), S.14(2-A)."
and argues that, the offence alleged in this case is continuous.
31. This case is in connection to EPF & Family Pension Fund Act where all the offences are continuous. But in the Companies Act, 1956 it is not so. Hence not applicable to the case on hand.
32. The learned counsel for the complainant has also relied upon the case law reported in AIR 1973 SC 908 in a case between State of Bihar Vs. Decokaran Nensha & another, which reads as follows:
"Index Note: (A) Mines Act (1952) Section 66 - Offence under is covered by substantive part of Section.79 and not by the explanation thereto. A complaint for failure to furnish return by prescribed date must, therefore, be filed within a period of six months - Distinction between offence which takes place when an act or omission is committed once and for all and a continuous offence stated. Case law discussed."
Held:
" That conducting a restaurant without having it registered and without maintaining registers required by the Bhihar shops and Establishments Act, VIII of 1954 and the Rules framed thereunder were continuing offences as every time a restaurant was run without its being, registered and without maintaining the requisite registers was an offence, and therefore, the period of limitation udner S.36 of the Act would begin to run 13 CC.No.12-14 from the date of occurrence of each of the defaults. (see) also State V. Laxmi Narain (2) Reg.3 read with S.66 of the Mines Act makes failure to furnish annual returns for the preceding year by the 31st of January of the succeeding year an offence. The language of Reg.3 clearly indicates that an owner, manager etc., of a mine would be liable to the penalty if he were to commit an infringement of the regulation and that infringement consists in the failure to furnish returns on or before January 21 of the succeeding year. The infringement therefore, occurs on January 21 of the relevant year and is complete on the owner failing to furnish the annual returns by that day. The regulation does not lay down that the owner manager etc., of the mine concerned would be guilty of an offence if he continues to carry on the mine without furnishing the returns or that the offence continues until the requirement of Reg.3 is complied with. In other words, Reg.3 does not render a continued disobedience or non-compliance of it an offence. As in the case of a construction of a wall in violation of a rule or a bye-law of a local body, the offence would be complete once and for all as soon as such construction is made, a default occurs in furnishing, the returns by the prescribed date. There is nothing in Reg.3 or in any other provision in the Act or the Regulation which renders the continued non-compliance an offence until its requirement is carried out".
The High Court, in our view, was right in holding that the complaint was time barred as the offence in question fell within the substantive part of S.79 of the Act and not under the "Explanation attached to it. The appeals, therefore, must fail and is dismissed. Appeal dismissed."
argues that the offence alleged in this case is a continuous.
33. This is also in connection to Mines Act where the facts and circumstances are different. Hence not applicable to the case on hand.
34. The learned counsel for the complainant has further relied upon the Judgement of the Hon'ble High Court of Andhara Pradesh in C.P.No.1338/2003 in a case between Krishna Prasad Palaypu Vs. The Registrar of Company, Hydarabad, which reads as follows: 14 CC.No.12-14
"We have gone through the Judgements on which reliance is placed by the learned counsel for the petitioner. In view of subsequent Judgement of the Supreme Court in BHAGIRATHI KANORIA (8 supra), we cannot agree with the view expressed by the Calcutta and Karnataka High Courts in NATIONAL COTTON MILLS and CHANDRA SPINNING & WEAVING MILLS respectively (3 and 4 supra), and we fully agree with the view taken by the latter Division Bench of the Calcutta High Court in LAXMI PRINTING WORKS LTD., (9 supra) and the Kerala High Court in RANI JOSEPH (10 supra) . Once Section.162(1) of the Act imposed penalty at the rate of Rs.50/- per every day till default continues, it must be held default in complying with the provisions of Section.220(1) of the Act is a continuing default covered by Section.472 Cr.P.C., The contravention of Section.220(1) of the Act made punishable under section.220(3) is a continuing offence and the period of limitation under section.468 Cr.P.C., does not attract for the prosecution launched against the company for the offence alleged and is governed by Section.472 Cr.P.C., and argues that the offence alleged in this case is continuous.
35. This is in connection to Sec.220(1) of the Companies Act punishable u/s.220(3) of the Companies Act for which penalty is imposed u/s.162(1) of the Companies Act at the rate of Rs.50/- per every day till default continuous. But in S.217(5) of the Companies Act it is not so. As I have said above, the penalty is not continued for each and every day. This shows S.217(5) of the Companies Act is not a continues offence. Thus, the above said Judgement is not applicable to the case on hand.
36. Here in this case, the complainant has not shown the date of knowledge & commencement of limitation. The date of offence in this case is 31.3.2007, as it is on that date Balance sheet and Profit & loss account is filed. The complaint is filed in the year 2014, which is beyond limitation of 1 year from the date of offence i.e., 31.3.2007. Even if it is 15 CC.No.12-14 taken that the date of inspection is date of knowledge, the date of inspection is 26.03.2009, from that day also the case is not within time as it is beyond 1 year. Further of course, the complainant has filed sanction order issued by the Regional Director i.e., on 16.06.2009 which is not mandatory. Even otherwise, if this period is excluded u/s.470(3) of Cr.P.C., also, the complaint should have been filed within 1 year from the date of sanction order i.e., on 17.6.2010, but filed on 24.01.2014 which is beyond 1 year. Hence, the complaint is not within time. So fit to be dismissed. Thus, the accused are fit to be acquitted as complaint do not survive for want of limitation. Hence, I answer points No.1 & 2 in negative.
37. Point No.3: In view of my findings on Points No.1 & 2, I proceed to pass the following order.
ORDER Acting u/s.255(1) of Cr.P.C., the accused No.1 to 3 are acquitted for the offence u/s.217(4) which is punishable u/s.217(5) of the Companies Act, 1956.
The case of the complainant in respect of S.626 of the Companies Act, 1956 is dismissed.
The bail bonds of A.1 to 3 stands cancelled.
Dictated to the Stenographer, directly on computer, typed by her corrected and then th pronounced by me, in open court on this the 30 day of January 2016.
PRESIDING OFFICER.
16 CC.No.12-14ANNEXURE:
ON BEHALF OF THE COMPLAINANT:
WITNESSES: P.W.1 Smt.Shilavathi Kulkarni.
DOCUMENTS:
Ex.p.1 Authorization Letter, Ex.p.2 A/c of Certificate of Incorporation, Ex.p.3 A/c of Certificate of change of name, Ex.p.4 A/c of Inspection Report, Ex.p.5 A/c of Balance sheet dated:31.3.2007, Ex.p.6 A/c of Annual return made upto 29.9.2007, Ex.p.7 A/c of Sanction letter dated:16.6.2009, Ex.p.8 A/c of Show cause notice dated:25.6.2009, Ex.p.9 Complaint.
ON BEHALF OF THE ACCUSED:
WITNESSES & DOCUMENTS: Nil.
(PUSHPAVATHI V) PRESIDING OFFICER, SPL.COURT FOR ECONOMIC OFFENCES, BANGALORE.