Delhi District Court
The Registrar Of Companies vs Best Commercial Enterprises Ltd on 24 July, 2024
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IN THE COURT OF SH. MAYANK MITTAL
ADDL. CHIEF JUDICIAL MAGISTRATE (Spl. Acts)
CENTRAL, TIS HAZARI COURTS, DELHI
ROC Vs. Best Commercial Enterprises Ltd.
CC No. : 1927/2021
CNR No. : DLCT02-004076-2021
Date of Institution : 03.08.2021
Name of the complainant : Registrar of Companies,
its registered office Government of India,
Ministry of Corporate Affairs,
Through Sh. A. K. Singh,
Officr of the Registrar of
Companies,
NCT of Delhi & Haryana
4th Floor, IFCI Tower, 61,
Nehru Place, New Delhi.
Name of accused : (i) Best Commercial Enterprises Ltd.
his parentage and address etc. Regd. Office at 31,
Community Centre,
Ashok Vihar, Phase-I,
New Delhi-110052.
(ii) Sh. Pankaj Choraria,
S/o Sh. Binod Kumar Choraria,
Director / Officer,
Address : 84/SB, Block Enew
Alipore, Kolkata,
West Bengal-700053.
(iii) Sh. Bajrang Lal Choraria
S/o Sh. Manik Chand Choraria,
Address : 84/SB, Block Enew
Alipore, Kolkata,
West Bengal-700053.
(iv) Sh. Rakeesh Kumar Bhadauria
S/o Sh. Fateh Singh Bhadauria
ROC vs. Best Commercial Enterprises Ltd.
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Address : B/B, 9/1, Taltala, Jyangra,
Baguiati, North Twenty Four
Parganas, Kolkata,
West Bengal-700059.
Offence complained of : U/s. 204(4) of The Companies Act,
2013
Date of Judgment : 24.07.2024
Plea of accused : Not guilty
Final Judgment : Convicted
Brief facts and reasons for decision of the case:-
1.The facts of the case of complainant is that the above accused no. 1 is a Company having name M/s BEST COMMERCIAL ENTERPRISES LIMITED (herein after referred to as "the Company") registered with the office of the Complainant, NCT of Delhi and Haryana on 10.10.1983 under the Companies Act with the CIN L51909DL1983PLC016722 and having its registered office at 31, Community Centre, Ashok Vihar, Phase- I, Delhi-110052. The copy of the Company Master Data is enclosed as Annexure - "A". That the accused no.2 to 4 are/were directors/officers of the Company and are/were responsible for compliance of various provisions of Companies Act and as such are considered officer in default under section 2(60) of the Companies Act, 2013 (hereinafter known as "Act"). Certified copy of the form DIN-3 evidencing the details of Accused no.02 to 04 (Directors/ Officers of the Company) is enclosed as Annexure -
"B". That the Office of the Director General Corporate Affairs, had issued Show Cause Notice C/RC101/160/2019/204/16-17 dated 04.11.2019 issued to the Company being Accused no.1 and Show Cause Notice No. D/RC101/641/2019/204/16-17 dated 04.11.2019, D/RC101/642/2019/204/ 16-17, dated 04.11.2019 and D/RC101/643/2019/204/16-17 dated ROC vs. Best Commercial Enterprises Ltd.
3 of 9 04.11.2019, issued to the accused no.2 to 4 for violation of the provision of Section 204 of the CA, 2013 r/w Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 via email because after scrutiny of the e-form AOC-4 for the financial year 2016-17, filed by the Company to the Office of Complainant, it has been observed by the Office of the Director General Corporate Affairs, Ministry of Corporate Affairs that the Company has not attached Secretarial Audit report in form MR-3 along with e-form AOC-4 which is in violation of the provisions of section 204(1) of the Companies Act, 2013 r/w Rule 9 of the Companies (appointment and remuneration of Managerial Personnel) Rules 2014 and punishable u/s 204(4) of the Companies Act, 2013. That the Office of Director General Corporate Affairs did not received any reply from accused in response to Show cause notice issued. That the Sanction Letter No RDNR/ SANCTION/ PROSECUTION /01/6785 dated 27.11.2020 received in the office of the Complainant from directorate Office of the Regional Director (NR) New Delhi on 04.12.2020 to file the prosecution for non-compliances of the provisions of the Companies Act, 2013.
2. The present complaint was filed by Mr. A. K. Singh, the then Officer of Registrar of Companies, NCT of Delhi & Haryana, on behalf of the complainant. Since the complaint was filed by 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.
3. Cognizance of offence(s) was taken and the accused were summoned vide order dated 03.08.2021. On appearance, copies were supplied to the accused No.1 to 4. Notice of accusation for contravention ROC vs. Best Commercial Enterprises Ltd.
4 of 9 of provisions of Section 204 of The Act, 2013 r/e Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 punishable under Section 204(4) of The Act was served upon accused no.1, 2, 3 & 4 on 27.02.2023 & 07.06.2023 to which they pleaded not guilty and claimed trial.
4. I have heard the rival contentions advanced by the Ld. SPP for the complainant and also by Ld. Defence counsel. Prior to delving into the contentions advanced on behalf of the parties, let us briefly discuss the testimonies of witnesses examined in complainant's evidence:-
4.1 CW-1 Sh. Shravan Kumar deposed that he has been authorised to depose in the present matter vide office order dt.27.07.2023 and the same is ExCW1/1(OSR) and the accused no.1 company is registered with the office of the complainant and the master data evidencing the same is ExCW1/2. He further deposed that the accused no.2 to 4 were directors and responsible as 'Officers who is in default' as defined u/s 2(60) of the Companies Act, 2013 and the certified copy of the signatory detail evidencing the directorship of accused no.2 to 4 is ExCW1/3. That the certified copy of the e-form DIN-3 filed by accused no.3 intimating the DIN numbers of accused no.2 to 3 is ExCW1/4(running into 4 pages). He deposed that the accused no.1 company was a listed entity and was required to conduct its secretarial audit and annex the secretarial audit report in compliance with section 204(1) of Companies Act 2013 for FY 2016-2017, which it had failed to do. He further deposed that the accused no.2 to 4 being the directors and officers who are in default during the financial year 2016-2017 are liable to be punished under 204(4) of the Act and the office of the complainant had received sanction letter dt.27.11.2020 on 04.12.2020 issued by the Regional Director wherein the ROC vs. Best Commercial Enterprises Ltd.
5 of 9 office of the complainant was directed to initiate prosecution for violation of section 204 of the Companies Act against the accused persons and the sanction letter is ExCW1/5(colly)(running into 3 pages). He deposed that the section 65B certificate filed in support of electronically derived documents is ExCW1/6, which is issued by Sh. A. K. Singh and he can identify his signature at point A. 4.1.1 During his cross examination, CW1 Shravan Kumar deposed that accused no. 1/company was a listed entity at the time of issuance of notice and at the financial year ended on 31.03.2017 and he can say that from the perusal of the accused no.1/company's master data. He further stated that he does not know on which particulars stock exchange the securities of accused no.1/company are listed. He deposed that no notices under Section 204 cannot be issued against unlisted company. He deposed that he does not know whether any communication with respect to de-listing of company by the concerned stock exchange is made to the jurisdictional ROC and there is no record pertaining to de-listing and listing of companies which is being separately maintained by the ROC. He deposed that no intimation had been received from accused no.1/company qua the purported de-listing in year 2015. He deposed that it is part of the record whether section 204 compliance for previous financial years were made by accused no.1/company or not. He stated that the notices in this particular matter was issued by the office of DGCOA after prior scrutiny of financial statements and accompanying e-forms. He denied the suggestion that ROC had not applied its mind prior to initiation of the present prosecution. He deposed that no reply was received from the accused persons and no secretarial audit report was filed subsequently. He deposed that he does not know whether any other show cause notices pertaining to other offences had been issued to the accused persons.
ROC vs. Best Commercial Enterprises Ltd.
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5. During arguments, it is submitted by Ld. Company Prosecutor that during the financial year 2016-2017, the accused no.1 company was registered company and as per section 204(1) of the Companies Act, 2013, the accused no.1 company was under obligation to get a secretarial audit conducted and filed the audit report. However, it is submitted that accused no.1 company has failed to comply with section 204(1) of the Companies Act and as result of which the company (accused no.1) and its director (accused no.2 to 4) are liable for conviction and punishment under section 204(4) of the Companies Act, 2013. Ld. Company Prosecutor has submitted that complainant has examined its witness Sh. Shravan Kumar and has exhibited documents ExCW1/1(OSR) the office order dt.27.07.2023, ExCW1/2 the master data, ExCW1/3 the certified copy of the signatory detail evidencing the directorship of accused no.2 to 4, ExCW1/4 the certified copy of the e-form DIN-3 filed by accused no.3 intimating the DIN numbers of accused no.2 to 3, ExCW1/5 the sanction letter and the ExCW1/6 the section 65B certificate filed in support of electronically derived documents, so as to prove the case of the complainant beyond reasonable doubt.
6. Ld. Counsel for accused has vehemently submitted that accused no.1 company was a listed company till 22.01.2017. However, as on 23.01.2017, the Delhi Stock Exchange has been de-recognized by the SEBI as a result of which, at the end of financial year 2017 on 31.03.2017, the complainant company cannot be stated to be a listed company. It is submitted that as audit / secretariat audit is to be started on the end of financial year, the existence / non existence of liability of accused no.1 should be considered on the end of concerned financial year. It is ROC vs. Best Commercial Enterprises Ltd.
7 of 9 submitted that as on 31.03.2017, the accused no.1 company was not a listed company, there does not arise any duty / responsibility to get the secretarial audit of the company. It is submitted that in view of above said submissions, firstly, the accused are required to be acquitted and secondly a heavy cost should be imposed on ROC for harassing the accused persons for last so many years.
Before proceedings ahead, it is advisable and beneficial to refer to relevant provisions of law:
Section 204(1) :
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.
Section 204(4) : (4) If a Company or any officer of the company or the company secretary in practice, 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.
7. From the perusal of the record and consideration of arguments advanced on behalf of both the parties, it is noted that it is admitted position on behalf of both the parties that accused no.1 company was a listed company with Delhi Stock Exchange till 22.01.2017 and after that, Delhi Stock Exchange got de-recognized by SEBI and the status of accused no.1 company as listed company ceased to have exist. The question to be determined by this court in the present complaint is whether for financial year starting from 01.04.2016 till 22.01.2017, the accused no.1 company was required to got secretarial audit in compliance of section 204(1) of the Companies Act, 2013. There is no provision in ROC vs. Best Commercial Enterprises Ltd.
8 of 9 company law nor is there any case law to suggest that whether to conduct secretarial audit or not by a company is to be determined on the date when the financial year ends i.e. 31st of March every year. The court find substance in the submissions of Ld. Company Prosecutor that as company is a listed company, for better protection of interest of share holders, a further layer of security has been provided by way of secretarial audit and the provisions providing for secretarial audit are mandatory and without any exception. When there is a provision of company law providing for secretarial audit for a listed company, it is mandatory for the company to get secretarial audit, till the time the company is a listed company. The moment, the company cease to be a listed company, the obligation / duty casted upon the company by way of section 204(1) of the Companies Act will also come to an end. In the similar way, in case an earlier listed company cease to exist as a listed company for any reason beyond the control of that company, all the obligations casted upon the listed company by the company law and other provisions continue till the time the company was listed company. There is no distinction between the voluntary and non voluntary ceasing to exist as a listed company.
8. Considering the above discussion, the accused no.1 company was certainly duty bound to get secretarial audit for financial year starting from 01.04.2016 to 22.01.2017, if company for any reason whatsoever was not interested in getting the secretarial audit for the remaining financial year. No legal or factual defence has been brought by the accused persons for not getting the secretarial audit for financial year starting from 01.04.2016 to 22.01.2017.
ROC vs. Best Commercial Enterprises Ltd.
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9. In view of above discussion, complainant has been able to prove beyond reasonable doubt that accused no.1 company was required to got secretarial audit for financial year 01.04.2016 to 22.01.2017 and for default of not getting secretarial audit, accused no.1 to 4 are liable to be convicted u/s 204 (4) of the Companies Act. Accordingly, accused no.1 to 4 are convicted u/s 204(4) of the Companies Act.
Digitally signed
Announced in the open court
MAYANK by MAYANK
MITTAL
on this 24.07.2024 MITTAL Date: 2024.07.24
17:24:36 +0530
MAYANK MITTAL
ACJM (Spl. Acts), CENTRAL
TIS HAZARI COURTS, DELHI
ROC vs. Best Commercial Enterprises Ltd.