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1. The primary question raised in these applications under Section 633(2) of the Companies Act, 1956, is whether the petitioners actively concealed material facts from the annual report of SBI Home Finance Ltd. ("the company") for the financial years ended March 31, 2000 and March 31, 2001. The Registrar of Companies required the petitioners to show cause why penal action under Section 628 read with Section 211 should not be initiated against them. The petitioners have replied to the Registrar's letter of December 31, 2004, but upon apprehension that the Registrar may institute criminal proceedings, have applied to the court seeking to be excused for the offence, if any, committed by them.

9. The first notice complains of violation of Section 628 of the Companies Act on the following lines:

The board of directors in their annual report to the members attached with the balance-sheet for the year 2001-02 have given the statement, 'due to non-infusion of capital, the net worth of the company continues to remain fully eroded' under the heading 'net worth of the company' whereas the fact is that the company has suffered heavy losses and due to that, the net worth of the company has eroded. The company in its reply states that the statements contained in the annual report have to be read together with a reference of carry forward losses has been given in paragraph 7 to Schedule 16 of the balance-sheet for the financial year 2001-02 the contention of the company is not acceptable and statement given in the director's report under the heading 'net worth of the company' is a false/misleading statement attract penal action under Section 628 of the Act.

10. The second notice speaks of violation of both Section 211 and Section 628 of the Act on the following basis:

During the financial years 1999-2000 and 2000-01 the company has not made provision/write off of Rs. 64.44 crores as per the prudential norms and finally the same was provided in the financial statement of the year 2001-02. The board of directors in their report and notes on account dated June 29, 2000 and August 17, 2001, attached with the balance-sheet for the years 1999-2000 and 2000-01 have made statement regarding relaxation of prudential norms by National Housing Bank which omits material facts knowing it to be material, which is knowingly omission of material particular in the directors' report under the heading 'relaxation of prudential norms by the National Housing Bank' therefore the management of the company violated the provisions of Section 628 read with Section 211 of the Act.
27. The petitioners here urged that NHB had the authority and continued to monitor the progress of the company after relaxing the norms. NHB did not complain that the relaxed norms would not apply since the company had not complied with the first pre-condition set by it to avail of the relaxation. In effect, the petitioners question the Registrar's reading of the first condition as a condition precedent since the authority that set the condition did not treat as such.
28. Whether the disclosure made by the company, or by the petitioners, in the relevant papers complained of by the Registrar were adequate, would depend on the first condition being established as a condition precedent. If, indeed, as the Registrar urges, the relaxation would not have applied if such condition was not first met, the company and the petitioners were guilty of not disclosing a relevant fact. Even then, for an offence under Section 628 of the Act to be established, it would require something more than the casual omission of a material particular or an apparent misstatement. Clauses (a) and (b) of Section 628 of the Act require, in addition, for it to be established that the false statement was made knowing it to be false or for the omitted material to have been ignored with knowledge that it was material. In the Registrar's subjective, and partly justifiable, opinion the fact that the company obtained relaxation of the strict norms applicable to it upon the condition set therefor by the NHB, should have been mentioned in the relevant documents. But the Registrar has not been able to establish that the alleged misstatement was deliberately made or that the omission was made with the idea of concealing the same. True, the Registrar would have had opportunity to establish the second limbs of either Clause found in Section 628 if the matter went to trial, but he could have attempted to establish the same in these proceedings.