THE HONOURABLE SRI JUSTICE K.SURENDER
WRIT PETITION Nos.29663 & 29669 OF 2017
COMMON ORDER:
Writ Petition No.29663 of 2017 is filed by Accused No.1-
Company. Writ Petition No.29669 of 2017 is filed Accused Nos.2 to 7
in CC.No.262 of 2017, taken cognizance by the Special Court for
Economic Offences at Hyderabad for the violations of Sections 217(1),
138(1), 383-A, 193(1), r/w.Section 194, 286(1), 171, 173(1) and
211(1) of the Companies Act, 1956. The complaint was filed by the
Serious Fraud Investigation Office (for short 'SFIO') on the basis of
investigation.
2. Heard both sides.
3. It is alleged in the complaint that Accused No.1-Company was
incorporated on 03.01.2000, converted into deemed Public Limited
Company and registered with Registrar of Companies. The allegation
against the Company is that the Balance Sheet of the Company for
the year ending 31.03.2005 to 31.03.2009 and the reserve amounts
were transferred without recommendation of the Board of Directors.
The Company made attempts to mislead regarding the
recommendations and comments of the Board of Directors, as such
violated the provisions of Section 217(1) of the Companies Act.
2
4. It was noticed that on 16.10.2000, Company had taken loan of
Rs.7 crores against security of goods. The Company did not inform
about repayment of loan within 30 days in Form-17 for which reason
Section 138(1) of Companies Act was violated.
5. The paid up capital of the Company when incorporated on
03.01.2000
was Rs.3.70 cores, however, it was increased to Rs.7 cores on 31.03.2008. The Company Secretary was employed on 06.09.2011. Since there was no Company Secretary from 03.01.2000 to 05.09.2011, the Company violated the provisions of Section 383-A of the Companies Act, 1956.
6. It was noticed that in the Minutes Books of the Board meetings of the Board of Directors of the Company and their Annual General Meeting/Extra Ordinary General Meeting, the running serial number has not been mentioned. Further, initial of the Chairman on several pages was not obtained. There is no signature of the Chairman on the papers pertaining to meeting of Board of Directors held on 10.01.2012. It amounts to violation of Section 193(1) r/w. Section 194 of the Companies Act, 1956
7. It was noticed that the Company had not issued notice of the Board meetings for every Board of Director's usual address in India 3 and further Dispatch Register is also not being maintained by the Company, by which violated Section 286(1) of the Companies Act.
8. As per Section 171 of the Companies Act, a general meeting of a company may be called by giving not less than 21 days notice in writing. But, it was noticed that the Company has not issued notices for the Annual General Body Meeting (AGM) held on 29.10.2009. Further, during the period from 21.06.2001 to 29.10.2012 the Company has not conducted Annual General Body Meetings by issuing required notice annexing explanatory statement to the notice, which resulted in violation of Section 171 and 173(1) of the Companies Act, 1956.
9. It was noticed that the Company has shown the Overseas Travelling Expenses of not only its employees but their families, in the company's account, by which violated section 211(1) of the Companies Act, 1956.
10. Learned Senior Counsel Sri K.Vivek Reddy, appearing for the petitioners would submit that the alleged offences under Section 217(1) and 211(1) of Companies Act are punishable upto six months or fine. The other offences are punishable with fine only. The complaint was filed beyond one year and there is a delay of 3 months and 13 days in lodging the complaint. The report of SFIO was on 4 23.03.2016 and the limitation starts from the said date. Even taking into consideration the counter of the SFIO that the limitation period commences from 27.06.2006, even then there is a delay. He relied on the Judgment of the Honourable Supreme Court in Cheminova India Limited and another v. State of Punjab and another 1. The Honourable Supreme Court quashed the proceedings when there was a delay of 9 days in lodging the complaint.
11. He also relied on the following Judgments.
i) Zandu v. Mohd.Sharaful, (2005) 1 SCC 122
ii) Vinod v. State of A.P. (2007) 139 Comp Cas 324
iii) N.Kumar v. M.O.Roy, (2007) 3 CTC 650
iv) Vinod Kumar v. ROC (1985) 9 DRJ 232
v) C.K.Ranganathan v. ROC (2002) 1 CTC 321
vi) Kavi Arora v. ROC (2015) SCC OnLine Del 12300
12. The Senior Counsel further submits that the present
Management had in fact taken over the earlier Management. Most of the period of the offences alleged was during the earlier management. The present management had taken over the Company on 16.04.2009. He relied on the Judgment of this Court in Union of Inida v. Tech Mahindra Limited, Mumbai in Company Appeal Nos.4 & 5 of 2014, dated 23.06.2014, wherein it was observed as follows; 1
(2021) 8 Supreme Court Cases 818 5 "It is not out of place to note in this context that the alleged confessional statement of accused No.3 i.e. the erstwhile Chairman of the Company has thrown the whole company into a deep crisis. With the intervention of the Central Government and the Company Law Board, the affairs of the company were put back on the rails. Indeed, in his order dated 16.04.2009 the chairman of the Company Law Board, Principal Bench, New Delhi, whereby he has permitted reconstitution of the company following global tenders has titled the said order metaphorically as "Adoption of orphan Satyam" or "Orphan Satyam adopted". The new management i.e. M/s.Tech-Mahindra which has taken over the company has stabilized the sinking ship and ensured that the Company is pulled from the depths of darkness of its past glory. It would therefore be wholly inequitable to subject the subject the revamped company to needless criminal prosecutions when it has gracefully decided to put a quietus to the vexing problem of prosecution. It would be a travesty of justice, if the Company, after its revamp is subjected to persecution."
13. The Ministry of Corporate Affairs issued authorization to SFIO to investigate into the affairs of the Company on 06.07.2012. The SFIO filed complaint on 09.01.2014. The supplementary report was filed on 23.03.2016. The said offences under Section 217(1) and 211(1) are punishable with a maximum of six months imprisonment and fine. On 17.06.2016, action was initiated and on 27.06.2016 the Officer authorizing to file complaint was appointed. The report was filed on 6 23.03.2016, as such, the limitation expires on 23.03.2017. Even taking into consideration the claim of the SFIO that limitation commences from 27.06.2016, since the complaint was filed on 06.07.2017, there is a delay in filing the complaint.
14. The delay in filing a complaint can be condoned under Section 473 of Cr.P.C., and Cognizance can be taken beyond the period of limitation. However, the Court has to satisfy on the facts and circumstances and the delay has to be explained. In the present case there is neither satisfaction recorded by the Court nor any explanation given by the complainant for delay in lodging the complaint.
15. The observation made in Company Appeal No.4 & 5 of 2014, dated 23.06.2014 was that criminal prosecution would be a travesty of justice if the present company management which had taken over the earlier company is subjected to prosecution.
16. For the foregoing discussion, since the complaint is barred by limitation, the proceedings in C.C.No.262 of 2017 against the petitioners in both the writ petitions are liable to quashed.
17. Accordingly both the Writ Petitions are allowed and the proceedings in C.C.No.262 of 2017 on the file of the Special Magistrate for Economic Offences-cum-Additional Metropolitan 7 Magistrate against the petitioners in both the writ petitions, are hereby quashed.
Miscellaneous applications pending, if any, shall stand closed.
__________________ K.SURENDER, J Date: 15 .09.2023 tk 8 THE HON'BLE SRI JUSTICE K.SURENDER WRIT PETITION Nos.29663 & 29669 OF 2017 Dt. 15.09.2023 tk