Calcutta High Court (Appellete Side)
Usha Martin Telematics Ltd. & Anr vs The Registrar Of Companies on 27 January, 2021
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
Present:
The Hon'ble JUSTICE SUVRA GHOSH
C.R.R. 494 of 2019
WITH
CRAN 1 of 2019(Old No. CRAN 1676 of 2019)
WITH
CRAN 2 of 2019(Old No. CRAN 1705 of 2019)
WITH
CRAN 5 of 2019(Old No. CRAN 4139 of 2019)
(Via Video Conference)
Usha Martin Telematics Ltd. & Anr.
Versus
The Registrar of Companies, West Bengal
For the Petitioners : Mr. Pradip Kumar Ghosh, Sr. Adv.
Mr. Sayantan Bose, Adv.
Mr. Sidhartha Basu, Adv.
Mr. Shahezad Kazi, Adv.
Ms. Madhurima Das, Adv.
Ms. Anyapurba Banerjee, Adv.,
For the Opposite Party : Mr. M.S. Tiwari, Adv.
Mr. Debu Chowdhary, Adv.,
Heard on : 20.01.2021
Judgment on : 27.01.2021
SUVRA GHOSH, J. :-
1.
In the present revisional application under article 227 of the Constitution
of India read with sections 401/482 of the Code of Criminal Procedure,
the petitioners have prayed for quashing of proceedings of complaint case
no. 15 of 2018 filed by the opposite party before the Learned 2nd Special
Court, Calcutta for offence punishable under sections 118(2) and (7) read
with sections 447/448 of the Companies Act, 2013.
2. The contention of the petitioners, in a nutshell, is that petitioner no. 1 is a
company registered under the provisions of the Companies Act, 2013 and
petitioner no. 2 is the erstwhile manager of the company. Petitioner no. 1
applied to the Reserve Bank of India vide application dated 28th March,
2014 for being registered as Core Investment Company (CIC) pursuant to
the Core Investment Companies (Reserve Bank) Directions, 2011
following which the Reserve Bank of India vide letter dated 6th May, 2014
sought certain clarifications and documents from the petitioner company.
A meeting of the Board of Directors of the company was held on 11th
June, 2014 and in course of preparing the minutes of the said meeting in
compliance with section 118(1) of the Companies Act, 2013, it was
erroneously recorded in item no. 12 of the minutes that the company
submitted application with the Reserve Bank of India for its de-
registration as NBFC and registration as a CIC. Such recording was an
inadvertent/typographical error as the company was not a registered Non
Banking Financial Company (NBFC) at the relevant time and the question
of de-registration as NBFC did not arise. The said error was detected by
the company subsequently and in a meeting of its Board of Directors held
on 9th September, 2015 the error was rectified.
3. It is further contended that sometime in February, 2016 the opposite
party inspected the books of accounts and other relevant records of the
company under section 206(5) of the Act of 2013 and detected the
erroneous recording in the minutes of the meeting dated 11th June, 2014.
The company was asked to show cause as to why prosecution would not
be initiated against it under the provisions of sections 118(2) and (7) read
with sections 447/448 of the Act for violation of the said provisions of law
by the company, such notice being issued on 24th August, 2018. In reply
to the said notice, the company explained the inadvertent mistake as well
as its rectification vide letter dated 20th September, 2018. The said
explanation was not found to be satisfactory by the opposite party who
lodged the complaint against the petitioners.
4. It is submitted on behalf of the petitioners that the error detected in item
no. 12 of the minutes was a typographical mistake which was
subsequently rectified by the company suo motu. Such rectification was
carried out on 9th September, 2015 and the show cause notice was issued
by the opposite party only on 24th August, 2018. Though the company
sufficiently and adequately explained the said error and its rectification to
the opposite party, the opposite party lodged the complaint for no good
reason. The petitioners have prayed for quashing the entire proceedings
pending before the Learned 2nd Special Court, Calcutta, being complaint
case no. 15 of 2018.
5. It is submitted on behalf of the opposite party that in making erroneous
recording in the minutes of the Board meeting, the petitioners have
violated the provisions laid down in sections 118(2) and (7) of the Act of
2013 and are liable to be prosecuted under sections 447/448 of the Act.
The proceeding is at a very nascent stage and remedy for the petitioners
lies in approaching the trial court and presenting their case before the
said court. The correction in the minutes book was carried out by the
petitioners only after the notice to show cause was issued upon them.
The present application is premature, moreso, as the complaint makes
out a prima facie case against the petitioners.
6. I have considered the submissions made on behalf of both the parties as
well as the documents placed before me.
7. At the outset, sections 118(2), (7) and (11) are set out.
"(2) The minutes of each meeting shall contain a fair
and correct summary of the proceedings thereat.
(7) The minutes kept in accordance with the provisions
of this section shall be evidence of the proceedings
recorded therein.
(11) If any default is made in complying with the
provisions of this section in respect of any meeting,
the company shall be liable to a penalty of twenty-
five thousand rupees and every officer of the
company who is in default shall be liable to a
penalty of five thousand rupees."
8. In item no. 12 of the minutes recorded with regard to meeting of the
Board of Directors of the company held on 11th June, 2014, it is stated
that "the Chairman informed that the Company had submitted
application with Reserve Bank of India (RBI) for its de-registration as
NBFC and registration as a CIC pursuant to the Core Investment
Companies (Reserve Bank) Directions, 2011......" The application for
registration as CIC-ND-SI before the RBI dated 28th March, 2014 speaks
of a request for registration of the company as CIC-ND-SI and is bereft of
any request for de-registration as NBFC. This indicates that the words
"for its de-registration as NBFC" was erroneously recorded in the
minutes and no such request was made before the RBI, moreso, as the
company was not registered as NBFC at the relevant time and therefore
the question of de-registration did not arise. Such erroneous recording
was detected by the company subsequently and by virtue of resolution
taken in the Board meeting of the company on 9th September, 2015 the
mistake was termed as inadvertent/typographical error and it was
further clarified that the company was not an NBFC.
9. In reply to the company's application for grant of registration as CIC, the
RBI vide letter dated 30th June, 2014 requested for resubmission of the
application with further particulars and documents and such request of
the RBI was complied with by the company vide letter dated 27th March,
2015. Be that as it may.
10. The opposite party inspected the books of accounts and other relevant
records of the company under section 206(5) of the Act of 2013 long
thereafter and issued a show cause notice upon the company on 24th
August, 2018 calling for an explanation with regard to the erroneous
recording in item no. 12 of the minutes of the meeting of the company
dated 11th June, 2014. Though the company, in its reply dated 20th
September, 2018 explained the entire situation to the opposite party,
complaint was lodged against the company by the opposite party who
did not find the reply sufficient or satisfactory.
11. It is trite law that jurisdiction under section 482 of the Code of Criminal
Procedure should be exercised with extreme care, caution and
circumspection and should not be an instrument to axe down or stifle a
legitimate prosecution. The test is whether the uncontroverted
allegations made in the complaint make out a prima facie case and
whether allowing the proceedings to continue would amount to abuse of
the process of the court.
12. It is crystal clear from the minutes dated 11th June, 2014 and 9th
September, 2015 that the words "for its de-registration as NBFC" was
inadvertently recorded and was rectified upon detection. The application
for registration dated 28th March, 2014 supports the contention of the
petitioners that no such request for de-registration was made in the said
application. The company not being registered as NBFC at the relevant
time, the question of de-registration did not arise and there could have
been no malafide on the part of the company on that score.
13. Sections 447 and 448 are penal provisions of the Act of 2013 which
provide for punishment for persons found to be guilty of fraud and false
statement. For such purpose, 'fraud' has been defined as hereunder:-
""fraud" in relation to affairs of a company or any
body corporate, includes any act, omission,
concealment of any fact or abuse of position
committed by any person or any other person with
the connivance in any manner, with intent to deceive,
to gain undue advantage from, or to injure the
interests of, the company or its shareholders or its
creditors or any other person, whether or not there is
any wrongful gain or wrongful loss;"
14. As envisaged in section 448 of the Act,
"...... any person makes a statement,-
(a) which is false is any material particulars,
knowing it to be false; or
(b) which omits any material fact, knowing it to be
material, he shall be liable under section 447."
15. The key ingredient of the offence is the intent to deceive, gain undue
advantage or injure the interest of the company or any person connected
thereto. In the case in hand, the complaint lodged by the opposite party
does not prima facie reflect such intent on the part of the petitioners.
Per contra, though the opposite party has referred to the notice of show
cause in the complaint, the reply to the said notice given by the
petitioners is conspicuously absent therein. It is also inconceivable that
the inspection was held sometime in 2018 and the notice to show cause
signed on 24th August, 2018 whereas the instruction of the Ministry to
launch prosecution for such violation was issued on 7th December, 2017,
i.e., preceding the inspection. The complaint does not prima facie make
out an offence under sections 118(2) and (7) read with sections 447/448
Act of 2013. Typographical/inadvertent error in recording of minutes
rectified subsequently can under no stretch of imagination be termed as
an offence, far less an offence under the provisions of the Act of 2013 as
alleged. That the petitioners acted with a malafide intention to deceive,
gain undue advantage or injure the interest of the company or any
person connected thereto is not reflected in the four corners of the
complaint. Allowing the proceeding to continue shall be a futile exercise
and abuse of the process of law in view of the fact that the inadvertent
error has been sufficiently and adequately explained and does not call
for any prosecution.
16. Upon consideration of the entire facts and circumstances of the case,
the contents of the complaint itself as well as the law on the point, I have
no impediment to hold that the proceeding in respect of complaint case
no. 15 of 2018 is liable to be quashed.
17. C.R.R. 494 of 2019 is allowed.
18. Proceedings in respect of complaint case no. 15 of 2018 pending before
the Learned 2nd Special Court, Calcutta be quashed.
19. A copy of this order be forwarded to the Learned Trial Court for
information and necessary action.
20. CRAN 1 of 2019 (Old No. CRAN 1676 of 2019) with CRAN 2 of 2019 (Old
No. CRAN 1705 of 2019) with CRAN 5 of 2019 (Old No. CRAN 4139 of
2019) are disposed of.
21. There will be no order as to costs.
22. Urgent certified website copies of this judgment, if applied for, be
supplied to the parties expeditiously on compliance with the usual
formalities.
(Suvra Ghosh, J.)
