Usha Martin Telematics Limited & ... vs The Registrar Of Companies
2022 Latest Caselaw 3584 Cal

            IN THE HIGH COURT AT CALCUTTA
           CRIMINAL REVISIONAL JURISDICTION
                  APPELLATE SIDE
Present:
The Hon'ble Justice Ajoy Kumar Mukherjee

                            C.R.R. 493 of 2019
                  Usha Martin Telematics Limited & ors.
                                    -vs-
                 The Registrar of Companies, West Bengal


For the Petitioners            : Mr. Pradip Kumar Ghosh
                                 Mr. Sayantan Bose
                                 Ms. Madhurima Das

For the Opposite Party         : Mr. Rajdeep Mazumder
                                 Mr. Debu Chowdhury
                                 Mr. Moyukh Mukherjee


Heard on          :            22.6.2022

Judgment on       :            27.06.2022


Ajoy Kumar Mukherjee, J.

1. The present revisional application has been directed to quash the

Complaint Case No. 14 of 2018 filed before 2 nd Special Court, Kolkata. In the

impugned proceeding, learned 2 nd Special Court, Kolkata after perusal of

application filed by complainant who is a public servant and also on perusal of

documents on record issued summons upon the petitioners/accused persons

vide order dated 14.12.2018.

2. The facts in relation to the criminal complaint under Sections

149/447/448 of the Companies Act, 2013 as set out in the revisional

application by the petitioners are that the petitioner no.1/Company held a

meeting of its Board of Directors on 9th December, 2014 and it was held, inter

alia, the appointment of Mr. Ajaybir Singh Bakshi (Mr. Bakshi) as an

"Additional Director". Pursuant to such meeting, Mr. Bakshi was appointed as

Additional Director of the petitioner No.1 /Company. The petitioner

no.1/Company filed Form DIR-12 with the respondent/ Opposite Party

recording the appointment of Mr. Bakshi as Additional Director. Furthermore a

copy of the letter dated 9th December, 2014 was issued to Mr. Bakshi

appointing him as Additional Director which was filed as an attachment to the

aforesaid Form DIR-12. Sometimes around February 2016 pursuant to its

power under Section 206(5) of the Companies Act, the respondent/Opposite

Party conducted an inspection of the petitioner no.1/Company's record and

during such inspection, the respondent/opposite Party noted that the Minutes

of the meeting of the Board of Directors of the petitioner no.1/Company held

on 9th December, 2014, the following sentence was included under Item No.05 :

"Item No.05.....

Further, the Board took a note of the declaration of independence provided

by Mr. Bakshi as per provisions of section 149(6) of the Act, for his

appointment as an Independent Director on the Board. ...."

3. It is further alleged that pursuant to the Board Minutes, the petitioner

no.1/Company had appointed Mr. Bakshi as an Independent Director and

made an incorrect declaration in the aforesaid Form DIR-12 that Mr. Bakshi

was appointed as Additional Director. Based on this, the opposite party issued

show cause notice on 30th August, 2018 to the present petitioners. Pursuant to

the said letter dated 20th September, 2018, the petitioner nos. 1 and 2

explained to the opposite party that -

(a) the one sentence in the Board Minutes was an inadvertent

typographical error.

(b) Mr. Bakshi was in fact appointed as an 'additional director' and not

as an 'independent director'.

(c) The Board Minutes in at least four places record unequivocally that

Mr. Bakshi was appointed as an 'additional director', detailed as

under:

(i) At the top of the Board Minutes recording the attendance of the

members it is noted that:

"Present .......

Mr. Ajaybir Singh Bakshi Director (Appointed as an

Additional Director during the

meeting)"

(ii) The heading to the relevant Item No.5 for discussion, records

as under:

"ITEM NO. 05 - APPOINTMENT OF MR. AJAYBIR SINGH

BAKSHI AS AN ADDITIONAL DIRECTOR ON THE BOARD"

(iii) The paragraph immediately preceding the incorrect and

inadvertent sentence records as under:

"It was proposed to appoint Mr. Ajaybir Singh Bakshi as an

Additional Director of the Company in terms of the provisions

of Section 161 of the Companies Act, 2013 ("the Act"). The

Board was informed that Mr. Bakshi has given consent to act

as a Director of the Company with the provisions of Section

152(5) of the Act and applicable Rules."

(iv) The actual resolution records as under:

"RESOLVED THAT, in accordance with the provisions of

Section 161 of the Companies Act, 2013 ("the Act") read with

applicable rules under the Act, and the articles of association

of the Company, Mr. Ajaybir Singh Bakshi be and is hereby

appointed as an Additional Director of the Company with

immediate effect to hold office upto the date of the next annual

general meeting of the Company."

(d) Form DIR-12 is consistent with the actual resolution passed by the

Board Minutes and the intent of the Petitioner No.1/Company of appointing

Mr. Bakshi as an 'additional director' on its board of directors.

e) Consistent with the resolution passed, the Form DIR-12 , item no. 5 and the

intent of the petitioner no. 1 company, the letter dated 9 th December, 2014

issued by the petitioner no. 1 company to Mr. Bakshi clearly stated that he has

been appointed as additional Director and said letter dated 9 th December, 2014

was filed as an attachment to the aforesaid Form DIR-12.

(f) the inadvertent error in the sentence referred above was without any mala

fide intention to deceive or to gain undue advantage from or to injure the

interest of the petitioner no. 1 company, it's shareholders creditors or any other

person. A separate letter dated 4 th October, 2018 was also given explaining the

aforesaid facts and circumstances of the occurrence which occurred due to

inadvertence.

4. Learned senior Advocate for the petitioner Mr. Pradip Kumar Ghosh

argued that Mr. Bakshi was appointed as an Additional Director by the

petitioner no. 1 company which has been correctly recorded and the word

"Independent Director" have not been used in the resolution. Mr. Bakshi,

during the relevant period of time was in the full time employment of one group

of companies of petitioner no. 1 company and hence was not qualified to be

appointed as an "Independent Director". Actually, the opposite party has

ignored the explanation furnished by the petitioners in their reply to show

cause and opposite party ignored the Form DIR-12 and the letter dated 9 th

December, 2014 issued to Mr. Bakshi in relation to his appointment as an

additional Director and unfortunately, the opposite party has started the

proceeding emphasising on one, inadvertent typographical error in one

sentence in the Board minutes which referred to Mr. Bakshi as "Independent

Director". In fact, the proceeding has been initiated ignoring the reply given by

the petitioners dated 20th September, 2018 and reply dated 4 th October, 2018.

The complaint does not even refer to the reply dated 20 th September, 2018 and

the reply dated 4th October, 2018 filed by the petitioner and without applying

its mind to the explanation submitted by the petitioners in their reply to show

cause notice, opposite party is continuing with the present proceeding, which

is nothing but an abuse of process of court.

5. Learned counsel for the petitioners argued that the criminal complaint

ex-facie does not bring out any case against the petitioners Under Section 149

of the Companies Act as Section 149 is generally in relation to appointment of

directors on the Board of a company and Sub-sections (6) to (10) of Section 149

are specific to "Independent Director". As can be noted from item no. 5 of the

Board minutes and in the form of DIR-12, the petitioner no. 1 company had

appointed Mr. Bakshi as an additional director under Section 161 of the

Companies Act, 2013 and as such the provision in relation to the appointment

of "Independent Director" under Section 149 of the Companies Act, 2013 does

not arise. Accordingly, the provision in relation to the appointment of an

"Independent Director" under Section 149 of Companies Act, 2013 are not

triggered at all and has got no application in the present context.

6. Mr. Ghosh, learned advocate for the petitioners further argued that

Section 448 of the Companies Act relates to punishment for false statement in

any return, report, certificate etc. and the Section itself makes it clear that

mens rea or guilty mind is an essential ingredient for charging any person

under Section 448 which expressly states that the false statement must be

made "knowing it to be false" or an omission of any material fact should be

made "knowing it to be material". Accordingly, Mr. Ghosh, learned advocate for

the petitioners submitted that there is no false statement made or material

omission made in the board minutes save and except an inadvertent

typographical error. Even in the complaint, nowhere it has been stated that the

alleged violation was made with knowledge by any of the petitioners. It has

further been argued on behalf of the petitioners that Section 447 of the

Companies Act, has an explanation which defines fraud for the application of

Section 447 of the Companies Act and bare reading of that Section makes it

clear that mens rea or knowledge or intention is again an essential ingredient

for charging any person under Section 447. In other words, in order to attract

Section 447 of the Companies Act, fraud must be "with intent". An inadvertent

typographical error can never amount to fraud. There is nothing to show that

alleged violations were made "with intent" from any of the petitioners.

Factually, the criminal complaint alleged by the opposite party is a result of a

trivial error and the Sections namely, Section 149,448 and Section 447 of the

Companies Act has been put incorrectly for which the ingredients for charging

a person under Section 447 or 448 of the Companies Act are missing in the

criminal complaint.

7. Referring the case of Madhavrao Jiwajirao Scindia and others Vs.

Sambhajirao Chandrojirao Angre and others, reported in AIR 1988 SC

709, Mr. Ghosh, learned advocate for the petitioners argued that the legal

position is well settled that when a prosecution at the initial stage is asked to

be quashed, the test to be applied by the court as to whether the allegations

has prima facie established any offence or not. The court cannot be utilised for

any oblique purpose specially when the conviction is bleak. Accordingly, he

submitted that no useful purpose is likely to be served by allowing the present

criminal prosecution to continue and as such prayed for quashing the

proceeding.

8. Learned counsel appearing on behalf of the opposite party Mr. Rajdeep

Mazumder submits that Section 448 or Section 447 of the Companies Act

makes it clear that when any person makes any false statement which he

knows to be false, these Sections attract. Whether the said statement

mentioning Mr. Bakshi as "Independent Director" was made intentionally or

not, will be adjudged at the time of trial and not at the time of issuing the

process. In this context, referring State of Haryana and others Vs. Bhajan

Lal and others, reported in 1992 Supp (1) SCC 335, Mr. Majumder, learned

advocate for the opposite party submits that at this stage, the court is only

required to look into whether the materials prima facie discloses any offence or

not. The petitioners admitted their mistake in so many terms and in so many

places. Accordingly whether in committing admitted "mistake" there exists any

mens rea or not shall be adjudicated at the time of trial and the proceeding

cannot be quashed at its threshold on the ground that it does not disclose any

guilty mind. The story of inadvertent typographical mistake is not believable in

view of the fact that quoting the relevant Section, it has been specifically stated

that Mr. Bakshi is appointed as "Independent Director". In this context, Mr.

Mazumder, learned counsel for the opposite party also relied upon paragraph

108 (1) of the Bhajanlal's Case (supra).

9. I have carefully gone through the complaint lodged under Section 447

read with Section 448 and Section 149 of the Companies Act and marked as

Annexure-A and also the relevant extract of minute book (page no. 429)

marked as Annexure-B, the G.A.R. 7 receipt, Ministry of corporate affairs

marked as Annexure-C, letter of appointment of Mr. Bakshi as additional

Director in the company marked as Annexure-D along with the reply to the

show cause notice given by the petitioners marked as Annexure-F and the

certified copy of the order sheet passed by Judge, 2 nd Special Court, Calcutta

dated 14.12.2018, along with other documents in the record.

10. From the order dated 14.12.2018 it is clear that the court concerned has

not disclosed in the impugned order as to how he satisfied about prima facie

case against the accused persons and what are the grounds for proceeding

against the accused persons. The said order is not only very cryptic but also

does not reflect that he has applied his mind. The order has been passed in a

very casual and routine manner.

In this context Apex Court's observation in Pepsi Foods Limited and another

Vs. Special Judicial Magistrate and others., reported in (1998) 5 SCC 749

is very much relevant

"28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto.

He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused".

11. Needless to say that the well settled principle of law is that the final

purpose of a criminal proceeding is to secure justice and to prevent the abuse

of process of law. The subsequent documents along with the resolutions if

taken at its face value makes, it is abundantly clear that Mr. Bakshi was

appointed as an Additional Director and there was no intention on the part of

the petitioners to appoint him as an "Independent Director" nor any attempt

was made to project him as "Independent Director". One single statement that

his consent was taken as "Independent Director" cannot be construed that the

board of Directors had actually appointed him as "Independent Director" and

not as "additional Director". Accordingly, the allegations levelled in the

complaint appears to be absurd and inherently improbable and if a prudent

person tests is applied then the inevitable conclusion would be that there is no

chance of conviction as there is nothing to show that the alleged "false

statement" was made knowing it to be false or any omission of material fact

was made knowing it to be material in order to deceive someone or to gain any

undue advantage from the company or it's share holders or it's creditors, in

order to attract the relevant sections. Furthermore, subsequent documents

makes it abundantly clear that the essential ingredient for Section 447 or

section 448 are not present in the present context.

12. In view of the above, the ultimate conclusion is that if the present

proceeding is allowed to be continued in view of the aforesaid facts and

circumstances of the case, that will be an abuse of process of court because

the allegations levelled in the complaint is absurd and inherently improbable in

view of the documents available in the record including the Annexures.

13. CRR 493 of 2019 is accordingly allowed.

14. Let all the proceedings in criminal complaint being Complaint Case 14 of

2018 pending before the learned 2 nd Special Court, Kolkata is hereby quashed.

However, there will be no order as to costs.

Urgent photostat certified copy of this judgment, if applied for, be given to the

parties upon compliance of all requisite formalities.

(AJOY KUMAR MUKHERJEE,J.)