Delhi High Court
Ajay Jain vs Registrar Of Companies Nct Of ... on 22 September, 2010
Author: Shiv Narayan Dhingra
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Reserve: 7th September, 2010
Date of Order: 22nd September, 2010
+ Crl.MC No.4007 of 2009
% 22.09.2010
Ajay Jain ...Petitioner
Versus
Registrar of Companies NCT of Delhi & Haryana ...Respondents
Counsels:
Mr. Abhay K. Das and Ms. S. Shalini, Advocates for petitioner
Mr. Anuj Aggarwal, Advocate for respondent.
JUSTICE SHIV NARAYAN DHINGRA
1. Whether reporters of local papers may be allowed to see the judgment? Yes.
2. To be referred to the reporter or not? Yes.
3. Whether judgment should be reported in Digest? Yes.
JUDGMENT
1. This petition under Section 482 Cr.P.C has been preferred by the petitioner for
quashing the proceedings initiated in Complaint No.477 of 2002 filed by Registrar of
Companies under Sections 63 and 628 of the Companies Act, 1956 for making false
statement in the prospectus in 1995.
2. It is submitted by counsel for the petitioner that the complaint does not show that
a false statement was made by the petitioner. It only shows that the petitioner has
utilized the funds for different purposes than what was stated in the prospectus and at
the most an offence under Section 406 IPC was made out and not an offence under
Sections 63 and 628 of the Companies Act. The other ground taken by the petitioner is
that the period of limitation in filing the complaint had expired. The cognizance could be
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taken within three years from the date of knowledge of the offence and the period of
limitation shall start from the date of filing of prospectus and the complaint was therefore
beyond the period of limitation. The third ground taken by the petitioner is that the
directors of the company of petitioner had resigned from the company during the year
2000 and the company was taken over by other management and there was no
complaint from any of the investors.
3. A perusal of complaint filed by the complainant would show that the petitioner had
issued prospectus being a public limited company and the prospectus informed the
shareholders that the petitioner would undertake business of leasing activities and shall
do business of hire purchase of the properties. However, the balance sheet for the year
1999-2000 showed that 70% of the shareholders funds amounting to Rs.2.05 crore was
deployed by the petitioner as advance deposits to the firms and companies pertaining to
the directors and others and the leasing activities was almost NIL and not carried out by
the company and if it was there it was much below the projections. The company in the
year 2000-01 indulged into sale and purchase of shares of more than Rs.5 crore which
was neither the object and business of the company as per public issue and the majority
of valuable funds of the company have been diverted or siphoned off for objects other
than the projected objects. It is submitted that the petitioner made untrue and misleading
statement to the investors.
4. A false statement is a statement which has been made purposely so that people
may believe existence of a fact which does not exist. In case of prospectus of a
company, a statement of objects, which the directors had no intention to carry, amounts
to false statement. The intention of making a false statement is to mislead or deceive the
person to whom the statement is made. In this present case, the petitioner's company
while issuing prospectus made a statement to intending investors that it would undertake
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the business of leasing and wanted people to subscribe to the shares for this purpose. It
gave projections of profits and business of the company of only in the field of leasing.
One can understand that the surplus funds of the company are deployed by the
company in a businesslike and wise manner but one cannot understand that the
business of the company is not even undertaken and the entire funds of the company
are either invested in shares or in the firms and companies of the directors. It is thus
prima facie apparent that from the very beginning, the directors had no intention to do
business as set out in the prospectus and their intention was to mop up the funds from
public and then to utilize the same for their own companies and firms in which they were
directors or to invest in shares. It is thus obvious that the statement made in the
prospectus was prima facie a false statement deliberately made knowing fully well that
the funds were not going to be utilized for the purpose they were collected. I consider
that the plea taken by the petitioner that the case falls under Section 406 IPC was not
tenable and it was prima facie a case of deliberately making a false statement.
5. As far as limitation aspect is concerned, limitation of offences under Sections 63
and 628 of the Companies Act, 1956 starts from the date of knowledge of making a false
statement. The Registrar of Companies learnt about making of false statement after filing
of balancesheet in the year 1999-2000, therefore, limitation would start only after the
date of filing of balance sheet and not from the date of issuing prospectus and this plea,
therefore, is not tenable. Whether the directors had resigned or not which is a question of
fact which cannot be gone into by this Court and only the trial court, during trial can
decide whether the directors had resigned or they continued to be the directors. I find no
force in this petition. The petition is hereby dismissed with no orders to costs.
September 22 , 2010 SHIV NARAYAN DHINGRA, J
rd
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