Madras High Court
Dilip Chandulal Parekh vs Deputy Registrar Of Companies on 5 August, 2021
1 Crl O.P. No.11983 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 05.08.2021
CORAM:
THE HON'BLE MRS. JUSTICE V.BHAVANI SUBBAROYAN
Crl.O.P. No.11983 of 2016
Dilip Chandulal Parekh ...Petitioner
Vs.
Deputy Registrar of Companies,
Office of the Registrar of Companies,
Tamilnadu, Shastri Bhavan, IInd Floor,
26, Haddows Road,
Chennai – 600 006. ... Respondent
PRAYER: Criminal Original Petition is filed under Section 482 Cr.P.C.,
to call for the records and proceedings in the complaint in EOCC No.05
of 2016 pending before the Court of Additional Chief Metropolitan
Magistrate EO-I, at Allikulam Commercial Complex, Second Floor,
Moor Market, Periamet, Chennai and quash the same.
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2 Crl O.P. No.11983 of 2016
For Petitioner : Mr. M.K.S. Sundar
For Respondent : Mr. K. Ramanamoorthy
(Counsel for Central Govt.)
****
ORDER
This Criminal Original petition has been filed under Section 482
Cr.P.C. seeking for to call for the records and proceedings in the
complaint in EOCC No.05 of 2016 pending before the Court of
Additional Chief Metropolitan Magistrate EO-I, at Allikulam
Commercial Complex, Second Floor, Moor Market, Periamet, Chennai
and quash the same.
2. The case of the prosecution is that the petitioner herein
being appointed as "Whole Time Director" in the company known as
Coral Hub Limited (Hereinafter is referred to as “Company”) having CIN
No.U32109TN1994PLC061452, which was incorporated on 02.05.1994
having its registered office at Kingsely Chambers, Block No.136,
Ramasamy Street, T. Nagar, Mambalam, Guindy Taluk, Chennai-600 017
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was issued a show cause notice dated 10.07.2015 by the respondent for
the violation of Section 149(1) second proviso of the Companies Act,
2013, read with Rule 3 of the Companies (Appointment and
Qualification of Directors) Rules, 2014 for not appointing Women
Director in the Company. Later, the respondent filed a complaint before
the learned Additional Chief Judicial Magistrate, Economic Offence-I,
Egmore, Chennai bearing E.O.C.C. No.5 of 2016 against the petitioner
under Section 149(1) second proviso of the Companies Act, 2013, read
with Rule 3 of the Companies (Appointment and Qualification of
Directors) Rules, 2014. After the compliant was filed by the respondent,
summon dated 01.02.2016 was sent to the petitioner herein and as a
result of which, the petitioner has appeared before the learned Additional
Chief Metropolitan Magistrate on 05.03.2016 and the copy of the
complaint was furnished under Section 207 of Cr.P.C. to the petitioner.
Subsequently, the petitioner has preferred the present Criminal Original
Petition praying to quash the aforesaid criminal proceedings initiated
against him.
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3. The learned Counsel for the petitioner would submit that the
said complaint was filed against the petitioner on the allegation that the
petitioner being a director of the said company failed to appoint at least
one women director of the said company within one year from the
commencement of the Companies Act, 2013, ie. 01.04.2014 on which
date in any event, the petitioner was not a director and was not in office
of the said company. The petitioner has received the summons dated
01.02.2016 on 11.02.2016 in EOCC No. 05 of 2016 issued by the Court
of Additional Chief Metropolitan Magistrate, EO-I, Periamet, Chennai,
without any copy of the said complaint.
4. It has been further submitted that the petitioner was
appointed as a whole time Director of the said company in the Annual
General Meeting of the said company held on 28.09.2006 for a period of
five years w.e.f. 05.02.2006 to 04.02.2011 on a monthly remuneration of
Rs.75,000/- till July, 2008 and from August, 2008 for period of two years
the monthly remuneration was revised at Rs.2,25,000/- and this fact is
recorded in the Annual Report of the said company for the Financial Year
2009-2010. After expiry of petitioner's term as "whole time director" of
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the said company on 04.02.2011, though its Chairman, Mr. G.S.
Chandrsekhar orally asked the petitioner to continue as Director on the
assurance that he would continue to be paid the same salary and in the
next Annual General Meeting, he would get his appointment approved by
passing appropriate resolution. However, no such Annual General
Meeting was called by the Chairman and the Board of Directors and also
the petitioner was not paid salary since , July 2010. Since the petitioner
was not being paid the Salary since July 2010, the petitioner resigned
from the post of Director vide his letter dated 28.06.2012 addressed to
the Chairman and other Directors of the said Company by registered Post
with A/D. In the aforesaid letter, the petitioner has requested the said
company to file the Form No.32. The said resignation letter dated
28.06.2012 was posted on 28.06.2012 by registered post with A/D and
the company received the same on 05.07.2012 as per the said A.D. card
received back by the petitioner herein. The said company also published
in the news papers concerned declaring the resignation of the petitioner
w.e.f. 05.07.2012. Despite the petitioner informed to the respondent
about his resignation from the said company, and the failure of the said
company to file the Form No.32, and requested the respondent to take
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appropriate legal action against the said company vide letter dated
14.09.2021 which was sent by Registered Post with A/D on 17.09.2012
and the same was duly received by the respondent on or about
20.09.2012.
5. Further, the learned counsel for the petitioner has relied on
the Judgment of the Division Bench of the Hon'ble High Court in the
case of "Saumil Dilip Mehta Vs. State of Maharashtra and others
reported in 2002(2) Bom. C.R. 594, wherein it has held as follows:
"6. The submissions advanced by the litigating
parties are touching an point involved in this matter which
make us to express out views on the point whether a director
of a Public or Private Limited Company can resign
unilaterally and that too by writing a letter to the Chairman
of the said Company or its Secretary. Is it necessary for
such a director to till up Form No.32 and is obliged to give
a notice or intimation to that effect to the Registrar of
Company? The question arises for our adjudication is
whether that particular director is obliged to give such
information to the Registrar of Companies with the said
requirement. Keeping in view the provisions of the
Companies Act, the relevant Articles of the Constitution of
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India, we come to the conclusion that a director of the
Public Limited Company or Private Limited Company can
tender his resignation unilaterally and without filing in
Form No.32 and without sending a notice to the Registrar
of Companies. It is clear that the filing in the said form and
giving due intimation and information to the Registrar of
Companies is the duty of the Company Secretary and not of
an individual director. Suffice it to say that what he has to
do is to send in writing a letter informing either the
Chairman or the Secretary of the Company, as the case may
be, his intention to resign from the post of the Director of
the said Company. Thereafter, the said letter has to be
moved in the meeting of the directors of the company, may
be ordinary meeting or may be extraordinary or special
meeting, as the case may be, and the Board of Directors
have to take a decision whether the Board is accepting his
resignation or not. An intimation should be set to such
director and after such resolution is passed, the Company
Secretary is under the obligation to comply with the legal
formalities for giving a finishing touch to the resolution
which has been passed in the said meeting of the Board of
Directors. It is for the Company Secretary to fill in the
forms as prescribed and to give due information and
intimation to the Registrar of Companies, as the law
requires. Thereafter, it has to be so mentioned in all
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prescribed registers of the company, accounts and balance
sheet of the Company and thereafter, the said fact is to be
brought to the notice of the members of the Company as
early as possible and at the latest in Annual General
Meeting."
Without considering the aforesaid observation made by the Division
Bench of the Hon'ble High Court, the respondent filed a complaint before
the learned Additional Chief Judicial Magistrate, Economic Offence-I,
Egmore, Chennai bearing No.E.O.C.C. No.5 of 2016 against the
petitioner under Section 149(1) second proviso of the Companies Act,
2013, read with Rule 3 of the Companies (Appointment and
Qualification of Directors) Rules, 2014, while the Company failed to file
Form No.32 with respect to his resignation as required under Companies
Act, 1956 and further the Financial Statements and Annual returns of the
Company were not filed before the respondent. Hence, a lapse or a
dereliction in statutory duty of the Directors or Company Secretary of the
said Company cannot be ground for fastening Criminal Liability upon the
petitioner.
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6. It has been further submitted that before issuing the said
summons to the petitioner, the learned Magistrate failed to exercise the
jurisdiction under Section 200 of the Code of Criminal Procedure which
provides that whenever a complaint in terms of Section 200 of Cr.P.C. is
laid before the Magistrate then he is duty bound to examine the
Complaint on oath. Without putting any question on the complaint made
by the respondent, the learned Magistrate has initiated Criminal
proceedings against the petitioner. Further, in summoning the petitioner
without providing copy of the complaint is in violation of the mandate of
Section 204(3) of the Cr.P.C. 1973, which provides the mode of service
of summons. The provision of Section 204(3) reads as under:
"Section 204(3): In a proceeding instituted upon
a complaint made in writing, every summons or warrant
issued under sub-section (1) shall be accompanies by a
copy of such complaint."
As per the aforesaid Section, the summon was not accompanied with a
copy of the complaint which means that the summon was not effectively
served upon the petitioner. Hence, the complaint in E.O.C.C. No.05 of
2016 is liable to be quashed.
7. Per contra, the learned Central Government Advocate for the
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respondent would submit after filing counter affidavit that the respondent
filed the complaint in E.O.C.C. No.5 of 2016 against the petitioner under
Section 149 of the Companies Act, 2013, which reads as follows:
149. Company to have Board of Directors:
(1) Every company shall have a Board of Directors
consisting of individuals as directors and shall have:-
(a) a minimum number of three directors in the
case of a Public Company, two directors in the case of a
Private Company, and one Director in the case of a One
Person Company; and
(b) a maximum of fifteen directors;
Provided that a company may appoint more than fifteen
directors after passing a special resolution ;
Provided further that such class or classes of companies as
may be prescribed, shall have at least one woman director.
As per the aforesaid rule, the petitioner should have appointed at least
one Women director as on 01.04.2015. But it was observed that no
Women director was appointed in the said Company as per the signatory
information available in the e-records of the respondent's office. Hence,
the petitioner has violated the above provision read with rules and thus is
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liable to be punished under Section 172 of the Companies Act, 2013.
8. It has been further submitted that a show cause notice was
issued on 10.07.2015 to the petitioner herein and the subject company for
violation of the Section 149 of Companies Act, 2013 read with Rule 3 of
the Companies (Appointment and Qualification of Directors) Rule, 2014
asking for a reply within a period of 10 days from the date of notice. But,
the reply sent by the petitioner, to the respondent is not tenable.
9.It has been further submitted that the Companies Act, 1956
does not have any provisions elucidating the process of Resignation of a
Director, from the Company. According to many interpretation and
precedents as set forth by the Hon'ble Supreme Court and High Court in
many case laws, with respect to the question of resignation, it is inferred
that, since the Companies Act, 1956 does not prescribe any specific
process for the Directors to resign from a Company, the clauses
established in the Articles of Association of a Company, shall be
followed and in the lack of clauses regarding Resignation of the Director,
in the Articles of Association of the Company, the resignation of the
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Director will be in accordance with the ordinary rule of common law.
Due to the fact that the Articles of association of the subject company
does not give any provision or process with respect to the resignation of
its directors, the rule of common law or precedents should be applied in
the case of the subject Company.
10. The learned Central Government Advocate would further
submitted that as per the explanation given under Section 269 of the
Companies Act, 1956, a whole time Director can be seen as the Director
who engages his/her whole time in the affairs of the Company. A whole
time Director of one Company cannot accept or hold position of a whole
time director in another company. The petitioner, being the only Whole
Time Director of the company during the period of his resignation,
cannot disregard his liabilities and responsibilities without getting
consent by way of the acceptance from the Board of Directors regarding
his resignation. Further, It has been relied upon the Judgment in the case
of Saumildilipmehtav Vs. State of Maharastra reported in (2003) 113
Comp. cas 443, wherein the Hon'ble High Court held as follows:
"when a director has tendered his resignation and
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the Board of Directors has accepted it, such director cannot
be held for liabilities incurred by the Company after the
date of acceptance of his resignation, except the liability
incurred by him for purchase of company's share and
nothing more." It is very clear that, the director is free from
all the liabilities, only after tendered his resignation, and
the Board of Directors has accepted it, whereas in the
subject matter, Board has not accepted his resignation,
since company has not filed Form-32 with respect to his
resignation, as required under Companies Act, 1956."
In another Judgment dated 15.04.2015 in the case of Smt. Dr. Renuka
Datla and Others Vs. Biological E Limited and Others, it has been held
as follows:
"if there is any provision in the Article giving the right to a
Director to resign at any time, the resignation will take
effect without any need for its acceptance by the Board or
the Company in the General Meeting. From the aforesaid
case, it can be referred that the petitioner, cannot resign by
just giving a notice to the company, rather, his resignation
should be accepted by the Company, as there is no specific
mention regarding the process of resignation in the Articles
of Association of the Subject Company. Further, the
petitioner only established that he submitted a letter to the
company, but there is no proof as to , if the same was
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accepted by the other directors of the Company or not. In
addition to, either Form 35 or DIR 12, wherever applicable,
is not seen filed by the Subject Company and hence the
petitioner is still a Director of the subject Company."
11. It has been further submitted that according to Section
303(2) of the Companies Act, 1956, which reads as under:
(2) The Company shall, within the periods
respectively mentioned in the sub-section, send to the
Registrar a return in duplicate in the prescribed form
containing the particulars specified in the said register and
a notification in duplicate in the prescribed form of any
change among its directors, managing directors, managing
agents, secretaries and treasurers, managers or secretaries
specifying the date of the change. The period within which
the said return is to be sent shall be a period of thirty days
from the appointment of the first directors of the Company
and the period within which the said notification of a
change is to be sent shall be thirty days from the happening
thereof.
As per MCA 21 portal, the signatory details (Annexure-A) of the subject
Company includes the name of the petitioner as the whole time director
till date. It is the statutory duty of the subject Company to file the Form
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32 according to the aforesaid Section, but the above said procedure was
not followed by the said company. Besides, the non-filing of Form-32 as
mandated by the Companies Act, 1956, by the subject Company, raises
the question as to whether the subject company was ready to accept the
resignation of the petitioner or not. Hence, the averments made by the
petitioner in the affidavit are false and baseless.
12. The learned Central Government Advocate would further
submit that the respondent has followed all the due procedure of Law
enshrined in the Companies Act, 1956 and Companies Act, 2013.
However, the subject company has not filled Financial Statements and
Annual Returns from the Financial Year 2010-2011 to till date. Also, the
Subject Company has never appointed a Women Director till date as
required under Second Proviso of Section 149 of Companies Act, 2013
read with Rules 3 of Companies (Appointment and Qualification of
Directors) Rule 2014. It makes clear that the present Criminal Original
Petition does not have any rationality and the averments and claims of
the petitioner against the respondent is not reasonable and acceptable.
Hence, this Criminal Original Petition is liable to be dismissed as there is
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no merit in the plea of the petitioner.
13.Heard, the learned Counsel for the petitioner and the
learned Central Government Advocate for the respondent as well as
perused the material available on record.
14.It is relevant to rely upon the Judgment of the Hon'ble
Supreme Court of India passed in Crl.A.No.579 of 2019 dated
02.04.2019 in the case of Devendra Prasad Singh Vs. State of Bihar &
Anr., as follows:-
" 12.So far as the second ground is
concerned, we are of the view that the High
Court while hearing the application under
Section 482 of the Cr.P.C. had no jurisdiction
to appreciate the statement of the witnesses
and record a finding that there were
inconsistencies in their statements and,
therefore, there was no prima facie case
made out against respondent No.2. In our
view, this could be done only in the trial
while deciding the issues on the merits
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or/and by the Appellate Court while deciding
the appeal arising out of the final order
passed by the Trial Court but not in Section
482 Cr.P.C. proceedings.
13.In view of the foregoing discussion,
we allow the appeal, set aside the impugned
order and restore the aforementioned
complaint case to its original file for being
proceeded with on merits in accordance with
law."
15.Recently, the Hon'ble Supreme Court of India dealing in respect
of the very same issue in Crl.A.No.1572 of 2019 dated 17.10.2019 in the
case of Central Bureau of Invstigation Vs. Arvind Khanna, wherein, it
has been held as follows:
“19. After perusing the impugned order
and on hearing the submissions made by the
learned senior counsels on both sides, we are of
the view that the impugned order passed by the
High Court is not sustainable. In a petition
filed under Section 482 of Cr.P.C., the High
Court has recorded findings on several disputed
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facts and allowed the petition. Defence of the
accused is to be tested after appreciating the
evidence during trial. The very fact that the
High Court, in this case, went into the most
minute details, on the allegations made by the
appellant-C.B.I., and the defence put-forth by
the respondent, led us to a conclusion that the
High Court has exceeded its power, while
exercising its inherent jurisdiction under
Section 482 Cr.P.C.
20.In our view, the assessment made by
the High Court at this stage, when the matter
has been taken cognizance by the Competent
Court, is completely incorrect and uncalled
for.”
16.Further the Hon'ble Supreme Court of India also held in the
order dated 02.12.2019 in Crl.A.No.1817 of 2019 in the case of
M.Jayanthi Vs. K.R.Meenakshi & anr, as follows:
"9. It is too late in the day to seek
reference to any authority for the proposition
that while invoking the power under Section
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482 Cr.P.C for quashing a complaint or a
charge, the Court should not embark upon an
enquiry into the validity of the evidence
available. All that the Court should see is as to
whether there are allegations in the complaint
which form the basis for the ingredients that
constitute certain offences complained of. The
Court may also be entitled to see (i) whether
the preconditions requisite for taking
cognizance have been complied with or not;
and (ii) whether the allegations contained in
the complaint, even if accepted in entirety,
would not constitute the offence alleged.
..............
13. A look at the complaint filed by the
appellant would show that the appellant had
incorporated the ingredients necessary for
prosecuting the respondents for the offences
alleged. The question whether the appellant
will be able to prove the allegations in a
manner known to law would arise only at a
later stage...................."
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The above judgments are squarely applicable to this case and as such, the
points raised by the petitioner cannot be considered by this Court under
Section 482 Cr.P.C.
17. It is alleged by the learned Counsel for the petitioner that the
petitioner's term as "whole time director" of the said Company expired on
04.02.2011 and the petitioner was not paid salary since July 2010.
However, it is seen from the records that the petitioner has sent a
resignation letter only on 28.06.2012 addressed to the Chairman and
other Directors of the said company by registered Post with A/D. Even
assuming that the petitioner's term as a Director had ended on
04.02.2011, no proof of the acceptance filed herewith by the Board. The
petitioner has stated that salary for performing as director was not paid
since July 2010 and if that is, it is surprising as to how the petitioner has
been working as a director even without salary since July 2010, but had
sent his resignation letter only on 28.06.2012. It is not known whether
the petitioner was working without any salary since July 2010 till
resignation of his post as Director of the Company. The facts are to be
proved by him. These are totally contradictory versions from the
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averments of the petitioner. However, according to the respondent, as per
MCA 21 portal, the signatory details (Annexure-A) of the subject
Company includes the name of the petitioner as the whole time director
till date. Under such circumstances, the factual aspects of the case would
be disclosed only after a thorough trial to be held before the Additional
Chief Metropolitan Magistrate (Economic Offences-I) District Judge,
Chennai.
18. In view of the aforesaid contradiction found and discussions in
the present petition as well as submissions of the learned Central
Government Advocate that as per the explanation given under Section
269 of the Companies Act, 1956, a whole time Director can be seen as
the Director who engages his/her whole time in the affairs of the
Company. A whole time Director of one Company cannot accept or hold
position of a whole time director in another company. The petitioner,
being the only Whole Time Director of the company during the period of
his resignation, cannot disregard his liabilities and responsibilities
without getting consent by way of the acceptance from the Board of
Directors regarding his resignation, hence, this Court is not inclined to
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quash the proceedings in E.O.C.C.No.5 of 2016 on the file of the
Additional Chief Metropolitan Magistrate (Economic Offences-I) District
Judge, Chennai. The petitioner is at liberty to raise all the grounds
before the trial Court. The Trial Court is directed to proceed further in
this case having heard pleas on either side and complete the proceedings
within a period of nine months from the date of receipt of copy of this
order.
19. Accordingly, this Criminal Original Petition is dismissed.
Consequently, connected miscellaneous petitions are also closed.
05.08.2021
Lbm
Index : Yes / No
Speaking order/Non-speaking order
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To:
1. Deputy Registrar of Companies,
Office of the Registrar of Companies,
Tamilnadu, Shastri Bhavan, IInd Floor,
26, Haddows Road,
Chennai – 600 006.
2. The Central Government Advocate
3. The Additional Public Prosecutor,
High Court of Madras,
Chennai.
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V.BHAVANI SUBBAROYAN.,J
lbm
Crl.O.P. No.11983 of 2016
05.08.2021
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