Telangana High Court

C.P. Gurnani, Director, vs Serious Fraud Investigation ... on 15 September, 2023

Bench: K.Surender

          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

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

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;

(2021) 8 Supreme Court Cases 818

"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

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