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Judgment
Arunachalam, J.—The petitioners are A-1 to A-6 in E.O.C.C. No. 1659 of 1989 pending on the file of Additional Chief Metropolitan
Magistrate (O.I.), Egmore, Madras. They are being prosecuted, on a private complaint, preferred by the respondent, the Additional Registrar of
Companies, Madras, for alleged violation of the provisions contained u/s 297 of the Companies Act, 1956, punishable u/s 629A of the same Act.
In this petition preferred u/s 482 of the Criminal Procedure Code, 1973, to call for the records and quash the pending prosecution as not
maintainable and an abuse of process of court, two grounds were urged by Mr. N.T. Vanamamalai, learned senior counsel appearing on behalf of
the petitioners.
Contention No. 1 : Contravention of the provisions of the Act, was within the knowledge of authorities concerned, during inspections made in
May, 1988, and December, 1988. Contraventions have occurred on November 30, 1985, November 30, 1986, and November 30, 1987. This
offence, if committed, is punishable only with fine which may extend to Rs. 500. The Companies Act not having prescribed any specific period of
limitation, the provisions of the Code of Criminal Procedure will come into operation. u/s 468(2)(a), period of limitation for initiating this
prosecution will be six months. Hence, complaint dated December 14, 1989, is hopelessly barred by limitation. Expatiating this contention, he
submitted, that the letter of law will have to be followed and the respondent cannot claim a different date of knowledge, for the entire department
must be deemed to be charged with a duty. The authorities concerned, whoever it might be, if they had become aware of commission of an
offence, must have promptly acted to inform the respondent to set the law in motion, within the period of limitation, or otherwise face the risk of the
prosecution being thrown out, on the ground of limitation bar.
Contention No. 2 : u/s 629A of the Companies Act, if the contravention is by a company or by any other person, of any provision of the Act for
which no punishment stands provided elsewhere under the Act, the company and every officer of the company who is in default or such other
person, shall be punished. At the time when the offences were committed, prior to amendment of section 5 of the Act on and from July 15, 1988,
an officer in default was stated to mean as follows :
Meaning of ""officer who is in default"". - ""For the purpose of any provision in this Act which enacts that an officer of the company who is in default
shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression ''officer who is in default'' means
any officer of the company who is knowingly guilty of the default, non-compliance, failure, refusal or contravention mentioned in that provision, or
who knowingly and wilfully authorises or permits such default, non-compliance, failure, refusal or contravention"".
That is the provision applicable in the instant case. As the law stood then, mens rea was essential, for an officer who was in default, meant any
officer of the company who was knowingly guilty of the default, etc. Mr. N.T. Vanamamalai contended that the allegations in the complaint do not
anywhere indicate the said mens rea which would be the sine qua non for initiating this prosecution. When the directors are sought to be
prosecuted, it was basically necessary to allege mens rea in the complaint at least, in so far as they are concerned.
Mr. T. Srinivasamurthy, learned counsel appearing on behalf of the respondent, submitted that even in the complaint, the respondent has
specifically stated that the inspection report with direction to file a complaint was received in his office only on November 17, 1989, on which date
alone he had knowledge. The impugned complaint preferred on December 14, 1989, was hence made, within the period of limitation. He referred
to section 469(1)(b) of the Code of Criminal Procedure, which reads that the period of limitation in relation to an offender shall commence, where
the commission of the offence was not known to the person aggrieved by the offence, or to any police officer, on the first day on which such
offence comes to the knowledge of such person or any police officer, whichever was earlier. If, on the allegations in the complaint, it is evident that
the respondent had knowledge only on November 17, 1989, the plea of limitation bar cannot enure in favour of the petitioners. He referred to
section 621 of the Companies Act, which reads that no court shall take cognizance of any offence against this Act (other than an offence with
respect to which proceedings are instituted u/s 545, which is alleged to have been committed by any company or any officer thereof, except on the
complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf, and
contended that the respondent is the person aggrieved and hence the date of his knowledge will be the relevant date. Expatiating further, he
submitted that every inspection need not result in a prosecution, and on processing made by the Company Law Administration, directions are
issued to the Registrar to prosecute, at the time when the offence gets disclosed, and hence the period of limitation cannot be reckoned from the
date of inspection. He also contended that inspection was different from investigation, for inspection may lead to investigation. To prefer a
complaint, the respondent was the proper authority. While construing limitation, the scheme, object and purpose of the Act should not be
overlooked. The respondent''s counsel submitted that on these facts, the question of limitation cannot be decided, in the exercise of inherent
powers, even if it be available to the petitioners, for that issue could be concluded only on the basis of evidence to be let in, which may indicate as
to when exactly the offence was disclosed, leading to this prosecution. He then referred to section 2(31) which reads as hereunder :
''Officer in default'' in relation to any provision referred to in section 5 has the meaning specified in that section"".
That section has to be taken note of as it existed prior to July 15, 1988, when it stood amended, since the violations relate to a period anterior.
He referred to paragraph 7 of the complaint, which describes petitioners Nos. 2 to 7 as officers in default within the meaning of section 5 of the
Act. He then pointed out paragraph 5 of the complaint, a portion of which reads as follows :
The said contraventions were taken up with the company by the inspecting officer by letter No. JDI/MAS/24/87, dated December 20, 1988
(annexure ""A"") and a copy of the same was endorsed to the directors requesting them to offer their comments within seven days from the date of
the letter. The first accused company by its letter dated March 8, 1989, (annexure ""B"") has admitted that it worked with Professional Advertising
and Design Agency Private Limited and made payment to the latter for advertising services. Hence, the proviso to sub-section (1) of section 297 is
attracted but previous approval of the Central Government having not been obtained, this complaint is made.
He then pinpointed averments in paragraph 6 of the complaint, that petitioners Nos. 2 to 7, as officers of the company, also allowed the said
default. It was argued by the respondent''s counsel, that petitioners Nos. 2 to 7 who had an opportunity to forward their comments did not do so,
and hence the element of ""knowingly"" on the basis of averments aforestated, do get disclosed, and on this ground, the impugned prosecution
cannot be quashed even at its threshold.
Thereafter, while Mr. Srinivasamurthy contended that the offence was continuing, Mr. N.T. Vanamamalai rebutted it. Both counsel have placed
for my scrutiny certain decided cases, which I shall refer to, as and when the context demands.
To appreciate the contentions advanced, for my assessment, it will be better to have a bird''s eye view of the nature of prosecution initiated
against the petitioners. The first petitioner, a leasing company, stands incorporated under the Companies Act. Petitioners Nos. 2 to 7 are not only
the directors as per the records of the company, but they are also officers in default within the meaning of section 5 of the Act. Section 297(1) of
the Companies Act states that except with the consent of the board of directors of a company, a director of a company or his relative, a firm in
which such a director or relative is a partner or any other partner in such firm or a private company of which the director is a member or director,
shall not enter into any contract with the company for the sale, purchase or supply of any goods, materials or services. The proviso to the said
section further provides that in the case of a company having a paid-up share capital of not less than one crore rupees, no such contract shall be
entered into except with the previous approval of the Central Government. During the course of inspection of the books of account of the
company, it was noticed, that Professional Advertising and Design Agency Private Limited (hereafter referred to as ""PADA"") was a company in
which the third petitioner, AL. Vadivelu, was interested as director-chairman. It was further found that the company was receiving services
towards advertisements from PADA in the form of advertisements in respect of fixed deposits, note of annual general meeting, chairman''s speech,
etc., in Deccan Herald, Times of India, Hindustan Times, etc. Due to the said services, PADA was enjoying credit facility. The year and balance in
PADA''s accounts have been listed in the complaint. As the paid-up capital of the company exceeded one crore rupees, previous approval of the
Central Government was required under the proviso to sub-section (1) of section 297 of the Act in respect of the transactions with PADA. As
already stated, the first petitioner has admitted that it had worked with PADA and had made payments to the latter for advertising service. It was
under those circumstances that the impugned complaint had its genesis.
Counsel on either side, in unison, stated that limitation for initiation of proceedings for offences under the Act had not been prescribed under
the Act itself, and hence the general law, under the Code of Criminal Procedure, will stand attracted. Since the offence alleged is punishable only
with fine, it is evident that u/s 468(2)(a) of the Criminal Procedure Code, 1973, the period of limitation for initiation of the impugned prosecution
will be only six months. Needless to add, section 468 of the Criminal Procedure Code bars the taking of cognizance, after the lapse of the period
of limitation aforestated. However, section 469 of the Code prescribes the commencement of the period of limitation, while section 470 takes
within its compass exclusion of time in certain cases. u/s 472 of the Code, in the case of a continuing offence, a fresh period of limitation shall begin
to run at every moment of time during which the offence continued. Section 473 of the Code provides for extension of the period of limitation in
certain cases in the interest of justice.
We will be now more concerned with the commencement of the period of limitation. u/s 469 of the Code, the period of limitation in relation to
an offender shall commence on the date of the offence or where the commission of the offence was not known to the person aggrieved by the
offence, the first day on which such offence came to the knowledge of such person. Again, where it was not known by whom the offence was
committed, the period of limitation shall commence from the first day on which the identity of the offender was known to the person aggrieved by
the offence.
On the facts averred in the complaint, it is clear that inspection of the first petitioner-company u/s 209A of the Companies Act was conducted
during May and December, 1988. Under the aforestated section, the books of account and other books and papers of every company shall be
open to inspection during business hours, (i) by the Registrar, or (ii) by such officer of the Government as may be authorised by the Central
Government in this behalf. In the instant case, the inspection was conducted by the officers authorised by the Central Government and not by the
Registrar. u/s 621 of the Act, a court can take cognizance only on a complaint in writing made by the Registrar or a shareholder of the company or
of a person authorised by the Central Government in that behalf. The impugned complaint has been preferred by the Additional Registrar of
Companies and not by any other category of persons contemplated u/s 621. Prima facie, when the complainant is the Additional Registrar of
Companies, the date of his knowledge of the commission of the offence will be the relevant criterion to reckon limitation. If that is taken as the
base, even on the averments made in the complaint, it is clear that the respondent became aware of the commission of the alleged offence only on
November 17, 1989. The complaint states that the inspection report with direction to file prosecution was received in the complainant''s office only
on November 17, 1989. If November 17, 1989, should be taken as the foundation date to calculate the commencement of period of limitation, the
present prosecution is well within time. However, the vehement submission made by petitioner''s counsel was that whoever might be the inspecting
authority, they owed a duty to inform the person concerned, who could initiate a prosecution u/s 621 of the Act, promptly keeping in view the
limitation bar, prescribed under the Code of Criminal Procedure for taking cognizance of offences. In the present case, the inspecting authority,
according to the petitioner''s counsel, ought to have intimated the respondent, if a prosecution was intended, to have it initiated within six months
from the date of inspection. This proposition, to my mind, at this stage, appears to be too wide. As rightly pointed out by the respondents'' counsel,
every inspection need not result in a prosecution. Investigation follows inspection. During the course of such investigation, explanation is called for
from the company and those responsible for the conduct of the business of the company. Based on the explanation, if any offered, the authority
concerned becomes aware, if on the basis of the total material available, an offence gets disclosed or not. It is at that point of time, if at all, that the
commission of an offence comes to the knowledge of the authority concerned, who has to decide about the initiation of prosecution and thereafter
direct filing of a complaint. Even on the basis of the averments made in the complaint, it is clear that only on March 8, 1989, the first petitioner had
offered his explanation, while the other petitioners did not choose to reply. Only on the basis of the reply of the first petitioner, taken along with the
material collected during investigation and subsequent assessment the authority concerned would have become aware of the commission of the
offence alleged. Obviously those details will have to be brought out in evidence before the plea of limitation can be considered. Merely, based on
the date of inspection, it will be neither fair, nor just, to hold even at the threshold, that the impugned prosecution is barred, though the averments in
the complaint, indicate the date on which the explanation was forwarded, as well as the date of knowledge of the respondent, who is the aggrieved
person. Again, it will pertain to the realm of evidence if the entire department is charged with the duty to be watch-dogs for initiating prosecution or
a particular procedure within the framework of law stands followed by the department. It is at this juncture that the averments in the complaint, that
the direction to file a prosecution was received in the office of the complainant on November 17, 1989, becomes relevant.
The petitioner''s counsel submitted that the complainant must abide by the letter of the law of limitation, or take the risk of prosecution, failing
on that ground. He referred to the judgment of the Supreme Court in State of Punjab Vs. Sarwan Singh, in support of this proposition. The
Supreme Court stated therein that the object of the Code of Criminal Procedure was to put a bar of limitation on prosecutions to clearly prevent
parties from filing cases after a long time as a result of which material evidence may disappear, as well as to prevent abuse of the process of the
court by filing vexatious and belated prosecutions long after the date of offence. The object which the statute sought to subserve was clearly in
consonance with the concept of fairness of trial as enshrined in article 21 of the Constitution. It was, therefore, of utmost importance that any
prosecution, whether by the State or a private complainant, must abide by the letter of law or take the risk of the prosecution failing on the ground
of limitation. Binding principles enunciated by the Supreme Court cannot give rise to a discordant note. But the basic question would be to decide
if, in the instant case, cognizance was taken beyond the period of limitation. On the available material, it is fairly apparent that the first contention
sought to be canvassed is a mixed question of law and fact and hence it will have to be necessarily relegated to the trial court to be appreciated
after sufficient evidence is brought on record on this aspect. It will also be open to the petitioners to contend before the trial Magistrate, as was
sought to be argued before me, that ""person aggrieved"" must be construed in a larger sense of the department as a whole. While considering the
question of limitation, the provisions u/s 470(3) of the Code of Criminal Procedure may also have to be taken note of.
Counsel on either side referred to the decision of the Delhi High Court in R.S. Arora v. State [1987] Cri.LJ 1215, wherein the starting point of
limitation in respect of a prosecution initiated under the Seeds Act, 1966, was considered. The following observations are relevant :
Now, the question is as to which is the date from which this period of limitation is to start and the answer to that finds mention in section 469(1)(b)
of the Code, according to which where the commission of the offence is not known to a person aggrieved by the offence or to any police officer, it
is the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier. The period of limitation
for the prosecution for that offence could not start in the case in hand when the sample was lifted, as the making of the offence could not be known
and it could be known only when the seed analyst submitted his report to the Seed Inspector u/s 16(1) of the Act whereupon the Seed Inspector
could launch the prosecution against the offender. In this case, even though the sample was lifted on January 5, 1984, that is not the material date
for the purpose of limitation, but the starting point of limitation is March 1, 1984, when the report of the seed analyst was received by the Seed
Inspector and keeping that date in view the prosecution against the petitioner launched on August 1, 1984, is obviously within the statutory
limitation of six months and thus the contention of learned counsel for the petitioner on the point of limitation is not correct and must be discarded"".
This decision is in consonance with the view I have taken.
A Division Bench of this court in Abdul Rahim v. State [1978] LW Crl. 195, observed that the words ""aggrieved person"" should not be given
a very restricted meaning including only one against whom a decision has been pronounced which has wrongfully deprived him of something or
wrongfully refused him something or wrongfully affected his title to something. That was a case where the Division Bench was considering if the
Registrar who was charged with the duty of enforcement of the provisions of the Tamil Nadu Chit Funds Act was excluded from the purview of
person aggrieved by the offence"" u/s 469(1)(b) of the Code of Criminal Procedure. In that context, the Division Bench observed that if the
Registrar were to be excluded from the purview of definition of ""person aggrieved by the offence"", it would reduce the Chit Funds Act to a futility
and if the Registrar was not allowed to invoke the provisions of section 469(1)(b) of the Criminal Procedure Code, the chit transaction will only be
ineffectual. This decision cited by the petitioner''s counsel does not help in arriving at any decision on the question of limitation involved in this
petition. Even under the Act, the Registrar is a person aggrieved. If a more liberal construction, on a person aggrieved, should be adopted, that
question has already been kept open.
The decision of the Andhra Pradesh High Court in The Public Prosecutor, High Court Vs. M. Prasad and Another, , will not help the
petitioners, on the question of limitation, for in that case the offence was detected on July 4, 1973, that is, even on the date of inspection and hence
the laying of charge sheet on December 31, 1974, was held to be barred by section 468(2)(b) of the Code of Criminal Procedure. In this case, we
are concerned with the date of detection of the commission of the offence, which cannot be correlated to the dates of the inspection alone.
The respondent''s counsel relied upon the judgment of the Supreme Court in Bhagirath Kanoria and Others Vs. State of M. P., , to contend
that the impugned offence will be a continuing offence on the parity of reasoning adopted by the Supreme Court under the Employees'' Provident
Funds and Family Pension Fund Act, 1952. The Supreme Court stated therein that non-payment of the employer''s contribution to the provident
fund before the due date was a continuing offence, and, therefore, the period of limitation prescribed u/s 468 cannot have any application and that
the offence would be governed by section 472, according to which a fresh period of limitation would begin to run at every moment of time during
which the offence continued. However, Mr. N.T. Vanamamalai, the petitioner''s counsel, referred to the decision rendered by S.A. Kader J. in
Assistant Registrar of Companies v. Narayanaswamy [1985] 57 Comp Cas 787, wherein the learned judge, while construing section 58A(3) and
(5)(a) of the Companies Act, stated that acceptance of deposits by a company in excess of limits prescribed by the Reserve Bank and failure to
repay the excess as required, on or before April 1, 1975, was a single default which got completed on the expiry of the aforestated period, and
hence cannot be stated to be a continuing one. In this petition, there will be ho need to consider if the offence alleged is continuing or otherwise, for
sans this issue, I am of the opinion that on the facts available in the complaint, the instant prosecution cannot be quashed on the ground of limitation
though this issue may have to be kept alive for consideration by the trial court after sufficient evidence is adduced. I have already stated my reasons
therefor.
A Full Bench of the Patna High Court, in Ram Kripal Prasad and Others Vs. The State of Bihar and Others, , observed that disputed
questions of limitation under sections 468 to 473 of the Criminal Procedure Code cannot be raised directly in the High Court for quashing of
proceedings u/s 482 of the Criminal Procedure Code. In that case, while considering the provisions of the Employees'' Provident Funds Scheme
read with relevant provisions under the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952, the Full Bench observed that it
cannot be said that cognizance having once been taken by the trial court, it would not be open to the accused to raise the issue of limitation
thereafter, nor was it permissible for the court to determine the same. The accused person has no locus standi in the matter till process had been
issued against him. His right to raise the issue of limitation can only be after he puts in appearance subsequent to the process issued after taking
cognizance. To recapitulate, I have already stated that this is a mixed question of law and fact which will have to be kept open for decision by the
trial Magistrate on the basis of evidence to be adduced.
Mr. T. Srinivasamurthy, the respondent''s counsel, then relied upon the decision of a Division Bench of the Calcutta High Court in Sushil
Kumar Lahiri v. Registrar of Companies [1983] 53 Comp Cas 54. In that case, it was held that u/s 621 of the companies Act read with section
2(4), the Assistant Registrar of Companies was the person competent to file the complaint and was the person aggrieved in the case. It was further
held that the fact that the balance-sheet and the profit and loss account for the year ending December 31, 1974, were not laid before the general
body in time, came to the knowledge of the Assistant Registrar of Companies for the first time from the annual return filed by the company on
October 23, 1975, and from the certified copy of the proceedings of the annual general meeting filed in the office of the Registrar, on February 23,
1976, and as such the petition of complaint was not barred by limitation u/s 469(1)(b) of the Code of Criminal Procedure. I have already left this
question open and there will be no need to say anything more on the first contention. At this stage, the first contention shall stand rejected.
The second ground, also referable to mens rea of the accused, will have to be left open for consideration by the trial Magistrate, on the basis of
evidence that may be brought on record by either party. It is not disputed that the meaning for the words ""officer who is in default"" in the instant
prosecution will have to be based on section 5 of the Act, as it stood prior to July 15, 1988, when mens rea was essential under that provision.
The said section has already been extracted earlier in this order. The word ""knowingly"", mentioned in the section, was stressed by the petitioner''s
counsel to contend that the averments in the complaint do not disclose necessary mens rea. I have already referred to the arguments of Mr. T.
Srinivasamurthy, the respondent''s counsel, pinpointing certain averments made in the complaint. The complaint does show that the first petitioner
has admitted the sum and substance of the contraventions brought to his notice, which amounts to an offence punishable u/s 629A of the Act.
Petitioners Nos. 2 to 7 who were put on notice about those contraventions did not choose to offer any explanation and at this stage that would
suffice to prima facie indicate the mens rea required for the offence alleged. The averments in the complaint also show that petitioners Nos. 2 to 7
are the officers in default within the meaning of section 5 of the Act and the records of the company confirm the said position. Merely because the
exact word ""knowingly"" found in section 5 of the Act, as it existed earlier, has not been quoted in the complaint, it does not stand to reason to
contend that mens rea has not been alleged in respect of petitioners Nos. 2 to 7. If petitioners Nos. 2 to 7 claim that they did not have the mens
rea required u/s 5 of the Act, it will always be open to them to put forth this defence before the trial Magistrate for appreciation. The second
ground also has no strength whatever.
Both grounds are rejected. This petition shall stand dismissed, subject to certain observations, which form an integral part of this order.