1 appln 287 to 294 of 2008 vks IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION NO.287 OF 2008 WITH CRIMINAL APPLICATION NO.288 OF 2008 WITH CRIMINAL APPLICATION NO.289 OF 2008 WITH CRIMINAL APPLICATION NO.290 OF 2008 WITH CRIMINAL APPLICATION NO.291 OF 2008 WITH CRIMINAL APPLICATION NO.292 OF 2008 WITH CRIMINAL APPLICATION NO.293 OF 2008 WITH CRIMINAL APPLICATION NO.294 OF 2008 Rajinder U. Miglani, Uttam House 69, P’Demello Road, Mumbai 400 009. .. Petitioner in all the Applications. -versus 1. The State of Maharashtra 2. Ram Mohan Rao, Assistant Director, Serious Fraud Investigation Officer, Ministry of Company Affairs, Government of India, Having address at: 2nd floor, 2 appln 287 to 294 of 2008 Parayavaran Bhavan, CGO Complex, Lodi Road, New Delhi 400 001 .. Respondents. in all applications. Mr. B. A. Desai a/w Inderpal Sing Nirmale, i/b ALMT LEGAL, for the petitioner in all the applications. Mr. Rajesh Desai, for Respondent No.2 in all the applications. Mrs. P. P. Bhosale, APP for the respondent in all the applications. Mrs. P. P. Bhosale, APP for the Respondent State. CORAM: R.C. CHAVAN, J. DATED: 11th August, 2011 P.C. 1. These applications filed under Sections 482 and 483 of the Code of Criminal Procedure and Article 227 of the Constitution of India, are being disposed of by this common judgment, since the factual question involved which is at the root of these cases is same. 2. Respondent No.2 Assistant Director of Serious Fraud Investigation, Ministry of Company Affairs, Government of India, had filed complaints against Vatsa Corporation Limited, and others including present petitioner, for the offences punishable under the Companies Act, 1956. The allegation was that Vatsa Corporation had issued prospectus which showed the name of present petitioner as a Director of the Company, when the petitioner had been inducted as 3 appln 287 to 294 of 2008 Additional Director of the company on 1st April, 1992 and had also resigned on 2nd June, 1992. In fact this is one of the reason why the complainant sought to prosecute by Company Case No.198 of 2005, Vatsa Corporation and others alleging that when the petitioner was to be shown as Director of the company in prospectus issued by the company, he was not the Director. It was alleged that by this prospectus for public issue of 45 crores equity shares of Rs.10/- each people were invited to subscribe for shares and debentures of the company. The prospectus allegedly contained recklessly false statements and false projection about revenue without full and correct particulars about the company. 3. Company Case No.233 of 2005 was filed on the allegation that accused No.3 Director, Pradeep Manilal Vakil was appointed as Managing Director of the company w.e.f. 24th April, 1992, but did not disclose his designation as Managing Director in the balance-sheet which he signed. 4. Company Case No.235 of 2005, was filed on the allegation that loans on Inter Corporate Deposit exceeding 30% of the subscribed capital were given by the company from 31st May, 1992 till 30th June, 1996. The company exceeded limit of 50% of the paid up capital which was imposed by resolution, in meeting dated 30th December, 1999. Complaint, was therefore, filed for violation of section 370 of the Companies Act, for lending beyond the limits prescribed. 4 appln 287 to 294 of 2008 5. Company case No.237 of 2005, was filed for issuing an advertisement on 2nd April, 1992, containing untrue and misleading statements and material particulars. In the advertisement name of Pradeep Manilal Vakil was shown as Managing Director, but the prescribed return in form No.32 filed with the Registrar of Companies showed that the date of appointment of said Pradeep Vakil as 24th April, 1992. 6. Company case No.242 of 2005, was filed on the allegations that loan of Rs.77,46,725/- was given to Vatsa Housing Finance Limited, in violation of provisions of Section 295 of the Companies Act. Certain transactions were also shown to have been entered into with wife of accused No.3 Pradeep Manilal Vakil. 7. Company Case no.243 of 2005, was filed on the allegation that advertisement was issued on 30th December, 1994 containing untrue and misleading statements relating to the permitted business activities of the company, the figures of profit before tax and dividend without preparing any balance sheet in the concerned year. Paid up capital was shown increased to Rs.4 crores, but in reality it was based only on rotation of cheques. 8. Company Case No.244 of 2005, was filed on the allegation that the advertisement dated 2nd April, 1992 and 30th December, 1994, were not filed in the Registrar of Companies as required under Rule 4 of Companies 5 appln 287 to 294 of 2008 (Acceptance of Deposits) Rules, 1975. 9. Company Case No.223 of 2005, was filed on the allegation that the company had indulged in investment in the shares and securities of other companies in excess of 30% limit imposed and Special Resolutions were passed in Annual General Meeting of the company held on 22.3.1993 which according to Fraud Investor, were not followed. It was alleged that the accused company Vatsa Corporation did not have status of investment company and therefore, it could not have invested amount in excess of 30% and hence accused were alleged to have committed offence under Section 372 and 374 of the Companies Act. 10. The learned Additional Chief Metropolitan Magistrate, before whom complaints were filed, directed issuance of process in all these cases against all accused including present petitioner Rajinder Miglani who was shown to be Director of the company. 11. The petitioner questions these orders by filing present petitions. He sought the relief that the proceedings as against him be quashed and set aside. These petitions came up for hearing before this Court and by orders dated 30th April, 2008, this Court held that the petitions need not be entertained in exercise of powers under section 482 as an adequate and equally efficacious remedy of filing revision was available to the petitioner. It was also held that the question 6 appln 287 to 294 of 2008 as to whether the petitioner was Director for only two months could also be look into by the Court of Sessions. The petitions were therefore, dismissed. The petitioner carried these orders, by filing Special Leave Petitions before Supreme Court and the Supreme Court, by its order dated 10th July, 2009 held as under:- “Leave granted in all the matters. These appeals are directed against the judgment dated 30.4.2008 passed by the High Court of Judicature at Bombay in Criminal application NO.287 of 2008. We have heard learned counsel for the parties at length We are of the considered view that application filed by the appellant under Section 482 of the Code of Criminal Procedure ought to have been decided by the High Court. In the facts and circumstances of this case, we direct the learned Single Judge of the High Court to decide the appellant’s application filed under Section 482 of the Criminal Procedure Code expeditiously. Consequently, we set aside the impugned judgment of the High Court.” 12. This is how the petitions came up for hearing. I have heard learned counsel for the parties. Learned counsel for the petitioner submitted that from the certified copies of form No. 32 dated 23rd June, 1992 and 17th June, 1992, the petitioner was appointed as Additional Director of the company on 1st 7 appln 287 to 294 of 2008 April, 1992 and resigned as Director on 2nd June, 1992. He submitted that petitioner had not at all participated in the management affairs of the company during this period. He submitted that the petitioner had not signed the misleading prospectus which was issued and since he had not at all participated in the management affairs of the company there was no question of his authorizing any of the misleading advertisement being issued. Therefore, according to him, the very foundation for his being joined for misdeeds of the company was missing and that the learned Additional Chief Metropolitan Magistrate should have seen these aspects before ordering issuance of process. Learned counsel further submitted that the order for issuance of process is a serious matter which affects the reputation of a person, as well as puts a restraint on his activities. He submitted that the petitioner is Managing Director of Uttam Galva Steel Ltd, and his being dragged in this prosecution prejudicially affects him. He submits that the charge itself is groundless and ought to be quashed. 13. Learned counsel for the respondent on the other hand submitted that prima facie there is evidence to show that the petitioner was connected with the affairs of the company since the Fraud Inspector has annexed copy of form No.32 which shows petitioner resigned as Director on 7th August, 1993 and therefore, the petitioner cannot claim that 8 appln 287 to 294 of 2008 he was Director of the company only for a period of two months. He further submitted that the prospectus which was issued, was signed by the present petitioner. Therefore, the petitioner cannot escape from his liability. He submitted that as far appointment and resignation is concerned, it is question of fact which ought to be decided only upon trial after the Court has an opportunity to consider the evidence that may be tendered and therefore, according to him this is not case where it could be said that the charge is groundless or that the prosecution is vexatious in order to have proceedings quashed. 14. Since in these cases, Supreme Court has specifically directed that present petitions should be disposed of by this Court, there is no need to go into the pleas about approaching the Court of Sessions. In view of directions of the Supreme Court, this Court would have to consider whether the proceedings warrant quashing in the light of several Judicial pronouncement cited. 15. Learned counsel for the petitioner relied upon the Judgment of Supreme Court, in State of Haryana and ors -vs- Bhajanlal and ors, reported in 1992 Supp (1) Supreme Court Cases, 335 and submitted that “the allegations made in the complaint are so absurd and or inherently improper on the basis of which no prudent man can ever reach a just conclusion that there is sufficient ground for 9 appln 287 to 294 of 2008 proceeding against the accused’. Learned counsel for the petitioner submitted that un-controverted allegations in the complaint do not disclose commission of any offence and make out a case against accused and therefore, applying the yardsticks prescribed in case of Dhariwal Tobaco Products Lotd & ors -vs- State of Maharashtra and anr 2009 ALL MR (Cri) 234 SC, 284, the petition ought to be allowed. 16. The complainant had annexed to complaint bearing case No.198 of 2005, “Annexure-D” which is an extract of Investigation report. This shows that the petitioner was Director of the accused company only for a period of two months and thus was not Director of the company as on 31st March, 1993, which is alleged to amount to untrue statement in the prospectus. If the complainant itself came out with the case that the petitioner was not the Director of the company at the relevant time, it is not clear as to how the complainant could prosecute the petitioner. 17. The contention of the learned counsel for the respondent that the petitioner had resigned on 7th August, 1993, on the basis of intimation given under form No.32, cannot be accepted since there could be no question of resignation from the post twice. Learned counsel for the respondent submitted that first intimation in form No.32 about appointment and resignation is in the capacity as Additional Director, whereas this resignation dated 17.8.1993 is as 10 appln 287 to 294 of 2008 Director. But for this the Fraud Inspector would have to show the date on which petitioner was in fact appointed as Director to enable him to resign on 7th August, 1993. There is no such document on record. 18. Learned counsel for the petitioner relied on the judgment of Delhi High Court, in case of A.G.Gaggar State and anr, CRL M. C. 5673 of 2005, decided on 2nd January, 2008 where the Court held that it was duty of the Registrar of the Companies to enquire into the correctness of intimation received by it. In para 8 of the judgment, the Court observed that form No.32 is an intimation. The Court has also pointed to circular dated 29th December, 1959, issued by the Department of Company Affairs. which requires that if the Registrar of Company finds upon such an enquiry that resignation was bonafide, he should not start any prosecution against such Director irrespective of the fact whether such resignation was or was not accepted by the company. It has not been disputed by the learned counsel for the respondent that there is such circular which requires the Registrar of Companies to enquire into the correctness of Intimation received. In that case it was incumbent upon the complainant to first ascertain as to whether the petitioner was in fact appointed as Director, after he resigned as Additional Director or was in the management affairs of the company when the misleading prospectus or advertisements were issued or 11 appln 287 to 294 of 2008 when the decisions to invest in inter corporate deposits in excess of the limits were taken. Since proceeding itself show that the petitioner has not personally signed the prospectus and it had been signed for and on his behalf by accused Pradeep Vakil as holder of Power of Attorney, it was also necessary for the complainant to locate the power of attorney so that the petitioner could be booked. Learned counsel for the petitioner states that the petitioner has not issued any such power of attorney in favour accused Pradeep Vakil. This bunch of cases was adjourned for two days to enable learned counsel for respondent to ascertain from the office of Fraud Inspector as to whether any such power of attorney exists and he states that no such document could be located. In view of this, since there are no documents to show that the petitioner was party to any misleading statements or any acts of advancing loans or making any corporate deposits or indulging in any transaction with another company, it has to be held that the allegations made in the complaint and evidence collected in support of the same does not disclose commission of any offence by the present petitioner. 19. Learned counsel for the petitioner may be right in submitting that when the complainant comes with a case that the petitioner had in fact resigned within two months and makes such resignation the foundation for prosecution for misleading claim that the petitioner was Director of the 12 appln 287 to 294 of 2008 company, the allegations made in the complaint must be held to be inherently improbable and therefore, applying yardstick for invocations of powers to this Court under Section 482 of the Code of Criminal Procedure or Article 227 of the Constitution, it has to be held that the prosecution as against the petitioner is thoroughly unwarranted and unjustified. 20. In view of this, Criminal Applications are allowed. The proceedings of Company case Nos.198/SS/2005, 233/SS/2005. 235/SS/2005, 237/SS/2005, 242/SS/2005, 243/SS/2005, 244/SS/2005, 223/SS/2005, as against the present petitioner, pending before Additional Chief Metropolitan Magistrate, 1st Court at Esplanade, Mumbai, are quashed and set aside. It is clarified that the cases would proceed against other accused persons. (R. C. CHAVAN, J.)