Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 1 of 34 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Crl.M.C. 531/2009 % Reserved on : 25th January, 2010 Pronounced on: 29th January, 2010 # SANJAY SURI & ORS. ..... Petitioner ! Through: Mr. Vijay Aggarwal and Mr. Rakesh Mukhija, & Mr. Gurpreet Singh Advs. versus $ STATE & ANR. ..... Respondent ! Through: Mr. Darpan Wadhwa and Ms. Divya Jha, Advs. for (ROC) + Crl.M.C. 532/2009 # SANJAY SURI & ORS. ..... Petitioner ! Through: Mr. Vijay Aggarwal and Mr. Rakesh Mukhija, & Mr. Gurpreet Singh Advs. versus $ STATE & ANR. ..... Respondent ! Through: Mr. Darpan Wadhwa and Ms. Divya Jha, Advs. for (ROC) + Crl.M.C. 533/2009 # SANJAY SURI & ORS. ..... Petitioner ! Through: Mr. Vijay Aggarwal and Mr. Rakesh Mukhija, & Mr. Gurpreet Singh Advs. versus $ STATE & ANR. ..... Respondent ! Through: Mr. Darpan Wadhwa and Ms. Divya Jha, Advs. for (ROC) Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 2 of 34 * CORAM: HON'BLE MR. JUSTICE V.K. JAIN 1. Whether the Reporters of local papers may be allowed to see the judgment? Yes 2. To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes : V.K. JAIN, J. 1. By this common judgment, I shall dispose of all the three petitions referred above. 2. Petitioner No.1 and 3 are the Managing Director and Director respectively of petitioner No.2, Dr. Morepen Ltd. (hereinafter referred to as the “company”). Vide its letter dated 7th June, 2005, Ministry of Company Affairs directed inspection of books of accounts and other records of the company. Pursuant thereto, inspection was carried out by Deputy Registrar of Companies for the period from 11th July, 2001 to 30th September, 2004, on various dates starting from 10th October, 2005 and the inspection continued up to 10th March, 2006. During the course of inspection, it was noticed that the company had acquired 8,86,716 shares of Total Care Limited on 8th March, 2003 and since the aforesaid shares constituted 95% of the total paid up capital of M/s Total Care Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 3 of 34 Limited. In terms of provisions of Section 212(1) of Companies Act, 1956, M/s Total Care Limited thereby became subsidiary of the company w.e.f that date and accordingly balance sheet of Total Care Limited for the period subsequent to 8th March, 2003 ought to have been attached alongwith the Balance Sheet of the company. The complaint under Section 212 (9) of Companies Act for contravention of Section 212(1) thereof was therefore filed by the respondent-Registrar of Companies against the petitioners and one Chander Shekhar N.K., another Director of the Company. It was alleged in the complaint that the contravention came to the knowledge of the complainant/respondent only on 24th May, 2006, the date on which the Inspection Report was received in the office of the complainant and, therefore, the complaint was within the prescribed period of limitation. As a matter of abundant caution, the complainant, however also filed an application under Section 473 of Code, for condonation of delay. The learned ACMM, Delhi having summoned the petitioners for the offence punishable under Section 212 (9) of Companies Act, in Crl.M.C. No. 531/2001, the petitioners are seeking quashing of the complaint on the ground that the complaint being barred by limitation and the delay in filing the complaint also Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 4 of 34 not having been condoned by learned ACMM, the order of summoning the petitioners is bad in law. 3. In the complaint subject matter of Crl.M.C.No.532/2009, the complaint has been filed under Section 212 (7) of Companies Act for contravention of Section 212 read with Schedule VI of Companies Act on the ground that during the course of inspection by Deputy Registrar of companies, it was found that it its Balance Sheet for the period ending 31st March, 2002, the company had not made proper disclosure in terms of Schedule VI of Companies Act since the company had given collateral security pursuant to order of this Court attaching its bank account to the extent of Rs.6.24 crores, but the company had not made any provision in its Balance Sheet for the aforesaid contingent liability. This contravention, according to the complainant, came to its knowledge on 24th May, 2006 when the report of Deputy Registrar of Companies was received in its office. 4. In the criminal complaint subject matter of Crl.M.C. No.533/2009, complaint has been filed under Section 217(5) of Companies Act for contravention of Section 217(1)(e) thereof and the allegation of the complainant is that the Board of Directors of the Company had failed to give information Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 5 of 34 relating to “activities relating to exports, initiative taken to increase exports development of new export market for products and services and export plans” as required in para (f) under column C of the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988 in the Annexure to the Director‟s Report on Company‟s Balance Sheet as on 31st March, 2002, 30th September, 2003 and 30th September, 2004.” This contravention also, according to the complainant, came to its knowledge only on 24th May, 2006, the date on which Inspection Report was received in its office. 5. Section 468 of the Code of Criminal Procedure, to the extent it is relevant that no Court shall take cognizance of an offence punishable with imprisonment for a term not exceeding one year after expiry of one year. Section 469 of the Code to the extent it is relevant provides that where the commission of the offence was not known to the „person aggrieved by the offence‟ or to any police officer, the period of limitation in relation to an offence shall commence from the first day on which such offence comes to the knowledge of the aggrieved person or to any police officer, whichever is earlier. 6. The first question which comes up for consideration in this case is as to whether the complainant-Registrar of Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 6 of 34 Companies is a „person aggrieved by the offence‟ within the meaning of Section 469(1)(b) of the Code, as contended by learned counsel for the respondent or his position is akin to that of a police officer as contended by learned counsel for the petitioner. 7. In support of his contention that Registrar of Companies cannot be said to be person „aggrieved by the offence‟, the learned counsel for the petitioner has referred to the decision of Madras High Court in Sulochana vs. State of Registrar of Chits, 1978, Crl.L.J. 116 and the decision of this Court in Nestle India Ltd and others vs. State and Anr. 1999 JCC (2), Delhi, 473. 8. In the case of Sulochana (supra), the question before the High Court was whether Registrar of Chits (Investigation and Prosecution) Madras was a „person aggrieved by the offence‟ as envisaged in Section 469(1)(b) of the Code of Criminal Procedure. After noticing that neither the word „person‟ nor the word „person aggrieved‟ is defined in the Code, the learned Single Judge of the High Court was of the view that the words „person aggrieved by the offence‟ should be given a limited or restrictive coverage viz. one who is personally or directly affected by an offence and not any member of the public or Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 7 of 34 even an officer who is charged with the duty of enforcing the prohibitory regulations under a statute. Relying upon two earlier decisions of his High Court in Official Receiver vs. Chellappa Chettiar, AIR 1951 Madras 953 and Thiruvengadam vs. Muthu Chettiar, AIR 1970 Madras 34, the learned Single Judge of the High Court, inter alia, observed as under: “These authorities certainly lend support to my view that the Registrar cannot be taken to be a person aggrieved by the offences so as to claim the benefit of extended limitation provided under S. 469(1)(b) and (c) of the Code. The Registrar has come forward his official duty and not on account of any grievance felt or sustained by him personally in the contravention committed by the petitioner. Complaints preferred in discharge of one‟s official duty are vastly different in character and nature from complaints preferred by persons aggrieved by the commission of the offences. They distinctly fall in two different categories and the former is not to be confused with the latter.” 9. In the case of Nestle India (supra), the learned Single Judge of this Court, inter alia, observed as under: “When an offence is committed against a person the Court could take cognizance of the offence either on a police report or on the complaint of the aggrieved person. In both these cases a complaint could be made within six months of the commission of the offence. Clause (b) of Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 8 of 34 Sub-section (1) of Section 469 makes a distinction between an aggrieved person and a police officer, obviously the police officer is not an aggrieved person. He is an officer who is enjoined by law to take steps to bring the offender to book. The position of the Company Prosecutor who is the complainant in the present case is akin to that of a police officer. If a police officer is not the "aggrieved person", the Registrar of Companies would also not be an aggrieved person. An aggrieved person would be one who is directly affected by the acts of commission or omission of another person. In this case the UTI who as transferee of the shares and debentures had made application for the registration of transfer in their name is the aggrieved person if its shares etc., were not registered and transferred in its name within time and not the Registrar of the Companies.” In taking this view, the learned Single Judge of this Court, took support from the decision of the Madras high Court in the case of Sulochana (supra) and agreed with the view taken in that case. 10. As far as the judgment of Madras High Court in Sulochana (supra) is concerned, that having been over-ruled by a Division Bench of the High Court in Abdul Rahim vs. State, 1979 Crl.L.J. (NOC) 192, no reliance on that judgment can be placed. The Division Bench of Madras High Court specifically held that Registrar of Chits was a person aggrieved within the meaning of Section 469(1)(b) of the Code, and Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 9 of 34 therefore, was competent to initiate prosecution for an offence punishable in Tamil Nadu Chits Funds Act, 1961. 11. As far as the judgment of this Court in the case of Nestle India Ltd. (supra) is concerned that also stands impliedly over ruled by the decision of the Hon‟ble Supreme Court in Registrar of Companies vs. Rajshree Sugar and Chemical Limited, AIR 2000 SC 1643. In the case before the Hon‟ble Supreme Court, prosecution of the respondent was initiated by the appellant for violation of Section 113 of Companies Act which requires a company to deliver shares certificates/debenture certificates, within three months after allotment and transfer shares/debentures within two months after the application for registration of transfer of any share/debenture is submitted to it. It was contended before the Hon‟ble Supreme Court that the appellant was not the „person aggrieved by the offence‟ within the meaning of Section 469(1)(b) of Code of Criminal Procedure. Rejecting the contention, the Hon‟ble Supreme Court, inter alia, held as under: “The phrase 'person aggrieved' has not been defined in the Code. However, as far as offences under the Companies Act are concerned, the words must be understood and construed in the context of Section 621 of the Act. If the words Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 10 of 34 'person aggrieved' are read to mean only 'the person affected' by the failure of the Company to transfer the shares or allot the shares, then the only 'person aggrieved' would be the transferee or the allottee, as the case may be. Under Section 621 of the Act, no Court can take cognizance of an offence against Companies Act except on the complaint of a share-holder, the Registrar or the person duly authorised by the Central Government. Where the transferee or allottee is not an existing share-holder of the Company, if the words 'person aggrieved' is read in such a limited manner, it would mean that Section 469(1)(b) of the Code would be entirely inapplicable to offences under Section code of the Act. There is, in any event, no justification to interpret the words 'person aggrieved' as used in Section 469(1)(b) restrictively particularly when, as in this case, the statute creating the offence provides for the initiation of the prosecution only on the complaint of particular persons. Having regard to the clear language of Section 621 of the Act, we have no manner of doubt that the appellant would be a 'person aggrieved' within the meaning of Section 469(1)(b) of the Code in respect of offence (except those under Section 545) against the Companies Act.” 12. As regards the decision of this Court in the case of Nestle India Ltd. (supra), the Hon‟ble Supreme Court noted that the learned Single Judge of this Court had not considered the provisions of Section 621(1) of Companies Act, which provides as under: Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 11 of 34 “621(1) No Court shall take cognizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under Section 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.” 13. In view of the above-referred authoritative pronouncement of the Hon‟ble Supreme Court, no reliance can be placed either upon the decision of Madras High Court in the case of Sulochana (supra) or the decision of this Court in Nestle India Ltd (supra). If Registrar of Companies is a person aggrieved in case of default on the part of the company in delivering the share certificate/debenture certificate or transferring shares/debentures, it cannot be said that it is only the shareholders of the company, who would be „persons aggrieved by offence‟ in respect of violations of Section 212(a) read with Section 212(1) of Companies Act, Section 211 (7) read with Schedule VI of Companies Act or Section 217(5) read with sub-section (1) of Section 217 of Companies Act. In fact, the person affected on account of violations of various provisions of Companies Act by its Directors, officers, Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 12 of 34 employees, etc. need not necessarily be the shareholders of the company. Such a person may, in some cases, be creditors, depositors or banker of the company, if the contravention is of such a nature that it may substantially affect their vital interests. The Registrar of Companies, in any case, would be a „person aggrieved of an offence‟ under Companies Act, as he has been assigned a statutory duty to ensure compliance of the provisions of the Act and also in view of the provisions contained in Section 621(1) of Companies Act, whereunder he is one of the persons on whose complaint the Court can take cognizance of such an offence. 14. In fact, a number of High Courts have disagreed with the view taken by Madras High Court in the case of Sulochana (supra) and have held that Registrar of Companies is the „person aggrieved by the offence‟ within the meaning of Section 469(1)(b) of the Code of Criminal Procedure. In S. Ashok Rao and Ors. vs. State of Andhra Pradesh, 2001 Company Cases 120, a complaint, filed against the company and its Directors under Section 628 of Companies Act, on the allegations that they had made a false statement in Form No.32 by showing the complainant as one of the Directors of the Company even though he was not, was dismissed holding that he not being Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 13 of 34 the shareholder of the company or Registrar of Companies or a person, authorized by the Central Government, cognizance could not have been taken on the complaint filed by him. This judgment, therefore, accepts the proposition that Registrar of Companies, being one of the persons mentioned in Section 621 of Companies Act, would be a person aggrieved from the offence alleged to have been committed against Companies Act. Similar view was taken by Madras High Court in its subsequent decision in V. Karthikeyan vs. Registrar of Companies (2001) 106 Company Cases, 685. On taking this view, Madras High Court relied upon the decision of its Division Bench in the case of Abdul Rahim (supra) and the decision of Hon‟ble Supreme Court in the case of Rajshree Sugar and Chemical Limited (supra). 15. In Sushil Kumar Lahiri and Ors. vs. Registrar of Companies, (1983) 53 Company Cases 54, Calcutta High Court rejected the contention of the petitioners that Registrar of Companies was not the person aggrieved within the meaning of Section 469(1)(b) of the Code of Criminal Procedure and, therefore, his knowledge was immaterial for the purpose of period of limitation. Relying upon the provisions, contained in Section 621 of Companies Act, it was held that Registrar of Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 14 of 34 Companies, including Assistant Registrar, was a person competent to file the complaint, he being the person aggrieved. In the case before Calcutta High Court, the allegation was that the Balance Sheet and the Profit & Loss Account of the Company for the year ending 31st December, 1974 had not been laid before the General Body in time. 16. In Ritesh Exports Ltd. and Anr. vs. Registrar of Companies (2005) 127 Company Cases 583, Andhra Pradesh High Court, after referring to the decision of this Court in the case of Nestle India Ltd. (supra) and the decision of Madras High Court in the case of Sulochana (supra) and relying upon the decision of the Hon‟ble Supreme Court in the case of Rajshree Sugar and Chemical Limited (supra), held that Registrar was person aggrieved and, therefore, was competent to file complaint under Section 113 of Companies Act. 17. In V.M. Modi, vs. State of Gujarat (1997) 88 Company Cases 871, Gujarat High Court (Hon‟ble Mr. Justice J.M. Panchal) held that the complaint, filed by a transferee alleging failure by company to comply with the order of Company Law Board to register transfer of shares, was not maintainable since he was not a shareholder and such a complaint could be filed only by a shareholder, Registrar of Companies or a Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 15 of 34 person authorized by Central Government in that behalf. Again, this judgment recognizes that in view of the provisions contained in Section 621 of Companies Act, Registrar of Companies is a person aggrieved on account of an offence committed under Companies Act. 18. Since the prescribed period of limitation starts from the date the offence came to the knowledge of the „person aggrieved by the offence‟, the next question which comes up for consideration is when the offence alleged to have been committed by the petitioners came to the knowledge of the complainant/respondent. The contention advanced by the learned counsel for the petitioners is that since the office of the respondent is required to scrutinize the balance sheet, etc. at the time it is filed and not to just store the document in its godown, the offence alleged to have been committed by the petitioners came to the knowledge of the complainant on the date Balance Sheet was filed. In support of his contention, the learned counsel for the petitioners has referred the decision in Assistant Registrar of Companies vs. H.C. Kothari and Ors. 1992 (75) Company Cases 688. In the case before Madras High Court, complaint was filed on the allegations that Balance Sheets of the company had revealed that investments Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 16 of 34 made by the company for the financial years 1980-81 & 82 in shares of other bodies corporate was in excess of 30% limited prescribed in Section 372(2) of the Companies Act and the approval of Central Government as well as Resolution under Section 376(2) having not been obtained, the respondents had committed an offence under Section 377(2)(4) read with Section 374 of Companies Act. It was held by the High Court that the Registrar of Companies was deemed to have knowledge of the contents of the Balance Sheets and of the offence, on the day, the same were received by him. During the course of the judgment, the High Court, inter alia, observed as under: “After receiving the balance-sheets, it is not open to the Registrar to keep these balance-sheets in cold storage, keep his eyes closed to them and then to deny knowledge of these contents, thereby defeating the law of limitation. The very object of the bar of limitation would be defeated if the contention of the appellant is accepted. When the balance-sheets are received by the Registrar of Companies, he is deemed to have knowledge about the contents of the balance-sheets and, consequently, of the offence, and limitation will start running from that day onwards.” 19. As against this, the learned counsel for the respondent has referred to decision of Kerala High Court in Thomas Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 17 of 34 Philip and Ors. Vs. Assistant of Registrar of Companies & Anr. 2006 (133) Company Cases, 842. In the case before Kerala High Court, a complaint was filed on October, 24, 2001 under Section 628 of Companies Act, 1956 alleging fictitious entries in the books of accounts and Balance Sheet of a company for the period 1995-1996. The petitioners, directors of the Company, filed a petition under Section 482 of the Code of Criminal Procedure, contending that the complaint was barred by limitation since the Balance Sheet was filed on December 24, 1996. The High Court considered the decision of Madras High Court in the case of H.C. Kothari (supra), but did not agree with the view taken in that case and preferred to go by the view taken by Andhra Pradesh High Court in Mishra Dhathu Nigam Ltd. vs. State, 1998 (92) Company Cases, 730. During the course of judgment, the High Court observed that there may be patent as well as latent offences revealed from the Balance Sheet and that at least regarding latent offences, merely because a Balance Sheet comes into the hands of the Registrar, it cannot be assumed that the Registrar had come to know of all the offences revealed on a vetting of the Balance Sheet. The learned counsel for the petitioners, before the High Court, relied upon Regulation 17 Crl.M.C.Nos. 531, 532 & 533 of 2009 Page 18 of 34 of Companies Act to contend that Registrar, on receipt of a document like Balance Sheet, is required to examine the document or cause it to be examined and which further stipulates that if there be any defect or incompleteness in the document, it has to be returned within a period of 15 days. The High Court, however, felt that an offence like the one before it cannot be said to have come to the notice of the Registrar, actually or constructively, on the date when the Balance Sheet was delivered at his office, so as to hold that the period of limitation starts running from that date. It was noticed that Balance Sheets and Annexures thereto are usually voluminous documents