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2004 (10) TMI 348 - HC - Companies Law

Issues:
Petition for quashing criminal proceedings under section 482 of Cr. P.C based on non-increase of paid-up capital by a private limited company under the Companies Act, 1956.

Analysis:

1. Petition for Quashing Criminal Proceedings:
The petitioners filed a petition under section 482 of Cr. P.C seeking to quash the criminal proceedings in Criminal Case No. 207/2003 pending before the Addl. Chief Metropolitan Magistrate, Ahmedabad. The petitioners argued that the complainant, respondent No. 2, failed to withdraw the criminal proceedings despite the company's application under section 560 of the Companies Act, 1956, requesting to strike off the company's name from the register of Registrar of Companies. The petitioners contended that the criminal proceedings were initiated based on the allegation of non-increase of paid-up capital, which was unnecessary since the decision to strike off the company's name had not been finalized. They emphasized that the department's failure to withdraw the case was unjustified, considering the compliance with General Circular No. 13/2003 and the Simplified Exit Scheme.

2. Respondent's Technical Objection:
The respondent raised a technical objection, stating that formal publication in the Government Gazette was necessary before withdrawing or dropping the proceedings. The reply affidavit highlighted the procedural steps taken under the Simplified Exit Scheme, including the advertisement in newspapers and the pending Gazette publication. The respondent argued that the publication in the Official Gazette was awaited, and the prosecution could only be withdrawn after the final notice in the Gazette for striking off under section 560 of the Act.

3. Court's Decision and Legal Analysis:
The Court, after considering the submissions and relevant provisions of section 560(5) of the Companies Act, supported the petitioners' argument. It was observed that the decision to strike off the company's name had been made, as indicated by the steps taken under the Simplified Exit Scheme. The Court noted that the complainant should have withdrawn the proceedings since all formalities for striking off the name had been completed. The Court found the prosecution unsustainable and concluded that the criminal proceedings should be quashed, as the department had not withdrawn the case despite fulfilling the necessary requirements. Consequently, the Court allowed the Criminal Miscellaneous Application and quashed the proceedings of Criminal Case No. 207/2003.

4. Conclusion:
In conclusion, the Court's judgment in this case highlighted the importance of procedural compliance under the Companies Act, 1956, and the necessity for timely withdrawal of criminal proceedings once the decision to strike off a company's name had been finalized. The Court's analysis focused on the legal provisions and the actions taken by the department, ultimately leading to the quashing of the criminal proceedings based on the petitioners' arguments and the respondent's failure to withdraw the case despite meeting the statutory requirements.

 

 

 

 

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