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Issues Involved:
1. Whether the offence under section 207 of the Companies Act has been validly taken cognizance before the expiry of the period of limitation. 2. Whether the petitioner, who has resigned from the directorship of the company, could be fastened with the vicarious liability of the alleged contravention of the provision under section 207 of the Act. 3. Whether the allegation contained in the complaint constitutes the offence under section 207 of the Act as against the petitioner. Detailed Analysis: 1. Valid Cognizance Before Expiry of Limitation: The petitioner argued that the complaint was barred by limitation under section 468(2)(b) of the Code of Criminal Procedure, which prescribes a one-year limitation period for offences punishable with imprisonment not exceeding one year. The dividend was declared on 19-9-1996, and the complaint should have been filed by 1-11-1997. However, the complaint was filed on 23-8-2006, well beyond the limitation period. The respondent contended that the limitation period started from the date of knowledge of the offence, which was when the Inspector's report was received on 1-12-2005, and the complaint was filed within one year of obtaining sanction on 1-5-2006. The court found that the respondent must have had knowledge of the offence as early as 2003 when the investigation was ordered, thus the complaint was barred by limitation. 2. Vicarious Liability of the Petitioner: The petitioner resigned from the directorship on 10-6-1996, and his resignation was accepted on 19-9-1996, the same day the dividend was declared. The court noted that the petitioner could not be held liable for the contravention of section 207 as he was not a director at the time of the declaration of the dividend. The court emphasized that the petitioner was not a party to the declaration of the dividend and thus could not be vicariously liable for the company's default. 3. Allegation Constituting Offence Under Section 207: The court examined whether the complaint contained allegations that the petitioner was "knowingly a party to the default" as required under section 207. The complaint did not contain any averment to this effect. The court highlighted that the petitioner was not a whole-time director and there were no specific allegations of his knowledge or involvement in the default. The absence of such allegations meant that the petitioner could not be held liable under section 207. Conclusion: The court concluded that the complaint was barred by limitation, the petitioner could not be held vicariously liable as he had resigned before the declaration of the dividend, and the complaint did not contain necessary allegations to constitute an offence under section 207. Consequently, the proceedings against the petitioner were quashed.
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