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2015 (9) TMI 1742 - HC - Companies LawNon-disclosure of capitalization of borrowing costs in the balance sheets - non-disclosure of details of capitalization of computer software in the Company s books of accounts for the year 31st March 2010 31st March 2011 31st March 2012 - non-disclosure of each class of intangible assets distinguishing between internally generated intangible assets and other intangible assets - alleged contravention of Sections 211(3A) (3B) and (3C) of the Act read with AS-16 and AS-26 - Balance Sheets did not comply with AS-16 and AS-26 as framed by the Institute of Chartered Accountants - time limitation. HELD THAT - The quashing of a complaint is permissible where the allegations made in the complaint even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. The quashing of a complaint is permissible if there is an express legal bar engrafted in any of the provisions of the Cr.P.C. to the institution and continuance of the proceedings. In the case of ZANDU PHARMACEUTICAL WORKS LTD. ORS. VERSUS MD SHARAFUL HAQUE ANR. 2004 (11) TMI 519 - SUPREME COURT the Supreme Court held that there may not be any straight jacket formula for exercising power under Section 482 Cr.P.C. but the same has to be exercised sparingly and in rarest of rare cases. The time period taken by the Regional Director to take the decision to direct the Registrar of Companies to launch prosecution cannot be excluded for the purpose of computing the period of limitation as both the Regional Director i.e. the Central Government as well as the Registrar of Companies was competent to launch prosecution once they had knowledge of the commission of the offences as on 24th June 2013 i.e. when the inspection reports were filed with either of them. Since for the offences under Section 211(7) 211(3A) (3B) and (3C) of the Act no consent/sanction for prosecution from the Central Government is required. Section 470 (3) Cr.P.C cannot be relied upon by the respondents. Admittedly Section 211 of the Act is punishable with six months imprisonment and fine. Under Section 468 Cr.P.C - no Court shall take cognizance of an offence punishable with imprisonment for a term not exceeding one year from the date of offence or the date of knowledge of the offence. Admittedly the Inspector submitted his inspection report on 24th June 2013 and the said complaint was only filed on 18th September 2014 after the expiry of a year from the date of knowledge of the offence as provided under Section 468 (2) (b) Cr.P.C. - The offences in the present case are not continuing in nature limitation commenced as per Section 469 (1) (b) Cr.P.C. when actionable knowledge was gained by the competent authority i.e. when the Registrar of Companies had knowledge of the commission of the alleged offences i.e. 24th June 2013 when the Registrar of Companies received the report of the Inspector and ran out on 23rd June 2014 and thus the complaint which was admittedly filed on 18th September 2014 was hopelessly barred by limitation. The complaint is based on the inspection report of the officer. Consequently in the present case there is no issue of fact at all with regard to the date of knowledge of offence to the Registrar of Companies. The complaint is therefore time barred - the impugned summoning orders and other proceedings emanating from the said orders against the petitioners are accordingly quashed - petition allowed.
Issues Involved:
1. Quashing of the complaint and proceedings under Section 482 Cr.P.C. 2. Alleged violations of Sections 211(3A), 211(3B), and 211(3C) of the Companies Act, 1956 read with AS-16 and AS-26. 3. Whether the offence is a continuing one. 4. Limitation period for filing the complaint. 5. Admissibility of documents in evidence. 6. Scope of interference under Section 482 Cr.P.C. Issue-wise Detailed Analysis: 1. Quashing of the Complaint and Proceedings under Section 482 Cr.P.C.: The petitioners sought quashing of the complaint and proceedings under Section 482 Cr.P.C. The Court noted that the power under Section 482 Cr.P.C. should be exercised sparingly and only in cases of gross illegality. The Court emphasized that disputed questions of fact should be decided during the trial and not at the stage of quashing proceedings. The Court referred to precedents where it was held that the High Court should not interfere unless the allegations in the complaint, even if taken at face value, do not constitute any offence or are time-barred. 2. Alleged Violations of Sections 211(3A), 211(3B), and 211(3C) of the Companies Act, 1956 read with AS-16 and AS-26: The complaint alleged non-disclosure of capitalization of borrowing costs and computer software, violating Sections 211(3A), (3B), and (3C) of the Act read with AS-16 and AS-26. The petitioners contended that no interest on borrowings was capitalized and that the only intangible asset was computer software, which was disclosed as per AS-26. The Court found that the complaint did not contain specific allegations of capitalized interest or self-created software, and thus, no tenable allegation of offence was made out. 3. Whether the Offence is a Continuing One: The Court examined whether the alleged offence was a continuing one. It referred to precedents distinguishing between continuing and completed offences. The Court concluded that the offence under Section 211(7) of the Act is not a continuing offence but is complete once the Balance Sheet is issued. Therefore, the limitation period is not extended by the continuing nature of the offence. 4. Limitation Period for Filing the Complaint: The Court noted that the limitation period for filing a complaint under Section 211(7) of the Act is one year from the date of knowledge of the offence. The Registrar of Companies received the inspection report on 24th June 2013, and the complaint was filed on 18th September 2014, beyond the one-year limitation period. The Court held that the complaint was time-barred and quashed the proceedings. 5. Admissibility of Documents in Evidence: The petitioners argued that the documents annexed to the complaint were not admissible in evidence as they were not certified by the Registrar or empowered authority. The Court did not specifically address this issue in detail, as it quashed the complaint on the grounds of limitation and lack of tenable allegations. 6. Scope of Interference under Section 482 Cr.P.C.: The Court reiterated the principles governing the exercise of power under Section 482 Cr.P.C. It emphasized that the power should be used sparingly and only to prevent abuse of the process of the Court or to secure the ends of justice. The Court found that the complaint was time-barred and did not make out a prima facie case against the petitioners, warranting interference under Section 482 Cr.P.C. Conclusion: The Court quashed the complaint and proceedings against the petitioners, finding that the allegations did not constitute any offence, the complaint was time-barred, and the offences were not continuing in nature. The Court emphasized the importance of adhering to the limitation period and the need for specific allegations in the complaint to make out a prima facie case.
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