2011 (2) TMI 1292 - HC - Companies Law

Whether the information which has already been furnished satisfies the requirement of section 209A(2) of the Act? Whether the initiation of the prosecution is barred by limitation ? Held that - n the present case the company has furnished the information as called for and the respondent has not stated as to how the information is not satisfactory. Therefore under these circumstances the jurisdiction under section 482 of the Criminal Procedure Code is to be exercised to quash the proceedings in E.O.C.C. No. 91 of 2009 on the file of the learned Additional Chief Metropolitan Magistrate s Court (Economic Offence-1) Egmore Chennai-600 008. Accordingly the criminal original petition is allowed.

Summary

Issues Involved:
1. Non-furnishing of information by the company under Section 209A(2) of the Companies Act, 1956.
2. Whether the prosecution is barred by limitation.
3. Interpretation of "books of account and other books and papers of the company" under Section 209A of the Act.

Detailed Analysis:

Non-furnishing of Information:
The petitioners, the managing director and company secretary of M/s. California Software Company Limited, were accused of failing to furnish information requested by the inspecting officer under Section 209A(2) of the Companies Act, 1956. The company had advanced an interest-free loan of Rs. 2 crores to California Software Employees Trust to purchase equity shares for its ESOP. The company was asked to provide details about the trust and the recovery of the loan. The petitioners argued that they had furnished the required information in their letter dated October 30, 2006, and again in response to a show-cause notice dated January 11, 2008.

Prosecution Barred by Limitation:
The petitioners contended that the prosecution was initiated beyond the one-year limitation period prescribed under the Criminal Procedure Code, 1973. The inspection was conducted on May 25, 2006, and the first letter requesting information was sent on October 10, 2006. The prosecution was launched on February 29, 2008, which the petitioners argued was beyond the permissible period. The court agreed, noting that the failure to furnish information should be considered from the date of the first notice, making the prosecution time-barred.

Interpretation of "Books of Account and Other Books and Papers":
The petitioners argued that the documents requested were under the custody of the trust, an independent body, and not part of the company's books of account as defined under Section 209A. The court, however, clarified that the prosecution was not for non-production of books but for non-furnishing of information. The court referenced previous judgments, including K. Kanagasabapathy v. T.M. Shanmugham and State v. S. Seshamal Pandia, to emphasize that the scope of "books of account and other books and papers" does not extend to every document in the company's office.

Court's Conclusion:
The court concluded that the company had indeed furnished the required information in their reply dated October 30, 2006, and the subsequent show-cause notice issued on January 11, 2008, was unnecessary. The court held that the failure to reply within ten days from the date of receipt of the show-cause notice did not constitute an offence. The court further stated that the offence, if any, was committed on the failure to furnish information for the first notice dated October 10, 2006, thus making the prosecution barred by limitation.

Final Judgment:
The criminal original petition was allowed, and the proceedings in E.O.C.C. No. 91 of 2009 on the file of the learned Additional Chief Metropolitan Magistrate's Court (Economic Offence-1), Egmore, Chennai-600008, were quashed.