TMI Blog2007 (4) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997. 3. The sum and substance of the allegation, as per the complaint, is that the company delayed in funding the dividend accounts of the company and failed to distribute the dividend within the stipulated time, viz., within a period of 42 days for the financial years 1995-96 to 1998-99 and within a period of 30 days for the financial year 1999-2000 and therefore, it is alleged that the company and its directors have contravened the procedure contemplated under section 207 of the Act and committed the offence under that section. 4. Mr. Habibullah Basha, learned senior counsel put forward the following contentions : ( i )The complaint filed in this case is barred by limitation. Under section 207 of the Companies Act, prior to amendment, within 42 days time from the date of declaration, dividend should be distributed and the failure of the same would attract the offence under this section and after the amendment the time-limit is 30 days from the date of declaration. In this case, the dividend was declared by the company on 19-9-1996, and forty-two days for posting the dividend warrant expired on 31-10-1996, and therefore, the complaint ought to have been filed within a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly filed the complaint on 23-8-2006, and therefore, the complaint was filed well within the stipulated period of one year. Under section 469(1)( b ) of the Code, the limitation starts from the date of knowledge of the commission of the offence by the aggrieved person. Under section 470( b ) of the Code, the period required for obtaining sanction of the Government shall be excluded for computing the limitation, Therefore, in this case the complaint was filed within the stipulated period of one year from the date of knowledge of the commission of the offence and after obtaining the sanction and as such the complaint is not barred by limitation. ( ii )The petitioner resigned as a director as per his letter dated 10-6-1996, and his resignation was accepted by the board of directors on 19-9-1996, and the dividend was declared on the same day, i.e ., on 19-9-1996. The contravention of the provision of section 207 of the Act was committed even during the financial year 1995-96, apart from the financial years 1997-98, 1998-99 and 1999-2000 and therefore, the offence was committed even during the period when the petitioner was working as director till 19-9-1996, and as such he c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , every director of the company (its managing agency or secretaries and treasurers; and where the managing agency is a firm or body corporate, every partner in the firm and every director of the body corporate; and where the secretaries and treasurers are a firm, every partner in the firm and where they are a body corporate, every director thereof;) shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine :" ( iii )Section 207 of the Act (after amendment) reads hereunder : "207. Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within thirty days from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to three years and shall also be liable to a fine of one thousand rupees for every day during which such default continues and the company shall be liable to pay simple interest at the rate of eighteen per cent per annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the violation of offence under sections 621 and 207 of the Companies Act. On a perusal of the records reveals prima facie case to take the complaint on file against the accused for the said violation. Accordingly, the complaint is taken on file against the accused and forwarded to A.C.M.M. (E.O.II), for disposal according to law." 15. It is evident from the perusal of the complaint that there is absolutely no averment as to how the period of limitation is calculated. It is also not disclosed in the complaint in respect of the date of the knowledge of the commission of the offence by the said company. In paragraph 10 of the complaint, it is merely stated in respect of the period of limitation as follows : "10. That the Ministry of Company Affairs vide its letter No. 5/10/2005-CL. II dated 1-5-2006, (Annexure E) has accorded its sanction and instruction of filing prosecution against the accused above named and hence the present complaint is well within the period of limitation as contemplated under section 468 of the Code of Criminal Procedure." 16. The respondent/complainant has come forward with the details of computing the period of limitation only for the first tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for the petitioner that the knowledge of the alleged commission of the offence under the Companies Act must have come to the notice of the Central Government on 19-9-1996, viz. , the date of declaration of dividend. 18. The Court in NEPC India Ltd. v. Registrar of Companies [1999] 97 Comp. Cas. 500 1 , held as follows : "C.C. No. 167 of 1998 also relates to an offence under section 207 of the said Act. It is seen from the complaint itself, the respondent came to know about the default on 8-9-1997. However, paragraph 3 of the complaint indicated that the inspection has been done and the same was completed on 20-1-1997. Under the circumstances, even at the time of the inspection itself, the respondent could have been well aware of the commission of the offence by the said company. They have caused a delay of nearly eight months in sending the show-cause notice. The delay caused by the respondent cannot be made use of to save their complaint. The complaint was filed in the court on 31-8-1998. Taking into consideration the fact that even according to the averments in the complaint, the respondent had completed the inspection on 20-1-1997, naturally the complaint ought to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the complainant or the Central Government had not had the knowledge about the alleged commission of offence under section 207 of the Act, on the date of declaration of dividend, i.e., on 19-9-1996, the documents relied on by the respondent/complainant, viz., order of the Government of India (Ministry of Company Affairs) dated 23-10-2003, appointing the inspector to investigate into the affairs of the accused company clearly shows that the respondent could have had the knowledge of the commission of offence as early as in the year 2003 and therefore, the complaint filed only in the year 2006 is certainly barred by limitation as the complaint is not filed within a period of a year from the date of knowledge of the commission of the offence as the complaint was admittedly filed only on 23-8-2006, and the learned Magistrate has taken cognizance on 29-8-2006 (3) No averments or explanations given in the complaint in respect of computing the period of limitation and further there is no whisper about the date of knowledge of the alleged offence by the complainant. (4) There is no provision under the Act contemplating prior sanction for prosecution of the companies under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, in the counter filed by the respondent/complainant it is specifically stated in paragraph 6 as follows : "This respondent states that the petitioner was a director in this company up to 31-12-1996, that is the date of recording of his resignation in the record of the office of the Registrar of Companies, Chennai, and in the report of the inspector, offences committed from the financial year 1995-96 onwards were found." 25. Therefore, it is clear that the respondent/complainant implicates the petitioner herein only for the offence said to have been committed during the financial year 1995-96. At this juncture, it is relevant to point out that in the earlier paragraph it is admitted by the respondent/complainant that the resignation of the petitioner was accepted by the board of directors on 19-9-1996, and as such it cannot be stated that the petitioner continued as a director up to 31-12-1996, which is the date of registration of the resignation of the petitioner by the Registrar of Companies. It is relevant to note that as per the complaint, as narrated in paragraph 6 of the complaint, the delay in respect of declaration of dividend for the financial year 1995-96 is only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seventh, eleventh and twelfth accused are the directors. Therefore, it is very clear that the petitioner is not a whole-time director to be aware about the entire affairs of the company. Therefore, in view of the absence of specific averment in the complaint to the effect that the petitioner had the knowledge about the commission of the offence by the company or the petitioner was knowingly a party to the default, the petitioner cannot be held vicariously liable for the contravention under section 207 of the Act and as such even on this ground the proceedings are liable to be quashed as against the petitioner herein. 29. One more infirmity in this case is that the complainant has not sent any show-cause notice to the petitioner or any of the accused in this case to explain about the alleged contravention of section 207 of the Act. Though there is no specific provision available under the Companies Act contemplating the issue of show-cause notice, the proviso to section 207 contemplates implied procedure of sending show-cause notice calling for explanation for the contravention of section 207 of the Act. This Court can read into the provision and the proviso to section 207 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be applied to decide whether any materials available on record to proceed against the accused. The principle of law laid down by the Hon ble Apex Court is squarely applicable to the instant case as in this case the allegations contained in the complaint do not make out a prima facie case for the offence under section 207 of the Act. 32. The Hon ble Supreme Court in State of Haryana v. Bhajan Lal 1992 Suppl. (1) SCC 335, pointed out certain categories of cases and laid down certain guidelines for quashing the proceedings and the first guideline is states as follows : "(1) Where the allegations made in the first information report or 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." (p. 378) 33. The abovesaid principle of law laid down by the Apex Court is squarely applicable to the facts of the instant case as in this case also the complaint is not only barred by limitation but also the allegations contained in the complaint do not attract the ingredients of the offence under section 207 of the Act as against the petitioner herein and as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
