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2016 (8) TMI 792 - GUJARAT HIGH COURT

2016 (8) TMI 792 - GUJARAT HIGH COURT - TMI - Offences punishable u/ss.209(5) r/w.Sections 211(7) and 628 of the Companies Act for non-maintenance of proper books of accounts - Held that:- The petitioner is a practicing advocate and it is his main vocation. Incidentally, he might have accepted Directorship, but merely he is a formal Director, no process can be issued against him unless specific allegation has been made against him in the complaint or primafacie ingredients of the offence has bee .....

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in the complaint against the petitioner, the process issued against the petitioner requires to be quashed. - A plain reading of Section 211(7) and 209(5) of the Act would go to show that the default is punishable with imprisonment for a term which may extend to six months and shall also be liable to fine which may extend to ten thousand rupees, or with both. - Section 628 provides for punishment with imprisonment, which may extend to two years and shall also be liable to fine. It is not .....

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on shall be six months, if the offence is punishable with fine only, and three years if the offence is punishable with imprisonment for a term exceeding one year, but not exceeding three years. - Having regard to the nature of the contravention, it could not be said that the Sections 211(7), 209(5) and 628 of the Companies Act are continuing offences so that the period of limitation would keep on running. What is continuing offence has been exhaustively explained by this Court, while disposi .....

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th SPECIAL CRIMINAL APPLICATION NO. 3142 of 2012 - Dated:- 16-8-2016 - MR. S.G.SHAH, J. FOR THE APPELLANT : MR MIHIR JOSHI, Senior Advocate with MR PRANIT NANAVATI for NANAVATI ASSOCIATES, ADVOCATE, MR PR ABICHANDANI, ADVOCATE FOR THE RESPONDENT : MR DEVANG VYAS, Asst. Solicitor General of India, MR MANAN MEHTA, APP COMMON CAV JUDGMENT 1. In all these four petitions, common issues of facts and law are involved, so also parties are common in all the petitions and therefore, all such petitions are .....

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gh as per the Company Law, it is considered to be a punishable offence, practically, in absence of evidence regarding mens rea and intention to commit offence as alleged, practically, they are technical offences of not following the statutory provision of law, though such breach of statutory provision, may be punishable. Only in one complaint, there is reference of Sections 467 and 471 of the Indian Penal Code. However, the perusal of entire record makes it clear that, practically, there is no p .....

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g Mardia Chemicals Ltd., in all there are 13 accused amongst which present petitioner is accused No.7. b. In Special Criminal application No.3140 of 2016, the petitioner has challenged the proceedings of Criminal Case No.08 of 2006 wherein including Mardia Chemicals Ltd., in all there are 12 accused amongst which present petitioner is accused No.7. c. In Special Criminal application No.3141 of 2016, the petitioner has challenged the proceedings of Criminal Case No.24 of 2006 wherein including Ma .....

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pondent No.2 in all such complaints, namely, Rasiklal Shantilal Mardia has challenged the same order in Special Criminal Application (Quashing) No.5550 of 2014 and Co-ordinate Bench of this High Court has by its order dated 29.4.2015 while allowing such application, quashed and set-aside the Criminal Complaint No.08 of 2006 so far as applicants in that application are concerned. In that application, there are as many as 10 applicants, which include accused Nos.2 to 6 and 9 to 13. Therefore, prac .....

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law and decision in the case of Udai Shankar Awasthi vs. State of Uttar Pradesh & Anr. (2013)2 SCC 435 and came to the conclusion that having regard to the nature of the contravention, it could not be said that the Sections 211(7), 209(5) and 628 of the Companies Act are continuous offences so that the period of limitation would keep on running. 5. In view of above facts and circumstances, so also considering the available material on record, it can certainly be said that there is substance .....

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have been falsified knowingly and intentionally to hide the fact of directors/relatives, enjoying the company s money without any tangible benefit to the company. Hence they are liable to be prosecuted under Section 628 of Companies Act, 1956. 5.2 Books of accounts for the year 1996- 1997, 1997-1998 and 1998-1999 did not present true and financial position and as such the accused being 2 to 13 are responsible and liable to be punishable under Section 209 read with Section 211 read with Section 6 .....

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nor in day to day management of the Company. Even otherwise, there is no averment in the complaint that the Petitioner was in-charge or that he was responsible for the conduct of the business of the Company. Further, there is nothing in the complaint to show that the act committee or the conduct of the Petitioner was such that an inference can be drawn that he could be held vicariously liable. Also, no overt act of commission or omission has been alleged against the applicant in the complaint. I .....

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Criminal Misc. Application No.139 of 1997 - S.I. Nanavati v/s State of Gujarat (e) Judgment dated 4.5.2007 of this Hon ble Court in Criminal Misc. Application No.7302 of 2000 - K.S. Nanavati v/s Registrar of Companies 5.5 There is no averment in the complaint that the Company does not have a managing director or a manager for fixing the alleged liability on all the Directors of the Company, including the Petitioner. In the circumstances, more particularly in absence of any specific allegation ag .....

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he Company has Managing Director or a Manager, every other Director of the Company is not a person referred to in Section 209 (5) of the Companies Act, 1956. 5.7 There is no allegation that the Petitioner was charged by the Managing Director, Manager or Board with the duty of seeing that the requirements of Section 209(7) are complied with. 5.8 A complaint alleging offence under Section 211 would also lie only against a person referred to in Section 209 (6) of the Companies Act, 1956. 5.9 Compli .....

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n default. In this regard, the Petitioner relies upon the judgment dated 5.3.2012 of this Hon ble Court in Special Criminal Application No.2421 of 2007 - Kalpesh Dagli v/s State of Gujarat. 5.10 There is no specific allegation made in the complaint, holding the Petitioner liable for the offence alleged to have been committed under Section 628 of the Companies Act. Further, there is no averment in the complaint alleging mala fides or want of good faith on the part of the Petitioner. In the circum .....

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made in respect of non-disclosure of party related transaction are in respect of the accounting periods of 2001-2002, 2002-2003 and 2003-2004, and hence the Petitioner cannot be held liable for the same. 5.12 The complaint has been filed on 17.2.2006, inter alia, in respect of some allegations prior to the Petitioner s resignation on 31.8.1998. The complaint is barred by limitation. In this regard, the Petitioner relies upon the judgment dated 29.4.2015 of this Hon ble Court in Special Criminal .....

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ndependent verification regarding fixed assets and thus have not adhered to AAS 11. 5.14 The accused persons have deliberately and willfully not replied to the observations/reservations etc., and have thereby violated the provisions of Section 209(5) read with Section 211(7) of the Companies Act, 1956 read with Section 628. Submissions of the Petitioner 5.15 The submissions in paragraph Nos.5.4 to 5.8 and 5.9 to 5.11 by the petitioner with reference to Criminal Case No.14 of 2006 i.e. in Special .....

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nt to any offence under Section 209(5) or 211(7) of the Companies Act, 1956. 5.17 The complaint has been filed on 4.2.2006, inter alia, in respect of some allegations prior to the Petitioner s resignation on 31.8.1998. The complaint is barred by limitation. In this regard, the Petitioner relies upon the judgment dated 29.4.2015 of this Hon ble Court in Special Criminal Application No.5550 of 2014 - Rasik Shantilal Mardia v/s State of Gujarat. Special Criminal Application No.3141/2012 (Criminal C .....

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said companies through the Company s account without any movement of funds, the source of account being the account of the Company. This amounts to financial transaction of purchase of shares of the Company from out of the funds available with the Company, which is in violation of the provisions of Section 77 of the Companies Act, 1956. 5.20 The accused persons being 2 to 13 have knowingly and willfully approved and signed the false annual accounts and thereby the accused persons have rendered .....

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n a company does not have officers specified in clause (a) to (c) of Section 5 of the Companies Act, 1956, and only when Director or Directors are not specified by the Board for the purposes of Section 5, that all Directors would be officers in default. There was a Managing Director and whole-time Director and consequently the other Directors, who are not in managerial capacity, would not be officers in default. In the circumstances, the filing of complaint, the issuance of process and the conti .....

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tle or to cause any person to part with property or to enter into any express or implied contract or with intent to commit fraud or that the fraud may be committed. The Petitioner submits that there is not a whisper of allegation that the Petitioner has forged the document, which purports to be a valuable security or which purports to give to any person make or transfer any valuable security or to receive the principal interest or dividends thereon or to receive or deliver any money, movable pro .....

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aint, much less against the Petitioner. Special Criminal Application No.3142/2012 (Criminal Case No.15 of 2006 ( complaint fo r short) Allegations made in Criminal Case No. 15 of 2006: 5.24 It is seen from the annual reports containing the auditor s report, director s reports, balance sheets, profit and loss accounts etc. for the period from 1994-1995 to 2003-04 (Annexure-A) received from various agencies such as ROC, SEBI, Stock Exchange, Income Tax Department etc. that the auditor s reports ha .....

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. 5.26 The accused persons being 2 to 16 have knowingly and willfully approved the accounts without furnishing fullest information and explanation to the adverse remark of auditors in the report on the said accounts and thereby the accused persons have rendered themselves liable to be prosecuted under Section 217(5) read with Section 628 of the Companies Act, 1956. Submissions of the Petitioner 5.27 The submissions in paragraph Nos.5.4, 5.12 by the petitioner with reference to Criminal Case No.1 .....

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ce alleged to have been committed under Section 628 of the Companies Act. In this regard, the Petitioner relies upon the judgment of the Hon ble Madras High Court in the case of In re G. Natesan and others, reported in AIR 1949 Mad 657. 5.29 There is no allegation whatsoever that the Petitioner has made any false statement in material particular knowing it to be false in any return, report, certificate, balance sheet, prospectus, statement or other document by or for the purposes of any of the p .....

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s made for the year 1994-1995 to 1997-1998 can be considered an adverse remark, qualification or reservation, much less an adverse remark which requires the Board to give any information or explanation. 6. The petitioner is a practicing advocate and it is his main vocation. Incidentally, he might have accepted Directorship, but merely he is a formal Director, no process can be issued against him unless specific allegation has been made against him in the complaint or primafacie ingredients of th .....

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