1994 (1) TMI 210 - HC - Companies Law

Officer in default - Whether where there is a managing director of company, directors thereof can be held to be falling within expression officer who is in default as defined in section 5 and can be held liable criminally, for default in complying with requirements of sub-sections (1) and (2) of section 220 - Held, no

Summary

Issues:
Challenge to Criminal Complaint under Section 220 of the Companies Act, 1956.

Analysis:
The petitioners challenged Criminal Complaint No. 47 of 1991 under section 482 of the Code of Criminal Procedure, contesting the allegations against them for an offense under section 220 of the Companies Act, 1956. The complaint was filed by the Registrar of Companies for default in filing balance sheets as required under section 220(1) and (2). The section provides for punishment for default, making both the company and officers in default liable. The definition of "officer who is in default" under section 5 includes managing directors, whole-time directors, managers, and others involved in the company's operations. In this case, since Mr. P.C. Maheshwari was the Managing Director, the petitioners, as directors, did not fall within the definition of officers in default, absolving them of criminal liability for the alleged default.

The court emphasized that when the complaint does not establish a case against the petitioners, it would not be just to quash it to prevent abuse of the court's process. Citing relevant case law, the court highlighted the importance of ensuring justice in such matters. Consequently, the petition was allowed, and the criminal proceedings against the petitioners in Complaint No. 47 of 1991 were quashed and dismissed. However, the case was directed to proceed against the company and Mr. P.C. Maheshwari, the Managing Director, who were the remaining accused in the matter.