1993 (12) TMI 204 - HC - Companies Law

Issues Involved:
1. Limitation period for initiating prosecution.
2. Requirement of mens rea for prosecution under section 5 of the Companies Act, 1956.

Detailed Analysis:

Issue 1: Limitation Period for Initiating Prosecution

Contention by Petitioners:
The petitioners argued that the alleged contraventions occurred on November 30, 1985, November 30, 1986, and November 30, 1987. The authorities were aware of these contraventions during inspections in May and December 1988. Since the offence is punishable only with a fine under section 629A of the Companies Act, the limitation period under section 468(2)(a) of the Criminal Procedure Code (CrPC) is six months. Therefore, the complaint dated December 14, 1989, is barred by limitation.

Contention by Respondent:
The respondent contended that the inspection report with directions to file a complaint was received in the office only on November 17, 1989, which is when the knowledge of the offence was acquired. Hence, the complaint filed on December 14, 1989, was within the limitation period. The respondent referred to section 469(1)(b) of the CrPC, which states that the period of limitation commences from the first day on which the offence comes to the knowledge of the person aggrieved or any police officer, whichever is earlier.

Court's Analysis:
The court noted that the prosecution was initiated by the Additional Registrar of Companies, who is the proper authority under section 621 of the Companies Act. The date of knowledge of the offence by the respondent (November 17, 1989) is relevant for calculating the limitation period. The court observed that the inspection alone does not necessarily result in prosecution; an investigation follows, during which explanations are sought from the company. The offence is considered disclosed when the investigating authority, after considering all material and explanations, decides to prosecute. The court held that the issue of limitation is a mixed question of law and fact, which should be decided by the trial court based on evidence.

Relevant Case Law:
- *State of Punjab v. Sarwan Singh*: Emphasized the importance of adhering to the limitation period to prevent vexatious and belated prosecutions.
- *R.S. Arora v. State*: The limitation period starts from the date the offence is known to the aggrieved person or police officer.
- *Bhagirath Kanoria v. State of M.P.*: Non-payment of provident fund contributions was considered a continuing offence, thus not subject to the limitation period under section 468 of the CrPC.

Conclusion:
The court rejected the petitioners' contention that the prosecution was barred by limitation, leaving the issue open for consideration by the trial court based on evidence.

Issue 2: Requirement of Mens Rea for Prosecution

Contention by Petitioners:
The petitioners argued that under section 5 of the Companies Act, as it stood prior to the amendment on July 15, 1988, mens rea (knowledge of the contravention) was essential for prosecution. They contended that the complaint did not indicate the required mens rea, which is necessary for prosecuting the directors.

Contention by Respondent:
The respondent pointed to specific averments in the complaint indicating that the first petitioner admitted the contraventions, and petitioners Nos. 2 to 7, who were notified, did not offer any explanation. This, according to the respondent, prima facie indicates the required mens rea.

Court's Analysis:
The court noted that the complaint described petitioners Nos. 2 to 7 as officers in default within the meaning of section 5 of the Act. The complaint also indicated that the first petitioner admitted the contraventions and the other petitioners did not provide any explanation. The court held that these averments sufficiently indicated the required mens rea. The court further stated that it is open to the petitioners to present their defense regarding the lack of mens rea before the trial court.

Conclusion:
The court rejected the petitioners' contention regarding the lack of mens rea, allowing the issue to be addressed during the trial.

Final Decision:
The petition to quash the prosecution was dismissed, with the court leaving certain issues open for consideration by the trial court based on evidence.

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