2001 (12) TMI 816 - HC - Companies Law

Issues Involved:
1. Quashing of proceedings under Section 482 of the Code of Criminal Procedure.
2. Alleged contravention of Section 58A(6) of the Companies Act, 1956, and related Rules.
3. Characterization of amounts received as deposits or advances.
4. Non-impleadment of the company as an accused.
5. Liability of company officers in the absence of the company being prosecuted.

Detailed Analysis:

1. Quashing of Proceedings under Section 482 of the Code of Criminal Procedure:
The petitioners sought to quash the proceedings in C.C. No. 29 of 1998, arguing that the complaint suffered from incurable legal infirmities. The court held that the characterization of the amounts received by the company as deposits or advances is a factual question that must be determined during the trial. The court refused to quash the complaint on this ground, stating, "No relief could be granted to the petitioners on this count. The complaint itself cannot be quashed on that ground."

2. Alleged Contravention of Section 58A(6) of the Companies Act, 1956, and Related Rules:
The complaint alleged that the company accepted deposits without complying with the requirements stipulated under Section 58A(1) and (2) and related rules. The court noted that the prosecution must establish whether the company indeed accepted deposits in contravention of the Act and rules. The court emphasized that "the question as to whether the company received the amounts as advances from the unit holders for the rearing of sheep for the purpose of the business of the company for rendering services is a question of fact."

3. Characterization of Amounts Received as Deposits or Advances:
The petitioners contended that the amounts received were advances for services and not deposits, which would exempt them under Rule 2(b)(vi) of the Companies (Acceptance of Deposits) Rules, 1975. The court stated that this defense could be raised during the trial and that it is for the prosecution to establish whether the amounts were deposits or advances. The court left this issue open for determination during the trial.

4. Non-Impleadment of the Company as an Accused:
The petitioners argued that the complaint was defective because the company was not made an accused. The court examined the complaint and noted that the company was not impleaded due to the appointment of a provisional liquidator. The court held that the non-impleadment of the company does not vitiate the prosecution against the officers. The court cited the Supreme Court's decision in Sheoratan Agarwal v. State of Madhya Pradesh, stating, "It does not lay down any condition that the person-in-charge or an officer of the company may not be separately prosecuted if the company itself is not prosecuted."

5. Liability of Company Officers in the Absence of the Company Being Prosecuted:
The court held that both the company and its officers are liable for contraventions under Section 58A(6). The court stated, "The language of section 58A(6)(a) and (b) does not justify the submission made by the learned senior counsel." The court further explained that the prosecution of the company is not a sine qua non for prosecuting the officers, provided there is a finding that the company committed the offense. The court referenced the Supreme Court's decision in Anil Hada v. Indian Acrylic Limited, which held that "the provisions do not contain a condition that prosecution of the company is sine qua non for prosecution of the other persons."

Conclusion:
The court dismissed the criminal petition, stating that the prosecution against the petitioners does not suffer from any incurable legal infirmity. The trial court must determine whether the company committed the alleged offense, and the officers can be prosecuted even in the absence of the company being an accused. The court emphasized that the observations made in the order are confined to the disposal of this application and that the trial should proceed in accordance with the law.

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