2000 (6) TMI 771 - HC - Companies Law

Director Disclosure of interest by, Penalty where no specific penalty is provided elsewhere in the act

Issues Involved:
1. Quashing of proceedings in C.C. No. 3 of 2000.
2. Alleged offences under sections 299(4) and 304 of the Companies Act, 1956, and section 409 of the Indian Penal Code, 1860.
3. Limitation period for filing complaints under section 468 of the Criminal Procedure Code, 1973.
4. Alleged contravention of sections 297, 299, and 300 of the Companies Act.
5. Alleged misappropriation of funds and criminal breach of trust under section 409 of the Indian Penal Code.
6. Liability of the company (Accused No. 4) for the alleged offences.

Issue-Wise Detailed Analysis:

1. Quashing of Proceedings in C.C. No. 3 of 2000:
The petitioners sought to quash the proceedings in C.C. No. 3 of 2000 on the ground that no offence could be made out even assuming the allegations in the complaint to be true. They contended that the continuation of the proceedings would amount to an abuse of the process of the law.

2. Alleged Offences under Sections 299(4) and 304 of the Companies Act, 1956, and Section 409 of the Indian Penal Code, 1860:
The petitioners faced prosecution for offences punishable under sections 299(4) and 304 of the Companies Act, 1956, and section 409 of the Indian Penal Code, 1860. Accused No. 1 also faced a charge under section 411 of the Indian Penal Code. The complaint alleged that the accused had committed various acts of omission and commission, including the misappropriation of funds through a sham contract with Kris Engineers.

3. Limitation Period for Filing Complaints under Section 468 of the Criminal Procedure Code, 1973:
The petitioners contended that the complaint was barred by limitation as prescribed under section 468 of the Criminal Procedure Code, 1973. They argued that the offences under sections 299, 300, and 297 of the Companies Act, being punishable with a fine only, had a limitation period of six months, which had expired. However, the court held that the offence under section 409 of the Indian Penal Code, which is punishable with imprisonment for life or ten years, had no limitation period, and the proceedings could not be questioned on this ground.

4. Alleged Contravention of Sections 297, 299, and 300 of the Companies Act:
The complaint alleged that accused Nos. 1 to 3 had violated sections 297, 299, and 300 of the Companies Act by entering into a contract with Kris Engineers without proper disclosure and authorization. The court held that the allegations in the complaint prima facie made out violations of these sections and that the matter involved questions of fact and law that needed to be examined during the trial.

5. Alleged Misappropriation of Funds and Criminal Breach of Trust under Section 409 of the Indian Penal Code:
The complaint alleged that accused Nos. 1 to 3 had misappropriated Rs. 50 lakhs by transferring it from A-4-company to Kris Engineers and then to accused No. 1. The court held that if the facts alleged in the complaint were taken to be true, they constituted an offence of criminal breach of trust under section 409 of the Indian Penal Code.

6. Liability of the Company (Accused No. 4) for the Alleged Offences:
The court examined whether any offence had been made out against accused No. 4-company. It held that the allegations in the complaint were specifically against accused Nos. 1 to 3 and that the company itself could not be held liable for the alleged offences. The court noted that the company was, in fact, the aggrieved party, as it had been defrauded by its directors. Consequently, the proceedings against accused No. 4-company were quashed, and the company was deleted from the array of the accused.

Conclusion:
The petition was partly allowed. The proceedings against accused No. 4-company were quashed, while the proceedings against accused Nos. 1 to 3 were allowed to continue.

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