2006 (1) TMI 252 - HC - Companies Law

Issues Involved:
1. Quashing of criminal proceedings under Section 482 of the Criminal Procedure Code (Cr.P.C.), 1973.
2. Alleged violation of Section 58A of the Companies Act, 1956, and the Companies (Acceptance of Deposits) Rules, 1975.
3. Applicability of the limitation period under Section 468 of the Cr.P.C.

Detailed Analysis:

1. Quashing of Criminal Proceedings under Section 482 Cr.P.C.:

The petitioner sought to quash the criminal proceeding in C.R. Case No. 364/98, pending before the Judicial Magistrate, 1st Class, Shillong, Meghalaya. The primary ground for invoking Section 482 Cr.P.C. was the alleged violation being punishable with fine only, and the complaint being filed beyond the period of limitation prescribed under Section 468 Cr.P.C. The petitioners argued that the offence was not a continuing one and thus, the complaint should have been filed within six months from the date of the alleged offence.

2. Alleged Violation of Section 58A of the Companies Act, 1956, and the Companies (Acceptance of Deposits) Rules, 1975:

The complaint filed by the Registrar of Companies alleged that the company accepted unsecured loans amounting to Rs. 22,58,159.12 but failed to file the Return of Deposits as required under Section 58A of the Companies Act, 1956, and the Companies (Acceptance of Deposits) Rules, 1975. The petitioners contended that the amounts in question were not "deposits" under Rule 2(b)(ix) and 2(b)(vi) of the Companies (Acceptance of Deposits) Rules, 1975, and thus, there was no requirement to file any Return of Deposits.

3. Applicability of the Limitation Period under Section 468 Cr.P.C.:

The petitioners argued that the complaint was barred by limitation as per Section 468 Cr.P.C., which prescribes a limitation period of six months for offences punishable with fine only. They contended that the complaint should have been filed on or before 30-6-1997, within six months from the date of submission of the balance sheet on 31-3-1997. However, the complaint was filed on 31-3-1998, beyond the prescribed limitation period.

Court's Observations and Findings:

The court noted that apart from the penalty of fine, Section 58A of the Companies Act, 1956, also provides for imprisonment, which may extend to five years. Therefore, the limitation period could not be determined solely based on the penalty of fine. The court observed that the complaint alleged a violation of Section 58A, which attracts a more severe punishment, including imprisonment.

The court referred to the provisions of Section 58A and the Companies (Acceptance of Deposits) Rules, 1975, noting that the definition of "deposits" excluded certain amounts borrowed by a company. The court found that the specific allegations in the complaint indicated a violation of both Rule 10 of the Companies (Acceptance of Deposits) Rules, 1975, and Section 58A of the Companies Act, 1956.

The court also referred to previous judgments, including the decision of the Apex Court in State of Bihar v. Deokaran Nenshi and the Karnataka High Court in Shree Dharma Sugar Industries (P.) Ltd. v. Registrar of Companies, which dealt with similar issues. However, the court distinguished the present case, noting that the allegations involved a violation of Section 58A, which includes a provision for imprisonment.

Conclusion:

The court concluded that the complaint was not barred by limitation as the allegations involved a violation of Section 58A, which includes a provision for imprisonment. The court dismissed the application for quashing the criminal proceedings, directing the petitioners to appear before the trial court to face the proceedings. The court emphasized that the question of whether there was a violation of Section 58A would be determined based on evidence during the trial.

Order:

The application for quashing the criminal proceedings was dismissed. The petitioners were directed to appear before the Judicial Magistrate, 1st Class, Shillong, for the trial. The court also directed the immediate transmission of case records to the trial court and expected an early disposal of the proceedings. There was no order as to costs.

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