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Issues Involved:
1. Alleged active concealment of material facts in the annual report. 2. Compliance with National Housing Bank (NHB) conditions. 3. Violation of Section 628 and Section 211 of the Companies Act, 1956. 4. Mens rea (guilty mind) and intent behind the alleged misstatements. Issue-Wise Detailed Analysis: 1. Alleged Active Concealment of Material Facts in the Annual Report: The primary question raised was whether the petitioners actively concealed material facts from the annual report of SBI Home Finance Ltd. for the financial years ended 31-3-2000 and 31-3-2001. The Registrar of Companies required the petitioners to show cause why penal action under section 628 read with section 211 should not be initiated against them. The petitioners responded to the Registrar's letter but, fearing criminal proceedings, applied to the court seeking to be excused for the offence, if any, committed by them. 2. Compliance with National Housing Bank (NHB) Conditions: The company applied to the NHB for relaxation of prudential norms and detailed a road-map proposing to infuse capital for the year 2000-01. NHB granted exemptions subject to conditions, including the infusion of Rs. 25 crores in equity and Rs. 25 crores in preference shares. The company acknowledged these conditions in its annual report but did not issue further shares or receive additional funds. An inspection under section 209A revealed discrepancies, leading to show-cause notices. 3. Violation of Section 628 and Section 211 of the Companies Act, 1956: The first show-cause notice alleged a violation of section 628 due to a misleading statement in the directors' report, which stated, "Due to non-infusion of capital, the net worth of the company continues to remain fully eroded." The court found no misstatement of fact, as the sentence conveyed that the erosion continued because the eroded capital had not been replaced by fresh capital. The financial position of the company was evident from the report, and the petitioners were absolved of the charges in the first notice. The second notice alleged violations of both section 211 and section 628, claiming the company did not make provisions/write-offs as per prudential norms and omitted material facts regarding NHB's relaxation of norms. The court noted that the Registrar's point was that a statement should have been made that relaxation applied without meeting the condition precedent. However, the petitioners argued that NHB continued to monitor the company and did not complain about non-compliance with the condition. 4. Mens Rea (Guilty Mind) and Intent Behind the Alleged Misstatements: The petitioners argued that there was no mens rea, and no one suffered due to the alleged omission. They cited various judgments to support that criminal intention is irrelevant if the accused acted honestly and in good faith. The court agreed that the petitioners did not conceal any material facts or make false statements with intent to deceive. The NHB's objective was achieved through the State Bank of India taking over the company's NPAs, even though the exact condition was not met. Conclusion: The court concluded that the petitioners did not violate the provisions of the Companies Act as alleged. The NHB's objective was achieved, and the petitioners' actions were in good faith. The petitions were allowed, and the petitioners were absolved of all liabilities in respect of the alleged offence complained of by the Registrar. There was no order as to costs.
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