2006 (6) TMI 215 - HC - Companies Law

Summary

Issues Involved:
1. Whether the criminal proceedings against the petitioner are barred by limitation.
2. Whether the petitioner, as an ordinary director and not a managing director, can be held liable for the alleged offences under sections 63, 68, and 628 of the Companies Act.
3. Whether the complaints filed against the petitioner constitute an abuse of the process of law.

Detailed Analysis:

1. Barred by Limitation:
The petitioner argued that the prosecution is barred by limitation since the criminal proceedings were initiated nearly eight years after the issuance of the prospectus. The petitioner cited several decisions to support this contention, including *Hafez Rustom Dalal v. Registrar of Companies* and *ITC Agro-Tech Ltd. v. Registrar of Companies*. The court noted that under section 469(1)(b) of the Criminal Procedure Code, the period of limitation would commence from the date on which the offence first came to the knowledge of the person aggrieved or any police officer. The Registrar of Companies claimed to have learned of the offences through a letter from the Regional Director dated 20-5-2002, and thus, the complaints filed on 29-7-2002 were within the limitation period. The court found that the complaints were not barred by limitation.

2. Liability of the Petitioner:
The petitioner contended that he was an ordinary director and not the managing director, thus not liable for the lapses. He referred to section 5 of the Companies Act, which defines "officer who is in default." The court examined the definition and noted that it includes managing directors, whole-time directors, and any person charged by the board with the responsibility of complying with the provisions of the Act. The court observed that the show-cause notice was issued to all directors, and a reply was issued on behalf of the petitioner and other directors without contesting the petitioner's responsibility. Therefore, the court rejected the petitioner's contention and held that he could be considered an officer in default.

3. Abuse of Process of Law:
The petitioner argued that the prosecution constituted an abuse of the process of law. The court referred to the principles laid down in *State of Haryana v. Ch. Bhajan Lal* regarding the exercise of inherent powers under section 482 of the Criminal Procedure Code. The court emphasized that such powers should be exercised sparingly and only in the rarest of rare cases to prevent abuse of the process of the court or to secure the ends of justice. The court found no abuse or misuse of the process of law in launching the prosecution against the petitioner.

Conclusion:
The court dismissed the criminal petitions, holding that the complaints were not barred by limitation, the petitioner could be held liable as an officer in default, and there was no abuse of the process of law in prosecuting the petitioner.