2009 (5) TMI 534 - HC - Companies Law

Whether the complaint filed by the respondents against the petitioners for making a mis-statement in a prospectus and for making a false statement in the prospectus offence punishable under sections 63 and 628 of the Companies Act, 1956 is within limitation? Held that - Taking into consideration that the prospectus in this case was filed on 11-4-1997, filing of the complaint in this case in the year 2004 cannot be justified at all. Thus, the complaint as well as the summoning order issued in this case is set aside and the complaint filed by the respondents is quashed. Consequently, all the proceedings emanating therefrom are hereby quashed.

Summary

Issues Involved:
1. Whether the complaint filed by the respondents against the petitioners for making a mis-statement in a prospectus and for making a false statement in the prospectus is within the limitation period prescribed by law.

Issue-wise Detailed Analysis:

1. Limitation Period for Filing the Complaint:
The core issue in this case is whether the complaint filed by the respondents against the petitioners for making a mis-statement in a prospectus and for making a false statement in the prospectus, offenses punishable under sections 63 and 628 of the Companies Act, 1956, is within the limitation period. The complaint was filed on 14-1-2004, while the prospectus in question was filed on 11-4-1997. The petitioners argue that the complaint is barred by limitation as per section 468 of the Cr.P.C., which prescribes a limitation period of three years for offenses punishable with imprisonment for up to three years. Both sections 63 and 628 of the Companies Act provide for a maximum punishment of two years.

2. Relevant Legal Provisions:
Section 63 of the Companies Act deals with criminal liability for mis-statements in a prospectus, prescribing a punishment of imprisonment for up to two years or a fine, or both. Similarly, section 628 prescribes a punishment of imprisonment for up to two years for making false statements in any document required by the Act. Section 468 of the Cr.P.C. bars the court from taking cognizance of an offense after the expiry of the period of limitation, which is three years for offenses punishable with imprisonment for a term exceeding one year but not exceeding three years.

3. Petitioners' Argument:
The petitioners argue that since the complaint was filed seven years after the filing of the prospectus, it is barred by the three-year limitation period prescribed by section 468 of the Cr.P.C. They rely on a previous judgment by the High Court in Sunair Hotels Ltd. v. Registrar of Companies, where a similar complaint filed beyond the limitation period was held to be barred by time.

4. Respondents' Argument:
The respondents contend that the delay in filing the complaint was due to the time taken to obtain the necessary sanction from the Department of Company Affairs. They argue that the period taken to obtain the sanction should be excluded from the limitation period as per section 470(3) of the Cr.P.C., which allows for the exclusion of time taken in obtaining the requisite sanction.

5. Court's Analysis:
The court examines the respondents' argument and finds that even if the period taken to obtain the sanction is excluded, the complaint is still barred by limitation. The court notes that the respondents have not provided specific dates for when they became aware of the mis-statement or when the balance sheet was filed. The court also points out that the respondents' averments regarding the delay are not part of the complaint.

6. Application of Section 473 of Cr.P.C.:
The court considers the application of section 473 of the Cr.P.C., which allows for the extension of the limitation period if the delay is properly explained or if it is necessary in the interests of justice. However, the court finds that the respondents have not satisfactorily explained the delay. The court emphasizes that the Magistrate must apply judicial mind to the question of limitation at the pre-cognizance stage and that the delay must be satisfactorily explained before taking cognizance of the complaint.

7. Conclusion:
The court concludes that the complaint filed in 2004, based on a prospectus filed in 1997, is barred by limitation. The court sets aside the complaint and the summoning order, and quashes all proceedings emanating from the complaint.

Final Judgment:
The petition is disposed of, and the complaint filed by the respondents is quashed along with all related proceedings.