2008 (1) TMI 628 - HC - Companies Law

Whether the complaint makes out even a prima facie case of an offence under section 58A(9) of the Act against petitioner Nos. 1 to 10? - Held that - This Court holds that the scheme as directed by the Company Law Board stood merged in the scheme of rearrangement as approved by this Court on 29-10-2003. Thereafter it has been acted upon by the parties. Consequently, the petitioners here could not be held even to have prima facie contravened section 58A(9) of the Act for not complying with the order of the Company Law Board. The petitioners are entitled to succeed on this ground itself. It is, therefore, not necessary to examine if the petitioners are otherwise entitled to be discharged on the ground that the complaint does not contain specific allegations in regard to the role played by each of them. For the aforesaid reasons, the petition is allowed. The summoning order dated 25-4-2003, passed by the learned Metropolitan Magistrate is hereby set aside. Petitioner Nos. 1 to 10 hereby stand discharged and vis-a-vis them the Complaint Company Case No. 349 of 2003 titled Vinay Bharat Ram (supra) stands hereby quashed.

Summary

Issues:
Petition seeking quashing of order under section 482 of CrPC, Alleged contravention of Companies Act, 1956, Compliance with scheme of restructuring and arrangement, Role of Regional Director and Registrar of Companies, Prima facie case of offence under section 58A(9) of the Act, Merging of schemes approved by different authorities, Specific allegations in complaint, Setting aside summoning order.

Analysis:
1. The petitioners filed a petition under section 482 of CrPC seeking to quash an order by the Additional Sessions Judge regarding a complaint filed by the Registrar of Companies under section 58A(10) of the Companies Act, 1956. The complaint alleged non-compliance with a Company Law Board order for repayment of matured fixed deposits. The petitioners argued that a scheme of restructuring and arrangement had been approved by the High Court, and they were complying with it by repaying the deposits as per the approved scheme.

2. The petitioners contended that the Regional Director had informed the Court about the proposed implementation of the scheme approved by the Company Law Board. They highlighted that the company had already repaid a significant portion of the outstanding deposits in accordance with the approved scheme. The petitioners relied on the Supreme Court's judgment to argue that once a scheme is approved by the High Court, all earlier schemes stand merged unless a different intention appears, thus absolving them of liability under the Act.

3. The respondents attempted to argue that the mere approval of the scheme by the High Court did not absolve the petitioners of their liability under section 58A(9) of the Act. However, the Court noted that the complaint did not mention the pending petition seeking approval of the scheme of arrangement under section 394 of the Act, which was crucial in determining the petitioners' compliance with the law.

4. The Court examined the sequence of events leading to the filing of the complaint and found that the basis of the complaint was non-existent as the Regional Director had earlier agreed to the proposed scheme of arrangement. The Court held that once the scheme directed by the Company Law Board merged with the scheme approved by the High Court, the complaint lost its basis. Consequently, the Court set aside the summoning order and quashed the complaint against the petitioners.

5. The judgment emphasized the statutory binding nature of a scheme approved by the Court, which has statutory force and cannot be altered without Court sanction. As the petitioners were acting in accordance with the approved scheme, they could not be held liable for non-compliance with the Company Law Board's order. The Court allowed the petition and discharged the petitioners, setting aside the summoning order and quashing the complaint against them.

6. In conclusion, the Court's detailed analysis focused on the merging of schemes approved by different authorities, the statutory binding nature of Court-approved schemes, and the lack of prima facie case against the petitioners. The judgment highlighted the importance of compliance with approved schemes and the legal implications of merging such schemes under the Companies Act.