2010 (2) TMI 597 - HC - Companies Law

Seeking to set aside an enquiry report by the Registrar of Companies, enclosed with annexure R dated 25-1-2006, to direct the Union of India to initiate prosecution against respondent Nos. 3 to 10 for alleged offences under the provisions of the Companies Act, 1956, as detailed in the application and for a direction to the Registrar of Companies to effect deletion of certain entries in the Register of Charges maintained under section 130 of the Companies Act, 1956. Held that - Insofar as the first aspect is concerned, sub-section (2) of section 621 lays down that sub-section (1) will not apply to any action taken by the Liquidator of a company in respect of any offence alleged to have been committed in respect of any of the matters included in Part VII (sections 425 to 560) or in any other provisions of the Act relating to the winding up of companies. There is an obviously false statement made in the statement of affairs filed and endorsed by the deponents of all the affidavits filed in support of the same. And for good measure, though there was no actual payment and discharge of the loan transactions it is, with impunity, reiterated in the pleadings in relation to this application, though sought to be justified on untenable premises. Insofar as the alleged criminal or civil misconduct of the office of the Registrar of Companies is concerned, in view of the apparent irregularity in the conduct of the concerned Registrar of Companies at the relevant point of time, it would be for the Central Government to take any action as against the said officer if it is so inclined. Accordingly, the present application stands disposed of while directing the Official Liquidator to initiate appropriate proceedings against the concerned respondents. The office of the Registrar of Companies is directed to delete the entries made in the Register of Charges on the basis of two sets of Form Nos. 13 and 17, dated 16-7-1996 and 2-8-1996, respectively, filed on behalf of the respondent-company and registered on 29-10-2001 and 1-11-2001, as the same have been entered contrary to section 141 of the Act.

Summary

Issues Involved:
1. Validity of the enquiry report by the Registrar of Companies.
2. Prosecution against respondent directors for alleged offences under the Companies Act, 1956.
3. Deletion of certain entries in the Register of Charges maintained under section 130 of the Companies Act, 1956.

Detailed Analysis:

1. Validity of the Enquiry Report by the Registrar of Companies:
The applicant, a co-operative bank, sought to set aside an enquiry report by the Registrar of Companies (RoC) dated 25-1-2006. The applicant had advanced loans to the first respondent company, which defaulted on repayment. The applicant discovered that the statement of affairs filed by the respondent directors did not disclose the charges created for the loans and falsely declared that all charges had been satisfied. The RoC conducted an enquiry and reported that relevant records were not traceable and that the discharge of loan transactions was based on an explanation that there was no authority to borrow initially. The RoC opined that the particulars furnished might not be false and that action, if any, should be initiated by the Official Liquidator. The court noted the RoC's report and found that the records regarding the issuance of notice of the filing of Form Nos. 13 and 17 were missing without adequate explanation. The court directed the RoC to delete the entries made in the Register of Charges based on the said forms as they were entered contrary to section 141 of the Act.

2. Prosecution Against Respondent Directors for Alleged Offences Under the Companies Act, 1956:
The applicant sought prosecution against the respondent directors for making false statements and falsifying records. The respondent directors claimed that the loans were availed fraudulently by two officers without the board's authority and that the charges created were illegal and invalid. The court found that the statement of affairs included a false declaration that the loans were satisfied, which was not true. The court held that the respondent directors were liable for making false statements and directed the Official Liquidator to initiate appropriate proceedings against them.

3. Deletion of Certain Entries in the Register of Charges Maintained Under Section 130 of the Companies Act, 1956:
The applicant sought the deletion of entries in the Register of Charges that falsely indicated the satisfaction of loans. The court found that the RoC had registered the discharge of charges based on invalid forms filed by the respondent company. The court noted that the RoC was not competent to rectify the entries and that the forms were filed to nullify the invalid charges. The court directed the RoC to delete the entries made based on the forms dated 16-7-1996 and 2-8-1996, registered on 29-10-2001 and 1-11-2001, respectively.

Conclusion:
The court disposed of the application by directing the Official Liquidator to initiate appropriate proceedings against the concerned respondents for making false statements and falsifying records. The court also directed the RoC to delete the invalid entries in the Register of Charges. A copy of the order was to be forwarded to the second respondent.