2014 (11) TMI 1131 - HC - Companies Law

Failure and neglect to hold the Annual General Meeting within the prescribed period - offence under Section 166(1) of the Companies Act 1956 - liability of petitioner as one of the director of the company - Held that - As rightly contended by the learned counsel for the petitioner it is only specifically stated that the petitioner who is accused No.3 in all the above said cases is only a Director of the Company. Nowhere it is stated what role that has been given to the petitioner in the Company what are his responsibilities and whether the Board has entrusted any of the responsibilities upon him and that he has committed any default under the above said specific provisions. In the absence of such elucidation of facts in the complaint it cannot be said that the petitioner is liable for the prosecution merely because he is one of the Directors of the Company. Therefore I am of the opinion that in none of the complaints there is any allegation made particularly against this petitioner that he has committed any default as stated in the above said four complaints. Therefore the complaints alleged against this petitioner particularly his default is meritless and no prosecution can be continued against this man. Otherwise it would amount to abuse of process of Court. Therefore the above said proceedings are liable to be quashed.

Summary

Issues:
Allegations of default in conducting Annual General Meetings and non-compliance with Companies Act provisions by the accused Directors.

Analysis:
1. Criminal Proceedings C.C.No.111/2006:
- The accused Company failed to hold an Annual General Meeting as required by Section 166 of the Companies Act, 1956, leading to allegations under Section 166(1) of the Act.
- The Registrar of Companies lodged a complaint, resulting in summons issued to the accused Directors. The petitioner, accused No.3, sought a stay from the Trial Court, which was granted by the High Court.

2. Criminal Proceedings C.C.No.44/2006:
- Accused Directors failed to produce books of account despite summons by the Inspecting Officer under Section 209A(5) of the Act, leading to allegations under Section 209A(8) of the Companies Act.
- The complainant filed a complaint for non-compliance, seeking action under the relevant provision.

3. Criminal Proceedings C.C.No.685/2006:
- Directors failed to conduct the Annual General Meeting and file annual returns as required by Section 166 and Sections 162, 168 of the Companies Act 1956.
- Registrar of Companies requested action against the accused Directors for non-compliance.

4. Criminal Proceedings C.C.No.861/2005:
- Accused Directors failed to present balance-sheet and profit and loss account at the Annual General Body Meeting as mandated by Sections 210(1) & (3) of the Companies Act, 1956.
- Allegations under Section 210(5) of the Act were made, seeking appropriate action by the Court.

5. Legal Interpretation - Section 168 and Section 5 of the Companies Act:
- Section 168 imposes penalties for default in conducting meetings, holding officers accountable. Section 5 defines "officer who is in default," specifying roles responsible for compliance.
- The complaint lacked specific allegations against the petitioner regarding his role, responsibilities, and defaults, essential for prosecution under the Act.
- The absence of details regarding the petitioner's specific responsibilities rendered the complaints meritless, risking an abuse of the Court's process.

6. Judgment:
- The High Court quashed all proceedings against the petitioner in C.C.Nos. 111/06, 44/06, 685/06, and 861/05, as the complaints failed to establish the petitioner's individual default or role in the alleged non-compliance with the Companies Act.
- Without specific allegations against the petitioner for default, holding him liable solely as a Director would amount to an abuse of the legal process, justifying the quashing of the proceedings.