2012 (6) TMI 5 - HC - Companies Law

Pray for being exonerated - limitation - inter-corporate deposit violation - permission of the Central Government was not obtained for making the inter-corporate deposit - reply of the company that in the decision making process for advancing the inter-corporate deposit, this director did not participate Allegation was that on inspection of the minutes of the board of directors it was found by the Central Government that there was no recording in the minutes whether the directors were interested in any matter discussed there - it was said that the interested directors did not participate in them and their presence was not included Travelling expenses of some family members of the directors were shown as expenses of the company - was mis-utilization of the company s fund - company replied to an earlier identical notice on 19 August, 2009, saying that the presence of the spouse was necessary in the business meetings which the directors of the company attended. The presence of the spouse promoted the company s business interests Limitation Held that - when a section 633(2) application is pending in the High Court, within the period of limitation, the Central Government should seek an injunction under section 470(2) of the Code of Criminal Procedure, instead of allowing limitation to set in, particularly so, when it follows the practice of not prosecuting an accused during the pendency of a section 633(2) proceeding. As the offences are minor and as no arguments were advanced in this behalf, petitioners ought to be discharged from the accusation on the ground of limitation. Since the petitioners are being discharged on the ground of limitation there is no need for the court to probe into the alleged offences. application is accordingly allowed by discharging the petitioners

Issues Involved:
1. Alleged offences related to inter-corporate deposit, recording of minutes of board meetings, and mis-utilization of company's funds.
2. Point of limitation raised by the petitioner.
3. Interpretation of the period of limitation in relation to the offences.
4. Power of the High Court under section 633(2) of the Companies Act, 1956 to relieve an alleged offender.
5. Consideration of the Central Government's actions within the period of limitation.
6. Effect of the order of injunction on the limitation period.
7. Discharge of the petitioners from the accusations based on limitation.

Detailed Analysis:

1. The judgment dealt with three show-cause notices alleging offences related to an inter-corporate deposit, recording of board meeting minutes, and mis-utilization of company funds. The petitioners sought exoneration from these alleged offences, citing various grounds in their defense, including lack of participation of the accused directors in decision-making processes.

2. The petitioner raised a crucial point of limitation, arguing that all alleged offences were barred by limitation. The time prescribed for cognizance of the offences varied based on the severity of the offence, with different periods specified for each show-cause notice.

3. The interpretation of the period of limitation was a significant issue in the judgment. The court considered the date when the Central Government acquired knowledge of the alleged offences, emphasizing that the commencement of the limitation period should be linked to the date of knowledge by the relevant authorities.

4. The judgment discussed the power of the High Court under section 633(2) of the Companies Act to relieve an alleged offender. It highlighted that the High Court had the authority to discharge an accused if no cause of action against them was disclosed, similar to the powers vested in a criminal court.

5. The court scrutinized the actions of the Central Government within the period of limitation, noting that deliberate inaction by the government could impact the prosecution of the accused. It suggested that seeking an injunction under section 470(2) of the Code of Criminal Procedure might have been a more appropriate course of action.

6. The effect of the order of injunction on the limitation period was analyzed, with the court concluding that the order did not assist the Central Government in light of the already barred cognizance of the alleged offences.

7. Ultimately, the petitioners were discharged from the accusations based on the ground of limitation. The court held that since the offences were minor and the Central Government did not act within the limitation period, there was no need to further probe into the alleged offences, and the application was allowed accordingly.

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