2009 (3) TMI 632 - HC - Companies Law

Period of limitation for registration of cases - petitioners seeking to challenge the registration of Cases and also seeks to challenge the consequential summons issued to the petitioners apart from seeking to challenge the order, taking cognisance in the aforesaid cases Held that - offence alleged in the complaint against the petitioner is not a continuous wrong and therefore, the bar to take cognisance as contemplated under section 468(2)(b) of the Code of Criminal Procedure applies to the complaint lodged in the present case and therefore, taking cognisance of such an offence after more than 11 years is clearly beyond the period of limitation prescribed and is clearly bared in law - order of cognisance and the summons issued in the aforesaid cases are set aside

Issues Involved:
1. Challenge to the registration of Criminal Misc. Cases under sections 159, 162, and 220(3) of the Companies Act, 1956.
2. Challenge to the consequential summons issued.
3. Challenge to the order dated September 25, 2001, taking cognisance.
4. Bar of limitation under section 468(2) of the Code of Criminal Procedure, 1973.
5. Nature of the offence as continuous or non-continuous.
6. Status of the petitioner as "officer-in-default".
7. Effect of company dissolution and striking off from the register.
8. Validity of prosecution against directors other than the managing director.
9. Effect of resignation of a director and filing of Form 32.

Detailed Analysis:

1. Challenge to the Registration of Criminal Misc. Cases:
The petitioners challenged the registration of 2(C)CC Cases Nos. 366 to 385 of 2001 under sections 159, 162, and 220(3) of the Companies Act, 1956. Section 159 mandates the filing of annual returns within 60 days of the annual general meeting, and section 162 stipulates penalties for non-compliance. Section 220 requires filing of balance-sheets and profit and loss accounts within 30 days. The petitioners argued that the complaints were lodged after the period of limitation, making the cognisance taken by the learned A.C.J.M. invalid.

2. Challenge to the Consequential Summons Issued:
The petitioners also sought to challenge the consequential summons issued to them, arguing that the complaints were barred by limitation and hence, the summons should not have been issued.

3. Challenge to the Order Dated September 25, 2001:
The order dated September 25, 2001, taking cognisance of the offences, was contested on the grounds that it was barred by limitation. The petitioners relied on the judgment in Nalco v. Registrar of Companies [2003] 96 CLT 592, which supported their contention.

4. Bar of Limitation under Section 468(2) of the Code of Criminal Procedure, 1973:
The petitioners argued that under section 468(2) of the Code of Criminal Procedure, the period of limitation for offences punishable with fine only is six months. Since the complaints were lodged much after this period, the cognisance taken was time-barred.

5. Nature of the Offence as Continuous or Non-Continuous:
The petitioners contended that the failure to file returns under section 159 is a non-continuous offence, and cognisance should have been taken within six months from the date of commission of the offence. They cited the case of Pravin Jha v. State of U.P. [2001] 106 Comp. Cas. 554/30 SCL 387 (All) and CWT v. Suresh Seth [1981] 129 ITR 328/6 Taxman 35, where non-filing of returns under the Wealth-tax Act was held to be a "non-continuing wrong".

6. Status of the Petitioner as "Officer-in-Default":
The petitioners argued that petitioner No. 1 could not be termed as an "officer-in-default" as his signature did not appear in any document filed. They relied on section 5 of the Companies Act, 1956, which defines "officer who is in default".

7. Effect of Company Dissolution and Striking Off from the Register:
The petitioners submitted that the company was dissolved and struck off from the register, and hence, continuing prosecution would serve no real purpose. They provided evidence of the company's dissolution.

8. Validity of Prosecution Against Directors Other Than the Managing Director:
The petitioners argued that only the managing director, who had filed the returns, could be prosecuted as the "officer-in-default". They cited that the managing director had compounded the offence by paying the necessary fees, which should absolve other directors from prosecution.

9. Effect of Resignation of a Director and Filing of Form 32:
The petitioners contended that petitioner No. 1's resignation was accepted on September 30, 1989, and should be effective from that date, not the date of filing Form 32. They relied on the judgment in Ashok Muthanna v. Wipro Finance Ltd. [2001] 105 Comp Cas 203, which held that a director's resignation is effective from the date of acceptance.

Conclusion:
The court held that the offence alleged was not a "continuous wrong" and thus, the bar to take cognisance under section 468(2)(b) of the Code of Criminal Procedure applied. Consequently, taking cognisance after more than 11 years was beyond the period of limitation and barred in law. The Criminal Misc. Cases were allowed, and the order of cognisance dated September 25, 2001, and the summons issued were set aside.

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