1999 (12) TMI 882 - HC - Companies Law

Summary

Issues:
1. Quashing of complaint under Sections 73(2B) and (3) of the Companies Act, 1956 filed by the Registrar of Companies.
2. Liability of alternate Director under Section 73(2A) of the Companies Act.

Issue 1: Quashing of the Complaint
The petition filed under Section 482 of the Cr. P.C. sought to quash the complaint filed by the Registrar of Companies against a company for alleged non-issuance of allotment letters and non-refund of application money within the prescribed period. The complaint also targeted the Managing Director, Company Secretary, and other Directors of the company. The petitioner, an alternate Director, challenged the process issued in the complaint, arguing that as an alternate Director, he was not an officer in default under Section 73(2A) of the Companies Act, and therefore, should not be prosecuted. The petitioner contended that the notice issued by the Registrar of Companies was replied to on behalf of the company, and thus, the prosecution against him was unwarranted.

Issue 2: Liability of Alternate Director
The court analyzed Section 73(2A) of the Companies Act, which imposes liability for non-refund of subscription amount or deposit of the subscription amount on "the Company and every director of the company, who is an officer in default." The definition of officer in default under Section 5 of the Companies Act includes managing directors, whole-time directors, managers, secretaries, and others. The court noted that the petitioner, as an alternate Director, did not fall under the categories specified in Section 5. The court highlighted that the complaint acknowledged the petitioner's status as an alternate Director, and as the company had other managerial personnel, the petitioner could not be held liable under Section 73(2A). The court also criticized the Registrar of Companies for not verifying the facts before filing the complaint, emphasizing the need for responsible action by public officers to prevent unwarranted harassment of citizens.

In conclusion, the court allowed the petition, quashing the complaint against the petitioner as an alternate Director, emphasizing the importance of ensuring legal proceedings are based on accurate interpretation of the law and factual circumstances to prevent wrongful prosecution.