2020 (9) TMI 129 - HC - Companies Law

Time Limitation for issuance of SCN - case of respondent is that once the respondent had knowledge of the offence, the respondent issued the show cause notices during February, 2005 and filed the complaints during July, 2005. Hence, the complaints have been filed well within the limitation period - HELD THAT - In the present case, no date was mentioned in the complaints as to when inspection under Section 209 A of the Companies Act, 1956, was conducted. Hence, it is presumed that the date on which the balance sheets have been filed is the date of knowledge of making the false statements. The balance sheets have been filed on 31.03.2001 and 31.03.2002 respectively, hence, the respondent had knowledge of the alleged irregularities under the Companies Act during March, 2001 and March, 2002 respectively, itself, however, they issued the show cause notices only during February, 2005 and filed the complaints during July, 2005. The maximum punishment for the offence under Section 628 of the Companies Act, 1956, is imprisonment for two years and shall also be liable to fine. Hence, the complaints should have been filed within a period of three years from the date of knowledge of making false statements - In the present case, though the respondent had knowledge of the alleged irregularities under the Companies Act during March, 2001 and March, 2002 respectively, they issued the show cause notices only during February, 2005 and filed the complaints during July, 2005, which is beyond the period of three years. Hence, the complaints are clearly barred by limitation. There is no hesitation to allow these criminal original petitions - petition allowed.

Summary

Issues:
1. Allegations of non-disclosure in balance sheets under the Companies Act, 1956.
2. Barred by limitation under Section 468 of Cr.P.C.
3. Interpretation of the limitation period for filing complaints under Sections 63 and 628 of the Companies Act, 1956.

Analysis:
The case involved allegations against the petitioner, the Director of M/s.Square D Distilleries Limited, for non-disclosure in the balance sheets under the Companies Act, 1956. The complaints (E.O.C.C.Nos.271 and 273 of 2005) stated that loans borrowed and made by the company were not reflected in the balance sheets, violating Section 628 of the Companies Act. The petitioner challenged these complaints, arguing that they were time-barred under Section 468 of Cr.P.C., as the complaints were filed beyond the limitation period.

The respondent contended that the complaints were filed within the limitation period, citing a Delhi High Court decision that the limitation for offences under Sections 63 and 628 of the Companies Act starts from the date of knowledge of making a false statement. The respondent issued show cause notices in February 2005 and filed the complaints in July 2005, claiming they were well within the limitation period. The central issue was whether the complaints were time-barred or not.

Upon examination, the court referred to the Delhi High Court decision, which clarified that the limitation for offences under Sections 63 and 628 of the Companies Act starts from the date of knowledge of making a false statement. In this case, the balance sheets were filed in March 2001 and March 2002, indicating the respondent's knowledge of the irregularities. However, show cause notices were issued in February 2005, and complaints were filed in July 2005, exceeding the three-year limitation period. As per Section 628, the complaints should have been filed within three years of the date of knowledge, making the complaints clearly barred by limitation.

Consequently, the court allowed the criminal original petitions, quashing the complaints against the petitioner. The judgment highlighted the importance of adhering to the limitation period for filing complaints under the Companies Act, emphasizing that complaints beyond the prescribed timeframe are not maintainable.