2021 (4) TMI 506 - HC - Companies Law

Inspection of the books of accounts and other statutory records of the Petitioner company - whether the Registrar would have to first call upon the Petitioner to give an explanation and also provide them a reasonable opportunity of being heard before the Registrar, before issuing show cause notices? - section 206(5) of the Companies Act, 2013 - HELD THAT - There is no doubt that under Section 207 of the Companies Act, 2013, statements of the Directors of the company have been recorded. However, under these circumstances the Petitioner ought to be given a reasonable opportunity of being heard - In the present case, preliminary findings were issued in September, 2020, and owing to the belated reply, the authorities have proceeded further, to issue the said show cause notices and it is not clear if the reply submitted was considered or not. A copy of the report of the IO, which contains allegations against the Petitioner, if already not supplied, shall be supplied to the Petitioner within a week from today - In continuation of the reply submitted in June, 2020, a comprehensive detailed reply be filed by Petitioner, in response to all the show cause notices within a period of four weeks, i.e. on or before 5th May, 2021. No further opportunity shall be granted in this regard. Petition disposed off.

Summary

Issues:
- Quashing of show cause notices under Companies Act, 2013
- Consideration of reply by Registrar of Companies
- Opportunity for Petitioner to respond to show cause notices
- Compliance with legal procedures under Companies Act, 2013

Quashing of Show Cause Notices:
The petitioner, a company, sought to quash 37 show cause notices and a letter for inspection of records issued by the Ministry of Corporate Affairs under the Companies Act, 2013. The petitioner argued that the Registrar of Companies should have allowed them to explain and provide a reasonable opportunity before issuing the notices. The petitioner's counsel contended that despite a delay in filing the reply, it was submitted and should have been considered. The respondent's counsel argued that sufficient time was given for the reply, which was belatedly filed, and the notices were issued after considering it. The court noted discrepancies in whether the reply was considered and emphasized the need for a fair hearing before further action.

Consideration of Reply by Registrar:
The court highlighted Section 206(4) of the Companies Act, which mandates the Registrar to conduct an inquiry after providing the company a reasonable opportunity to be heard. It noted that the company's directors' statements were recorded under Section 207, but the petitioner should still be given a fair chance to present its case. The court directed the authorities to provide a copy of the report containing allegations, if not already done, and instructed the petitioner to file a comprehensive reply to all show cause notices within a specified timeframe.

Opportunity for Petitioner to Respond:
To ensure fairness, the court ordered the Registrar to grant a hearing to the petitioner regarding the allegations and show cause notices. The process was to be completed within a specified period, balancing the interests of the petitioner with procedural requirements. The court emphasized the importance of affording the petitioner a proper opportunity to respond and directed the Registrar to act in accordance with the law.

Compliance with Legal Procedures:
While issuing directions for the proceedings, the court made it clear that it had not assessed the merits of the allegations raised. It allowed the petitioner to pursue remedies against any decision by the Registrar. The court disposed of the petition and related applications, ensuring that the legal procedures under the Companies Act, 2013 were followed, and the petitioner's rights were upheld throughout the process.