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2022 (6) TMI 504 - HC - Companies LawProsecution for offence under Section 68A - allegation of acquiring shares in fictitious name - Purchase of share jointly in the name of God and in the name of a person - inspection conducted under Section 209A of the Act - period from 04.05.2006 to 13.06.2006 - failure to verify the physical share certificate of the company - HELD THAT - It is not in dispute that the payments for the shares were made by the petitioner. It is also not in dispute that the shares were in the name of the Shri Venkatachalapathy and the petitioner jointly. Had the petitioner had any intention, he would not have given his own address for Lord Venkatachalapathy. PW2 admitted that Shri Venkatachalapathy and the petitioner are joint shareholders of the shares and the application was made and signed by the petitioner giving his own address. The petitioner in his reply/Ex. P5 categorically stated that he is the second holder along with Lord Venkatachalapathy/first holder. Thus, the trial Court found fault for the petitioner not filing the appropriate returns under Section 187C of the Act disclosing these facts within the stipulated period. It is seen that PW1 merely filed the complaint and nothing more. It is also seen that the show cause notice, its reply, whether it was considered or not, nothing is available in the complaint, which is improper. Had the petitioner referred to Shri Venkatachalapathy as Lord Venkatachalapathy, the above issue would not arise. The petitioner had filled up and signed the application form, paid for the shares in the first name of Shri Venkatachalapathy and the second name for himself and the address given is that of the petitioner, which clearly discloses that there is no other intention for the petitioner to commit any impersonation for acquisition and no intention for the petitioner to acquire shares in fictitious name. Hence, there is no evasion or enrichment. The petitioner ought not to be prosecuted for offence under Section 68A of the Act. The petitioner ought to have filed the declaration under Section 187C of the Act within the prescribed period. For non filing of declaration, only penalty can be imposed and nothing more. As per Section 55A of the Act, the SEBI authorities would be a right authority to initiate prosecution for offence under Section 68A of the Act relating to issuance and transfer of securities and non payment of dividends - Criminal Revision Case is allowed.
Issues Involved:
1. Legality of the petitioner's conviction under Section 68A(1) of the Companies Act, 1956. 2. Validity of shares held in the name of Shri Venkatachalapathy. 3. Compliance with Section 187C of the Companies Act, 1956. 4. Authority to file the complaint under Section 68A of the Companies Act, 1956. 5. Jurisdiction of SEBI under Section 55A of the Companies Act, 1956. Detailed Analysis: 1. Legality of the petitioner's conviction under Section 68A(1) of the Companies Act, 1956: The petitioner was convicted by the trial court and the conviction was upheld by the lower appellate court. The petitioner was sentenced to undergo rigorous imprisonment for one year for the offence under Section 68A(1) of the Companies Act, 1956. The primary contention was that the shares were held in the name of Shri Venkatachalapathy, which the prosecution argued was a fictitious name used by the petitioner. 2. Validity of shares held in the name of Shri Venkatachalapathy: The petitioner argued that the shares were held in reverence to the deity Shri Venkatachalapathy and that it is common practice to hold properties in the name of a deity. The court noted that the petitioner had made payments for the shares and had given his own address for the deity, indicating no intention to impersonate or commit fraud. The court also considered the evidence of DW1, the Secretary of the company, who confirmed that the shares were jointly held in the name of the deity and the petitioner. The court found that there was no intention of impersonation or acquisition of shares in a fictitious name. 3. Compliance with Section 187C of the Companies Act, 1956: The court observed that the petitioner had failed to file the necessary returns under Section 187C of the Act, which requires disclosure of beneficial ownership of shares. The court noted that for non-filing of the declaration, only a penalty could be imposed, and not a criminal prosecution under Section 68A of the Act. 4. Authority to file the complaint under Section 68A of the Companies Act, 1956: The petitioner argued that the complaint was not filed by an authorized person as per Section 621 of the Act, which specifies that only the Registrar, Shareholder, or Government can file a complaint. The court found that PW1, who filed the complaint, was only an Assistant in the office of the Registrar of Companies and did not have the authority to file the complaint. The lower appellate court's finding that the Registrar includes Assistant Registrar was not accepted by the High Court. 5. Jurisdiction of SEBI under Section 55A of the Companies Act, 1956: The petitioner argued that after the insertion of Section 55A of the Act, only SEBI had the authority to initiate prosecution for offences related to issuance and transfer of securities and non-payment of dividends. The court agreed with this argument, noting that SEBI would be the right authority to initiate prosecution for the offence under Section 68A of the Act. Conclusion: The High Court concluded that the petitioner should not have been prosecuted under Section 68A of the Act and that the appropriate action for non-filing of declaration under Section 187C would be a penalty. The court set aside the judgments of the trial court and the lower appellate court, and acquitted the petitioner of all charges. The Criminal Revision Case was allowed.
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