2022 (4) TMI 1629 - HC - Indian Laws

Challenge to SCN - SCN silent as to period and amounts mentioned as required under sub-Section (2) of Section 205C of the Companies Act 1956 - failure to file E Form 5 INV - Section 205C r/w. Section 629A of the Companies Act, 1956 - HELD THAT - The cause of action for filing this complaint is that every company shall within 90 days after holding its Annual General Meeting or the date on which it should have been held and every year thereafter, till completion of seven years period, identify the unclaimed amounts as referred to in sub- Section (2) of Section 205C of the Act and upload on its own website and also on the Ministry's website or any other website specified by the Government through the E Form 5 INV giving details as aforesaid. Petitioners have not filed E Form 5 INV as required, leading to filing of this complaint. The complaint allegation shows that petitioners have not filed E Form 5 INV as required in the show cause notice issued dated 21.07.2014 given by the respondent. However, it is the case of the petitioners that they gave reply dated 28.07.2014 explaining their position and requesting dropping the further action. The complaint allegation shows that no reply was received from the petitioners. Copy of the reply dated 28.07.2014 sent by the first petitioner shows that the reply was received by the office of the Registrar of Companies on 30.07.2014. Petitioners 2 to 4 had also sent a reply dated 05.08.2014, reading the reply dated 28.07.2014 of the first petitioner. Their reply were received in the office of the Registrar's office on 08.08.2014. Therefore, it is clear that the allegation made in the complaint that respondent's show cause notice dated 21.07.2014 was not replied by the petitioners is not correct. It is true that the show cause notice dated 21.07.2014 had just reproduced the Section 205C of the Companies Act, 1956. Though the amounts referred in (a) to (g) are liable to be credited to Investors Education and Protection Fund. The show cause notice is not specific about which one among these amounts is liable to be credited to Investor Educations and Protection Fund. In so far as the petitioner's company, the allegation against the petitioners is that unpaid dividend amount of Rs. 10,00,000/- for the period ending 31.03.2013 was not uploaded in the website. Then, the show cause notice is expected to refer only that particular default committed by the petitioners. Reproduction of part of Section 205C of Companies Act, 1956 cannot be appreciated. This Court finds that the show cause notice was defective, non consideration of reply sent by the petitioners amounts to non application of mind depriving petitioners to set up a valid defence and therefore the complaint is unsustainable in law - Petition allowed.

Summary

Issues Involved:
1. Validity of the Show Cause Notice.
2. Requirement of filing E Form 5 INV.
3. Consideration of the Petitioners' Replies.
4. Prematurity of the Prosecution.
5. Specificity of the Show Cause Notice.

Detailed Analysis:

1. Validity of the Show Cause Notice:
The petitioners argued that the show cause notice dated 21.07.2014 was silent on the period and specific amounts under clauses (a) to (g) of sub-Section (2) of Section 205C of the Companies Act, 1956, which were not credited to the Investors Education and Protection Fund. The court found that the show cause notice was defective as it merely reproduced part of Section 205C without specifying the exact offence committed by the petitioners. This ambiguity deprived the petitioners of the opportunity to give a proper reply, making the complaint unsustainable.

2. Requirement of filing E Form 5 INV:
The respondent contended that the petitioners were required to submit and upload details of unpaid dividends on their website and the Ministry's website through E Form 5 INV annually. The petitioners failed to do so, leading to the filing of the complaint. The court noted that the Investors Education and Protection Fund (uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, mandated this requirement. However, the court also acknowledged that the amounts referred to in clauses (a) to (d) of Section 205C would only form part of the fund if they remained unclaimed and unpaid for seven years.

3. Consideration of the Petitioners' Replies:
The petitioners submitted that they had replied to the show cause notice, but their replies were not considered. The court found that the petitioners had indeed sent replies within the stipulated time, but these were not taken into account by the respondent. The court referred to previous judgments, which held that non-consideration of replies amounted to non-application of mind, making the complaint liable to be quashed.

4. Prematurity of the Prosecution:
The petitioners argued that unpaid dividends should not form part of the Investors Education and Protection Fund until seven years had elapsed from the date they became due. The court noted that the dividend in question was for the period ending 31.03.2013, and thus, giving a show cause notice before the completion of seven years and launching the prosecution was premature and illegal. However, the court clarified that Section 205C dealt with amounts liable to be credited to the fund and that the rule requiring annual uploading of information was to inform interested persons to claim the amount.

5. Specificity of the Show Cause Notice:
The court found that the show cause notice was not specific about which amount among those listed in Section 205C was liable to be credited to the Investors Education and Protection Fund. The notice's ambiguity hindered the petitioners from providing a proper reply, contributing to the complaint's unsustainability.

Conclusion:
The court concluded that the show cause notice was defective, and the non-consideration of the petitioners' replies amounted to non-application of mind. Consequently, the complaint was deemed unsustainable in law. The Criminal Original Petition in Crl.O.P. No.28705 of 2015 was allowed, and the complaint in EO CC No.199 of 2015 was quashed.