2019 (1) TMI 1509 - HC - Companies Law

Repayment of deposits accepted before commencement of Section 74 of the Companies Act, 2013 - time limit to repay in terms of Section 74(1) - Held that - By virtue of the order dated 03.11.2016, the period of compliance with the requirement of Section 74(1) of the Companies Act, 2013, as extended earlier by the tribunal in the company petition in terms of order dated 11.03.2016 stood further extended upto 31.12.2016 pursuant to directions of the appellate tribunal in appeal - This remains the factual position as shown by careful reading of the final order in appeal passed on 31.01.2017, wherein the appellate tribunal expressly said that it had found no grounds to extend the period beyond 31st December, 2016 . It is clear that the gravamen of the charge on which the prosecution under the penal clause contained in Section 74(3) is to be founded has to be to the effect that the company to be prosecuted had failed to abide by its liability under Section 74(1) or within the extended period granted by the tribunal on a petition to that effect. Since the order of the tribunal does not attain finality inasmuch as there is a remedy of appeal available there against, the provision contained in Section 74(2), in so far as it refers to the time allowed by the tribunal will have to be construed as the time allowed by the tribunal alongwith modification in such regard if ordered in appeal by the appellate tribunal. The criminal complaint on which the cognizance was taken on 20.09.2016 was rendered premature or infructuous upon the appellate tribunal entertaining the appeal under Section 421 and granting an interim protection extending the period of compliance upto 31.12.2016. By virtue of the subsequent order of the appellate tribunal, bottom had gone out of the case of the respondent in the aforementioned criminal complaint case, continuation whereof would undoubtedly be an abuse of the process of the court. Petition allowed.

Issues:
1. Interpretation of Section 74 of the Companies Act, 2013 regarding repayment of deposits.
2. Compliance with statutory provisions by a company and consequences of failure to repay deposits.
3. Validity of summoning order by a criminal court under Section 74(3) of the Companies Act, 2013.
4. Effect of orders passed by the National Company Law Appellate Tribunal on criminal proceedings.
5. Impact of appellate tribunal's orders on the period of compliance with Section 74(1) of the Companies Act, 2013.

Issue 1: Interpretation of Section 74 of the Companies Act, 2013 regarding repayment of deposits:
The case involved a company that had outstanding liabilities towards depositors, as per Section 74 of the Companies Act, 2013. The company was required to repay these deposits within a specified period, with provisions for seeking an extension from the National Company Law Tribunal. Failure to repay within the stipulated time could lead to penalties under Section 74(3) of the Act.

Issue 2: Compliance with statutory provisions by a company and consequences of failure to repay deposits:
The company in question failed to comply with the repayment obligations despite seeking extensions from the tribunal. This non-compliance led to a criminal complaint being filed by the Registrar of Companies, resulting in summoning of the company and its officers as accused under Section 74(3) of the Companies Act, 2013.

Issue 3: Validity of summoning order by a criminal court under Section 74(3) of the Companies Act, 2013:
The validity of the summoning order by the criminal court was challenged through petitions. The court considered the facts, including the company's actions and tribunal orders, to assess the legality of the summoning order and its compliance with the provisions of the Companies Act.

Issue 4: Effect of orders passed by the National Company Law Appellate Tribunal on criminal proceedings:
The National Company Law Appellate Tribunal issued orders related to the company's compliance and the extension of the repayment period. These orders impacted the criminal proceedings initiated by the Registrar of Companies, leading to considerations of the legality and timing of the summoning order by the criminal court.

Issue 5: Impact of appellate tribunal's orders on the period of compliance with Section 74(1) of the Companies Act, 2013:
The orders of the appellate tribunal extended the period for compliance with Section 74(1) of the Companies Act, 2013, affecting the timeline for repayment of deposits by the company. The court analyzed the appellate tribunal's decisions and their implications on the criminal complaint and summoning order issued by the criminal court.

In conclusion, the High Court set aside the summoning order by the criminal court, considering the impact of the appellate tribunal's orders on the compliance period and the legality of the criminal proceedings. The judgment highlighted the importance of appellate decisions in modifying statutory timelines and the need for adherence to legal provisions regarding deposit repayment under the Companies Act, 2013.

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