2020 (8) TMI 113 - HC - Companies Law

Penalty u/s 383(1A) of the Companies Act, 1956 - non-application of mind - the company did not have a Whole-time secretary - order passed only on the basis of a bare complaint without any supporting documents - allegation is that despite having share capital of more than ₹ 50 lacs as on 31.03.1996, the company did not have a Whole-time secretary from 18.09.1997 - HELD THAT - The respondent in this case as well, chose to file the criminal complaint without any supporting documents despite referring to them in the body of the complaint - A perusal of the complaint would show that in Para 4, it was stated that the criminal complaint had been filed only on the basis of an Inspection Report, conducted at the behest of the respondent which revealed the alleged contravention. However, neither the contents of any Inspection Report were reproduced in the complaint nor the same was filed along with the complaint. Learned ACMM, while passing the order on summoning had completely overlooked this aspect that not only the Inspection Report, which was stated to be the very basis of filing the complaint, was not filed, but the other supporting documents mentioned in the complaint were also not placed on record. This non application of mind continued when, again in absence of the above referred documents, ld. ACMM framing the notice under S. 251 Cr.P.C. against the petitioners. The respondent was well aware of the objections raised in the earlier petition but still remained in a state of inertia and did not bring on record the requisite documents for 9 years despite being in possession of those document for all these years. It is not a case of inadvertence but rather sheer continued negligence which has caused serious failure and prejudice to the petitioners - The application of mind at the time of taking cognizance and framing of notice is sine qua non. In the opinion of this Court, the impugned order of framing of notice and the earlier order of summoning were passed mechanically in a perfunctory manner without any application of judicial mind either to the facts or to the records of the case. Accordingly, in the facts and circumstances of the case, the petition deserves to be allowed on this ground only and the other grounds raised need not be gone into. Petition allowed.

Issues Involved:
1. Quashing of the criminal complaint under Section 383(1A) of the Companies Act, 1956.
2. Setting aside the order framing notice under Section 251 Cr.P.C.
3. Setting aside the order allowing the respondent to place additional documents on record.
4. Non-maintainability of the second petition under Section 482 Cr.P.C.
5. Application of mind in the summoning order and framing of notice.

Detailed Analysis:

1. Quashing of the Criminal Complaint:
The petitioners initially sought quashing of the criminal complaint filed under Section 383(1A) of the Companies Act, 1956. The complaint alleged that the petitioner company did not have a Whole-time secretary despite having a paid-up share capital of more than ?50 lacs as on 31.03.1996, thus rendering it liable for penal action. The complaint was based on an inspection report by the Deputy Director (Inspection), Deptt. of Company Affairs, which found the company non-compliant for the financial years 1996-97, 1997-98, and 1998-99.

2. Setting Aside the Order Framing Notice Under Section 251 Cr.P.C.:
The petitioners challenged the order dated 14.11.2008 framing notice under Section 251 Cr.P.C. They argued that the order showed complete non-application of mind, as it was based solely on a bare complaint without any supporting documents. The court noted that despite the reliance on five documents in the complaint, none were annexed, and the summoning order was passed on a pre-typed proforma order. The court found that the trial court overlooked the absence of documents and framed the notice mechanically.

3. Setting Aside the Order Allowing Additional Documents:
The petitioners also sought to set aside the order dated 12.03.2010, which allowed the respondent to place additional documents on record. The court observed that there is no provision in Cr.P.C. to file additional documents after framing of notice, and permitting the respondent to do so constituted a grave illegality. The court emphasized that the respondent could not be allowed to fill the lacuna at the post-charge stage.

4. Non-Maintainability of the Second Petition Under Section 482 Cr.P.C.:
The respondent argued that a second petition under Section 482 Cr.P.C. was not maintainable. However, the court referred to the Supreme Court's observations in Superintendent and Remembrancer of Legal Affairs, West Bengal v. Mohan Singh, which stated that the High Court has inherent power to make such orders to prevent abuse of the process of the court or to secure the ends of justice. The court found that a fresh cause of action accrued due to the absence of supporting documents at the time of framing notice, and thus, the objection of non-maintainability was rejected.

5. Application of Mind in the Summoning Order and Framing of Notice:
The court emphasized the need for application of mind at the stage of summoning and framing of notice. It referred to several Supreme Court decisions, including Pepsi Foods Ltd. v. Special Judicial Magistrate and Mehmood Ul Rehman v. Khazir Mohammad Tunda, which highlighted that summoning an accused is a serious matter and requires careful scrutiny of evidence. The court found that the summoning order and the order framing notice were passed mechanically, without judicial application of mind, and were based on a pre-formatted cyclostyled proforma order.

Conclusion:
The court quashed and set aside the order framing notice under Section 251 Cr.P.C. and allowed the petition. It noted that the impugned orders were passed without application of judicial mind and emphasized the necessity of careful consideration at the stages of summoning and framing of notice. The court directed that a copy of the order be communicated to the trial court.

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