2022 (6) TMI 316 - HC - Companies Law

Violation of principles of natural justice - Validity of prosecution proceedings - service of SCN - Case of petitioners is that, prior to launching the criminal prosecution, no show cause notice was given to the petitioners - HELD THAT - Initiation of criminal proceedings without giving show cause notice is against the principles of natural justice. There is no mentioning in the complaint about issuance of show cause notice. There is also no proof filed to show issuance of show cause notice and its service on the petitioners. If show cause notice had been given, petitioners would have got the opportunity for rectifying their defects. When that opportunity is not given, criminal prosecution is liable to be quashed. There is no specific averment made in the complaint as to whether the Directors are responsible for the offences alleged to have committed by the Company. No speaking order was passed by the Additional Chief Metropolitan Magistrate at the time of taking cognizance of the cases. A reading of the complaint in these cases shows that it was specifically mentioned that show cause notice was issued on 13.08.2018/28.11.2017. In the list of documents, show cause notice is shown as document relied by the prosecution. It is true that the proof for service of the show cause notice on the petitioners is not produced. However, it is for the respondent during the trial to prove the service/non-service of the show cause notice. When there is clear averments made in the complaint that the show cause notice was issued on 13.08.2018/28.11.2017, the contention of the learned counsel for the petitioners that no show cause notice was issued to the petitioners cannot be accepted. The offences alleged against the petitioners are statutory violations for non complying certain mandatory provisions. This Court can gather from the records summoned that the Additional Chief Metropolitan Magistrate had taken cognizance of the cases only after going through the complaint allegations and materials filed in support of the complaint allegations. These petitions have been filed only to protract the proceedings and deserve to be dismissed - Petition dismissed.

Summary

Issues:
1. Allegations of non-compliance with provisions of the Companies Act, 2013.
2. Quashing of criminal proceedings based on lack of show cause notice.
3. Role of Directors in the alleged statutory violations.

Issue 1: Allegations of Non-Compliance:
The judgment involves multiple Criminal Original Petitions (Crl.O.P.) filed under various sections of the Companies Act, 2013, concerning non-compliance with statutory provisions. The complaints revolve around failure to file financial statements, annual returns, and conduct Annual General Meetings within specified timelines as mandated by the Act. The accused individuals are alleged to have violated Sections 137(1) and (3), 92(4) and (5), 129(2) and (7), and 96(1) of the Companies Act, 2013, for different financial years. The prosecution contends that the accused are liable for prosecution due to their failure to adhere to these statutory requirements.

Issue 2: Quashing of Criminal Proceedings:
The primary contention in the quash petitions is the absence of a show cause notice before initiating criminal prosecution, which the petitioners argue violates principles of natural justice. The petitioners claim that they were not provided an opportunity to rectify any alleged defects before facing prosecution. However, the prosecution maintains that show cause notices were indeed issued, although proof of their service was not presented in the complaint. The court notes that the absence of proof of service does not negate the issuance of the notice, and the respondent can establish service during the trial. The court rejects the petitioners' argument that the lack of a show cause notice warrants quashing the proceedings, emphasizing that the offenses are continuing and the Magistrate took cognizance after due consideration.

Issue 3: Role of Directors in Statutory Violations:
Another aspect addressed is the role of the Directors in the alleged statutory violations. The complaint identifies the Directors as officers in default under Section 2(60) of the Companies Act, 2013, representing the accused company. The petitioners contest the lack of specific averments regarding the Directors' responsibilities in the complaint. However, the court dismisses this argument, stating that the Directors' roles are adequately outlined in the complaint, and they are deemed responsible for the offenses attributed to the company.

In conclusion, the court finds that the petitions were filed merely to delay the proceedings without merit. After a thorough analysis of the submissions and materials, the court dismisses the petitions, asserting that the criminal proceedings were not initiated unfairly. The judgment underscores the importance of complying with statutory provisions and upholding due process in legal proceedings.