2022 (10) TMI 641 - HC - SEBI

Power of SEBI to initiate action against the company or its directors who have defaulted in payment of dividend - non payment of dividends - Whether the complaint filed by the respondent is barred by limitation as specified under Section 468(2) of Cr.P.C.? - HELD THAT - A reading of the unamended Section specifies that the company and its directors are said to have committed an offence if the dividends are not paid within 42 days from the date of declaration. There is no provision that the company or its directors shall also be liable to pay a fine of Rs.1000 everyday during which such default continues. Hence, the offence committed under the unamended section was not a continuing offence. The decisions relied upon by the learned counsel for petitioners were rendered with reference to unamendend section and the same are not applicable to the present case since the offence alleged to have been committed by the Petitioners is under the amended section which is a continuing offence. Hence, the complaint is not barred by limitation as specified under Section 468(2) of Cr.P.C. Whether the respondent has locus-standi to maintain the complaint when the dividends were already paid to the shareholders as on the date of filing the complaint? - A combined reading of Section 55(A) and Section 207 clearly indicates that the SEBI is vested with power to safeguard the interests of the shareholders in the matter of non payment of dividends and the moment the dividends are paid, the SEBI has no power to initiate any action against the company or its directors who have defaulted in payment of dividend within 30 days as specified under Section 207 of the Act. Section 621 clearly specifies that the shareholder/registrar of companies/person authorized by a central government can only maintain a complaint for the offence punishable u/s 207 even though the dividends are paid, since criminality does not get absolved on payment of dividends after the stipulated time. Hence, Point No.2 is answered affirmatively in favor of the Petitioners. For the foregoing discussions, the respondent had no locus standi to file the complaint and the cognizance taken on the said complaint stands vitiated.

Summary

Issues involved:
1. Whether the complaint filed by the respondent is barred by limitation under Section 468(2) of Cr.P.C.?
2. Whether the respondent has locus standi to maintain the complaint when dividends were already paid to the shareholders at the time of filing the complaint?

Analysis:
Issue 1:
The complaint filed by the respondent alleged offences under Sections 205A, 207 r/w Section 55A, 205(1A), 205A(1), and 621 of the Companies Act, 1956. The petitioners contended that the complaint was time-barred under Section 468(2) of Cr.P.C. as it was filed after three years from the date of knowledge. However, the court observed that under the amended Section 207, the offence of not paying dividends within 30 days is a continuing offence. Unlike the unamended provision, the amended section imposes a fine for each day of default, making it a continuing offence until dividends are paid. Therefore, the complaint was not barred by limitation.

Issue 2:
Regarding the locus standi of the respondent to maintain the complaint when dividends were already paid, the court analyzed Section 621 of the Act. It was noted that while the general rule requires complaints to be filed by the Registrar, a shareholder, or a person authorized by the Central Government, the second proviso allows SEBI to file complaints for non-payment of dividends. The court emphasized that SEBI can take action until dividends are paid, as per Section 207 and Section 55(A) of the Act. However, once dividends are paid, SEBI loses the authority to proceed against defaulting companies or directors. Therefore, the court held that the respondent had no locus standi to file the complaint, and the cognizance taken on the complaint was deemed invalid. Consequently, the criminal petition was allowed, and the impugned proceedings were quashed.

This detailed analysis of the judgment highlights the key legal arguments, statutory provisions, and court's reasoning for each issue involved, providing a comprehensive understanding of the case.