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TMI Blog1987 (6) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... ding, No. 1, Vidhana Veedhi, Bangalore-1 (the company); T.T.John, the managing director of the company; the petitioner in Criminal Petition No. 650 of 1985; the petitioner in Criminal Petition No. 651 of 1985; Mr. Victor Fernandes; and Mr. V.S. Mathews, arranging them as A-1, A-2, A-3, A-4, A-5 and A-6, respectively, in the trial court on March 14, 1980, under section 200 of the Code for the offence punishable under section 58A(3)( c ) read with section 58A(5) of the Companies Act, 1956 (1 of 1956) ("the Act", for short). The allegations in the complaint are these: The company was incorporated as a private limited company under the Act on December 29, 1966. It was subsequently converted into a public limited company with effect from August 26, 1968. The company is having its registered office at 4th Floor, Coffee Board Building, No. 1, Vindhana Veedhi, Bangalore-1. The company is engaged in manufacturing micro meters, calipers, vernier calipers, height gauges, depth guages, all kinds of precision machines and was governed by the Non-Banking Non-Financial Companies (Reserve Bank) Directions, 1966, in force prior to February 3, 1975, and is governed by the Companies (Acceptance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factory financial position of the company, the company has no basis to accept any fixed deposits or renew them either. But the company has accepted deposits as seen from the balance-sheet as on December 31, 1974, amounting to Rs. 7,81,176. This act of the company is in clear contravention of para. 3(2)( ii ) of the Non-Banking Non-Financial Companies (Reserve Bank) Directions, 1966, in force, prior to February 3, 1975, attracting the provisions of section 58A(3)( c ) of the Act punishable under section 58A(5) of the Act. This position of deposits has been supported by the company in its letter No. MYT. PSB. 8.3545, dated March 29, 1976 (copy enclosed as annexure "B"). The complainant has received a number of complaints from the deposit-holders of the company regarding non-repayment of the deposits on maturity in spite of repeated requests (copies of the complaints are at annexures "C" to "I"). The complainant has, therefore, reasonable cause to believe that the company has failed or omitted to make repayment of the deposits received by it in contravention of the directions made under Chapter III-B of the Reserve Bank of India Act, 1934, on or before April 1, 1975. The company has, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave held that no case against A-3 and A-4 had been made out, which if unrebutted, would warrant their conviction and that the trial court should have discharged A-3 and A-4. In support of their submissions, they invited my attention to the evidence of P.W-1 and the documentary evidence and contended that the trial court failed to consider the evidence in the proper perspective and that it committed a serious error in looking into the allegations in the complaint and in considering the documentary evidence not proved according to the rules of evidence. As against this, learned Central Government Standing Counsel for the respondent submitted, supporting the order, that the evidence taken by the trial court justified the opinion formed by it and that there is ground for presuming that A-3 and A-4 have committed the offence alleged against them. He further submitted that there are no grounds to upset the well-reasoned order of the trial court in exercise of the inherent powers of this court under section 482 of the Code. The short question for consideration is whether the order of the trial court impugned in these petitions is liable to be set aside. The relevant provisions in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken; and that notwithstanding the difference in the position, there is no scope for doubt that the stage at which the Magistrate is required to consider the question of framing of charge under section 245(1) is a preliminary one and the test of "prima facie" case has to be applied. It has been further observed, in the said decision, that in spite of the difference in the language of the three sections, the legal position is that if the trial court is satisfied that a prima facie case is made out, charge has to be framed. In Abhey Dass v. Gurdial Singh, AIR 1971 SC 834; [1971] Cri LJ 691, the Supreme Court, in a case instituted on a complaint, applied the prima facie test. In Stale of Bihar v. Ramesh Singh [1978] 1 SCR 257; AIR 1977 SC 2018, the Supreme Court again pointed out that the standard of test and judgment which are to be finally applied before recording a finding regarding guilt or otherwise of the accused, is not to be applied at the stage of deciding the matter under section 227. It was further observed (at page 2071 of AIR 1986 SC): "If the evidence which the prosecution proposes to adduce to prove the guilt of the accused even if fully accepted before it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the general experience of a connection between certain facts or things, one being usually bound to be the companion or effect of the other. The connection, however, in this class is not so intimate or so uniform as to be conclusively presumed to exist in every case; yet, it is so done that the law itself without the aid of a jury infers one fact from the crude existence of the other in the absence of opposing evidence. In this mode, the law advances the nature and amount of the evidence which is sufficient to establish a prima facie case and throws the burden of proof upon the other party; and if no opposing evidence is offered, the jury are bound to find in favour of the presumption. A contrary verdict might be set aside as being against evidence. The rules in this class of presumptions as in the former have been adopted by common consent from motives of public policy and for the promotion of the general good yet, not as in the former (conclusive proof) class forbidding all further evidence but only dispensing with it till some proof is given on the other side to rebut the presumption raised. Thus, as men do not generally violate the Penal Code, the law presumes every man to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ravention of the rules made under sub-section (1), repayment of such deposit shall be made by the company within thirty days from the date of acceptance of such deposit or within such further time, not exceeding thirty days, as the Central Government may, on sufficient cause being shown by the company, allow. (5) Where a company omits or fails to make repayment of a deposit in accordance with the provisions of clause ( c ) of sub-section (3), or in the case of a deposit referred to in sub-section (4), within the time specified in that sub-section, ( a )the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the court, trying the offence, to the person to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall, to the extent of the amount paid by the court, stand discharged; ( b )every officer of the company who is in default shall be punishable with impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of PW-1. The question for consideration is whether, prior to February 3, 1975, the company had accepted deposits in contravention of the directions made in Chapter 1II-B of the Reserve Bank of India Act, 1934. These directions were in force up to February 3, 1975. Subsequent to February 3, 1975, the deposits accepted by the companies are governed by Companies (Acceptance of Deposits) Rules, 1975, framed under section 58A of the Act. PW-1 has stated that as per the directions of the Reserve Bank of India, the limit up to which the company could accept deposits from the public is up to 25% of the paid-up capital of the company less the accumulated losses; that the paid-up capital of the company as on December 31, 1974, was Rs. 23,52,200; that the company was not holding any reserve fund; that at that time, the accumulated losses of the company were at Rs. 38,23,558 inclusive of preliminary expenses, promotional and incorporation expenses and development expenditure; that the financial position of the company as on December 31, 1973, was the same and the net worth of the company was also negative; and that in view of the negative financial position of the company, it should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of the complaints produced along with the complaint referred to by the witness in the course of his evidence. The trial court has referred to the evidence of PW-1 and the documents admitted in evidence for the respondent spoken to by PW-1. Though the trial court has referred to the allegations in the complaint in the course of the order, it is clear from a reading of the order as a whole that it considered the evidence of PW-1 and the documentary evidence and depended upon it in passing the impugned order. The record shows that copies of some of the documents which were not furnished to the company and other accused persons earlier, were furnished during the course of recording of the evidence of PW-1. It appears that A-3 and A-4 cannot now contend that the trial court received inadmissible evidence and referred to it in the course of the order to reach the conclusion that there was ground for presuming that A-3 and A-4 have committed the offence alleged against them. The admission of PW-1 on which strong reliance was placed to the effect that after December 31, 1971, the company did not accept any fresh deposits, that it repaid the unsecured loans to some extent and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leged is founded upon the material. In R.S. Nayak's case, AIR 1986 SC 2045, the Supreme Court has pointed out that the language of sub-section (1) of section 245 of the Code places the matter beyond dispute by using the test suggested by the Supreme Court in the case of Ramesh Singh [1978] 1 SCR 257; AIR 1977 SC 2018. It cannot be said that the proceedings initiated by the respondent are in abuse of the process of the court. Nor can it be said that the well-reasoned order of the trial court needs to be disturbed for securing the ends of justice. There are absolutely no grounds to quash the proceedings initiated by the respondent. The next question for consideration is whether A-3 and A-4, on the basis of the evidence, can be considered as officers of the company in default so as to make them answerable to the charge in respect of the offence alleged against them and the company. Placing reliance on the evidence of P.W-1 that A-2 was the managing director of the company; that he was in charge of preparing the balance-sheet and the entire affairs including the accounts of the company; that he did not know whether A-3 was in charge of the day to day administration of the compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be the director on his failure to attend three meetings of the board of directors consecutively. Having regard to the offence alleged against the company and its directors and the other material on record, it cannot be said that A-4 was not the director of the company at the material time. The trial court has adverted to this aspect and has concluded that on the date of the alleged contravention, A-4 was the director of the company. There is also material to show that A-3 and A-4 were directors of the company as on December 31, 1975. Exhibit P-11, the balance-sheet, is accompanied by the reports of the auditors and directors. A-3 and A-4 are shown to have signed the balance-sheets, exhibits P-11 and P-12. The reports of the auditors, exhibits P-10( a ), P-11 ( a ) and P-12( a ), would show that the company accepted the position that it had received fixed deposits and loans from the public in contravention of the permissible limits as provided under section 58A of the Act. The trial court has held on the basis of the consideration of the evidence that it cannot be said that the company had accepted the deposits without the knowledge of A-3 and A-4 adding that the question as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r was a party which allowed the company to make borrowings in excess of the limit. There was no act of the petitioner wherein the petitioner had knowingly subscribed to the borrowings beyond the limits. There was also no act of the petitioner having wilfully authorised or permitted someone to borrow monies in excess of the limits. It was on these facts it was held by the High Court of Bombay that the petitioner could not be said to be an "officer in default" and was, therefore, entitled to relief against the apprehended penal action. The facts in the instant case are clearly distinguishable from the facts in the reported case. A-3 and A-4 cannot derive any benefit from the enunciation. Having regard to the evidence referred to by the trial court showing prima facie A-3 and A-4 as officers in default of the company, it cannot be said that the conclusion of the trial court in that regard is erroneous or perverse. Whether they would be officers in default or not will have to be considered at the conclusion of the trial and not at the stage at which the trial court was considering that aspect. For the reasons aforesaid, I find no merit in these petitions. A-3 and A-4 have not shown ..... X X X X Extracts X X X X X X X X Extracts X X X X
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