9911796707
TMI Blog1996 (8) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 2 and 3 are the ex-chairmen, accused No. 4, Y. Sundara Babu, is the ex-managing director, and accused No. 6 is another loanee company. In C.C. Nos. 66 and 68 of 1994, accused No. 1 is the ex-managing director and accused No. 2 is the managing director at the time of filing the complaint. Since common questions of fact arise, I am disposing of these petitions by this common judgment. 2. Admittedly, as per the complaint itself the petitioner was appointed as the managing director of the said financing company with effect from 16-9-1992. These three cases are filed alleging that the company has committed offences under the different sections of the Indian Compa- nies Act. C.C. No. 64 of 1994 was filed against the five accused persons alleging that the financing company as a lending company has advanced loans in excess of limits prescribed under the Central Government Notification No. G.S.R. 448(E), dated 17-4-1989 - See [1989] 65 Comp. Cas. (St.) 585 [the notification issued under section 370(1) of the Companies Act, 1956 ('the Act')]. According to the said notification, the maximum lending limit of the bank is 30 per cent of the subscribed capital and free reserves, which com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done so. Thus, the company has not complied with Part I, Schedule VI. On the basis of these allegations, the complainant prays that accused Nos. 1 and 2, ex-managing director and the managing director, as on the date of filing of the complaint, shall be punished as the officers-in-default under section 211 [sub-sections (7) and (8)]. 4. C.C. No. 68 of 1994 is filed against the lending company for the offences under sub-sections (6) and (7) of section 209, for failure to comply with the requirements of sub-sections (1) and (3) of the said section 209. In this case also it is alleged that as per the inspection of the company by the officers of the Central Government from 25-4-1994 to 30-5-1994, it is revealed that the lending company has not kept the books of account properly as required under sub-sections (6) and (7) of section 209. It is further stated that the aggregate amount of money accepted under the STS scheme in 1991-92 amounted to Rs. 1,170.45 crores and in 1992-93 the amount was Rs. 398.77 crores. Even though the funds accepted on own account as well as from STS claims were treated alike, the company opted to treat the amount as accepted under the STS scheme as 'off th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondly, the learned counsel for the petitioner submitted that even in the complaints, it is not alleged that the petitioner has committed the offence 'wilfully'. Unless it is alleged that there is a 'wilful default' on the part of the particular officers, no offence can be constituted under the respective sections mentioned in each of the complaints. In support of his contention, learned counsel for the petitioner also relied upon the judgment of the Bombay High Court in H. Nanjundiah v. V. Govindan, Registrar of Companies [1986] 59 Comp. Cas. 356. 7. On the other hand, the learned counsel appearing for the respondent-Registrar of Companies submitted that there is some substance in the argument of the petitioner so far as Criminal Petition No. 1712 of 1995 is concerned and insofar as Criminal Petition No. 1711 of 1995 and Criminal Petition No. 1713 of 1995 is concerned, a prima facie case is made out on the basis of the complaint filed and, therefore, the petitioner is not entitled to any relief under section 482. 8. Regarding the principle under what circumstances, this Court can quash the proceedings under section 482 (561A of the old Code), both the counsel reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal evidence adduced in support of the case or the evidence adduced clearly or manifestly fails to prove the charge. In dealing with this class of cases it is important to bear in mind the distinction between a case where there is no legal evidence or where there is evidence which is manifestly and clearly inconsistent with the accusation made and cases where there is legal evidence which on its appreciation may or may not support the accusation in question. In exercising its jurisdiction under section 561 A, the High Court would not embark upon an enquiry as to whether the evidence in question is reliable or not. That is the function of the trial magistrate, and ordinarily it would not be open to any party to invoke the High Court's inherent jurisdiction and contend that on a reasonable appreciation of the evidence the accusation made against the accused would not be sustained...." (p. 869) 9. In the latter judgment in Bhajan Lal's case ( supra ) , the Supreme Court formulated seven broad principles as guidelines for exercising the inherent jurisdiction under section 482, by the High Courts as under: "1. Where the allegations made in the first information report or the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Supreme Court, I now proceed to consider the merits of each of these cases. 11. Criminal Petition No. 1711 of 1995 is filed for quashing the proceed-ings in C.C. No. 64 of 1994 filed for the offence alleged to have been committed by the petitioner-accused No. 5 under section 371 for failure to comply with section 370(1) on the allegation that the accused persons as the officers-in-default of accused No. 1-company have advanced loans as lending company in excess of 30 per cent permitted in terms of the Central Government Notification No. G.S.R. 448(E), dated 17-4-1989 See [1989] 65 Comp. Cas. (St.) 585, without the special resolution of the lending company in terms of section 371B of the Act. It is relevant to extract paragraph No. 5 of the complaint which reads as under: "5. That the subject offence in this matter is that during the period since commencement of business till 31-3-1992, the lending company had granted loans to various bodies corporate/companies and as on 31-3-1992, the total amount of such loans granted and remaining outstanding was Rs. 511.48 lakhs. From 1-4-1992 onwards, the lending company continued to grant loans to bodies corporate/companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 7-9-1994. It is further clear that A-2 to A-4 were the officers of the lending company during the relevant and material times of the subject of offence. However, it also described the present petitioner as accused No. 5 as one of the officers-in-default in the next sentence. The short question would be whether the petitioner who is accused No. 5 in this case is an officer-in-default as per section 5 of the Act, for the purpose of the offences under the provisions of the Act. As per section 5 for the purpose of the provisions of the Act, an officer of the company, who is in default, is made liable to punishment or penalty. Under clauses ( a ) to ( g ) of the said section it has described such defaulting officers in cases of lapses and violations for the purpose of the punish- ment and penalty and they are managing director or managing directors, the whole-time director or whole-time directors, the manager, the secre- tary and any person under whose directions or instructions the board of directors of the company are accustomed to act, any person charged by the board with the responsibility of complying with that provisions of the Act. Examining the present case in the light of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 is the ex-managing director of the Andhra Bank Financial Services Ltd. (hereinafter referred to as 'company') during period from 25-2-1991 to 7-9-1992 and he was thereby officer-in-default during all the relevant and material times when the subject offence took place. Accused No. 2 has been the managing director of the company since 16-9-1992." 18. From the reading of the complaint itself, it is clear that it is only accused No. 1 who is described as officer-in-default but not the petitioner who is accused No. 2. The very allegation in the complaint states that the balance sheet and profit and loss account for the year ended 31-3-1992, was not kept in accordance with law. As stated above, the present petitioner was not the managing director during that period and he assumed charge as the managing director only with effect from 16-9-1992. In this view of the matter, it can be safely concluded that no offence is made out against the present petitioner under section 211, read with Schedule VI. Moreover, the learned counsel for the respondent-complainant fairly conceded that so far as this complaint is concerned prima facie no offence is made out against the present petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the commission of any offence by the present petitioner under section 209. Following the principle laid down by the Apex Court in the judgments referred to above even these proceedings in C.C. No. 68 of 1994 are liable to be quashed. 21. On the basis of the allegations made in these complaints if the proceedings are allowed to go on the petitioner would be put to great loss and hardship and it would definitely result in abuse of the process of the Court. The allegations imputed are of the period prior to 31-3-1992, and the petitioner has assumed the charge only with effect from 16-9-1992, he cannot be termed as an officer-in-default under section 5, so as to make him liable for the offences committed under different sections of the said Act as alleged in the complaint. In similar circumstances, the Calcutta High Court in Ajit Kumar Sarkar v. Asstt. Registrar of Companies [1979] 49 Comp. Cas. 909 also held that a person against whom there are no specific averments in the complaint cannot be said to be an officer-in-default. I am extracting the relevant portion as under: "The next point taken is that the case against the company and one of the directors has not been filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
