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TMI Blog1997 (1) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in SBI Capital Markets Ltd., and in ANZ Grindlays Bank. In the petition they state that the Registrar of Companies issued a show-cause notice to the company on May 3, 1995, under sections 49, 211, 292, 292(1)( d ) and 292(3) of the Companies Act, 1956, alleging that the meeting of the board of directors held on July 20, 1989, authorised the managing director to deal with the surplus funds without specifying the total amount up to which they can be invested and the nature of investments, thus violating section 292(3). It is also alleged that they contravened section 292(1)( d ) in making investments in non-banking institutions like SBI Capital Markets Ltd., amounting to Rs. 735 lakhs and Rs. 1,965 lakhs in the years 1990-91 and 1991-92 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the normal accounting procedure and the same were audited by statutory auditors and certified by the Comptroller and Auditor-General under section section 619(2) of the Companies Act, 1956, and that they never pointed out any objection regarding this method of exhibition. The petitioners apprehend that the Registrar may launch prosecution under various provisions of the Act and accordingly seek relief under section 633(2) on the ground that they acted honestly, reasonably and in the interest of the company and that no loss has been incurred by the company nor any personal gain accrued to the petitioners as a result of these transactions. Notice before admission was issued and pending admission, stay of prosecution of the petitioners was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the Special Judge for Economic Offences, Hyderabad, launched against the company by the Registrar of Companies, subsequent to the filing of the company petition, are barred by limitation and hence the petitioners are entitled to be relieved from the liability; (3)Even as regards the failure to comply with section 49(7) for not maintaining proper register and for not taking physical delivery of documents, the Department cannot now prosecute as the limitation is over; (4)Even as regards the offence under section 211 for non-disclosure of investments in balance-sheets, the prosecution is barred by limitation; (5)In any event, the petitioners have acted honestly and reasonably and in the best interests of the company and hence are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge has to be taken as September 19, 1994, when the Department of Company Affairs would have received, in the normal course, the reply dated September 16, 1994, sent by the company to the notice dated August 19, 1994, issued by it prior to issue of prosecution notice. If this date is taken, time to launch prosecution will be up to September 19, 1995. But as the petitioners have obtained stay of prosecution on September 7, 1995, and as the stay is subsisting as on date, that period has to be excluded under section 470(1) of the Criminal Procedure Code, 1973. Further, the period of notice of prosecution has to be excluded under section 470(3) of the Criminal Procedure Code, 1973. The prosecution notice was issued on May 3, 1995, and reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of short-term deposit or investment in the nature of portfolio management scheme is debatable. There is no reason why the averments in the petition that the petitioners have acted honestly and reasonably and in good faith in treating the deployment of funds as short-term deposits should not be accepted, more so, when the company is not put to any loss or the petitioners have not gained any personal advantage as a result of these transactions. In view of these circumstances, I hold that the petitioners have acted honestly, reasonably and in good faith. Accordingly, they are entitled to be relieved of the offence under section 211 of the Act. The decision of Mr. D.H. Nasir, J. in C.P. No. 25 of 1993, dated December 6, 1995 ( P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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