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TMI Blog2000 (6) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... unishable with fine of Rs. 5,000 and the limitation for filing the complaints in respect of these under section 468 of the Criminal Procedure Code, 1973, being only six months, the complaint in question is thus barred by limitation. It is thus contended that continuation of the proceedings in the complaint would amount to an abuse of the process of the law. The parties shall be referred to as arrayed in the complaint for the sake of convenience. Before these contentions are examined, it is necessary to refer briefly to the allegations in the complaint : The complainant is a shareholder in Spectrum Power Generation Limited, Hyderabad (for short "SPGL") holding 2,700 equity shares. The complainant met Dr. A.V. Mohan Rao one of the promoters and director of SPGL and enquired into the reasons for non-payment of dividend by SPGL in spite of making the investment in the shares way back in 1995. It has come to the notice of the complainant that accused No. 4-company has contravened several provisions of the Companies Act with various acts and omissions which are punishable under the Indian Penal Code. Accused No. 4 SPGL was incorporated on October 26, 1986. Accused No. 1 was functio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 4-company either jointly or severally by virtue of resolution of accused No. 4-company and thus A-1 to A-3 as agents of accused No. 4-company were having domain and control over its funds. Several contracts were entrusted to bogus companies and the funds of accused No. 4-company were siphoned off to the tune of several crores. One such contract was awarded to Kris Engineers in October, 1993, for Rs. 3.30 crores for purportedly carrying out the works relating to site levelling, earth filling, construction of storage facilities (water tank) for green belt area and construction of internal roads, bridges, culverts and storm drains on the northern side of the site. This complaint is confined to a transaction of Rs. 50,00,000 (rupees fifty lakhs) transferred from A-4-company to Kris Engineers which is owned by A-2 and A-3 resulting in misappropriation by A-2 and A-3 with the active co-operation and connivance of A-1 and A-4. It is stated that Kris Engineers have entered into a contract with A-4-company in October, 1993, for the value of Rs. 3.30 crores for carrying out the above works. In pursuance of it, accused No. 4 advanced Rs. 50 lakhs under a cheque dated May 8, 1995, to Kris E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee out of the total strength of the four directors were interested in the said contract either directly or indirectly which makes them ineligible to participate or vote in the board proceedings under section 300 of the Companies Act, 1956. Thus, it is alleged that the provisions of sections 299 and 300 of the Companies Act, 1956, have been violated by accused No. 4-company. Hence, A-1 to A-4 committed offences punishable under the relevant provisions of the Companies Act. The proceedings in this complaint which has been taken cognizance of by the learned special judge for economic offences are sought to be challenged in this petition on various grounds. One of the grounds is that the complaint has been filed beyond the period of limitation as prescribed in section 468 of the Criminal Procedure Code, 1973, as far as the offences under sections 299, 300 and 297 of the Companies Act read with section 629A of the Companies Act, are concerned. The contention of learned counsel for the petitioner is that the complaint has been filed on January 10, 2000, and the cheque for Rs. 50 lakhs which was said to have been fraudulently issued in favour of Kris Engineering firm for misappropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rizing to enter into contract with Kris Engineers and in fact as stated in the complaint no such resolution could have been passed as out of four directors, three were interested, the said provision of section 299 of the Companies Act does not apply to the facts of the case and that there could be no contravention of the said provision. Section 299 of the Companies Act read as follows : "299.(1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the board of directors. (2)( a ) In the case of a proposed contract or arrangement, the disclosure required to be made by a director under sub-section (1) shall be made at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the board held after he becomes so concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into with that body corporate or firm. Clause ( b ) of sub-section (3) contemplates that such notice shall expire at the end of the financial year in which it was given. There is a specific averment in the complaint that there was violation of section 299 of the Companies Act on the part of accused Nos. 1 to 3 on account of their failure to inform at a meeting of directors of A-4 company, Spectrum Power Generation Limited, that they are interested in Kris Engineers inasmuch as accused Nos. 2 and 3 are the partners of that firm and inasmuch as they are no other than the sons of accused No. 1. There is also an allegation that the provisions of sub-sections (1) and (4) of section 297 of the Companies Act have been contravened inasmuch as no resolution of the board of accused No. 4-company was passed recording the consent of board of directors of A-4 company for entering into contract with Kris Engineers in respect of execution of a contract of which A-2 and A-3 are the only partners who are related to A-1, the managing director of A-4 firm. The further statement in the complaint that "the 'profound fact' is that no such resolution could have been passed at the board meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for transferring a sum of Rs. 50 lakhs from the funds of A-4-company to the said Kris Engineers, a partnership firm, in which accused Nos. 2 and 3 are directly interested as partners. The further allegation in para. 8 of the complaint is that the said amount has again been retransferred to A-1. It is specifically alleged that Kris Engineers has not utilised the said amount for any work for A-4-company and that the whole amount has been misappropriated by A-1 to A-3 and they have committed breach of trust in respect of the said amount. Thus, it is alleged that A-1 to A-3 being the directors of A4 company have committed an offence under section 409 of the Indian Penal Code. If the facts as alleged in the complaint are taken to be true, there can be no manner of doubt that the alleged facts constitute an offence prima facie of criminal breach of trust in respect of Rs. 50 lakhs transferred from A-4-com-pany at the behest of A-1 to A-3 to Kris Engineers of which A-2 and A-3 are the partners. Thus, as far as A-1 to A-3 are concerned, there is a little doubt that on the basis of the facts alleged in the complaint, it cannot be contended that the offences as alleged have not been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 of the Act. It may, however, be seen that under sub-section (2) of section 197 of the Companies Act circulating or advertising a report of the proceedings of any general meeting of a company in contravention of sub-section (1) renders every officer of the company who "is in default" liable for punishment. Thus, the company is excluded from the liability under this provision. Similarly, violation of provisions of the Companies Act regarding maximum managerial remuneration under section 198 of the Act or contravention of the provisions regarding payment of any remuneration, fee or any tax as provided for under section 200 of the Companies Act can be held to render the company liable for punishment under section 629A of the Companies Act. It may be noted that sub-section (8) of section 205A of the Companies Act renders the company and every officer of the company who is in default punishable with fine or contravention of the said section 205A in respect of the dividends declared. Similarly, section 207 of the Companies Act renders every director of the company, its managing agent or secretaries or treasurers liable for punishment for failure to distribute the dividends declared w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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