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TMI Blog2014 (6) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... mposition. The Chairman, the Managing Director and the whole-time Director who are accused in these cases and also the main cases filed for fudging or falsification of accounts, have not applied for composition. This Court, indeed is unable to appreciate the conduct of the appellant herein in needlessly filing these appeals knowing well that accused Nos.1 and 4 have no complicity in the alleged commission of the scam with respect to which separate prosecution has been launched. Such conduct on the part of the appellant would only encourage frivolous and vexatious litigation and discourage entrepreneurs with positive approach to undertake the arduous task of resuscitating the discredited companies such as the company in question. On the analysis as above and for the reasons mentioned which are supplied to fortify the conclusions of the Company Law Board, the appeals must fail. The Registrar of Companies, who is stated to have already received penalty from accused Nos.1 and 4 and issued Form-21 is directed to inform the learned Special Judge for Economic Offences, Hyderabad before whom C.C.Nos.394 and 400 of 2009 are pending about the composition of the offences qua accused Nos.1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned at this stage the reasons that prompted this Court to remand the cases. It was pleaded on behalf of respondent Nos.1 and 2 before this Court that respondent No.1-company was made a victim of the fraud played by its Directors; that following the fraud of a great magnitude indulged in by the then Chairman, Managing Director and other Directors of the Company, a fresh life was infused into the company by the new Management, viz., M/s Tech-Mahindra; and that the Company itself, even before it was reconstituted after its taking over, was not an accused in the criminal cases involving the fraud by its Directors (hereinafter referred to as "main cases" investigated by the CBI). It was further pleaded that the CBI, after investigation, found absolutely no role whatsoever by respondent No.2- the Company Secretary (accused No.4), which fact was informed by the CBI to the new Management of the Company, vide its letter, dated 27.08.2010 and that besides giving a clean chit to respondent No.2-accused No.4, the CBI has cited him as a prosecution witness in the main cases, as evident from letter, dated 7/11-7-2011, addressed to the Chairman of the Company. This Court referred to the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No.2 to the Company Law Board for its fresh consideration in accordance with law. A further direction was given to the Company Law Board to bear in mind the contentions of the parties and the aspects noted by this Court for deciding whether or not to permit the compounding of the offences. After the cases were remanded, the Company Law Board has passed a fresh order, dated 16.10.2012, whereby it has allowed the applications the Company and respondent No.2 compounding the offences by levying the compounding fees, viz., Rs. 7,50,000/- on the Company and Rs. 50,000/- on respondent No.2 in CC.No.394 of 2009 (CA.No.233 of 2010) and Rs. 2,50,000/- on the Company and Rs. 25,000/- on respondent No.2 in CC.No.400 of 2009 (CA.No.234 of 2010). It is admitted the fine imposed on the Company-accused No.1 is the maximum fine that could be imposed under Section 629A of the Act. It is also apt to note in this context that after the cases were remanded, Serious Fraud Investigation Office (SFIO) which has preferred these two Company Appeals has received special notices from the Company Law Board for hearing. Having received the notices, the SFIO has not participated in the hearing. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the criminal proceedings. I have carefully considered the submissions of the learned counsel for both parties and perused the record. Before proceeding further, this Court is unable to desist from expressing its absolute dissatisfaction at the way the Company Law Board has conducted itself in disposing of the applications after remand. Despite the mandatory direction issued by this Court to consider the case afresh after taking into consideration the material relied upon by the Company and respondent No.2, it has not bothered itself to discuss the said material. It has also failed to give any reasons whatsoever in support of its decision allowing the applications for composition. Though Sri S. Ravi, learned Senior Counsel, has submitted that no question of law arises in these appeals, which is a sine qua non under Section 10-F of the Act for their maintainability, I am of the view that failure to furnish reasons by the Company Law Board allowing the applications for composition of the offences, itself gives rise to a question of law. Therefore, this Court is not inclined to throw out the appeals on the ground of absence of a question of law. It is an accepted proposition of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for either side. Hence, I do not propose to deal with the same. Instead, this Court proceeds on the premise that the Company Law Board has discretion to refuse compounding of the offences. Therefore, I will proceed to deal with the second issue. The facts recorded above would reveal that the gravamen of the accusation against the accused in C.C.No.394 of 2009 is that they have failed to obtain the opinion of the Central Government for payment of special fees to accused No.6 as envisaged under proviso (b) to Section 309(1) of the Act. In C.C.No.400/2009, the accused have been alleged to have failed to upload some statutory documents along with the Directors' Report. It is not in dispute that no specific penalties for violation of the provisions of the Act in this regard have been stipulated under the Act. In the absence of specific penalties provided elsewhere in the Act, the general provision i.e., Section 629-A of the Act is applicable. This provision reads as under : "If a company or any other person contravenes any provision of this Act for which no punishment is provided elsewhere in this Act or any condition, limitation or restriction subject to which a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service of summons may kindly be effected upon the accused as mentioned in the complaint who have violated the provisions of Section 220(1) of the Act and rendered themselves liable for penal action under Section 220(3) of the Act. (b) That, a list of documents and witnesses has been annexed with the complaint. The complainant craves leave of this Hon'ble Court to refer to and to rely upon additional list of documents and witnesses, if necessary, during the course of trial. (c) That Hon'ble Court may while convicting the accused award cost of the proceedings to the Complainant in terms of Section 357 of Cr.P.C. 1973 and Section 626 of the Companies Act, 1956. (d) That any such orders, which this Hon'ble Court deems fit and proper in the circumstances of the case, may kindly be passed. As can be seen from the reliefs claimed in C.C.No.394 of 2009, even if accused Nos.1 and 4 are convicted by the jurisdictional Court, they are liable to be punished with fine under Section 629-A of the Act as prescribed therein and no further. Even in the event of conviction by the criminal court, the disqualification envisaged by Section 274(1)(d) and Schedule XIII of the Act may not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It would therefore be wholly inequitable to subject the revamped company to needless criminal prosecutions when it has gracefully decided to put a quietus to the vexing problem of prosecution. It would be a travesty of justice, if the Company, after its revamp is subjected to persecution. As regards accused No.4, he is also presently the Company Secretary. In the previous round of appeal, he has placed before this Court, copies of letters dated 27-8- 2010 and 7/11-7-2011 addressed by the Central Bureau of Investigation to the C.F.O. of Mahindra Satyam and the Chairman of the Company, respectively, which in unequivocal terms show that it has given a clean chit to accused No.4, and, on the contrary he has been examined as a prosecution witness in the main case (Satyam scam case). The authenticity of these letters has not been disputed by the appellant before the Company Law Board. At the hearing before this Court, Sri C. Raghu, the learned counsel for the appellant, has fairly admitted the authenticity of these letters. Thus, I have no hesitation to hold that the refusal to compound the offences on behalf of accused Nos.1 and 4 in both these cases causes grave and immense prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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