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TMI Blog2011 (12) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... are employees, particularly managerial staff including tea garden managers, who are on secondment from one company to the other and the accounts between the sister concerns are adjusted by the concerned company reimbursing the other in respect of payments on account of the relevant employees. 3. The first charge is in a notice dated April 28, 2011 and alleges violation of the provisions of section 300(1) of the Companies Act in one or more of the company's directors being present at the time an item of business in which such directors were personally interested had been taken up for consideration at the board meeting. It is evident from the recording in the minutes that the concerned directors did not participate in course of the business transacted on the item on the agenda. It is also a matter of record that the presence of such interested directors was not taken into account for the purpose of ascertaining the quorum of the meeting for such resolution. In view of the aforesaid, there does not appear to be any degree of seriousness in the charge levelled by the Registrar for the alleged violation by the petitioners of the provisions of section 300(1) of the Companies Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L during the year 2005, there was a breach of clause (e) of sub-section (1) of section 295 since, according to the Registrar, the board of directors of the company was in a position to control the decision of SHIL by virtue of four directors of the company also being directors on the board of SHIL. 7. It appears that such first presumption may be slightly flawed. The Registrar has not charged the directors of the company of influencing the course of action in SHIL; the Registrar's charge is that by virtue of the composition of board of directors of the two companies, the board of directors of the company could cause the board of directors of SHIL to act in a particular manner. It is evident from the copies of the annual accounts and other records of the company that its board of directors consisted of eight directors. Admittedly, during the relevant period four of the eight directors of the company were also the directors of SHIL. SHIL had six directors in all at the material time. It does not stand to reason that the board of directors of the company could have caused, through the four members of it on the board of SHIL, to take any decision according to its wishes or dictate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imate years. The appropriate journals of the company have been produced in original. The Registrar was permitted to inspect all records of the company that had been relied upon by the petitioners in the supplementary affidavit. The Registrar did not avail of the opportunity but has filed an affidavit dealing with the supplementary affidavit. 10. The petitioners seek to demonstrate that for several years the company has had regular transactions with SHIL. The petitioners have given a summary of the accounts between the company and the SHIL beginning the year 2003. The petitioners say that it would be evident from the books maintained by the company that at the end of each financial year, up to the year 2010, SHIL was a creditor of the company in the sense that upon accounts being taken between the two parties, money would have been payable by the company to SHIL. The petitioners seek to contend on the basis of such records that the assessment by the Registrar was erroneous in view of the fact that there was no loan which was made available by the company to SHIL. The petitioners show, with the original journals being opened for the court, that there were only two cash transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances, it does not appear that there was any violation of the provisions of section 295(1)(e) by the petitioners as directors of the company in course of the company's transactions with SHIL. 15. In such view of the matter, all the three show-cause notices that form the subject-matter of the later petition are quashed and the Registrar is directed not to proceed in such regard any further. The petitioners will, however, pay costs to the Registrar assessed at 500 GM. 16. C. P. No. 274 of 2011 is disposed of as above. 17. C. P. No. 556 of 2010 is the earlier petition under section 633(2) of the Act and involves 12 show-cause notices. Some of the show-cause notices issued by the Registrar of Companies carry multiple charges. 18. The stand taken by the petitioners is that most of these charges relate to subjective matters and it would not be evident from the show-cause notices that either the petitioners benefited personally in doing the things complained of or that any prejudice was occasioned to any person thereby. 19. The several charges levelled by the Registrar range from the manner in which the books of account and other statutory documents were maintained b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the company did not segregate the value of the land from the value of the buildings and provide for depreciation. The company owns several tea gardens and the parcels of land thereat are obtained on lease from the State against payment of periodical amounts by way of rent. The petitioners say that the valuation of the land cannot be done by the company, and, in any event, such valuation would be meaningless since the company is not the owner of the several pieces of land where it has its tea estates. The petitioners also contend that the matters complained of in the relevant show-cause notice, at the highest, amount to the Registrar interpreting the Accounting Standards otherwise than had been done by the company, its directors and its auditors. The petitioners refer to a judgment reported at Chandra Kumar Dhanuka v. Registrar of Companies, West Bengal [2008] 83 SCL 296 (Cal.), for the proposition that the Accounting Standards involve the subjective assessment of matters pertaining to accounts and if it is possible to see that a plausible interpretation was given to any particular provision by a company or its officers, that such interpretation falls foul of the Registrar& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strar's understanding that the lands comprised in the tea estates of the company should have been valued when there was no question of the company valuing the same since the lands belonged to the State and not to the company. The charges levelled in the relevant show-cause notice under section 211(1) and (2) of the Act should, accordingly, not be proceeded with by the Registrar. 23. The further charge under section 211(1) of the Act is on account of the company using the word "equipment" in its accounts. The Registrar says that such word is not included in Schedule XIV to the Act and the use of such word was inappropriate and rendered the officers of the company liable to prosecution. The Registrar is right in that the word "equipment" is not mentioned in the relevant schedule. However, Schedules VI and XIV to the Companies Act, 1956 refer to "goodwill, vehicles, etc." and the petitioners are justified in being aggrieved that though the company should have clubbed all equipment under the omnibus "etc.", the petitioners have been sought to be taken to task for having been more specific. The charge is of no seriousness or consequence and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an dispense with the register of investments for the company not having made any investment. Since the petitioners and the company, through these petitioners, undertake to maintain a register of investments notwithstanding the company not making any investment, the petitioners stand absolved of the charge levelled by the Registrar under section 372A(5) of the Act. 29. The last of the 12 charges against the petitioners is for the alleged violation of the provisions of section 176(2) of the Act in the company notices for general meetings not showing with sufficient clarity that the shareholders were entitled to attend the meetings and appoint proxies. The company's reply to the show-cause notice was that such matter was mentioned in the relevant notices. In such circumstances, there does not appear to have been any violation of the provisions of section 176(2) of the Act. 30. In the light of the view taken in respect of the 12 several show cause that form the subject-matter of the earlier petition, the Registrar is directed not to institute any criminal proceedings in respect of any of the matters covered thereby. The petitioners and the company, through the petitioners, are di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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