- (1.) This application under Section 482 of the Code of Criminal Procedure has been taken out by Sanjiv Jajodia, an accused in Case No. C/1079 of 2010 pending in the Court of learned Metropolitan Magistrate, 10th Court at Calcutta praying for quashing of the proceeding against him under Section 63 of the Companies Act. The petitioner has also challenged the legality, validity and propriety of the orders dated 13.1.2010 and 28.1.2010. A reference to the factual aspect is required to be set out in order to appreciate the matter effectively.
(2.) The petitioner was appointed as a Director of the said Chandi Steel Industries Limited (hereinafter referred to as the company) on 20th September 19993 and is continuing since then.The company came out with a public issue of 55,00,000 equity shares of Rs. 10 each for cash at par aggregating to Rs. 550 lacs during the year 2003 in terms of prospectus dated 22nd October 2003. The objects of the issue as it was then envisaged and stated in the prospectus was to expand the installed capacity of the plant from 10,800 MT to 44,000 MT per year at a capex of Rs. 525 lakhs and to meet the issue expenses at an estimated cost of Rs. 25 lakhs. The entire fund requirement of Rs. 550 lacs was to be financed from proceeds from the public issue. The prospectus was filed with the Registrar of Companies, West Bengal on 22.10.2003. The said public issue was opened on 3rd November 2003 and was fully subscribed. On the public issue being made, the company received the sum of Rs. 5, 50,00,000/- (calls-in-arrear Rs. 39,000/- against the 55,00,000 equity shares of Rs. 10 each. As stated in the prospectus, a sum of Rs. 525 lacs was to be utilized for expansion of the re-rolling mill of the company by increasing the installed capacity from 108000 MT to 44000 MT per year and the project was scheduled to be completed by March 2004 and commercial production was to commence in April 2004. The Company was hopeful that it would be able to implement during the year 2005-06 the expansion project for which the public funds were collected. However, before the company could proceed with further implementation of the project, it was observed that further increase of re-rolling mill capacity was no more a viable option in view of two major developments during the years 2004-2005 and 2005- 2006. a. Inspite of the best efforts the Energy charges (power cost) as a cost of production remained at a high level which was affecting the viability of the project in the given competitive market. b. There was an increase in demand for secondary rerolled steel products. Due to this increase, the primary steel producers started setting up and increasing capacities for producing rerolled secondary steel products. This resulted in steep market competition for the small-scale secondary steel rerolling units.
(3.) The company has a smll-scale secondary steel rerolling unit. In view of market factors as also the energy cost increasing manifold as aforesaid, the Board of Directors of the Company at its meeting held on 25th February 2006 considered it prudent to take a decision to abandon the Expansion project of the Company as envisaged in the prospectus but modernize the existing re-rolling facilities of the company to become efficient in the fact of adverse market situations. Pursuant to the decision taken by the Board at its meeting held on 25th February 2006, an extraordinary general meeting of the company was convened on 27th March, 2006 to consider utilization of the unutilized money amounting to Rs. 381.20 lacs raised through public issue for the modernization of the existing manufacturing facilities of the company instead of undertaking the expansions plans of the company as envisaged in the prospectus. Such Extraordinary General Meeting was held on 27th March 2006 and requisite resolution was adopted at the Extraordinary General Meeting of the shareholders of the company on 27th March 2006. By such Extraordinary General Meeting, the shareholders of the company accorded consent to the management of the company to utilize the balance sum of Rs. 381.20 lakhs raised through such public offer in the year 2003 in the modernization scheme instead of undertaking the expansion plan as stipulated therein. Pursuant to an in terms of such resolution of the Extraordinary General Meeting, the company undertook the modernization scheme instead of the expansion plan. By a letter dated 12th February 2007, the Deputy Registrar of Companies, West Bengal called for information and explanation under Section 234 of the Companies Act, 1956.The company sent a reply dated 10th April 2007. In continuation of such reply, the company sent another letter dated 17th May 2007 to the Registrar of Companies, west Bengal. The office of the Regional Director, Eastern Region, Ministry of Corporate Affairs, Government of India, undertook inspection under Section 209 A of the Companies Act, 1956. By a letter dated 11th September 2008, the Deputy Director (Inspection) alleged that the alleged violation of the provisions of the Companies Act, 1956 had been noticed. By a letter dated 14th November 2008, the company explained and clarified the allegations levelled by the Deputy Director (Inspection) in the letter dated 11th September 2008. The opposite party issued a three show cause notices numbering 2756, 2757 and 2758 all dated 18th December 2009 alleging contravention of the provisions of Sections 63, 68 and 628 of the Companies Act, 1956. The Company requested for time to reply thereto and sought for extension till 15th January 2010. However the opposite party instituted a criminal case against the petitioner on the self same material by filing a complaint being case no. C/1079/2010 filed by the opposite party as the complainant in the Court of the Learned Chief Metropolitan Magistrate at Kolkata against the petitioner .;