SUDHIR RAI Vs. REGISTRAR OF COMPANIES

LAWS(CAL)-2014-9-29

HIGH COURT OF CALCUTTA

Decided on September 19,2014

Sudhir Rai Appellant

VERSUS

The Registrar of Companies Respondents

JUDGEMENT

- (1.) BACKDROP: Registrar of Companies issued several show cause notices, firstly to inspect the records of the Company, Narbheram and Company Limited. After causing inspection he issued several show cause notices in May 2008 contemplating proceedings to be initiated against the directors of the Company under Section 209(3)(b), 217(3), 297, 209(1) and 292(1)(e) of the Companies Act 1956 (hereinafter referred to as the said Act of 1956) alleging various irregularities in maintaining the records of the Company. The directors applied for quashing of the said notices in C.P. No. 214 of 2008 that the learned Company Judge disposed of vide order dated June 16, 2008 appearing at page-93-94 of the paper book. His Lordship extended the time to reply to the show cause notices coupled with a direction upon the respondent authority to consider such reply in accordance with law. Accordingly, the directors replied to the show cause notices and claimed exemption. The authorities issued notices on February 2, 2009 under Section 295 and 209A of the said Act of 1956 appearing at pages 136-142. The authority issued a notice on February 13, 2009 appearing at pages- 147-148 inter-alia asking them to appear and give evidence and produce record relating to the books of accounts and other records specified in the said notice. Ultimately, five notices were issued being dated February 2, 2009, February 13, 2009 and February 20, 2009 under the aforesaid provisions of the said Act of 1956. Being aggrieved, five directors applied for quashing of the said notice and/or for being excused for the alleged default as referred to in those five show cause notices that would appear at pages-62-74 and repeated in pages-80-92. The petitioner No. 1 claimed, he was a director of the company for the period on September 20, 2004 to August 6, 2007 whereas other four directors were still on the Board of the Company on the date of making of the application. According to the petitioners, one R.P. Kamani made a complain to the Registrar of Companies on April 12, 2006 as a retaliation for the dispute that the third petitioner had with one Rajen Kamani, the brother of the said R.P. Kamani. If we read the notices as a whole we would find, the allegations would center around irregularity committed by the Company and/or the directors, as the case may be, in maintaining the books of accounts pertaining to leave encashment as well as various loans and/or inter-corporate deposits being made by the Company inter-alia, in other sister concerns without taking any step for realization thereof as a result, the Company suffered. The learned company Judge heard the application and disposed of the said application vide judgment and order dated June 20, 2014 whereby His Lordship granted relief to the petitioners with regard to the first two batches of notices dated February 2, 2009 and February 13, 2009 mainly on the ground of limitation in accordance with the provisions of Section 468 of the Code of Criminal procedure. According to His Lordship, the Central Government was entitled to proceed with the show cause notices issued under Section 295 of the Companies Act within the time specified in law. Since the notices were issued beyond the prescribed period of limitation of one year even taking into account the order of injunction subsisting in between the notices under Section 295 and 299 would be barred by the laws of limitation. His Lordship excused the petitioners under Section 633(2) of the said Act of 1956 for the show cause notices issued on February 2, 2009 and February 13, 2009.
(2.) PRESENT LIS: The Registrar accepted the said decision and did not prefer any appeal whereas the petitioners filed the instant appeal with regard to the notice dated February 20, 2009 that His Lordship declined to interfere with. The relevant paragraph of His Lordship's judgment and order is quoted below: "By the letter dated 20th February, 2009 the petitioners have been informed that instructions have been given to launch prosecution pursuant to the show-cause notices issued under Section 209)10, 209(b), 217(3) and 292(10(e) of the 1995 Act. That the said letter has been received by the petitioners is an admitted fact but in spite of receipt no copy of letter dated 2nd December, 2008 has been sought by the petitioners; therefore, in respect of the said communication dated 20th February, 2009 the petitioner is not entitled to any order."
(3.) CONTENTIONS: Mr. Ratnanko Banerjee learned senior counsel appearing for the appellants would contend, initially in 2008 when the first batch of notices was served and the learned Judge asked the petitioners to reply to the show cause notices the petitioners duly replied to the said notices giving explanation as to the alleged irregularity and submitted all records for the perusal of the Registrar and participated at the hearing held on August 28, 2008. The authority based the notice on an inspection report dated December 2, 2008 that was never given to the petitioners for their perusal and comment. According to Mr. Banerjee, the notice under Section 209(3)(b) and Section 217(3) would relate to leave encashment. The Company was a small company and whatever records they had with regard to leave encashment were produced giving sufficient explanation hence, the authority ought to have dropped the proceeding. Commenting on the loans and/or inter-corporate deposits Mr. Banerjee would submit, the authority complained of violation of 209(1) and 292(1)(e) for alleged non recovery of such loans by the Company. According to him, the company tried their best to recover the same in fact, part of the loan complained of, was availed by Rajen and/or R.P. Kamani the complainant above named. Hence, the authority could not have proceeded on the basis of the complaint that the Kamani brothers lodged on April 12, 2006. Commenting on the judgment and order of His Lordship, Mr. Banerjee would comment, the learned Judge declined to interfere on the ground, petitioner did not ask for the copy of the letter dated December 2, 2008 that was an internal communication in the Government departments and the petitioners had nothing to do with the same, in fact, the petitioner was never favoured with any copy of such letter. Merely because the petitioners did not ask for a copy of the same, the learned Judge could not have declined relief. Mrs. Asha Gutgutia learned Counsel was representing the Registrar of Companies. She could not be present during hearing however, we permitted her to submit a written note when she mentioned the matter at the time of rising of the Court on the day when we closed the hearing and reserved our judgment.;

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