SHARMA, J. - (1.) THIS Miscellaneous Petition under Section 482 Cr. P. C. arises out of the Criminal Case. No. 254/1987 pending in the court of Judicial Magistrate (Special Court) (Economic Offences) Rajasthan Jaipur and has been filed against the order dated August 21, 1990 under which the application of M/s Mewar Sugar Mills Ltd, the petitioner herein, praying that under Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (for short, the Special Provisions Act) the complaint be dismissed, has been rejected. The present petition arises in the following circumstances :
(2.) THE petitioner M/s Mewar Sugar Mills Ltd. (for short, the company) is a limited liability company incorporated under the provisions of the Companies Act, 1956 (for short, the Companies Act) and is having its registered office at Bhupal Sagar. Under rule 3 (2) (i) and (ii) of the Companies (Acceptance of Deposits) Rules, 1975 (for short, 1975 Rules), the company was entitled to accept deposits during the period 1984-85,1985-86 and 1986-87, THE maximum limits to which under the aforesaid rules the company for the aforesaid period could have accepted deposits was 25% of the aggregate of the paid-up share capital and free reserves of the company. As per the explanation to rule 3 of the aforesaid Rules, which explanation was substituted by the Companies (acceptance of Deposits) First Amendment Rules, 1986, w. e. f. January 2, 1986, in arriving at the aggregate of the paid-up share capital and free reserves of a company, there shall be deducted from the aggregate of the paid-up share capital and free reserves as appearing in the latest audited balance-sheet of the company, the amount of accumulated balance of loss, balance of deferred revenue, expenditure and other intangible assets, if any, as disclosed in the said balance-sheet. For the aforesaid three years, a notice under Section 58 A of the Companies Act was given to the company on February 19, 1987 by the Registrar of the Companies, Rajasthan, Jaipur wherein it was stated that whereas for the aforesaid periods the company was entitled to deposits mentioned in the aforesaid notice, it has accepted the deposits also detailed in the notice. THE deposits which the company could have accepted and in fact accepted have been given in the notice given to the company. In the show cause notice it was stated that whereas the company was not entitled to accept any deposits under the provisions of Section 58-A of the Companies Act, and 1975 Rules, but in the year 1984, the officers have renewed the deposits accepted by the company whereas it was under obligation to repay the same and the by provisions of sub-section (4) of Section 58-A of the Companies Act have been contravened and the Directors have made themselves liable for prosecution under sub-section (5) of Section 58 A of the Companies Act. On behalf of the company the reply was filed on February 27, 1987 wherein it was stated that the time allowed is too short and thereafter explanation was given. Even after considering the same, the complaint was filed. The petitioner company had earlier come to this Court and this Court had refused to entertain writ petition and refused to go into this question and observed that the petitioner should take the objection under section 22 of the Special Provisions Act before the trial court and then if necessary, it may move this court. The company thereafter, made an application and the learned Judicial Magistrate (Special Court) under his order dated August 21, 1990 dismissed the application and in doing so he has taken a view that so far as criminal prosecution for the contravention of section 58a of the Companies Act read with 1975 Rules and Section 22 of the Special Provisions Act does not come into play and the complaint cannot be dismissed. It was contended by the learned counsel for the petitioner company that the provisions of the Special Provisions Act over ride the provisions of the Companies Act and 1975 Rules and therefore, because the Board for the Industrial and Financial Reconstruction (for short, the Board) on a reference having been made to it by the company under sub-section (1) of Section 15 of the Special Provisions Act has held that the company has become a sick industrial company and after holding an inquiry Shri Madan Manohar Lal was appointed as a Special Director of the petitioner company under the powers conferred on the Board under Sub-section (4) of Section 16 of the Special Provisions Act. Section 22 of the said Act is applicable and the complaint should have been dismissed. The question therefore is as to whether a complaint filed by the Registrar of the Companies, Rajasthan, against the company for the contravention of Section 58a of the Companies Act read with Rule 3 (2) (i) and 3 (2) (ii) of 1975 Rules cannot proceed or cannot be entertained by the Magistrate in view of the provisions of Section 22 of the Special Provisions Act? It will be proper to read section 22 of the Special Provisions Act which is as under: - "22. Suspension of legal proceedings, contracts, etc. (1), Where in respect of an industrial company, an inquiry under Section 16 is pending or any scheme referred to under section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending, then notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or the memorandum and articles of association of the industrial company or any other instrument having effect under the said Act or other law, no proceedings for the winding-up of the industrial company or for execution distress or the like against any of the properties of the industrial company or for the appointment of a receiver in respect thereof shall lie or be proceeded with further, except with the consent of the Board, or, as the case may be, the Appellate Authority. (2) Where the management of the sick industrial company is taken over or changed, notwithstanding anything contained in the Companies Act, 1956 (1 of 1956) or any other law or in the memorandum and articles of association of such company or any instrument having effect under the said Act or other law : - (a) it shall not be lawful for the shareholders of such company or any other person to nominate or appoint any person to be a Director of the company : (b) no resolution passed at any meeting of the share-holders of such company shall be given effect to unless approved by the Board. (3) During the period of consideration of any scheme under section 18 or where any such scheme is sanctioned thereunder for due implementation of the scheme, the Board may by order declare with respectto the sick industrial company concerned that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force to which such sick industrial company is a party or which may be applicable to such sick industrial company immediately before the date of such order, shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified by the Board. Provided that such declaration shall not be made for a period exceeding two years which may be extended by one year at a time so, however, that the total period shall not exceed seven years in the aggregate. (4) Any declaration made under sub-section (3) with respect to a sick industrial company shall have effect notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), or any other law, the memorandum and articles of association of the company or any instrument having effect under the said Act or other law or any agreement or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order and accordingly- (a) any remedy for the enforcement of any right privilege, obligation and liability suspended or modified by such declaration and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall remain stayed or be continued subject to such declaration; and (b) on the declaration ceasing to have effect. (i) any right, privilege, obligation or liability so remaining suspended or modified, shall become revived and enforceable as if the declaration had never been made; and (ii) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached, when the proceed ings became stayed. (5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability, the period during which it or the remedy for the enforcement thereof remains suspended under this section shall be excluded. "
(3.) IT will be stated at the very outset that at this stage, I would not like to go into the merits of the case as to whether there has been or has not been any contravention of the provisions of 1975 Rules, moreso, when it cannot be said positively that it is a case where there is no material for prima facie contravention of the Rules as it is a matter to be decided by the learned Magistrate on the material on record whether the company did or did not accept the deposits in contravention of the aforesaid Rules in exceses of the limits mentioned therein and I will simply confine myself to the legal question as to whether Section 22. of the Special Provisions Act is attracted and therefore the complaint cannot proceed any further. Section 22 of the aforesaid Special Provisions Act has already been extracted in the earlier part of this order. As a result of the Board's order it will have to be taken for the disposal of this miscellaneous petition that the company is a sick industrial company within the meaning of Section 3 (0) of the Special Provisions Act. The Board arrived at the aforesaid conclusion after making the enquiry on the ground that as on July 31, 1986 the accumulated losses of the company amounted to Rs. 2,283. 86 lacs while its net worth was only Rs. 94. 30 lacs for the year ending 31. 07. 1985 and cash loss of Rs. 58. 45 lacs was incurred for the year ending July 31, 1986. Both these losses were before depreciation. As said earlier, the Board has appointed a Special Director of the Company under sub-section (4) of Section 16 of the Special Provisions Act. No order if any made under the provisions of Section 17 of the Special Provisions Act has been brought to my notice though the order to the effect that the company has become sick industrial company and appointment of Special Director was made on September 28,1987. The application of the company to the Department of the Companies Affairs, Government of India, New Delhi in terms of Section 58a (8) of the Companies Act for extension of time by five years for payment of the said deposits and interest thereon was rejected as far back as on August 28, 1987 and a Company Petition No. 5/87 under section 391 of the Companies Act is said to have been filed at the principal seat of this Court at Jodhpur for approval of scheme on the line of IFC1 and notice has been issued therein. In my opinion prima facie the said application has no relevance so far as the contravention if any of the provisions of Section 58a of the Companies Act read with 1975 Rules is concerned. A reading of Section 22 of the Special Provisions Act which has been extracted in the earlier part of this order will show that all that it prohibits are (i) Winding-up proceedings (ii) executive proceedings or proceedings of distress or the like proceedings against any property of the industrial company. IT also prohibits any order for appointment of Receiver in respect of the properties in case an enquiry under Section 16 of the Special Provisions Act is pending or any scheme referred to under Section 17 is under preparation or consideration or a sanctioned scheme is under implementation or where an appeal under section 25 relating to an industrial company is pending. Thus, the prohibition to my mind is only of the aforesaid proceedings against the properties of the industrial company and the said prohibitions will not be attracted in case where there is any contravention of the provisions of the Companies Act or 1975 Rules, or for that matter any rules made thereunder which will make the contravention as penal. Section 58 A along with Section 58 B was inserted in the Companies Act by the Companies (Amendment) Act XLI of 1974, w. e. f. February 1,1975. The historical background of the aforesaid section will show that the aforesaid section was inserted in order to safeguard the interests of depositors. Deposits from the public is an important mode of finance in the corporate sector and as far as possible a company will prefer to raise finance by accepting deposits from the Public rather than taking loans from financial institutions, and it is so for more than one reasons. Prior to February 1, 1964 there was no control over deposits from the Public in the various companies and the Reserve Bank of India assumed powers to regulate acceptance of deposits by non-banking companies by amendment of Reserve Bank of India Act, 1934 with effect from February 1, 1964 and the directions were issued for regulating the acceptance by the non- banking companies. IT was in order to regulate more effectively the deposits by the non-banking companies that the 1975 Rules were made in exercise of the powers conferred under the Companies Act. The aims and objects of the Bill under which the aforesaid amendments were introduced will show that it was to limit the acceptance of public deposits and economic health of the companies and in order to see that the deposits do not exceed the limits prescribed and are refunded in time. Sub-section (5) of Section 58a of the Companies Act makes the contravention of clause (c) of Sub-Section (2) or subsection (4) as penal and in case the contravention is proved, then besides the fine to which the company was liable, every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine. IT was contended by Mr. Kuhad, learned counsel for the petitioner company that these are coercive methods for realising the amounts of deposits and for payment to the depositors and therefore under Section 22 of the Special Provisions Act even these proceedings could not be initiated or at any rate could not lie and the complaint should have been dismissed. In support of his contention, Mr. Kuhad, learned counsel for the petitioner company, referred to the case of Testeels Ltd. V. Radhaben Ranchhodlal Charitable Trust (1 ). IT was a case where a winding-up petition had been filed under the Companies Act for winding-up of the company which was declared as sick industrial company within the meaning of Section 2 (0) of the Special Provisions Act and it was not a case where the court was dealing with a case where the complaint was filed for contravention of the Act or Rules framed thereunder which contravention was made penal. To my mind, that case has no application to the present case. Even under rule 11 of the 1975 Rules, if a company or any other person contravens any provision of 1975 Rules for which no punishment is provided in the Companies Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to five hundred rupees and where the contravention is a continuing one, with a further fine which may extend to fifty rupees for every day after the first, during which the contravention continues. I am therefore in agreement with the learned Magistrate that the provisions of Section 22 of the Special Provisions Act do not apply to a criminal complaint as the filing of the complaint does not amount to execution, distress or the like against any properties of the industrial company. Consequently, I find no merit in this miscellaneous petition which is hereby dismissed. .;