K. Vinod Kumar v. The Assistant Registrar of Companies, Kerala

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE V.K.MOHANAN FRIDAY, THE 22ND AUGUST, 2008 / 31ST SRAVANA, 1930 **Crl.MC.No. 4294 of 2005 (B)** (CRL.M.P.NO.2144/05 in CC.33/2004 of ADDL.CHIEF JUDICIAL MAGISTRATE (E & O),ERNAKULAM) .................... PETITIONER: ---------------- K.VINOD KUMAR, SUSAILAM, VRINDAVAN COLONY, KADAVANTHRA, COCHIN 682 020. BY ADV. SRI.JOSEPH GEORGE RESPONDENT: ----------------- THE ASSISTANT REGISTRAR OF COMPANIES, KERALA, M.G.ROAD, ERNAKULAM, COCHIN 682 011. BY ADV. SRI.S.KRISHNAMOORTHY, CGC THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 22/08/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ## **V.K.MOHANAN, J.** ## **--------------------------------------------Crl.M.C.No. 4294 of 2005 - B --------------------------------------------Dated this the 22[nd] day of August, 2008** ## **O R D E R** Challenging Annexure A3 order, by which the petitioner herein is impleaded as additional accused No.4 and amending the cause title of Annexure A1 complaint, the petitioner preferred this Crl.M.C. under Section 482 of the Code of Criminal Procedure with a prayer to quash the above order. 2. The respondents herein preferred Annexure A1 complaint in which the number of persons initially arrayed as accused is shown as three. The case of the first respondent, complainant is that an inspection under Section 209A of the Companies Act, 1956 was carried out by the inspecting officers, whose names are mentioned therein, which commenced from 22.9.1998 and during such inspection, none of the Directors of the company was present at the registered office. According to the complainant, during the course of inspection, it was observed by the Inspecting Officers from the books of accounts at the registered office that the company had ## **Crl.M.C. NO. 4294 of 2005** ## **:-2-:** accepted deposits from the Directors, share holders and their relatives etc. and the outstanding was Rs.32.26 lakhs, Rs.97.15 lakhs and Rs.96.98 lakhs as on 31.3.96, 31.3.97 and 31.3.98 respectively. According to the complainant, the money was accepted by the company in violation of the provisions of Section 58A(4) of the Act and the Rules thereunder. It is also stated in the complaint that as per Rule 2(b)(ix), any amount borrowed by a company will not be termed as deposit if the amount received was from a person who at the time of receipt of the amount was the Director of the company or in the case of a private company if the amount was from its shareholder, provided the director or shareholder from whom the money is received furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of the funds acquired by him by borrowing or accepting from others. According to the complainant, Rule 3(2)(i) is also attracted. In the complaint, the figures are given on the basis of the ## **Crl.M.C. NO. 4294 of 2005** ## **:-3-:** balance sheets of the first accused, company regarding the deposit under Rule 3(2)(i) and 3(2)(ii). Thus, according to the complainant, on a scrutiny of the balance sheets of the company for the period mentioned above, it was observed that the company had accepted deposits in excess of the limits prescribed in Rules 3(2) (i) and 3(2)(ii) of the Rules. It is also the case of the complainant that the company had not repaid the excess deposit as required under sub-section(4) of Section 58A of the Act. It is also the case of the complainant that a show cause notice was issued from the office of the complainant to the company and all its directors as to why legal action shall not be taken against them under Section 58A(6) and 58A(5) of the Act for contravening the Rules 3(2)(i) and 3(2)(ii) of the rules and sub-section (4) of Section 58A of the Act respectively. But, no reply was furnished by the accused, and therefore, a complaint was preferred against accused who are guilty of default of Section 58A(1) read with Rule 10 of the Rules. It is also stated that accused Nos.1 to 4 are guilty ## **Crl.M.C. NO. 4294 of 2005** ## **:-4-:** of default of Section 58A(4) of the Act and as such, accused No.1 is liable to be punished under Section 58A (5)(a) of the Act and accused Nos.2 to 4 are liable to be punished under the provisions contained in Section 58A (5)(b) of the Act, as they are officers in default as defined under Section 5 of the Act. Annexure A1 complaint is dated 31.3.2000. 3. On taking cognizance upon Annexure A1 complaint, a case was instituted as S.T.No.83 of 2000 before the court below. Thereafter, the case against the third accused was split up and the case was renumbered as C.C.No.33 of 2004. Thereafter, there was no progress in the trial of the case till 20.9.2005. After the splitting of the case against the third accused and institution of C.C.NO.33 of 2004, the complainant, the first respondent herein had preferred a petition dated 11.7.2005 before the court below in C.C.No.33 of 2004 with a prayer to amend the cause title of the complaint by including the petitioner herein as the Managing Director of the first accused, company and as accused ## **Crl.M.C. NO. 4294 of 2005** ## **:-5-:** No.4 to represent the first accused-company. A copy of the above petition is produced along with this M.C. as Annexure A2. Upon Annexure A2 petition, the learned Magistrate had issued an order dated 20.9.2005, a copy of which is produced along with this Crl.M.C. as Annexure A3. Annexure A3 reads as follows:- “This is a petition filed by the complainant to amend the cause title and implead additional accused number 4. Heard. Allowed.” It is the above order challenged in this Crl.M.C. 4. I have heard the learned counsel for the petitioner and also the Standing Counsel for the first respondent. 5. Reiterating the contentions raised in the Crl.M.C., counsel for the petitioner submits that Annexure A3 order is passed without any jurisdiction and without hearing the petitioner as well as the other accused and Annexure A3 order itself is vitiated as the same is not a speaking order. The learned counsel submits that in Annexure A2 petition, the provision ## **Crl.M.C. NO. 4294 of 2005** ## **:-6-:** under which the said petition was filed was not mentioned. In Annexure A3 order, the learned Magistrate had not noted the provision under which he issued the order. The learned counsel submits that the only provision in the Cr.P.C. is Section 319 which enables the trial court to implead the additional accused. According to counsel, in the present case, no trial was commenced and therefore, the learned Magistrate has no jurisdiction to invoke Section 319 of the Cr.P.C. The learned counsel further submits that in view of Section 5 of the Companies Act, only the officer in default can represent the company. But, in the present case, the accused shown as first in number is not represented by any such officer of the company. It is also the case of the counsel that the petitioner was not the Managing Director or any authorised officer as envisaged by Section 5 of the Companies Act and hence, the petitioner is not liable to be prosecuted or represent the company in the complaint. 6. Per contra, the learned Standing Counsel for ## **Crl.M.C. NO. 4294 of 2005** ## **:-7-:** the first respondent submits that the allegation contained in the complaint is a serious one and the persons responsible shall be allowed to prosecute for the commission of the above offence. The learned Standing Counsel further submits that the only intention in filing Annexure A2 petition was to bring the proper party on record and to prosecute them effectively. Standing Counsel fairly submits that Annexure-A3 order is not legally sustainable, but the first accused, company, being a statutory person, can represent only through officers authorised by it, and at the time of filing the complaint, it was omitted to mention the officer who represent the first accused-company. Therefore, the Standing Counsel submits that opportunity may be given to cure that defect by resorting appropriate procedures and provisions. 7. In the decision reported in **Maksud Saiyed** v. **State of Gujarat and others** [2008(3) KLT SN 47 (C.No.57)(SC), the Apex Court had held that in the absence of clear statutory provisions, no vicarious **Crl.M.C. NO. 4294 of 2005** ## **:-8-:** liability can be attributed to the Managing Director and Directors for the acts done by the accused-company. The Apex Court had further held that it is obligatory on the part of the complainant to make requisite allegations to attract the provisions constituting vicarious liability. On the strength of the above decision, the learned counsel submitted that even the first respondent/ complainant has no case that the petitioner was the Managing Director of the company and therefore the petitioner cannot be impleaded as additional respondent. 8. Since the Standing Counsel fairly conceded that Annexure A3 order is not legally sustainable, I am not going into the details of the contentions taken by the petitioner and also the correctness of Annexure A3 order. It is relevant to note that as evidenced by para 2 of the complaint, the complainant/first respondent is aware of the fact that the petitioner is to be shown as the person representing the first accused- company, but I am unable to understand as to why the same is ## **Crl.M.C. NO. 4294 of 2005** ## **:-9-:** omitted. Annexure A3 is not at all a speaking order. As evidenced by Annexure A2 petition, none of the provisions of the code or any other statute is mentioned under which such a petition is filed and the authority of court to pass orders like Annexure A3 upon such petition. Therefore, Annexure A3 order is not legally sustainable. Hence, Annexure A3 is liable to be quashed. 9. Considering the seriousness of the allegations contained in Annexure A1 complaint and as requested by the Standing Counsel for the first respondent, it is made clear that the first respondent is free to take appropriate legal steps, if he is advised so to prosecute the real culprits. In the result, this Crl.M.C. is disposed of quashing Annexure A3 order and it is open to the first respondent to take appropriate legal steps in the matter to prosecute the real culprits. **V.K.Mohanan, Judge.** MBS/ ## **Crl.M.C. NO. 4294 of 2005** **:-10-:** **V.K.MOHANAN, J.** -------------------------------------------- Crl.R.P.NO. OF 200 -------------------------------------------- ## **Crl.M.C. NO. 4294 of 2005** ## **:-11-:** O R D E R DATED: -6-2008 ## **Crl.M.C. NO. 4294 of 2005** **:-12-:**