The Delhi High Court has recently observed that while taking cognizance, the trial court has to apply its mind as to whether the complaint was within the period of limitation or not.
A single bench of Justice Asha Menon disposed of two connected petitions in which the petitioners have been summoned to face trial in two complaint cases filed under Section 211(7) of the Companies Act, 1956.
The ground for filing the complaint by the respondent before the ACMM, Special Court, Central, Tis Hazari, New Delhi was that they had not strictly complied with the provisions of Section 211 of the Companies Act, 1956 as there were discrepancies in their disclosures.
In the first petition, the allegation was that the fixed assets were improperly shown in the Balance Sheet for year ending March 31, 2008 without factoring the previous year’s fixed assets of Rs 1,36,308 and nil inventory had been declared against the previous year’s inventory worth Rs 6,00,000. The process of scrutiny took time and it was on September 4, 2015 that a notice under Section 206(1) read with Section 4 of Companies Act 2013 (sic) was sent. The reply sent by the petitioner dated October 26, 2015, that the fixed assets could not be shown on account of a scanning error, was found to be not satisfactory.
Thereafter, the sanction from the Regional Director for the prosecution was obtained on December 27, 2017, whereafter, a show cause notice dated August 24, 2018 was sent to the petitioner. Since the response was not satisfactory, the complaint was filed.
In the second petition, the complaint was filed when on scrutiny it was found that the Balance Sheet, Profit and Loss Account for year ending March 31, 2013 and March 31, 2014 had shown Rs 7,500 and Rs 20,000 as income from operations, improperly, respectively, without proper disclosures having been made. Scrutiny took time and the order under Section 206(1) read with Section 4 of Companies Act, 2013, calling upon the Company for the explanation was issued on September 4, 2015. This was replied to by the company on October 26, 2015. Sanction for prosecution from the Regional Director was obtained on December 27, 2017. A show-cause notice was issued by the respondent on August 24, 2018, whereafter, the complaint was filed.
It is the contention of the Counsel for the petitioners that the offence under Section 211(7) of the Companies Act, 1956 was punishable with imprisonment for a term which could extend to six months or with fine which could extend to Rs 1,000 or with both. Therefore, under the provisions of Section 467 CrPC, the period of limitation prescribed was one year, and as such, the Trial Court could not have taken cognizance of the offences vide the impugned order dated July 12, 2019 to summon the petitioners. Reliance has been placed on the judgment of the High Court of Madras in C.K. Ranganathan Vs. Registrar of Companies, 2001 SCC OnLine Mad 914 where the court held that the offence under Section 211(7) of the Companies Act, 1956 for a default had commenced on April 1, 1997 and the complaint filed in 2000 was barred by time. Hence, it was prayed that the present complaints be dismissed.
Both the Counsel for the respondent, have argued that the offence under Section 211(7) of the Companies Act, 1956 was a continuing offence and, therefore, there was no question of limitation. Reliance has been placed on the judgment of the High Court of Madras in Teledata Technology Solutions Ltd. (A1) and others Vs. Deputy Registrar of Companies, 2022 SCC OnLine Mad 102 in support of this contention. Counsel submitted that both the complaints were filed with applications for condonation of delay and when the ACMM took cognizance, clearly delay had been condoned, even if the offence was to be treated as not being of a continuing nature.
The High Court noted that in First Petition the Trial Court, while taking cognizance and issuing summons, observed that the “complaint was within limitation”. However, in the second petition, the impugned order does not even refer to the question of limitation. Significantly in both the complaints, the respondents have filed applications for condonation of delay. The observation of the ACMM in the order dated July 12, 2019 in a complaint case that the complaint was within limitation is against the record. Similarly, in another complaint case, the question of limitation was not even addressed by the Trial Court.
“It would have been quite simple for this Court to have considered the question of limitation, but for the fact that both the complaints were accompanied with applications for condonation of delay. While taking cognizance, the learned Trial Court has to apply its mind as to whether the complaint presented was within the period of limitation or not. The learned Trial Court must also consider whether there were sufficient grounds to condone the delay that may have occurred in the presentation of the complaint. But in the two cases at hand, clearly, the learned Trial Court overlooked the filing of the application for condonation of delay. The mind has not been applied to the question of condonation of delay and the complaint being within the period of limitation,” the Court observed.
Thus, the High Court set aside the impugned orders dated July 12, 2019 and remanded the matters back to the Trial Court to consider the applications for condonation of delay. The High Court also restrainted itself from discussing the question whether the offence complained of, is a continuing offence or not as these questions would be urged before the learned Trial Court for its consideration. The petitions were accordingly allowed by the single bench.