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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the complaint disclosed an offence under section 294(2) of the Companies Act, 1956 so as to justify cognizance and prosecution.
Analysis: Section 294(2) makes the appointment of a sole selling agent valid only if it is made subject to the condition that the appointment will cease to be valid unless approved in the first general meeting held after the appointment. The complaint did not aver that the appointment order or the resolution appointing the agent was made without incorporating that statutory condition. In the absence of such an essential allegation, the facts stated in the complaint did not constitute contravention of section 294(2). The court also noted that the contention based on limitation did not prevent examination of the complaint at the threshold, but the decisive defect was the failure to disclose the ingredients of the offence.
Conclusion: No offence was disclosed in the complaint, and cognizance taken on that basis was unsustainable. The complaint was liable to be quashed in favour of the petitioner.
Ratio Decidendi: Where the complaint does not contain the essential averment that the appointment under section 294(2) of the Companies Act was made subject to the statutory condition, no offence is disclosed and the complaint can be quashed in exercise of inherent jurisdiction.
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