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Issues: (i) Whether the complaint for contravention of section 372 of the Companies Act, 1956 was barred by limitation under the Criminal Procedure Code, 1973. (ii) Whether the company fell within the expression "investment company" in section 372(10) of the Companies Act, 1956 and was therefore exempt from the restriction in section 372(2).
Issue (i): Whether the complaint for contravention of section 372 of the Companies Act, 1956 was barred by limitation under the Criminal Procedure Code, 1973.
Analysis: The offence was punishable only with fine, so the limitation period was six months under section 468(2)(a) of the Criminal Procedure Code, 1973. The relevant date for commencement was the date when the offence came to the knowledge of the person aggrieved under section 469(1)(b). The balance-sheets for 1980, 1981 and 1982 were received by the Registrar on different dates, and their contents disclosed the alleged excess investment. Once those balance-sheets were received, the Registrar was deemed to have knowledge of the contents and of the offence. The prosecution could not postpone limitation by asserting lack of actual knowledge until the later inspection report.
Conclusion: The complaint was barred by limitation and this ground was decided against the appellant.
Issue (ii): Whether the company fell within the expression "investment company" in section 372(10) of the Companies Act, 1956 and was therefore exempt from the restriction in section 372(2).
Analysis: The statutory test was the principal business of the company, not the source of income. On the memorandum, the company's object remained acquisition and holding of shares, stocks, debentures and securities, and the balance-sheets showed substantial investments in shares during the relevant years. Although the objects clause had been enlarged to permit other activities such as hire-purchase and leasing, the acquisition of shares continued to be the principal business. The company therefore satisfied the description of an investment company and was entitled to the exemption under section 372(13).
Conclusion: The company was an investment company and this ground was also decided against the appellant.
Final Conclusion: The acquittal was upheld because both the limitation defence and the investment-company exemption were sustained.
Ratio Decidendi: For limitation under section 469(1)(b) of the Criminal Procedure Code, 1973, receipt of balance-sheets disclosing the offence can amount to knowledge of the offence, and a company is an investment company if its principal business is acquisition of shares and securities even if it has diversified into ancillary activities.
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