Sanction under Section 197 CrPC barred prosecution of public servant-directors for alleged company filing defaults.

Previous sanction under Section 197 CrPC was required before prosecuting public servant-directors for alleged non-filing of balance sheets and profit and loss accounts under the Companies Act, because the alleged omission had a reasonable connection with their official duties and the complaint was instituted without sanction. The High Court treated the absence of sanction as a legal bar to continuation of the criminal proceedings against those directors and quashed the prosecution as against them. The company itself remained liable to be proceeded against for the statutory non-compliance.

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Issues: Whether sanction under Section 197 of the Code of Criminal Procedure, 1973 was necessary for prosecuting the public servant-directors for alleged default in filing the balance sheet and profit and loss account under the Companies Act, and whether the criminal proceedings were liable to be quashed as against them for want of sanction.

Analysis: The alleged default related to statutory filing obligations under the Companies Act, 1956. The Court found that the petitioners sought to be prosecuted as directors were not in office at the time of the alleged default and that the alleged omission was attributable to earlier lapses in preparation, audit, and filing of accounts. Applying the test of reasonable connection between the act complained of and discharge of official duty, the Court held that the prosecution of public servants in respect of such allegations required previous sanction. The complaint had been instituted without obtaining sanction, which constituted a legal bar to continuation of the proceedings against those petitioners. The Court also held that the company itself could still be proceeded against for non-compliance with the statutory requirements.

Conclusion: Sanction under Section 197 of the Code of Criminal Procedure, 1973 was required for the public servant-directors, and the proceedings against them were liable to be quashed for want of sanction. The prosecution against the company was permitted to continue.

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