2012 (4) TMI 45 - HC - Companies Law

Proof of service of statutory orders is required to prosecute; absence of service and limitation led to quashing of summons.

Proof of service of statutory orders under Section 234 was found absent on the record and a reply did not constitute lawful acknowledgment, so prosecution ... Service of statutory notice under Section 234 of the Companies Act - Limitation for taking cognizance - Continuing offence versus once and for all offence - Exercise of inherent powers under Section 482 Cr.PC - Quashing of summoning orderService of statutory notice under Section 234 of the Companies Act - Summoning order - Statutory orders under Section 234 were not proved to have been served on the petitioner company and, consequently, the complaint was not maintainable. - HELD THAT: - The Registrar of Companies relied upon issuance of orders under Section 234 (1), 234 (3A) and 234 (4)(a) but produced no documentary proof of delivery or mode of service on the petitioner company. A mere earlier reply to an initial inquiry-letter could not be equated with acknowledgment of service of statutory orders required by law. Absence of evidence of service meant that the prosecution was initiated without giving the company the statutory opportunity to reply, rendering the complaint prima facie not maintainable. [Paras 8]Statutory orders under Section 234 were not shown to be delivered to the petitioner; complaint was prima facie not maintainable for want of service.Limitation for taking cognizance - Continuing offence versus once and for all offence - The cognizance taken by the Trial Court was time barred because the offence was not a continuing one and the limitation period commenced when the prosecuting agency gained knowledge of the offence. - HELD THAT: - The show cause notice was issued on 26.7.2005 while cognizance was taken on 11.9.2007. There was no bar in Section 234 requiring prior Central Government approval before initiating prosecution and no application for condonation of delay appeared on record. Relying on the established distinction, a continuing offence requires recurrence of non compliance; here the liability arose from a failure to comply which did not amount to repeated daily contraventions creating fresh offences. Consequently, the offence was not a continuing offence and the complaint was prima facie time barred. [Paras 9, 11]Cognizance was barred by limitation as the offence was not continuing and the complaint was filed beyond the permissible period without condonation.Exercise of inherent powers under Section 482 Cr.PC - Quashing of summoning order - This Court exercised its inherent powers under Section 482 Cr.PC to quash the summoning order against the petitioners in the interests of justice. - HELD THAT: - Although interference under Section 482 Cr.PC is to be sparingly used, the plenitude of the power permits intervention where there is apparent injustice or manifest error. Given the prima facie findings that statutory notices were not proved to be served and that the complaint was time barred, the circumstances justified exercise of the inherent jurisdiction at the summoning stage to prevent a manifestly unlawful prosecution. [Paras 6, 12]Petition allowed; summoning order quashed as against the petitioners in exercise of Section 482 Cr.PC.Final Conclusion: The petition was allowed: summons issued to the petitioners were quashed because statutory orders under Section 234 were not shown to have been served and the complaint was prima facie barred by limitation; the High Court exercised its inherent jurisdiction under Section 482 Cr.PC to prevent a manifestly unlawful prosecution. Issues: (i) Whether statutory orders under Section 234 of the Companies Act were served on the petitioners so as to constitute non-compliance; (ii) Whether cognizance taken by the trial court was barred by limitation and whether the alleged offence is a continuing offence attracting the exception to limitation.Issue (i): Whether statutory orders under Section 234 of the Companies Act were delivered to the petitioner company and thus the complaint was maintainable.Analysis: The record shows correspondence between the Registrar of Companies and the company, but there is no documentary evidence proving service or delivery of the statutory orders dated 19.04.2004, 16.06.2004 and 26.07.2005 on the petitioner company. A reply to an earlier letter does not amount to acknowledgement of receipt of statutory orders required by law. Proof of delivery of statutory orders is essential before alleging non-compliance and initiating prosecution.Conclusion: The statutory orders under Section 234 were not shown to have been delivered to the petitioner; the complaint was not maintainable on this ground. (In favour of petitioner)Issue (ii): Whether cognizance by the trial court was barred by limitation and whether the alleged offence is a continuing offence for limitation purposes.Analysis: The show cause notice was issued on 26.07.2005 while cognizance was taken on 11.09.2007. There is no record of any condonation of delay. The limitation period for taking cognizance commences when the prosecuting agency gains knowledge of the offence. The nature of the alleged offence was examined against the legal test distinguishing continuing offences from offences committed once and for all; the present liability stems from a failure to comply with a statutory requirement but is not a recurring daily offence after the initial default.Conclusion: The offence is not a continuing offence for limitation purposes and the complaint is prima facie time barred; cognizance taken by the trial court was barred by limitation. (In favour of petitioner)Final Conclusion: Both identified issues being decided in favour of the petitioners, the summoning order is quashed and the petition is allowed.Ratio Decidendi: Proof of service of statutory orders is a prerequisite to prosecute for alleged non-compliance under Section 234 of the Companies Act, and limitation for taking cognizance begins when the prosecuting agency acquires knowledge of the offence; an offence not shown to be continuing is time barred if cognizance is taken after the statutory limitation period without condonation of delay.