1997 (8) TMI 539 - HC - Companies Law

Court quashes complaints against directors in corporate offences case, stressing need for specific allegations and evidence

The court found no prima facie case against the petitioners for alleged offences under the Companies Act and IPC. The complaints were quashed, emphasizing ... - Issues Involved:1. Offences under the Companies Act.2. Offences under the Indian Penal Code (IPC).3. Responsibility and liability of accused individuals and companies.4. Issuance and non-receipt of share certificates.5. Legal procedures and civil litigation.Issue-wise Detailed Analysis:1. Offences under the Companies Act:The petitions involve allegations of offences under the Companies Act, specifically Section 73 read with Section 123. The complaints are against a Private Limited Company (Accused No. 1) and a Public Limited Company (Accused No. 7), along with their directors. The court noted that Accused No. 1 acted as the Registrar to the issue, and thus, for offences under the Companies Act, Accused No. 7 and its directors (Accused Nos. 8 to 19) would be responsible. The court found that Accused Nos. 3 and 4, who are directors of Accused No. 1, could not be held responsible for the alleged offences under the Companies Act as they were not connected with Accused No. 7.2. Offences under the Indian Penal Code (IPC):The complaints also allege offences under Sections 197, 403, 421, 464, 466, 468, and 471 of the IPC. The court examined the applicability of Section 197, which pertains to issuing false certificates. The court found that the certificate in question, which stated the despatch of share certificates and other documents, did not meet the legal criteria for a certificate required by law to be given or signed. Furthermore, the court referenced a precedent from the Calcutta High Court, which held that a certificate must be admissible in evidence without proof to attract Section 197. Consequently, the court concluded that no offence under Section 197 was made out against the petitioners.3. Responsibility and Liability of Accused Individuals and Companies:The court emphasized the need for specific allegations against individuals to hold them liable. It referred to Section 5 of the Companies Act, which defines who can be considered an officer in default. The court found that the complaint did not specify that Accused Nos. 8, 9, 13, and 15 fell into any of the categories defined in Section 5. Thus, they could not be held responsible merely because they were directors. The court also cited a Supreme Court judgment, which held that proceedings against directors must be quashed if there are no clear allegations indicating their responsibility for the conduct of business or the alleged offences.4. Issuance and Non-receipt of Share Certificates:The complainants alleged that they did not receive their share certificates despite fulfilling all conditions for allotment. The court noted that the companies involved had initiated procedures for issuing duplicate share certificates, which were eventually deposited with the High Court Registry. The court found that the prompt response from the companies to issue duplicate certificates indicated their willingness to rectify the situation.5. Legal Procedures and Civil Litigation:The court observed that civil suits were also filed in relation to the non-receipt of share certificates. The civil suits sought cancellation of the licences of the companies and the public issue. The court noted that the civil litigation and the criminal complaints were interconnected, but the primary issue was the non-receipt of share certificates, which had been addressed through the issuance of duplicates.Conclusion:The court concluded that no prima facie case was made out against the petitioners for the alleged offences under the Companies Act and the IPC. The petitions were allowed, and the complaints and the process issued against the petitioners were quashed. The court emphasized the need for specific allegations and evidence to hold individuals liable for corporate offences.