2023 (10) TMI 1002 - HC - Companies Law

Petitions Dismissed: Criminal Proceedings Under Companies Act Continue; Industry Designation Issue to Be Addressed by Trial Court.

The petitions challenging the continuation of criminal proceedings for violations of the Companies Act, 2013, were dismissed. The court concluded that the ... Limitation under Code of Criminal Procedure - commencement of period of limitation - date of knowledge to the Registrar of Companies - offence under Section 148(8) read with Section 147 of the Companies Act, 2013 - applicability of Companies (Cost Records and Audit) Rules, 2014 - Rule 3 - quashing of complaint and remand for factual verificationLimitation under Code of Criminal Procedure - commencement of period of limitation - date of knowledge to the Registrar of Companies - Whether the complaints alleging non-filing of cost audit report for the financial year ending 31.03.2014 are barred by limitation - HELD THAT: - The court applied Sections 468-469 of the Code of Criminal Procedure and observed that the offence as alleged attracts one year limitation under Section 468(2)(b). Under Section 469, the period commences from the date the offence comes to the knowledge of the aggrieved person or police officer. The Registrar of Companies' show-cause/notice dated 14.06.2016 evidenced knowledge of the alleged non-filing; the date of sanction (03.10.2016) cannot be treated as the commencement of the limitation period. Excluding the day from which computation begins, a complaint filed on 30/31.05.2017 falls within the statutory period. The court therefore held that the ground of limitation is not made out and that continuance of the complaints cannot be quashed on the basis of being time-barred. [Paras 8, 9, 10, 11]Complaint held to be within limitation; petition attacking continuance on limitation grounds dismissed.Applicability of Companies (Cost Records and Audit) Rules, 2014 - Rule 3 - quashing of complaint and remand for factual verification - Whether the company's classification as 'Edible Oil Seeds and Oils (including vanaspati)' and the consequent applicability of Rule 3 can be tested in the quashing petition - HELD THAT: - The court noted the contention that seed-manufacturing companies are not listed under Rule 3 and that the companies before the court are seed manufacturers who recorded the industry as 'Edible Oil Seeds and Oils (including vanaspati)' for uploading documents. The High Court declined to undertake determination of this factual and technical classification issue in a petition for quashing. The court directed that the trial court should examine the circumstances under which the industry was so stated and determine applicability of the Rules and the legitimacy of the prosecution in the course of trial. No final finding was recorded on the merits of applicability; the matter was left for adjudication at trial. [Paras 12, 13, 14, 15]Challenge to applicability of Rule 3 and industry classification not decided; matter remitted to the trial court for factual consideration.Final Conclusion: All petitions challenging continuance of the complaints are dismissed; limitation objection is rejected and the question of industry classification under Rule 3 of the Companies (Cost Records and Audit) Rules, 2014 is remitted to the trial court for consideration. Issues involved:The judgment deals with the continuance of proceedings in Criminal Cases on the grounds of violation of Section 148(8) of the Companies Act, 2013, for failure to file Cost Audit Reports within the stipulated time, and the main issue questioned is the limitation period for filing the complaints.Issue 1: Limitation for filing complaintsThe petitions were filed questioning the continuation of proceedings in Criminal Cases for violation of the Companies Act, 2013. The complaints were filed on 31.05.2017, and the petitioners argued that the complaints were beyond the limitation period as they should have been filed from 01.10.2014 or 01.11.2014. The notice issued under Section 233B(11) of the Companies Act, 1956 was considered illegal as the provision had been repealed. The respondent contended that the complaints were filed within the time limit and that the trial court should determine if an offense was committed.Issue 2: Commencement of the period of limitationThe period of limitation for the offenses was discussed under Section 468 to 473 of the Code of Criminal Procedure. Since the punishment prescribed under the Companies Act was one year, the limitation period was one year under Section 468(2)(b) of the Cr.P.C. The commencement of the limitation period was considered to start from the date of knowledge to the Registrar of Companies, which was deemed to be 14.06.2016, the date on which the show-cause notice was sent to the accused company. The date of obtaining sanction could not be considered the date of knowledge of the offense.Issue 3: Interpretation of Rules for Cost Records and AuditThe petitioners argued that the company did not fall under Rule 3 of the Companies (Cost Records and Audit) Rules 2014 as a seed manufacturing company. However, since the company was mentioned under 'Edible Oil Seeds and Oils (including vanaspati)' in the industry column, the prosecution was initiated. The respondent acknowledged that seed manufacturing companies were not covered under Rule 3 but proceeded with prosecution based on the company's industry designation.In conclusion, the petitions were dismissed as the complaints were filed within the limitation period. The issue of the company's industry designation could only be raised before the trial court. The trial court was directed to consider the grounds raised in the applications, particularly regarding the industry designation, as no finding was given on this matter.