Statutory auditor prosecution fails without specific allegations or mens rea; vague complaints cannot sustain criminal proceedings.

A complaint by a Deputy Registrar was treated as maintainable because the term "Registrar" under the Companies Act includes a deputy registrar, and the proceedings were found not barred by limitation. However, the Court found no prima facie material showing that the statutory auditor knowingly made a false statement or omitted a material fact with fraudulent intent under Sections 129 and 448. It also held that vague and general allegations, especially where the company was not arraigned as an accused, could not sustain criminal prosecution against the auditor. The criminal proceedings were therefore quashed as oppressive and unwarranted.

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Issues: (i) Whether the complaint filed by the Deputy Registrar of Companies was maintainable under Section 439(2) of the Companies Act, 2013; (ii) whether the complaint was barred by limitation; (iii) whether the alleged contraventions under Sections 129 and 448 of the Companies Act, 2013 were prima facie made out against the petitioner; and (iv) whether the prosecution could continue against the statutory auditor in the absence of specific allegations and without the company being arraigned as an accused.

Issue (i): Whether the complaint filed by the Deputy Registrar of Companies was maintainable under Section 439(2) of the Companies Act, 2013.

Analysis: Section 439(2) restricts cognizance to complaints by the Registrar, a shareholder, a member, or a person authorised by the Central Government. The definition of "Registrar" in Section 2(75) includes a deputy registrar, and the complaint was filed by the Deputy Registrar in that capacity. On that basis, the complaint was held to be within the statutory competence contemplated by the Act.

Conclusion: The complaint was held to be maintainable.

Issue (ii): Whether the complaint was barred by limitation.

Analysis: The alleged defaults related to non-disclosure during the period of demonetization, and the complaint was lodged in November 2019. The Court treated the alleged conduct as falling within the framework of offences carrying punishment beyond the limitation bar under Section 468 of the Code of Criminal Procedure, 1973, and held that the proceedings were not time-barred.

Conclusion: The complaint was held not to be barred by limitation.

Issue (iii): Whether the alleged contraventions under Sections 129 and 448 of the Companies Act, 2013 were prima facie made out against the petitioner.

Analysis: The complaints mainly alleged non-disclosure in financial statements, but the Court found no specific material showing that the petitioner knowingly made a false statement or omitted a material fact with the requisite fraudulent intent. Criminal liability was not to be inferred merely from the petitioner's status as auditor, and the essential ingredients of the offence were not disclosed with sufficient particulars.

Conclusion: The alleged offences were not prima facie made out against the petitioner.

Issue (iv): Whether the prosecution could continue against the statutory auditor in the absence of specific allegations and without the company being arraigned as an accused.

Analysis: The Court found that the complaint was vague, general, and lacking in particulars against the petitioner. It also noticed that the company itself had not been arrayed as an accused, while the allegations were directed principally at the company's affairs. In these circumstances, continuation of the criminal proceeding was held to be oppressive and unwarranted.

Conclusion: The prosecution was held unsustainable and liable to be quashed.

Final Conclusion: The revisional applications succeeded, and the criminal proceedings arising from the two complaint cases were set aside in relation to the petitioner.

Ratio Decidendi: A criminal prosecution against a company officer or auditor under the Companies Act cannot be sustained in the absence of specific allegations showing the essential ingredients of the offence and the requisite mens rea, and vague or general accusations are insufficient to justify continuation of proceedings.

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