ASSISTANT REGISTRAR OF COMPANIES Vs. H C KOTHARI

JUDGEMENT

(1.) THIS appeal against the acquittal is filed by the Assistant Registrar of Companies, Madras 6, challenging the acquittal, of the respondents, tried by the Additional Chief Metropolitan Magistrate-Economic Offences-II, Egmore, Madras, in C. C. No. 126 of 1985, for an offence under section 372(2) and (4) read with section 374 of the Companies Act, 1956. The appellant filed the complaint against the respondents for the above offence on the allegation that they were the directors of Investment Trust of India Limited (hereinafter referred to as "the company") at the relevant time and an inspection by the Deputy Director (Inspection) attached to the office of the Regional Director, Company Law Board, Madras, made under section 209A of the Companies Act (hereinafter referred to as "the Act") revealed that, during the financial years 1980, 1981 and 1982, the investments made by the company in the shares of other bodies corporate, was in excess of the 30 per cent. limit prescribed under section 372(2) and the approval of the Central Government and the required resolution under section 372(4) of the Act had not been obtained. After issue of show-cause notices, the complaint was filed. During the trial, on behalf of the prosecution, the Inspecting Officer was examined as PW-1 and a Senior Technical Assistant in the office of the Registrar of Companies, Madras, was examined as PW-2.

(2.) THE printed balance-sheets for the years 1980, 1981 and 1982 were marked as exhibits P-1 to P-3 respectively. THE letter dated August 24, 1984, from the Regional Director, Company Law Board, Madras, to the Registrar of Companies, Madras, was marked as exhibit P-4 and the copy of the show-cause notice sent to the company and its directors as exhibit P-5 and the reply, covering letter, further replies and covering letters as exhibits P-6 to P-10, and the printed copy of memorandum and articles of association of the company as exhibit P-11.THE respondents, when questioned, denied having committed the offence and claimed that their company was an investment company. Though no defence witness was examined, the office copy of the reply sent by the company to PW-1's letter dated August 31, 1983, was marked as exhibit D-1 and the letter dated January 6, 1982, sent by the Registrar of Companies, Madras, to the company was marked as exhibit D-2. THE learned Magistrate acquitted the respondents on the ground that the prosecution was barred by limitation and that the company was an investment company within the terms of section 372(10) and as such the limitation regarding the investment would not apply to the company. Aggrieved with the acquittal, the complainant has filed this appeal.

(3.) THE enlargement of the objects clause of the memorandum is to empower the company to undertake certain other activities like hire-purchase, leasing, etc. Investment in shares and securities continued to be the main object and exhibits P-1 to P-3 and also the other records of the company proved that this was so. Learned counsel further urged that income from investments was not the real test and that the real test would only be the extent of investment made. Learned counsel, therefore, justified the acquittal. THE question that arises for consideration is whether the acquittal of the respondents by the learned Magistrate can be sustained. It is seen that respondents Nos. 4 and 5 have since died and the charge abates as against respondents Nos. 4 and 5. This appeal is dismissed against them on the above ground. Taking up the first point, namely, limitation, we find that the offence under section 372 read with section 374 of the Act is punishable only with fine and as such, under section 468(2)(a), the period of limitation is six months. THE relevant part of section 469(1), Criminal Procedure Code, relating to the commencement of the period of limitation is as follows: