NEPC INDIA LIMITED Vs. REGISTRAR OF COMPANIES

JUDGEMENT

(1.) FOR the The petitioners in E. O. C. C. No. 9 of 1997 on the file of the Additional Chief Metropolitan Magistrate, Economic Offences, egmore, have filed Crl. O. P. No. 1121 of 1999, The petitioners in E. O. C. C. No. 461 of 1998, the petitioners in E. O. C. C. No. 455 of 1998, the petitioners in e. O. C. C. No. 301 of 1998 and the petitioners in E. O. C. C. No. 167 of 1998 on the file of the same court have preferred the Criminal Original Petitions Nos. 1114, 1119, 1120 and 2220 of 1999 respectively under section 482 of the criminal Procedure Code for quashing the proceedings pending against them. The case in brief for disposal of all the petitions is as follows : The petitioners in Crl. O. P. No. 1121 of 1999 are accused nos. 2, 3, 4, 6 and 8 in E. O. C. C. No. 9 of 1997. The respondent preferred a complaint against them under section 207 of the Companies Act, 1956, on the allegation that one S. R. Gupta, through a letter dated May 10, 1996, complained to the office of the Regional Director, Department of Company affairs, Madras , stating that the company had declared dividend in the annual general body meeting held on September 19, 1995, and he has received the dividend warrant on april 15, 1996, after five months. The company has become liable to pay the dividend to the shareholders whose names appear in the register of members on the date of the declaration of the dividend. The dividend warrants have to be despatched to the shareholders within 42 days from the date of declaration. It is further stated that they had not despatched the dividend warrants till April 25, 1996. The respondent issued a show-cause notice on September 17, 1996. The complaint so far as the petitioners are concerned is an abuse of the process of law and court. The petitioners have not adopted delaying tactics and it is only due to financial condition and for the reasons that the company has not received monies from its debtors, the company could not make any payments of the dividends within 42 days. The petitioners have despatched the entire dividends on March 18, 1996. The company had also approached the High Court under section 391 of the Companies Act for a scheme for (arrangement ") unpaid dividend and the same was approved by the Company Law Board. The petitioners in crl. O. P. No. 1114 of 1999 are accused Nos. 1 to 4 in C. C. No. 461 of 1998. The respondent preferred a complaint against them under section 17 read with section 291 of the Companies Act, on the allegation that the company cannot carry on any activities which are not covered under the objects of its memorandum of its association and that the company has carried on the business of air taxi operations without necessary provisions with effect in the memorandum of association. Section 17 of the Companies Act deals with amendment of objects of a company. The petitioners have only carried on the business of air taxi operations pursuant to its objects and the petitioners have not committed any offence. In the complaint, it is alleged that they have carried on the business of air taxi operations without necessary provisions. Section 629a of the companies Act stipulates that in case of contravention under provisions of the act for which, no specific punishment is provided elsewhere in this Act, the company and every officer of the company shall be punishable with fine which may extend upto Rs. 500 and where the contravention is continuing with a further fine which may extend to Rs. 50 for everyday. The complaint itself alleged that they came to know about the alleged default only on February 24, 1998, whereas the respondent has specifically stated that the show-cause notice was issued on April 17, 1997. They had obtained due permission from the respondent before approaching the public for funds for diversifying into this operation and the prospectus had been approved by the respondent. Only subsequent to the due clearance by the respondent, the petitioners had diversified into this activity. The petitioners in Crl. O. P. No. 1119 of 1999 are also accused in C. C. No. 455 of 1998. In this case-also, the respondent preferred a complaint under section 207 of the Companies Act on the allegation that S. Sivasubramanian, through a letter dated August 2, 1996, complained to the office of the Regional Director, Department of Company Affairs, Madras, stating that the company had declared dividend in the annual general body meeting held on April 30, 1996, and he has received the dividend warrant on August 28, 1996, after 119 days from the date of declaration instead of receiving the same on or before June 10, 1996. The petitioners in Crl. O. P. No. 1120 of 1999 are accused nos. 1 to 3 in E. O. C. C. No. 301 of 1998. The respondent preferred a complaint under section 207 of the Companies Act on the allegation that the dividend declared on the annual general body meeting held on August 14, 1996, has not been received. Even in the complaint, it is stated that the dividend warrants have to be despatched to the shareholders within 42 days from the date of declaration. It is further stated that they had not despatched the dividend warrant till September 26, 1996. The respondent issued a show-cause notice on september 9, 1997.

(2.) THE petitioners in Crl. O. P. No. 2220 of 1999 are accused nos. 1 to 3 in E. O. C. C. No. 167 of 1998. THE respondent preferred a complaint against them under section 209a of the Companies Act. According to the prosecution, the company has become liable to pay the dividend to the shareholders whose names appear in the register of members on the date of declaration of dividend and the dividend warrants have to be despatched to the shareholders within 42 days from the declarations THE complainant came to know about the default on September 8, 1997. On October 17, 1997, the accused filed a compounding application for violation of section 205a but, for the violation of section 207 , they have not given any satisfactory reply. THE complaint has been filed within the period of limitation on the ground that the instruction to launch prosecution was received-only an September 8, 1997, from the Regional director. On the other hand, the Central Government has approved a scheme of arrangement and this court had also sanctioned the scheme of arrangement. THE petitioners have also clarified that the non-payment of the dividend was due to inadvertence and was not intentional. THE respondent filed separate counters, alleging that the petitioners have carried out their air-taxi operations without suitably amending their articles of association and memorandum of association. THE said default was noticed on February 24, 1998, and instruction to prosecute was given to the Registrar of Companies. THE prosecution has been launched within one year from the date of instruction given to the Registrar of companies and, as such, the complaint is well within limitation. THEy have also filed petition for compounding admitting their guilt and, as such, the present applications for quashing are not maintainable'. THE provisions of section 207 of the Companies Act are mandatory. Once a dividend is declared, it has to be paid within 42 days from the date of declaration. THE question is not whether the dividend Warrants were despatched before the issue of show-cause notice. THE question is whether the dividend warrants were despatched within 42 days from the date of declaration. Heard learned counsel for both sides.

(3.) FOR the reasons stated above, Crl. O. Ps. Nos. 1114, 1119 and 2220 of 1999 are allowed and the proceedings in C. C. No. 461 of 1998, 455 of 1988 and 167 of 1998, pending on the file of learned Additional Chief metropolitan Magistrate, Economic Offences, Egmore, Madras, are liable to be quashed and, accordingly they are quashed. Crl. O. Ps. No. 1121 of 1999 and 1120 of 1999 are dismissed. It is, however, open to the petitioners to agitate the very same points before the trial court and the trial court is directed to consider the same and dispose of the case as expeditiously as possible. Consequently, connected criminal miscellaneous petitions are closed. .