C V SIVA PRASAD Vs. REGISTRAR OF COMPANIES

JUDGEMENT

(1.) The petitioner is the one and the same in all these three cases and he has filed these criminal petitions for quashing the proceedings. Criminal Petition No. 1711 of 1995 arises out of the proceedings in C.C. No. 64 of 1994 pending before the Special Judge for Economic Offences, Hyderabad. Criminal Petition No. 1712 of 1995 arises out of the proceedings in C.C. No. 66 of 1994 and Criminal Petition No. 1713 of 1995 out of the proceedings in C.C. No. 68 of 1994, pending before the same court. The petitioner is accused no. 5 in C.C. No. 64 of 1994, and accused No. 2 in C.C. No. 66 of 1994, and C.C. No. 68 of 1994. It is relevant to be noted that in C.C, No. 64 of 1994, Andhra Bank Financial Services Limited is accused No. 1 represented by Sri C.V. Siva Prasad, accused No. 5 (hereinafter referred to as "the lending company"). Accused Nos. 2 and 3 are the ex-chairman, accused No. 4, Y. Sundara Babu, is the ex-managing director, and accused No. 6 is another loanee company. In C.C. Nos. 66 and 68 of 1994, accused No. 1 is the ex-managing director and accused No. 2 is the managing director at the time of filing the complaint. Since common questions of fact arise, I am disposing of these petitions by this common judgment.

(2.) Admittedly, as per the complaint itself the petitioner was appointed as the managing director of the said financing company with the effect from 16/09/1992. These three cases are filed alleging that the company has committed offences under the different sections of the Indian Companies Act. C.C. No. 64 of 1994 was filed against the five accused persons alleging that the financing company as a lending company has advanced loans in excess of limits prescribed under the Central Government Notification No. G.S.R. 448(E), dated 17/04/1989 [See [1989] 65 Comp Cas (St.) 585] (the notification issued under section 370(1) of the Companies Act, 1956). According to the said notification, the maximum lending limit of the bank is 30 per cent. of the subscribed capital and free reserves, which comes to Rs. 1.5 crores. Accordingly, it is alleged that the financing company having lent the loan in excess of 30 per cent. without a resolution of the shareholders has committed an offence under section 370 of the Companies Act, 1956. It is further alleged that the accused persons being officers-in-default are liable to be punished under section 370 of the Companies Act. In paragraph (5) of the complaint it is stated that the subject offence in this matter is that during the period since commencement of business till 31/03/1992, the lending company had granted loans to various corporate bodies and as on 31/03/1992, the total amount of such loans granted and outstanding was Rs. 511.48 lakhs. It is also stated that from 1/04/1992, onwards the lending company continued to grant loans to the corporate bodies to the extent of Rs. 139.50 lakhs. On the basis of these allegations, it is prayed in the complaint that the accused shall be punished according to law being the "officers-in-default" during the relevant and material times of the subject of the offence.

(3.) C.C. No. 66 of 1994 was filed against accused Nos. 1 and 2 who are the ex-managing director and managing director at the time of filing of the complaint under sub-sections (7) and (8) of section 211 read with Schedule VI to the Companies Act, 1956, for failure to comply with the requirements of sub-sections (1) and (2) of the said section. In this complaint, it is alleged that on the basis of the inspection conducted by the officers of the Central Government from 25/04/1994, to 30/05/1994, it was disclosed that the balance-sheet and profit land loss account for the year ended 31/03/1992, did not show the true and fair view of the state of affairs as required under section 211 read with Schedule VI to the Act and such a balance-sheet was also contrary to the guidelines issued in pursuance of the circular issued in January, 1991. It is further stated in the complaint that the amounts should have been reflected in the profit and loss account and balance sheet as on 31/03/1992, and the actual liability outstanding as on 31/03/1992, and the outstanding liability under the STS scheme as on 31/03/1992, was Rs. 160.25 crores. It is further stated that the company should have disclosed the details of each and every purchase and sale of shares and bonds by way of schedule to the balance-sheet as on 31/03/1992. The company has not done so. Thus, the company has not complied with Part I, Schedule VI to the Companies Act. On the basis of these allegations, the complainant prays that accused Nos. 1 and 2, ex-managing director and the managing director, as on the date of filing of the complaint, shall be punished as the officers-in-default under section 211 (sub-sections (7) and (8) of the Act).