MISHRA DHATHU NIGAM LIMITED Vs. STATE

JUDGEMENT

(1.) are petitions filed by the petitioner-Company, a Government of India undertaking, for quashing the proceedings in S.T.C. Nos. 11 to 14 of 1995, on the file of the Special Judge for Economic Offences, Hyderabad, seeking prosecution of the company for the following offences launched under the Companies Act (for short "the Act") : ----------------------------------------------------------------------Case Offence Section under PunishmentNo. which complaint prescribed is filed----------------------------------------------------------------------STC 11 of 1995 Failure to comply Section 49(9) Fine up to with section 49(1)(a) Rs. 5,000 of the ActSTC 12 of 1995 Violation of section Section 629A Fine up to 292 r/w. article Rs. 500 85(XII) of the articles of associationSTC 13 of 1995 Violation of section do. do. 292(1)(d) of the ActSTC 14 of 1995 Violation of section do. do. 292(5)--------------------------------------------------------------------

(2.) The averments in the petitions are as follows : The Joint Director of Inspection in the office of the Department of Company Affairs, Ministry of Law, Justice and Company Affairs, Government of India (for short referred to as "the Department"), issued notice of inspection on 19/08/1994, under section 209A of the Act calling for certain particulars to which the petitioner gave a reply on 16/09/1994, furnishing all the particulars required. On 3/05/1995, the Registrar of Companies issued a show-cause notice alleging that in the meeting of the board of directors held on 20/07/1989, the managing director/director (finance) was authorised to deal with the surplus funds without specifying the total amounts up to which the funds may be invested and without indicating the nature of the investment, thus violating section 292(3) of the Act. It was also alleged that the company made investment in non-banking financial institutions as against the authorisation of the board of directors for investment in short-term deposits in public sector undertakings, financial institutions, Can Bank Mutual Funds, etc., thus violating section 292(1)(d) of the Act. It was also alleged that deposits in SBI Capital Markets Ltd. amounting to Rs. 735 lakhs and Rs. 1,965 lakhs in the years 1990-91 and 1991-92 respectively and of Rs. 310.55 lakhs in ANZ Grindlays Bank being in the nature of portfolio management scheme were not kept in the name of the company and there was no physical delivery of documents contravening section 49(1)(a) of the Act. It was also alleged that the funds of the company were invested without approval of the President of India as required by article 85(XII) of the articles of the company, thus violating section 292. The notice refers to offences for failure to comply with section 49(7) and section 211 which are not relevant for the purpose of these petitions. The company replied on 29/05/1995, denying the allegations and stating that the amounts were deposited as short term deposits for reasonable interest and cannot be termed as investments in the nature of portfolio management scheme, contemplated under section 292(3) of the Act. It was also stated that the deposits were authorised by the resolution of the board of directors passed on 20/07/1989, and that there is no provision in the Act to treat the short term deposits as investments. Evidently, not satisfied with the explanation of the petitioner, the Registrar of Companies has launched prosecution as stated above. The petitioner contends that even if the allegations in the complaints are taken as true, they do not constitute the offences alleged and that in any event, the complaints are barred by limitation under section 468(2)(a) of the Criminal Procedure Code, 1973 (for short "the Crl. P.C.").

(3.) Registrar of Companies has filed a counter contending that section 292 of the Act does not distinguish short-term deposits and long-term investments and the resolution passed by the board of directors on 20/07/1989, authorised the deployment of funds in short-term deposits only in public sector undertakings, financial institutions, Can Bank Mutual Funds, etc., and not investment in any non-banking financial institutions such as SBI Capital Markets Ltd., and ANZ Grindlays Bank, which is a foreign bank. The counter reiterates the allegations made in the notice. Regarding the limitation, it is contended that the Registrar of Companies had knowledge of the offence on 30/03/1995, when he received the communication dated 29/03/1995, from the Department and hence the complaints are within limitation of six months as per the provisions of section 468(2)(a) read with section 469(1)(b) of the Criminal Procedure Code, 1973.