SUDHIR RAI Vs. REGISTRAR OF COMPANIES

JUDGEMENT

(1.) This application has been filed under Section 633(2) of the 1956 Act.

(2.) The case of the petitioner is that on the basis of the complaint filed by one of its ex-Directors a show cause notice was issued. When it was brought to the notice of the ROC that the complaint had been filed to pressurise conciliation in favour of the complainant as a dispute was under consideration by a mediator or conciliator, the proceeding initiated was dropped. On 11th October, 2007 information and explanation was sought on the basis of inspection made under Section 209A of the 1956 Act. A reply was given on 19th November, 2007. The said reply was found to be unsatisfactory and resulted in issuance of a show cause notice dated 12th May, 2007 and 27th May, 2009. An extension of time was sought to give reply but when no extension was granted C.P.217 of 2008 was filed wherein an order was passed on 16th June, 2008 extending the time to file the reply to the show cause notice issued on 12th May, 2008. Three sets of show cause notices have been issued. The first set of show cause notice was issued on 12th May, 2008 under Sections 209(3)(b), 217(3), 297, 209(1) and 292(1)(e) of the 1956 Act. Time was sought for filing reply. Without granting time as sought a second set of show cause notice was issued on 27th May, 2008 under Sections 209(3)(b), 217(3), 297, 209(1) and 292(1)(e) of the 1956 Act which could not have been issued. In fact, on the basis of an inspection made queries were raised on 11th October, 2007 to which a reply was given on 19th November, 2007. The said reply was also not considered prior to issuance of the second set of show cause notice. Pursuant to the reply filed the respondent authorities were to consider such reply and no step was to be taken during the pendency of hearing so also for a fortnight after receipt of order by the applicant therein. A hearing was undertaken. Without passing any order on the show cause notices issued on 12th May, 2008 and 27th May, 2008 by the Central Government two further show cause notices were issued on 2nd February, 2009 under Sections 295 and 299 of the Companies Act, 1956. By letter dated 16th February, 2009 a reply has been given thereto and without considering the same under cover of letter dated 20th February, 2009 the petitioners have been informed that pursuant to the hearing held on 20th August, 2008 the authorities by letter dated 2nd December, 2008 issued instruction to launch prosecution for violation of Sections 209(3)(b), 217(3), 209(1) and 292(1)(e) of the 1956 Act. It was also decided not to proceed against the company in respect of show cause notice issued under Section 297 of the 1956 Act. In the show cause issued under Section 209(1) of the 1956 Act no allegation has been made against the company. Therefore, the said show cause notice is bad. In the show cause notice dated 2nd February, 2009 loan aggregating to approximately Rs.4 lakhs has been show to have been given in the financial year 2006- 2007. The show cause notice of 2nd February, 2009 is based on the show cause notice of 12th May, 2008 and without disposing of the show cause notice of 12th May, 2008 so also 27th May, 2008 the show cause notice of 2nd February, 2009 could not have been issued.

(3.) Similarly on 12th May, 2008 a show cause notice was issued under Section 209(3)(b) and 217(3) of the 1956 Act. The said issue was dealt by the company in Clause 10 of its reply dated 19th October, 2007. The said has also not been considered by the Central Government and in total non-application of mind has directed launch of prosecution under Sections 209(3)(b) and 217(3) of the 1956 Act by communication dated 20th February, 2009.