KRISHNA KHAITAN Vs. ADDITIONAL REGISTRAE OF COMPANIES

JUDGEMENT

(1.) BY this application dated 20th December, 2005 under section 482 of the Code of Criminal Procedure, prayer has been made for quashing of proceedings in Complaint Case No. C-1143 of 1998 pending before the learned Metropolitan Magistrate, 14th Court, Calcutta under section 628 of the Companies Act. Also is challenged the order passed by the learned Magistrate dated 26. 07. 2005 in connection with the proceeding.

(2.) THE Additional Registrar of Companies lodged petition of complaint against ten persons who are the petitioners herein alleging that the petitioners who are the Directors/officers of M/s. Khaitan Electricals Limited deliberately gave wrong statement in the balance sheet as at 31st March, 1995 in violation of the provision of section 628 of the Companies Act. During inspection of books of accounts and other records of the company carried out by an officer authorised by the Central Government under section 209a of the Companies Act, 1956, it was observed that the company has shown a sum of Rs. 922. 78 lacs as secured loan in the balance sheet of the company as at 31st March, 1995, although the sanction limit as on that day was rs. 345 lacs and accordingly a deliberate and false statement was made which is punishable under section 628 of the Companies Act. This contravention of the provision was brought to the notice of the accused persons by the complainant by the letter dated 25th September, 1997 to which reply was made by the accused company on 6th October, 1997 but the reply was not found to be satisfactory. The offence complained of came to the knowledge of the complainant for the first time from a letter dated 4th september, 1997 received from the office of the Regional Director, department of Company Affairs, Eastern Region, Calcutta.

(3.) IT is submitted by the learned Counsel for the petitioners that allegations in the petition of complaint do not disclose the essential ingredients of the offence, that the expression "any person" in section 628 of the Companies Act, (for short the Act) would mean the company only and not its Directors and in view thereof no prosecution could be launched against the Directors/ petitioners, and that the prosecution has been launched against the petitioners on an inferential basis and do not connect the petitioners with the alleged offence. It has further been submitted by the learned advocate for the petitioner that section 628 of the Act makes that person liable who makes a false statement in any material particular knowing it to be false or which omits any material fact knowing it to be material. Understandably, the false statement in any material particular has to be in connection with any return, report, certificate, balance sheet, prospectus, statement or other document required by or for the purpose of any of the provision of the Act. Therefore, it is that person who makes allegedly a false statement in material particular knowing it to be false or omits any material fact knowing it to be material that can be charged with criminal liability and not all the persons who are on the Board of Directors of the company. Therefore, it is the identification of a person making false statement upon which a complaint can be lodged because all the Directors are not responsible for any wrong or misleading statement in the balance sheet and they do not have any mens rea in commission of the alleged offence. It is the Director who signed the statement can be held responsible for such alleged misleading statement with culpable intention. Thus, culpable intention of making a false statement is the gist of the offence. In the petition of complaint it has not been alleged as to how in the matter of submission of alleged false statement in the balance sheet all the petitioners who are said to be the Directors of the company are liable. Argument was also to the effect that wrong balance sheet is not necessarily a false balance sheet and cannot invite the penal offence of section 628 of the Act. There cannot be, argument runs, any vicarious liability in the commission of the alleged offence.