Sujani Textiles Private Ltd. and Another vs Assistant Registrar of Companies

Suryamurthy, J.—This is a petition to quash the proceedings in C.C. No. 294 of 1978 on the file of the court of the Judicial First Class

Magistrate, Coimbatore.

The learned counsel for the petitioner, Mr. Navaneethakrishnan, says that he has nothing to say by way of arguments in support of this petition,

and, therefore, I have not had the benefit of listening to his erudite arguments in this case. Obviously, this petition has been filed frivolously and

vexatiously with a view to protract the proceedings and gain breathing time for the attempt the petitioners are said to be making to get an

exemption from the operation of Section 58A(4) and 58A(5) of the Companies Act (which shall hereafter be referred to as ""the Act""), under

which this complaint has been filed. The learned counsel for the petitioners, who kept us waiting for about nearly 40 minutes before making his

appearance, wants this petition to be posted to another date for the purpose of consulting his clients and withdrawing the petition. However, having

regard to the importance of the question raised in this petition and the possibility of similar petitions being filed merely for the purpose of protracting

the proceedings in the trial courts, it is necessary to decide the question on merits.

The criminal complaint has been filed against the petitioners herein by the Assistant Registrar of Companies, Madras, u/s 58A(4) and 58A(5) of

the Act read with Section 200 , Cr.P.C. The first petitioner herein, Sujani Textiles P. Ltd., having its registered office at Senthottam, Sowripalayam

Post, Coimbatore, is a company within the meaning of the Indian Companies Act, incorporated on January 25, 1956, as a public limited company.

The first accused (who shall hereafter be referred to as "" the company "") subsequently became a private limited company on and with effect from

April 3, 1956, with its registered office at Senthottam, Sowripalayam Post, Coimbatore. The second petitioner herein, viz., Mrs. N. Savithri, is the

managing director of the company. A-3 to A-6 in the case, who are not parties to this petition, are the directors of the company. The company has

filed its balance-sheet as on December 31, 1973, December 31, 1974, and December 31, 1975, in the office of the Assistant Registrar of

Companies, Madras, from which it would appear that the paid up capital on December 31, 1973, was Rs. 4,04,000, on December 31, 1974, Rs.

4,04,000 and on December 31, 1975, Rs. 4,04,000, and free reserves on the aforesaid three dates, respectively, were Rs. 1,86,523, Rs.

1,95,813 and Rs. 89,083. From the return of deposits filed by the company as on March 31, 1976, as required under Rule 10 of the Companies

(Acceptance of Deposits) Rules, 1975, it appears that the deposits covered under Rule 3(2)(i) of the said Rules amounted to Rs. 1,007 thousands

and the deposits renewed during the year, viz., renewal of existing deposits as per company''s letter dated May 27, 1977, amounted to Rs. 912

thousands. As Rs. 16,000 was repaid from out of the amounts deposited prior to the period, the balance of deposits outstanding at the end of the

year was a sum of Rs. 991 thousands.

The total amount of deposits repayable during the year was Rs. 90,000. Thus, the deposits covered under Rule 3(2)(ii) are in excess of 25% of

the aggregate of the paid-up capital and free reserves less accumulated losses. The company renewed deposits to the tune of Rs. 9,11,550 during

the period from April 1, 1975, to March 31, 1976, despite the fact that the existing deposits amounting to Rs. 10,07,500 were already in excess

of the limits laid down under Rule 3(2)(ii) of the Rules.

The contention of the complainant was that as the company had renewed deposits in contravention of Section 58A of the Act and the relevant

rules made u/s 58A(1) of the Act, the company ought to have repaid the deposits within 30 days from the date of acceptance of such deposits as

required u/s 58A(4) of the Act. The company has failed or omitted to make repayments of all the excess deposits received by it in contravention of

Section 58A(4) of the Act within 30 days from the date of acceptance of such deposits, Therefore, the complaint was filed alleging that the

company has committed an offence u/s 58A of the Act, punishable u/s 58A(5)(a) of the Act. A-2 is the managing director of the A-1 company

and A-3 to A-6 are the directors who in terms of Section 2 (30) of the Act are officers of the company. It is the responsibility of A-2 to A-6 to

ensure that the company does not accept any deposit in excess of the limit prescribed under the Companies (Acceptance of Deposits) Rules,

1975, and where any deposit is accepted by the company in contravention of the aforesaid Rules, it is the responsibility of the office bearers to

repay such deposit within 30 days from the date of acceptance of such deposit. As A-2 to A-6 have failed to make repayment of the deposits as

required u/s 58A(4) of the Act, they are alleged to have rendered themselves liable for punishment u/s 58A(5)(b) of the Act.

To quash these proceedings, the first two accused have filed this petition contending that no fresh deposits were received as alleged by the

complainant and that only the old deposits were renewed. It is further contended that the prosecution is barred by limitation. There is no force in

the first contention, because when the deposits matured prior to the relevant date or even thereafter, the amounts should have been repaid to the

depositors. Instead of repaying the amount, the petitioners have kept the amount and have issued fresh deposit receipts. This renewal amounts to

receiving fresh deposits. The word "" renew "" also means ""to acquire again"". Therefore, the renewal amounts to receiving fresh deposits within the

meaning of Section 58A of the Act. The petitioners are, therefore, guilty of an offence u/s 58A(4) punishable u/s 58A(5)(b) of the Act. Since the

punishment for an offence punishable u/s 58A(4) read with Section 58A(5) of the Act is more than three years, and also fine, the prosecution is not

barred by reason of the provision''s of Section 468(c) of the Code of

Criminal Procedure. Having regard to the gravity and the nature of the offence committed, I hope that adequate sentence would be awarded if

the case ends in conviction.

It is contended by the learned counsel for the petitioners that the petitioners are trying to get exemption u/s 58A(8) of the Act and that, till then,

this petition may be adjourned. There is no certainty that any such exemption will be granted. The petitioners cannot use this court as a shock

absorber or insulator between the prosecution of the case and the grant of exemption by the Government. I place on record my deep regret that

this petition should have been filed merely for the purpose of gaining time.

There is no merit in this petition, and it is, therefore, dismissed with a direction to the trial court to expedite the trial of the case and dispose of

the same. The petitioners shall pay the costs of the Government counsel in the instant case. Costs of the Government counsel, Rs. 750.