MOOL CHAND GARG, J.(ORAL)
1. The short point involved in this case is as to whether the complaint filed by the respondents
against the petitioners for making a mis-statement in a prospectus and for making a false statement
in the prospectus offence punishable under Section 63 and 628 of the Companies Act, 1956 is
within limitation. The relevant paragraphs of the complaint are as follows:
2. That No.1 and 3 being signatories to the prospectus dated 11.04.1997 are responsible for
conduct of affairs of the company at the relevant point of time and are, therefore, responsible for
compliance with the provisions of Section 63 and 628 of the Companies act, 1956. Copy of the
prospectus regarding the proof of directorship of the company being the person who authorized the
issue of the prospectus is marked as Annexure II to the complaint.
3. That the company, in question, in terms of Section 60 of the Companies Act 1956 filed the
prospectus with the office of the complainant for raising money from the public/primary market
and the said prospectus was registered by the office of the complainant.
6. That show cause notice dated 21.05.2002 to the said contravention was thereafter issued to
the Accused which is marked as Annexure-4 to the complaint and reply of the company to the said
show cause notice is marked as Annuexure-5.
7. That the complainant most respectfully submits that the reply to the said show cause notice
was thereafter forwarded to the Authorities concerned and accordingly in the absence of any
communication from the Department of Company Affairs, Shastri Bhawan, New Delhi, the
complainant could not have filed the present complaint. The Department vide its letter dated
11.11.2003 directed the Regional Director (NR), Kanpur to advise the office of the complainant to
file the present company who in turn by letter dated 20.11.2003 advised this office to file the
present complaint. Copies of the aforesaid letters are marked as Annexure-6 & 7 respectively. The
provision of Section 468 Cr.P.C. are, therefore, not applicable to the present complaint.
2. The complaint has been filed only on 14.01.2004. According to the petitioners this
complaint has been filed by the petitioner for making a mis-statement in the public prospectus
which was filed by the petitioners on 11.04.1997 is barred by limitation. It is submitted that the
punishment for making a mis-statement in a prospectus is punishable under Section 63 of the
Companies Act which provides punishment of two years. The said Section for the sake of
reference is reproduced hereunder:
63. Criminal liability for misstatements in prospectus:-(1) Where a prospectus issued after the
commencement of this Act includes any untrue statement, every person who authorised the issue of
the prospectus shall be punishable with imprisonment for a term which may extend to two years, or
with fine which may extend to 1[fifty thousand rupees], or with both, unless he proves either that
the statement was immaterial or that he had reasonable ground to believe, and did up to the time of
the issue of the prospectus believe, that the statement was true.
(2) A person shall not be deemed for the purposes of this section to have authorised the issue of a
prospectus by reason only of his having given--
(a) the consent required by section 58 to the inclusion therein of a statement purporting to be made
by him as an expert, or
(b) the consent required by sub-section (3) of section 60.
3. Section 628 of the Companies Act which is the other provision for which the petitioners are
sought to be prosecuted also provided punishment of two years only. The said provision also reads
628. PENALTY FOR FALSE STATEMENTS:If in any return, report, certificate, balance sheet,
prospectus, statement or other document required by or for the purposes of any of the provisions of
this Act, any person makes a statement -
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material;
he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a
term which may extend to two years, and shall also be liable to fine.
4. It is submitted by the petitioners that for any offence punishable for up to two years the
period of limitation is only three years as per the provisions of Section 468 of the Cr.P.C. As such
the complaint which has been filed after seven years of the filing of the prospectus is barred by
5. The petitioners have also relied upon a judgment delivered by this Court in
Crl.M.C.1777/2005 titled as Sunair Hotels Ltd. and Anr. Vs. The Registrar of Companies and Anr.
decided on 18.03.2009 wherein in a similar circumstance also a complaint was filed beyond period
of limitation, this Court has held:
6. Section 374 of the Companies Act reads as under:
374 - Penalty for contravention of section 372 or 373:- If default is made in complying with the
provisions of1[section 372 [excluding sub-sections (6) and (7)] or section 373], every officer of the
company who is in default shall be punishable with fine which may extend to2[fifty thousand
7. Similarly, it will also be appropriate to take note of Section 468 of Cr.P.C.
468. Bar to taking cognizance after lapse of the period of limitation.
(1) Except as otherwise provided elsewhere in this Code, no court, shall take cognizance of an
offence of the category specified in sub-section (2), after the expiry of the period of limitation.
(2) The period of limitation shall be-
(a) Six months, if the offence is punishable with fine only;
(b) One year, if the offence is punishable with imprisonment for a term not exceeding one year;
(c) Three years, if the offence is punishable with imprisonment for a term exceeding one year but
not exceeding three years.
1[(3) For the purposes of this section, the period of limitation, in relation to offences which may be
tried together, shall be determined with reference to the offence which is punishable with the more
severe punishment or, as the case may be, the most severe punishment.]
It was further held:
8. In view of the aforesaid it is apparent that the limitation to take cognizance of the offence
alleged to have been committed by the petitioner expired long ago before the filing of the compliant
which has been filed sometimes in 2004.
9. The only explanation given by the respondents to justify the delay is that the sanction for
lodging the prosecution against the petitioner company was required to have obtained prior to the
filing of this complaint which was received from the Department of Company Affairs, Shastri
Bhawan, New Delhi. They have also relied upon the provisions of Section 470(3) of the Code of
Criminal Procedure and submits that in the circumstances, the period taken by them in obtaining
the prior sanction which they say has to be excluded from the period of limitation as provided
under Section 468 of the Cr.P.C. Since the sanction was received only on 13.04.2004 and,
therefore, filing of the complaint within 6 months thereafter is justified and brings the complaint
10. Coming to the judgments which have been relied upon by the petitioner I find that in the
case of Vinod Kumar Jain (supra) it has been held:
(4) The petitioner appeared in the trial Court in obedience to the process issued to him but he has
challenged the legality and validity of the summoning order through this petition.
(5) The learned counsel for the petitioner has at the outset assailed the cognizance of the complaint
by the learned Additional Chief Metropolitan Magistrate on the ground that the complaint was
hopelessly barred by time on the date it was presented and the learned Magistrate could not take
cognizance of the same without first condoning the delay as envisaged in Section 473 of the Code
and that too after notice to the petitioner. Hence, the impugned order, according to him, is vocative
of principles of natural justice. Moreover, it betrays total non-application of judicial mind with
regard to the facts spelt out by the respondent-complainant in the application made by him under
Section 473 of the Code for condensation of delay. As pointed out by him, the cryptic order" and
find prima facie grounds to proceed against the accused under Section 473 Criminal Procedure
Code .......", does not disclose whether the learned Additional Chief Metropolitan Magistrate
condoned the delay and if so, on what ground.
(6) SUB-SECTION (1) of Section 468 of the Code lays down that except as otherwise provided
elsewhere in the Code, no court shall take cognizance of an offence of the category specified in
Sub-section (2) thereof after the expiry of the period of limitation prescribed in clauses (a), (b) &
(c) of the Sub-section. Obviously the bar of limitation operates before the court takes cognizance of
an offence. Under clause (a). Sub-section (2) of Section 468, the period of limitation is six months
if the offence is punishable with fine only as is admittedly the position in the instant case. Section
469 of the Code prescribes the terminus a quo for the commencement of period of limitation. It is
the date of the offence or where the commission of the offence was not known to the person
aggrieved by the offence, the first day on which such offence cones to the knowledge of such
person whichever is earlier. In the instant case, the contention of the respondent-complainant is that
he came to know of the commission of offence on 24th January 1981 when he perused the report of
the Inspecting Officer Shri O.P. Chadha. Obviously, thereforee, the complaint was hopelessly
barred by time on the date of its institution.
(7) Section 473 of the Code, however, provides that notwithstanding anything contained in the
foregoing provisions the court may take cognizance of an offence after the expiry of period of
limitation provided thereforee if it is satisfied on the facts and in the circumstances of the case that
(i) the delay has been properly explained; or that (ii) it is necessary so to do in the interests of
(8) It is thus manifest that if a complaint is prima facie barred by time when it is filed, it becomes
necessary for the prosecuting agency to explain the delay and seek condensation of the same.
Unless the delay is condoned the court cannot take cognizance of the complaint. In other words, the
Magistrate has to apply his mind to the question of limitation at the pre-cognizance stage and
satisfy himself that delay has been properly explained or that it is necessary to condone the delay in
the interests of justice. The Magistrate cannot hasten to issue the process without first recording his
satisfaction that the delay was satisfactorily explained to him or that he was of the view that the
condensation of delay was in the interests of justice. It 19 highly doubtful that the court can
condone the delay and thus extend limitation subsequent to the taking of cognizance of the offence.
Of course, the condensation of delay may be implied from the act of the Magistrate in taking
cognizance after the expiry of the period of limitation and proceeding with the case but the order
must be clear and categorical in this respect. He has no power or authority to condone the delay
provisionally or ex facie as has been seemingly done in the instant case.
(9) In State of Punjab v. Sarwan Singh, AIR 1981 SC1054, the accused Sarwan Singh was
convicted of an offence under Section 406, Indian Penal Code, by the trial Court. However, on
appeal having been preferred by him, the High Court set aside his conviction and acquitted him
mainly on the ground that the prosecution launched against him was clearly barred by limitation
under sections 468 & 469 of the Code. The State went in appeal by special leave to the Supreme
Court but the same was dismissed with the following observations which are very pertinent to
"The object of Criminal Procedure Code in putting a bar of limitation on prosecutions was clearly
to prevent the parties from filing cases after a long time, as a result of which material evidence may
disappear and also to prevent abuse of the process of the court by filing vexatious and belated
prosecutions long after the date of the offence. The object which the statute seeks to subserve is
clearly in consonance with the concept of fairness of trial as enshrined in Article 21 of the
Constitution. It is, thereforee, of the utmost importance that any prosecution, whether by the State
or a private complainant must abide by the letter of law or take the risk of the prosecution failing on
the ground of limitation."
(10) Obviously an accused person acquires a valuable right the moment his prosecution is barred by
limitation. Hence, that right cannot be taken away except in accordance with the provisions of law.
It is, therefore, imperative for the court taking cognizance of the offence to apply its judicial mind
as to whether the prosecution has satisfactorily explained the delay in launching prosecution at the
pre-cognizance stage i.e. when the Magistrate applies his mind for the purpose of proceeding under
Section 200 and the succeeding Sections in Chapter 15 of the Code. Since the discretion vesting in
the Magistrate to condone the delay or not has to be judicially exercised, the principles of natural
justice require that the accused must be afforded an opportunity before he is called upon to face the
prosecution in a time barred matter. As observed by a Division Bench of this Court in State ( Delhi
Administration) v. Anil Puri and others ILR 1979 Delhi 350
6. In the present case, the respondents have submitted that it is only when a balance sheet was
filed by the petitioners for the year ending 31.03.2001 that they came to know that the statement
made in the prospectus was not correct and accordingly they gave a show cause notice which was
given on 21.05.2002 and then they have filed a complaint dated 14.01.2004. It is submitted that the
delay had been caused because of obtaining sanction etc. from the department concerned.
7. Even if one takes the case of the respondents at the highest and apply the provision of
Section 473 of the Cr.P.C. to the facts of this case, then also once the respondents having come to
know about the violation, i.e, on filing of the balance sheet, no where it is stated as to when the said
balance sheet was filed, it is also not stated as to whether prior to 31.03.2001 any balance sheet was
filed by the petitioner or not and in case such balance sheet was filed then what was the status
shown in that balance sheet. It is hard to believe that the petitioner had not filed any balance sheet
prior thereto though balance sheet as per the petitioners were filed on year to year basis. Moreover,
it is nowhere stated in the complaint as to from which date the limitation starts so as to bring the
complaint within limitation. As a matter of fact, the averments made in the response by the
respondents are not even forming part of the complaint.
8. Thus, even the averments made in the complaint are per se false to the knowledge of the
respondents and therefore the plea taken by the respondents that this is a case where neither there
was any continuing wrong and that the limitation period was continuing till the respondents filed
the complaint cannot be sustained. Even otherwise the law has been already discussed by this
Court in the judgment quoted above. No contrary judgment has been cited.
9. Taking into consideration that the prospectus in this case was filed on 11.4.1997, filing of
the complaint in this case in the year 2004 cannot be justified at all. Thus, the complaint as well as
the summoning order issued in this case is set aside and the complaint filed by the respondents is
quashed. Consequently, all the proceedings emanating therefrom are hereby quashed.
10. Petition stands disposed of.
MOOL CHAND GARG,J
MAY 05, 2009
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