JUDGMENT - PARKAR S.S., J.:---This petition is filed under section 482 of the Cri.P.C. for quashing the complaint filed by the respondent No. 1 the Registrar of companies being C.C. No. 124/RC/93 in the Court of Additional Chief Metropolitan Magistrate, Esplanade, Bombay under the provisions of section 73(2-B) and (3) of the Companies Act, 1956. 2. The allegation in the complaint is that M/s. Mural India Limited, having its office at Dubash House, 15, J.N. Horodi Marg, Ballard Estate, Bombay 38, had issued prospectus dated 8-4-1994 for issued of its shares which were applied for subscription by the members of the public and though the applications were sent to the company along with the application money, the allotment letters were not issued nor application money was refunded to them within the prescribed period. The issue was opened on 5-5-1992 and was to be closed on 8-5-1992 but not later than 15-5-1992. It is further alleged that some of the subscribers had received allotment letters but did not receive the share certificates about which several complaints were received by the Registrar of companies and, therefore, the Registrar of companies issue show-cause notice dated 12-10-1993 to the company. Although in the complaint it is averred that the notice was not replied to by the company, the petition mentions that the notices were replied to on behalf of the company. Thereafter the present prosecution was lodged against not only the company but against the Managing Director. Company Secretary and other Directors of the Company. A copy of the complaint filed in the trial Court is annexed as Exhibit "D" to this petition. 3. The present petitioner was arraigned as accused No. 7. The title of the complaint itself mentions the accused No. 7 to be an alternate Director to one Dr. F. Hartmann who is a foreigner. The petitioner was appointed as an alternative Director on 26-2-1992 and as per the petition he had already resigned on 20-8-1993.
3. The present petitioner was arraigned as accused No. 7. The title of the complaint itself mentions the accused No. 7 to be an alternate Director to one Dr. F. Hartmann who is a foreigner. The petitioner was appointed as an alternative Director on 26-2-1992 and as per the petition he had already resigned on 20-8-1993. The petitioner challenges the process issued in the said complaint in this petition and seeks quashing of the said complaint on the ground that petitioner being an alternate Director was not an officer who is in default within the meaning of section 5 of the Companies Act and, therefore, no process could have been issued against the petitioner as he was not liable under section 73(2-A) for the repayment of the moneys to the subscribers or to deposit the subscription amount in a Scheduled Bank. 4. I find substance in the contention raised on behalf of the petitioner, section 73(2-A) of the Companies Act is worded as follows : "The liability for non-refund of the subscription amount or deposit of the subscription amount in the bank lies on "the company and every director of the company who is an officer in default".” The officer in default has been defined in section 5 of the Companies Act, which means: (a) the managing director or managing directors: (b) the whole-time director or whole time directors; (c) the manager; (d) the secretary. (e) any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act: (f) any person charged by the Board with the responsibility of complying with that provision: Provided that the person so charged has given his consent in this behalf to the Board; (g) where any company does not have any of the officers specified in Clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors: Provided that where the Board exercises any power under Clause (f) or Clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form." 5. From the title of the complaint it is obvious that the complainant was aware that the petitioner was only an alternate director.
From the title of the complaint it is obvious that the complainant was aware that the petitioner was only an alternate director. The petitioner, therefore, does not fall under Clauses (a) to (d) of section 5 nor is it averred in the complaint that the petitioner falls under any of the Clauses (e) to (g) of section 5. Para 4(ii) of the petition gives the names of the Executive and whole-time Director of the company and of the Company Secretary and, therefore, the contingency contemplated under Clause (g) of section 5 does not arise. It is also averred in the petition that the petitioner was not whole-time or Executive Director of the company but was only an alternate to Mr. F. Hartmann who himself was not a whole time or Executive Director of the company and, therefore, the present prosecution would not lie against the petitioner. Mr. Sathe, the learned Counsel appearing for the petitioner, also brought to my notice the Circular issued by the Department of Company Affairs dated 24th June, 1994 interpreting the definition of "officer who is in default" in section 5 of the Companies Act which is worded as follows : "Where penal provisions of the Companies Act provide for punishment of officers in default, prosecution is to be filed against managing director/whole-time director/manager, apart from secretary, if any, and company. It is only where there is no such managerial personnel prosecution is to be filed against all directors, apart from secretary, if any, and the company." 6. From the averments made in the petition, which are not denied by the respondent No. 1, though served, it is clear that the company did have an Executive and whole-time Director and, therefore, the petitioner as an alternate Director, was not liable to be prosecuted for the contravention of section 73(2-A) and (3) of the Companies Act. In the aforesaid circumstances, the petitioner ought not to have been made accused in the first instance and having done so the Magistrate ought not to have issued process against him. 7. Surely the Registrar of companies was in a position to ascertain the above facts from his own office records before filing the complaint and thus avoid unnecessary harassment of citizens. A Public Officer like Registrar of companies should have acted with greater sense of responsibility.
7. Surely the Registrar of companies was in a position to ascertain the above facts from his own office records before filing the complaint and thus avoid unnecessary harassment of citizens. A Public Officer like Registrar of companies should have acted with greater sense of responsibility. This is also a clear example of Additional Chief Metropolitan Magistrate issuing process mechanically for the asking without applying his mind to the facts of the case and the provisions of law which has resulted in wrong prosecution of a citizen. 8. In the result, the petition is allowed and rule is made absolute in terms of prayer Clause (a) of the petition. Petition allowed. -----