RoC abused the process of law by filing complaint u/s 448 against petitioner: HC

Case Details: Deva Jaya Thanga Thambi v. Deputy Registrar of Companies - [2022] 136 taxmann.com 121 (Madras)

Judiciary and Counsel Details

• • N. Sathish Kumar, J.
  • P. Vasanth for the Petitioner. 
  • Dr. D. Simon, Central Govt. Standing Counsel for the Respondent.

Facts of the Case

In the instant case, a Petitioner company was inspected by an Inspecting Officer. The Inspecting Officer observed that in the profit and loss account of the petitioner company, it was shown that a sum of Rs. 27.85 crore shown as bad debts, was written off.

The Officer-in-Charge called for complete details of the transactions and break up of parties/debtors. The Officer-in-charger initiated the prosecution offense under section 448 of the Companies Act citing reasons that the reply to the show-cause notice wasn’t satisfactory.

The petitioner-Co. contented that the entire prosecution was nothing but an abuse of process of law and there were no details containing the entire complaint as to the nature of suppression of material facts to attract the offence either under section 447 or 448 of the Companies Act.

It was further contended that the RoC was also aware of the fact that the accounts of the company reflected as bad debts. Therefore, it was observed that the contention of the respondent was not proper. Hence, the petitioner prayed for abashment of the proceedings.

A petition was filed to quash the proceedings filed against the accused for the offence under section 448 of the Companies Act, 2013.

High Court Held

The Madras High Court observed that in order to initiate prosecution either under section 448 or to attract punishment under section 447, there must be a clear finding on record as to fraud or suppression or omission of material facts. However, in instant case at any event, no findings were recorded to show nature of suppression of material facts or omission to state material facts in order to attract provisions of section 447 or 448 and instant prosecution had been filed mainly on the ground that reply notice given by petitioner was not satisfactory. Therefore, it was held that the prosecution of the petitioner was an abuse of the process of law and thus, the same was to be quashed.