The High Court
Case Details
IN THE HIGH COURT OF ORISSA AT CUTTACK COA No. 1 of 2023 Hemanta Sharma & others -versus- The Registrar of Companies, Orissa, Cuttack …. …. Appellants Respondent Learned advocates appeared in the case: For Appellants : Mr. P.K. Mohanty, Sr. Advocate Mr. Rakesh Behera, Advocate For Respondent : Mr. P.K. Parhi, DSGI Mr. P. P. Behera, CGC COA No. 2 of 2023 Prasanta Kumar Pradhan and others …. Appellants The Registrar of Companies, Orissa, Cuttack -versus- …. Respondent Learned advocates appeared in the case: For Appellants :
Legal Reasoning
before us there is no dispute or controversy regarding appellants, being accused persons, as were non-executive directors of the companies. The Supreme Court in Sunil Bharti Mittal (supra) said there has to be a specific act attributed to the director or any other persons admittedly in control and management of the company, to the effect that such a person was responsible for the act committed by or on behalf of the company. At the material time the companies were in the business of, inter alia, distribution of electricity. The affairs of the companies were such that their licences stood revoked and interim arrangement directed by said order dated 4th March, 2015 for assuming control over administration of the companies through GRIDCO, a Government company. Mr. Mohanty submits, subsequently in exercise of powers under the Act of 2003, GRIDCO floated global tender and at present private players have taken over the business of distribution of electricity in this State. 11. Impugned judgment is reversed in appeal. The convictions and penalties imposed are set aside. The appeals are allowed and disposed of. (Arindam Sinha) Judge (M.S. Sahoo) Judge Page 10 of 10 Signature Not Verified Digitally Signed Signed by: PRASANT KUMAR SAHOO Designation: Personal Assistant Reason: Authentication Location: Orissa High Court Date: 31-Jan-2024 19:25:04 COA nos.1,2,3,4,5 and 6 of 2023
Arguments
Mr. P.K. Mohanty, Sr. Advocate Mr. Rakesh Behera, Advocate For Respondent : Mr. P. K. Parhi, DSGI Mr. B. S. Rayaguru, CGC COA No.3 of 2023 Trilochan Panda and others ... Appellants -versus- The Registrar of Companies, … Orissa, Cuttack Respondent Learned advocates appeared in the case: For appellants : Mr. P.K. Mohanty, Sr. Advocate Mr. Rakesh Behera, Advocate For Respondent: Mr. P. K. Parhi, DSGI Mr. B. Moharana, CGC Page 1 of 10 // 2 // COA No.4 of 2023 M/s. Northern Eastern Electricity Supply .... of Kalyani Complex, BBSR and others Appellants -versus- State of Odisha and others … Respondents Learned advocates appeared in the case: For Appellants : Mr. Milan Kanungo, Sr. Advocate Ms. Ipsita Swain, Advocate For Respondents: Mr. P. K. Parhi, DSGI Mr. U.R. Jena, CGC COA No.5 of 2023 M/s. Western Electricity Supply of Kalyani Complex, BBSR and others .... Appellants -versus- State of Odisha and others .... Respondents Learned advocates appeared in the case: For Appellants : Mr. Milan Kanungo, Sr. Advocate Ms. Ipsita Swain, Advocate For Respondents: Mr. P. K. Parhi, DSGI Mrs. J. Sahoo, CGC COA No.6 of 2023 M/s. Southern Electricity Supply of Kalyani Complex, BBSR and others .... Appellants -versus- State of Odisha and others .... Respondents Learned advocates appeared in the case: For Appellants : Mr. Milan Kanungo, Sr. Advocate Ms. Ipsita Swain, Advocate For Respondents: : Mr. P.S. Nayak, Senior Panel Counsel COA nos.1,2,3,4,5 and 6 of 2023 Page 2 of 10 // 3 // CORAM: JUSTICE ARINDAM SINHA JUSTICE M.S. SAHOO J U D G M E N T ---------------------------------------------------------------------------------------------- Date of hearing and judgment: 30th January, 2024 ------------------------------------------------------------------------------------------ ARINDAM SINHA, J. 1. The appeals have been preferred against judgments, all dated 1st February, 2023 made by the Additional Chief Judicial Magistrate (Special Court)-cum-Assistant Sessions Judge. The judgments can be said to be common except that they are separate in respect of persons in management of three different companies. The prosecution was on complaint made by the Registrar of Companies (RoC) pursuant to show cause notices dated 23rd June, 2015. By the judgments there was finding that all accused persons were guilty of offences punishable under section 172 in Companies Act, 2013, for contravening provisions in section 149(1)(b) read with rule-3(ii) of Companies (Appointment and Qualifications of Directors) Rules, 2014. 2. Mr. Mohanty, learned senior advocate assisted by Mr. Rakesh Behera, learned advocate appear on behalf of appellants in COA nos.1, 2 and 3 of 2023. Mr. Kanungo, learned senior advocate assisted by Ms. Ipsita Swain, learned advocate appear on behalf of appellants in COA nos.4, 5 and 6 of 2023. Mr. Parhi, learned advocate, Deputy Solicitor COA nos.1,2,3,4,5 and 6 of 2023 Page 3 of 10 // 4 // General appears on behalf of the RoC in all the appeals, except COA no.6 of 2023. He is assisted by Mr. P.P. Behera, learned advocate, Central Government Counsel in COA no.1 of 2023; Mr. B.S. Rayaguru, learned advocate, Central Government Counsel in COA no.2 of 2023; Mr. B. Moharana, learned advocate, Central Government Counsel in COA no.3 of 2023; Mr. U.R. Jena, learned advocate, Central Government Counsel in COA no.4 of 2023 and Mrs. J. Sahoo, learned advocate, Central Government Counsel in COA no.5 of 2023. Mr. P.S. Nayak, learned advocate, Senior Panel Counsel appears for the RoC in COA no.6 of 2023. 3. Mr. Mohanty submits, the complaint, pursuant to said show cause notices could not have been made by the RoC. He draws attention to notification dated 5th June, 2015 published in the Gazette of India, Extraordinary, entry 30 in the table to submit, it was notified that sub-section (2) in section 439 is to be read on omission of the words, including ‘The Registrar’ in making complaint against a Government company. As such, the RoC could not have initiated the proceeding because the companies stood vested in GRIDCO, a Government company, on and from 4th March, 2015, date of order made in Case no.55 of 2013 by the Odisha Electricity Regulatory Commission (OERC) under section 20(d) in Electricity Act, 2003. The order was COA nos.1,2,3,4,5 and 6 of 2023 Page 4 of 10 // 5 // tendered as exhibit-B in the Special Court. Paragraph 3 from said order is reproduced below. “3. The Commission directs that the management and control of the utilities of NESCO, WESCO and SOUTHCO with all the assets, interests and rights shall vest with Chairman-Cum-Managing Director, GRIDCO with immediate effect and he shall manage the electricity supply activities in the revoked licensed area of NESCO, WESCO and SOUTHCO respectively till further orders of the Commission.” (emphasis supplied) 4. He submits further, his clients and other accused persons were all non-executive directors. He relies on judgment of the Supreme Court in Sunil Bharti Mittal v. Central Bureau of Investigation, reported in (2015) 4 SCC 609, paragraphs 37 and 38 (Manupatra print). Reproduced below are paragraph 37 and a sentence from paragraph 38. “37. No doubt, a corporate entity is an artificial person which acts through its officers, directors, managing director, chairman etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. It would be more so, when the criminal act is that of conspiracy. However, at the same COA nos.1,2,3,4,5 and 6 of 2023 Page 5 of 10 // 6 // time, it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides so. 38. ... ... ... ... Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company. ... ... ... ...” (emphasis supplied) He submits, there be interference in appeal to set aside impugned judgments. 5. Mr. Kanungo adopts submission made by Mr. Mohanty and also seeks setting aside of impugned judgments. 6. Submissions made before us was not the case made out before the Special Court, submits Mr. Parhi. He demonstrates from pages 106 and 107 in volume-I of paper book filed in COA no.01 of 2023, shareholding pattern of SOUTHCO as on 31st March, 2017 was shown as 49 % of GRIDCO and share capital of the company at ₹376 crores. The same position prevailed as on 31st March, 2018. Both the documents were certified to be true copies by the company secretary. It is on this basis there was prosecution and finding, of the accused COA nos.1,2,3,4,5 and 6 of 2023 Page 6 of 10 // 7 // persons being guilty and imposition of penalties. In the circumstances, there should be no interference in appeal. 7. It being that case of interim direction under section 20(d) in the Act of 2003 and notification dated 5th June, 2015 was not made out before the Special Court though, inter alia, said order dated 4th March, 2015 tendered as exhibit-B, we proceed to deal with the appeal on merits. Second proviso in sub-section (1) of section 149, in Companies Act, 2013 is reproduced below. “Provided further that such class or classes of companies as may be prescribed, shall have at least one woman director.” (emphasis supplied) On query from Court Mr. Parhi submits, the prescription came by rule 3 of the rules brought into force on 1st April, 2014. Sub-section (2) in section 149 is reproduced below. “(2) Every company existing on or before the date of commencement of this Act shall within one year from such commencement comply with the requirements of the provisions of sub-section (1).” 8. We must necessarily give effect to the provision regarding time limit of one year from commencement, to comply, as one year time COA nos.1,2,3,4,5 and 6 of 2023 Page 7 of 10 // 8 // limit commencing from 1st April, 2014. Where penal consequences attach, provided time limit cannot be curtailed. The time to comply therefore must be deemed to have commenced on and from date of subsequent prescription by the rules on 1st April, 2014, to expire on 31st March, 2015. The companies stood taken over by interim direction made under section 20(d) in the Act of 2003 on said order dated 4th March, 2015 of OERC. In the circumstances, notification dated 5th June, 2015 came into operation, to benefit of the companies and the accused persons. By the notification there was direction that certain provisions of Companies Act, 2013 as specified in column 2 of the table shall not apply or shall apply with such exceptions, modifications and adoptions, as specified in column (3) of the table, to a Government company. Submission made on behalf of appellants regarding making of said order dated 4th March, 2015, by which the companies were taken over by GRIDCO, a Government company is not disputed before us. In the circumstances, within the time for compliance, the companies and their affairs as on or before 4th March, 2015 did not continue any further by reason of the interim direction. On and from 4th March, 2015 till 31st March, 2015, date of expiry of the time limit for compliance, the companies can be said to have become Government companies or merged in respect of the management and administration, with Government company GRIDCO. Complaint regarding non- Page 8 of 10 COA nos.1,2,3,4,5 and 6 of 2023 // 9 // compliance by omission to appoint woman directors by the companies, on or prior to 4th March, 2015, as prescribed by the rules, cannot be said to be a complaint attracting prosecution and penalty since, time to comply is deemed extended as aforesaid and had not expired as on 4th March, 2015 against appellants. 9. Section 437 in Companies Act, 2013 provides for, inter alia, appeal. The section is reproduced below. “437. Appeal and revision.—The High Court may exercise, so far as may be applicable, all the powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973 (2 of 1974) on a High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court of Sessions trying cases within the local limits of the jurisdiction of the High Court.” (emphasis supplied) Section 386 in chapter XXIX of the Code provides for powers of the appellate Court in an appeal from a conviction. The learned Judge by impugned judgment convicted the accused persons under section 255 (2) in the Code. 10. In view of aforesaid, there could not have been conviction in a prosecution based on a charge for non-compliance of the statutory provisions, before expiry of the time limit to comply. Furthermore, COA nos.1,2,3,4,5 and 6 of 2023 Page 9 of 10 // 10 //