Vishal Sharma v. The State of West Bengal & Anr.

#7. Being aggrieved by and dissatisfied with the Orders dated 22.11.2019 passed in Complaint Cases No. 44/2019 and 43/2019 by Learned Judge, 2nd Special Court, Kolkata, the petitioner filed these Criminal Revisional applications seeking quashing of the orders as well as the proceedings pending before the Trial Court. Hence, applications. 5 ARGUMENTS ON BEHALF OF THE PETITIONER: -

#8. Learned counsel appearing on behalf of the petitioner vehemently argued and submitted the present Criminal Revisional applications arise out of the Complaint Case No. 44 of 2019 and Complaint case No.43 of 2019 pending before the Court of the Learned 2nd Special Judge at Kolkata is baseless and liable to be quashed since the case is bereft of the following reasons: - a. Firstly, is not maintainable since it has been contravention of Section 439(2) of the Companies Act, 2013. Neither the registrar, a shareholder, nor a member of the company, nor a person authorised by the Central Government on that behalf filed it. As the instant complaint, which is not a complaint in writing by the Registrar, has been filed by Deputy Registrar of Companies (Vineet Rai), a person not authorised by the Central Government, the complaint is filed without any authorisation. In support of this contention, the Petitioner has relied on the decision of this Hon'ble Court in Usha Martin Telematics Limited & Ors. v. Registrar of Companies1 which places reliance on the decision of the Hon'ble Supreme Court in Pepsi Foods Limited v. Special Judicial Magistrate2. 1 2022 SCC Online Cal 1792 2 (1998) 5 SCC 749 [28] 6 b. Neither the complaint, nor the documents in support thereof, nor the order passed by the Learned Judge reflects submission of any authorisation. The said order dated 22nd November, 2019, specifies in detail that the Deputy Registrar of Companies filed the case, and he is the complainant who sought the dispensation of personal attendance, which was exempted and the application was allowed. No record of any authorisation on behalf of the Registrar of Companies is recorded in the said order. The exemption granted under Section 256 of Cr.P.C. read with Section 439(3) of the Companies Act, 2013, is different from the authorisation necessary under the other provision. It was further submitted that before arraigning the petitioner as an accused, the company must be entangled in the present case; otherwise, the whole complaint is not maintainable in law. c. The complaint is bad in law as it suffers from non-joinder and misjoinder of the Company, being the primary accused, being arraigned as a party in the present case.

#9. The Deputy Registrar has initiated a complaint on the basis of information received by one interloper/third party on a purported tip and alleged contravention of Section 129 (Financial Statement) and Section 448 (Punishment for false statement) of Companies Act, 2013 which is complained of after more than six months which is the 7 period within which any discrepancy ought to have been noticed and complaint filed, but the purported concealment of transactions all arose before 30th December, 2016 and the information was received by letter dated 4th October, 2018 and complaint was filed on 22nd November, 2019.

#10. The notification dated 30th March, 2017, under the Gazette of India, proposed disclosure of details of Specified Bank Notes by amendment to General instructions in preparation of Balance Sheets under Schedule III by insertion of Clause K, was affected retrospectively; therefore, the Central Government, being aware of such implementation, had also introduced. The Specified Bank Notes (Cessation of Liabilities) Act, 2017, was notified on 27th February, 2017, which imposed restrictions on penalties against contravention and offences.

#11. It is an admitted position that the complaint is made beyond the prescribed period with regard to the application under Section 447 of the Companies Act. For such provision to apply the Complaint has to be supported by any finding of fraud, guilty mind or mens rea, but in the present case, no such case is made out, as the complaint proceeds on the basis of inability to disclose specified bank notes, for which offenses, related to fraud, cannot be ex facie made applicable 8 on account of the provisions of The Specified Bank Notes (Cessation of Liabilities) Act, 2017 notified on 27th February, 2017.

#12. The petitioner herein is not charged for refrainment from disclosing the details of Specified Bank Notes and has been charged only violation under section 448 of the companies Act, 2013 for non- disclosure of related party transactions and incorrect reporting of Trade receivable due for within six months which will be clear from the complaint under Section 129 and 448 of the Companies Act by the Opposite party No.2.

#13. In the aforesaid contentions raised by the Petitioner, the said complaint is not maintainable on multiple grounds. In any event, the purported grounds in the complaint, as alleged by the Opposite Party, are also not maintainable on the respective submissions.

#14. The case of the opposite party in respect of the contravention of the financial statement is two-fold. Firstly, paragraph 3.1 relates to the Auditor’s action for not disclosing specified bank notes but holds the Petitioner/Directors liable as accused without any finding of guilt or mens rea. Preparation of the balance sheet as per statutory norms is a responsibility of the Auditors; therefore, unless there is proof of guilt on the part of the Directors, they could not have been named as accused in the present case. As per Section 129 of Companies Act, 9 financial statements are required to be in accordance with accounting standards.

#15. Further, the discussion in relation to the applicability of provisions of The Specified Bank Notes (Cessation of Liabilities) Act, 2017, notified on 27th February, 2017, has been discussed hereinabove. Therefore, in light of the restriction on punishment provisions under Section 129 of the Companies Act, 2013, it cannot be applied in such a case.

#16. Secondly, at paragraph 3.2 it alleges contravention of procedure laid down under Accounting Standard 18 in recording transaction by related parties. The particular accounting standard does not apply to a company within the meaning of Small and Medium Sized Enterprise level II enterprise under Accounting Standard 18.

#17. From the definition of Level-II enterprise at Page 31D, it would appear that the Company (having turnover of over Rs. 5 crores) would fit this category of enterprise having turnover in excess of Rs. 40 lakhs and under Rs. 5 Crores.

#18. When read with exemptions/relaxations for SMEs, Related Party Disclosure is not applicable for such an enterprise. Therefore, the charge has been incorrectly levelled against the Company.

#19. In addition to the fact that this provision is not applicable, from the balance sheets on record, it would appear that such disclosure of party-related transactions has been carried forward in the Books of 10 the Company for several years and is not a fresh statement that was required to be disclosed. Unsecured Borrowings from corporate amounting to Rs. 80,50,450/- is the related party transaction complained of, which was reflected as on 31st March, 2017 and 31st March, 2016. Unsecured Borrowings from corporate amounting to Rs. 80,50,450/- were reflected as on 31st March, 2016 and 31st March, 2015, and from corporate amounting to Rs. 80,50,450/- was reflected as on 31st March, 2018 and 31st March, 2017. This is not a new transaction that requires disclosure.

#20. If there is no transaction, the question of disclosure of transaction under Accounting Standard 18 does not and cannot arise.

#21. Although there are two grounds raised by the Respondent authorities regarding contravention of the said provision, the Petitioner restricted submissions to paragraph 3.3 of the Complaint as the Petitioner are not implicated as per paragraph 3.4.

#22. No case of suppression of Specified Bank Notes is made out as the Balance Sheet suffers from mere non-disclosure, and it cannot be construed as suppression of Specified Bank Notes in respect of a notification which was affected retrospectively. In reply, the Petitioner relied upon a certificate from its Bankers regarding the disclosure of Specified Bank Notes to the Registrar of Companies, which neither 11 violates the accounting standards nor the Specified Bank Notes (Cessation of Liabilities) Act, 2017, notified on 27th February, 2017.

#23. Since the ambit of its offence is restricted by a Special law, provisions of section 448 of the Companies Act cannot be attracted in such cases.

#24. It was further submitted that due to demonetization declared on 8th November, 2016 and the world pandemic in the year 2020, there was almost no cash transaction whatsoever left as the cash reserve was deposited in the account of the company. The petitioner is merely an auditor of the company. He had no personal interest in the company as he was neither a shareholder, nor a director, nor an employee. He was not in any way connected with the company.

#25. The Trial Court further failed to consider that the complaint, lodged after expiry of more than one and a half years from the date of the actual cause of action, is barred by limitation as stipulated under section 468 of the Cr.P.C.

#26. Finally, it was submitted that a Co-ordinate Bench of this High Court in CRR No. 4526 of 2024 [Arup Mookerjee vs. The Registrar of Companies, West Bengal] with CRR 1805 of 2020 [Archana Chakraborty vs. The Registrar of Companies, West Bengal] dated 28th March, 2025, on identical allegations, facts and circumstances, in relation to the same transactions against the Directors, of another 12 concern, which has held the complaint to be bad in law and liable to be set aside, being not in accordance with law and abuse of the process of law.

#27. It was further submitted that this court also allowed a revisional application, being CRR No. 1806 of 2020 (Apurba Mookerjee v. The Registrar of Companies, dated 4th February, 2026, and quashed the proceedings against the Directors of the company. Therefore, the petitioner herein is also entitled to the same relief.

#28. In the aforesaid facts and circumstances, the Complaint Case no. 44 of 2019 and Complaint Case no. 43 of 2019 pending before the Learned 2nd Special Judge at Kolkata are also liable to be quashed on the same prepositions; otherwise, it would be highly prejudicial and/or an abuse of process of law. ARGUMENTS ON BEHALF OF THE REGISTRAR OF COMPANIES:-

#29. Per contra, the learned counsel appearing on behalf of the Registrar of Companies submitted that the instant Criminal Revisional application stems out of a complaint case being Complaint Case No. 44 of 2019 and Complaint case no. 43 of 2019 pending before the Learned Second Special Judge at Kolkata whereby, necessary processes were issued in respect of the present petitioner so far as the violation of Section 448 of the Companies Act, 2013. 13

#30. The Auditor is a monitor for the company and is duty-bound to report if they find any irregularities in the company, but failed. The Petitioner has deliberately violated section 448 of the Companies Act, 2013, and as such a prima facie case has been made out against the present petitioner.

#31. The Learned counsel representing the Registrar submitted upon enquiry, it was found that the financial statements furnished by the company do not give a true and fair view of the state of affairs of the company. Furthermore, it has been revealed that the petitioner, while filing the financial statement, omitted material facts knowing it to be material for the purposes of this Act. Thus, the petitioner has committed fraud that tantamount to omission and/or concealment of any fact as defined under Section 447 of the Companies Act, 2013.

#32. The Deputy Registrar of Companies is not empowered to file a complaint before the Learned Court by virtue of section 439 (2) of the Companies Act, 2013, which is an utterly misconceived nuance of Law. In this regard, it is submitted that as per section 2(75) of the Companies Act, 2013, the term "Registrar" means a registrar, an additional registrar, a joint registrar, a deputy registrar or an assistant registrar having the duty of registering companies and discharging various functions under the Act. Therefore, since the terminology and definition of the term “Registrar” includes a Deputy 14 Registrar as well, it can be conclusively said that he is accordingly duly empowered to file the instant complaint case before the Court of the Learned Second Special Court at Kolkata.

#33. The Petitioner has alleged that the instant Complaint Case is barred by limitation, which is also misconceived. The provision of Section 448 of the Companies Act is not subject to Section 468 of the Cr.P.C., as it is punishable by imprisonment up to 10 years. Additionally, an offence committed under section 447 of the Act, which is in the nature of the fraud committed, is a continuing one and, therefore, Section 468 of the Cr.P.C. has no manner of applicability whatsoever. Accordingly, it is urged that the instant Criminal Revisional application is not maintainable in its tenor and form and as such, the same should be dismissed in limine.

#34. Learned counsel for the opposite party no. 2 has placed reliance on the following judgments:- i. State of U.P. Vs. O.P. Sharma3 particularly in paragraph nos. 12, 13 and 14; ii. Kathyayini Vs. Sidharth P.S. Reddy & Ors.4 particularly in paragraph no. 23; iii. Satvinder Kaur Vs. State (Govt. Of NCT of Delhi) and Anr.5 particularly in paragraph nos. 14 and 16;