Latest News | HC Quashes Proceedings Against Officials Manning Govt Undertakings

Chennai, Apr 30 (PTI) The Madras High Court has set aside the proceedings pending against nine officials of the Tamil Nadu Urban Infrastructure Finance Services, pending before the Economic Offences Court at Egmore here.

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Justice M Nirmal Kumar quashed the proceedings on the file of the Additional Chief Metropolitan Magistrate [EO-1], while passing orders on two criminal original petitions, the other one from State Industries Promotion Corporation of Tamil Nadu (SIPCOT), on April 25.

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The first company, wholly owned by the Tamil Nadu government, had been registered and incorporated under the Companies Act. According to the Registrar of Companies, the company, falling under the ambit of Cost Audit, had not filed the same for 2013-14, even beyond the last date of submission. It amounted to contravention of sub-section (6) of Section 148 of the Companies Act, 2013.

As per this section, a company shall, within 30 days from the date of receipt of a copy of the cost audit report prepared in pursuance of a direction under sub-section (2), furnish to the central government with such report along with full information and explanation on every reservation or qualification contained therein. As per sub-section (8), if any default is made in complying with the provisions of this section, the Company and every officer of the company who is in default shall be punishable in the manner as provided. Since the accused have not complied with the provisions, prosecution was launched.

Aggrieved, they moved the High Court with the present petitions.

Considering the submissions made and on perusal of the materials, the judge found that the petitioner company is a Public Sector one and the others are its nominee directors and officers. Pursuant to the notification of Sec. 148 of the Companies Act, Companies (Costy Records and Audit) Rules came into existence in 2014.

The requisite turn over attracting the appointment of Cost Accountant as a Cost Auditor had been complied with by a resolution adopted on June 28, 2016 and CRA-4 Form for the Financial Year 2014-15 filed. In this case, the show cause notice was issued on August 29, 2016 and a suitable reply was sent on September 28 same year informing the appointment of the Cost Accountant and filing of the requisite statutory forms. Hence, it cannot be stated to be a continuing offence.

Admittedly, for any violation under Section 148 of the Companies Act, only a fine can be imposed. Hence, any prosecution ought to have been initiated within six months. Admittedly, in this case, the complaint was filed and taken cognizance only in 2018, which is beyond the period of limitation. Further, as could be seen from the General Circular No.1/2020, instructions had already been issued to ensure that civil or criminal proceedings are not initiated against independent directors or non-executive directors, the judge pointed out and quashed the proceedings.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)