JUDGMENT
Badar Durrez Ahmed, J.
1. These three petitions are taken up together. A detailed order was passed on 12.12.2006 with regard to the submissions made in these petitions. The order reads as under:
These three petitions are taken up together as they arise out of the same complaint. The petitions are directed against the summoning order passed on 17.02.2005 by the learned ACMM, Delhi. The petitioners have been summoned under Section 370(1)/371 of the Companies Act, 1956. They have been summoned for the violation of the provisions with regard to loans extended by Daewoo Motors India Ltd. (DMIL). The complaint itself points out that these deposits were permitted as per approval granted by Central Government by order dated 24.01.1996 but, were subject to three conditions being satisfied. The three conditions being that the loanee company should have made profits for the preceding three years; should have declared dividends for the preceding three years in excess of at least 10% and that its net worth should have been positive for the preceding three years. The complaint indicates that there has been a violation of these three conditions.
The learned Counsel for the petitioners firstly submit that the three years to be reckoned are 1992-93, 1993-94 and 1994-95 inasmuch as the loans/ ICDs were made and or renewed in the financial year 1995-96. Therefore, only these three years, i.e, 1992-93, 1993-94 and 1994-95 are required to be considered for ascertaining as to whether the conditions stipulated by the Central Government were satisfied or not. According to the learned Counsel for the petitioner, if these three years are taken into account, then all the three conditions stand satisfied.
However, the learned Counsel appearing on behalf of the respondent submits that the loans were extended in 1996-97 and subsequently renewed from time to time. He submits that although the deposits were made in 1995-96, they were renewed in the financial year 1996-97 and subsequent years. Therefore, the three years that have to be taken into contention, as per the stipulation of the Central Government, would not be limited to 1992-93, 1993-94 and 1994-95. The learned Counsel for the respondents seeks some time to place on record the exact dates of last renewals taken in each of these cases.
Renotify on 15.12.2006.
Interim order to continue.
2. Today, the counsel appearing on behalf of the petitioners have taken another point which, to me, appears to be of a fundamental nature. The point taken by the learned Counsel for the petitioners is that paragraph 6 of the complaint under Section 371 for contravention of the provisions of Section 370(1) of the Companies Act, 1956 refers to a letter of the Department of Company Affairs issued on 29.11.2004 whereby it accorded sanction and instructions for filing prosecutions against the accused persons. The learned Counsel for the petitioners drew my attention to the said letter of 29.11.2004 Paragraphs 8 and 10 of the said letter are material and they read as under:
8. In respect of violations of the Companies Act, you are authorised to file appropriate legal proceedings in the appropriate court. In this regard you are requested to intimate the same of your nominated official for declaring him competent authority under Section 621(1) of the Act for filing the complaints.
xxxx xxxx xxxx xxxx 10. Prosecutions, wherever required, be filed only after issue of Show Cause Notices.
3. A reading of the aforesaid extracts from the said letter dated 29.11.2004 indicates that the respondent (Serious Fraud Investigation Office) was required to provide the name of the nominated official for declaring him to be the competent authority under Section 621(1) of the Act for filing the complaint. In pursuance of this direction, a notification was issued on 18.01.2005, whereby Shri Prit Paul Singh, Sr Assistant Director was notified as the nominated person to file the complaint on behalf of the respondent.
4. With regard to the requirement of issuance of show cause notices before prosecution, the learned Counsel for the petitioners submitted that there is no material on record to show that any show cause notices were ever issued. The contention, therefore, is that in the absence of the show cause notices, the authority granted to the competent person was not complied with inasmuch as it was a conditional authority. Section 621(1) of the Companies Act, 1956 clearly stipulates that no court can take cognizance of an offence under the said Act unless a written complaint is received either from (a) The Registrar of Companies; or (b) a shareholder of the company; or (c) the person authorised by the Central Government in that behalf. In the present case, the person authorised by the Central Government to file the complaint was required to comply with the condition of issuing show cause notices prior to launching prosecution. Since the show cause notices were not issued to the petitioners, the complain would not be competent in view of the provisions of Section 621(1) of the said Act read with the sanction letter of 29.11.2004 and the notification dated 18.01.2005.
5. On the other hand, the learned Counsel appearing on behalf of the respondent submitted that the condition with regard to issuance of show cause notices prior to launching prosecution had been waived before the written complaint was filed. However, he was candid enough to admit that there is nothing in the material available on record to indicate that such a condition was waived. In this regard, he sought liberty of this Court to place the necessary documents whereby the said condition was purportedly waived.
6. I have considered the arguments advanced by the counsel for the parties. It is clear that the summoning order which is challenged before this Court by way of these petitions was passed on the material placed before the court. And, the material before the court did not indicate that any show cause notices were issued. Furthermore, there was nothing before the court to even suggest that such a condition was waived. Therefore, I am of the view that the summoning order could not have been passed unless and until the condition contained in paragraph 10 of the said letter of 29.11.2004 was complied with. Before this Court, it is being urged for the first time by the respondent that, in fact, this condition was waived prior to the filing of the written complaint. Unfortunately, there is no mention of this purported waiver in the complaint. However, while I am in agreement with the counsel for the petitioners that the summoning order, as it stands on the basis of the materials available today, is liable to be set aside, I also feel that the respondent ought to be given an opportunity to place additional material to indicate that the conditions prescribed under the letter dated 29.11.2004 was either complied with or waived.
7. In these circumstances, the impugned orders are set aside. The matter is remanded to the learned ACMM at the pre-summoning stage with liberty to the respondent / complainant to lead further pre-summoning evidence. It is made clear that no opinion has been expressed on the other points which were raised by the counsel for the parties and the petitioners reserve their rights to raise such issues at an appropriate stage. The learned ACMM shall now permit the respondent to lead further pre-summoning evidence and shall pass an order in accordance with law.
With these directions, these petitions stand disposed of.