The Calcutta High Court has allowed a petition, by quashing a notice issued by the Registrar of Companies (ROC), West Bengal, which had threatened prosecution for alleged violations relating to presentation of financial statements under the Companies Act, 2013(the “Act”). The Court held that the impugned notice was ex facie barred by limitation, mechanically issued, and based on purely technical and trivial accounting issues that stood satisfactorily explained by the company.
The dispute arose from a notice dated April 8, 2021, from ROC for financial information and explanations under section 206(1) of the Act, which was duly replied to by the petitioner dated June 25, 2021. After a period of eighteen months, a summon was issued on March 14, 2023, under section 207(3)(b) of the Act for the examination of the concerned officer on oath regarding the earlier reply. Thereafter, a notice dated July 20, 2023, was issued seeking the financial information of FY March 31, 2020 – March 31, 2022. Despite the clarification, the ROC issued a notice dated December 20, 2024, alleging violations of section 129(1) read with Schedule III of the Act.
Justice Ravi Krishan Kapur found that all alleged violations were technical in nature and petitioners had duly responded to the queries raised, and that the explanations furnished by the company were neither considered nor dealt with on merits. The Court further observed that all the financial information and account statements were already available with the ROC and there was no mala fide intention.
On the issue of limitation, the Court held that the ROC had knowledge of the alleged violation when the respective balance sheets were filed and that the time prescribed for initiating proceedings had already elapsed. The Court held that the respondents had “slept over their rights” but could not revive stale proceedings through a belated notice.
The Court further criticised the impugned notice for recording factually incorrect statements. Emphasising that the role of the ROC as a regulator must align with the principle of “ease of doing business” and not “unease of doing business,” the Court held that coercive proceedings based on such trivial issues amount to misuse of statutory power.
Accordingly, the High Court quashed the notice dated December 20, 2024, absolved the petitioners of all liabilities arising therefrom, and allowed the company petition in terms of the prayers sought.
Appearances:
For the Petitioners – Senior Advocate Jayanta Kumar Mitra, with Advocate Rishav Dutt, Patrali Ganguly, Shrishti Roy Barman, and Anuj Singh,
For the Registrar of Companies – Advocate Shreya Choudhury, Ms. Rashmi Bothra and Mr. Jeet Barman, Advocates
