Radha Satish Timblo And 3 Ors vs The Union Of India, Thr. Its Secretary And 2 Ors

2026:BHC-GOA:912
WPCR -6-2024
2026:BHC-GOA:912

Niti
IN THE HIGH COURT OF BOMBAY AT GOA
CRIMINAL WRIT PETITION NO.6 of 2024
1. MRS. RADHA SATISH TIMBLO
MAJOR OF AGE, MARRIED,
OCC: BUSINESS,
R/O: HOUSE NO. 22/339,
MACHADO COVE, DONA PAULA,
ILHAS, GOA. 67 years.

2. MR. CHETAN SATISH TIMBLO,
MAJOR OF AGE, MARRIED,
OCCU: BUSINESS,
R/O: HOUSE NO. 22/339,
MACHADO COVE, DONA PAULA,
ILHAS, GOA. 46 years.

3. MR. ROHAN SATISH TIMBLO,
MAJOR OF AGE, MARRIED,
OCCU: BUSINESS,
R/O: VILLA NO. 502,
NANU BEACH RETREAT,
THONWADDO, BETALBATIM,
SALCETE-GOA, 44 years.

4. MRS. MALLIKA ROHAN TIMBLO,
MAJOR OF AGE, MARRIED,
OCCU: BUSINESS,
R/O: VILLA NO. 502, 43 years.
NANU BEACH RETREAT
THONWADDO, BETALBATIM,
SALCETE-GOA.
Petitioner Nos.2,3 and 4 are represented
through POA holder, i.e. Petitioner No.1.

...PETITIONERS

Versus

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1. THE UNION OF INDIA,
THROUGH ITS SECRETARY,
MINISTRY OF CORPORATE
AFFAIRS, GOVERNMENT OF INDIA,
NEW DELHI.

2. THE REGISTRAR OF COMPANIES
OF GOA, DAMAN AND DIU,
(V.P. KATKAR)
MINISTRY OF CORPORATE
AFFAIRS,
GOVERNMENT OF INDIA,
HAVING ITS OFFICE AT PATTO,
PLAZA, PANAJI-GOA.

3. MR. ANNA CHETAN TIMBLO,
MAJOR OF AGE, MARRIED,
OCCU: BUSINESS,
R/O: HOUSE NO: 69, AQUEM ALTO,
SALCETE, MARGAO-GOA 403-601.

... RESPONDENTS

Mr Devidas Pangam, Senior Advocate with Mr Shubham Priolkar
and Mr Parikshit Sawant, Advocates for the Petitioner.

Mr Raviraj Chodankar, Central Government Standing Counsel for
Respondent Nos.1 and 2.

CORAM :
ASHISH S. CHAVAN, J.

st
Reserved on : 21 APRIL 2026
th
Pronounced on : 27 APRIL 2026

JUDGMENT :

1.
By way of this Writ Petition, the Petitioners have invoked the
inherent jurisdiction of this Court to examine, quash and set aside the order
taking cognizance dated 11.12.2014 and the summoning order dated

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25.06.2015 passed by learned JMFC, ড় D ঢ় Court, Panaji in Labour Case
No.54/2014/A and all consequential proceedings arising therefrom pending
before learned JMFC, ড় D ঢ় Court, Panaji.
2.
The Petitioners before this Court are arraigned as accused in the
private complaint filed by the Registrar of Companies under Section 217(3)
of the Companies Act, 1956 শড়the said Aǉtঢ়, ǟoȖ shoȖtষ for an offence
punishable under Section 217(5) of the said Act. The contesting Respondent,
i.e. Respondent No.2, is the Registrar of Companies of Goa, Daman and Diu.
3. The chronology of events necessary to determine the issue arising
from the present Petition is summarised as under:

(i) The Petitioners herein were the Directors of the Company registered
, a private
u ǿdeȖ the ǿaǾe aǿd stΡle oǟ ড়M/s. TiǾǈlo PȖiΚate LiǾitedঢ়
limited Company registered at Panaji, Goa, under the said Act.

(ii) The Respondent No.2, vide private complaint bearing Labour Case
No.54/2014/A, dated 11.12.2014, filed before the learned JMFC,
D Court, Panaji, sought to initiate criminal proceedings against the
ড় ঢ়
Petitioners under Section 217(5) of the said Act.

(iii) The allegation against the Petitioners is that the Petitioners failed to
furnish the fullest information or explanation in respect of the
ȖeǾaȖk iǿ the AuditoȖঢ়s ȖepoȖt statiǿǠ that ৚ the Company has an
internal audit system, which needs to be strengthened ৛.

(iv) The genesis of the aforesaid accusation against the Petitioners arises
out of an annexure to the Auditor reports dated 12.09.2007,

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20.09.2008 and 11.09.2009, received by the Office of the
Respondent No.2 during the process of scrutiny of the company
balance sheets of the years 31.03.2007, 31.03.2008 and 31.03.2009,
respectively.

(v) On the basis of the aforesaid observation encapsulated in the
Audito Ȗঢ়s ȖepoȖt, a show cause notice dated 09.09.2014 came to be
issued against the Petitioners, alle ǠiǿǠ that the AuditoȖঢ়s ȖepoȖt
reveals that the Board has failed to furnish the fullest
information/explanation on the aforesaid remark. Consequently,
the Petitioners were called upon to answer as to why penal action
under Section 217(5) of the said Act may not be initiated against
them.
(vi) The Petitioners replied to the aforesaid show cause notice vide their
reply dated 18.09.2014, inter alia, informing Respondent No.2 that
the Petitioners are in the process of accounting, finalising in
preparation of filing tax audit, etc. and as such sought extension of
time to file proper reply.

(vii) Despite the reply of the Petitioners, the Respondent No.2 lodged the
complaint referred to hereinabove against the Petitioners.

(viii) On 11.12.2014, the learned JMFC, Panaji Goa, was pleased to take
cognizance of the complaint filed at the instance of Respondent
No.2 and on 25.06.2015 issued summons to the Petitioners.
(ix) Prior to filing of the said complaint dated 11.12.2014, the Respondent
No.2 had lodged another complaint vide Labour Case No.21/2014

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(prior complaint) before the learned JMFC, Panaji, against the same
Company in its corporate capacity along with its Directors.

(x) It is the case of the Petitioners that the prior complaint was instituted
based on the same material facts and circumstances on which the
complaint forming the subject matter of the present Petition has
been instituted.

(xi) It is further the case of the Petitioners that the prior complaint has
been disposed of since the accused therein pleaded guilty and a fine
of Rs.7,000/- (Rupees Seven Thousand only) was imposed upon
the accused.
4.
Heard Mr Devidas Pangam, learned Senior Counsel for the
Petitioners and Mr Raviraj Chodankar, learned Central Government
Standing Counsel for the Respondents.

5. Rule. The rule is made returnable forthwith at the request of and with
the consent of the learned Counsel for the parties.
6. With the assistance of the learned Counsel for the parties, I have
perused the record.
7.
The Petitioners have challenged the summoning order and the order
taking cognizance and the consequential proceedings arising out of the
impugned private complaint on several grounds. Firstly, that no offence is
made out under Section 217 of the said Act. On behalf of the Petitioners it
was urged that the provision mandates that the Board shall furnish fullest

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information and explanations only in respect of a reservation, qualification or
the remark
adverse remark contained in the Audito Ȗঢ়s ȖepoȖt. HoΛeΚeȖ,
complained of by the Respondent No.2 to which the Petitioners allegedly
ǟailed to ǠiΚe the ǟullest iǿǟoȖǾatioǿ is ৚ the Company has an internal audit
system which needs to be strengthened ৛. It was strenuously urged on behalf
of the Petitioners that the aforesaid remark, cannot, by any stretch of
i ǿteȖpȖetatioǿ ǈe ǉoǿstȖued as a ৚ȖeseȖΚatioǿ৛, ৚ȕualiǟiǉatioǿ৛ oȖ ৚adΚeȖse
ȖeǾaȖk৛ Λithiǿ the ǾeaǿiǿǠ oǟ Seǉtioǿ ࢳࢲࢸশࢴষ oǟ the said Aǉt. At the hiǠhest,
the said remark is in the nature of a general observation or recommendation
made by the Auditors for improvement of internal processes. Such a remark
cannot trigger the statutory obligation contemplated under Section 217(3) of
the said Act.
8. Additionally, it was pointed out that the requirement of furnishing
explanation under Section 217(3) of the said Act is directed towards the
shareholders of the Co ǾpaǿΡ aǿd it is to ǈe ǉoǾplied thȖouǠh the BoaȖdঢ়s
report placed before the Annual General Meeting (AGM). The provision
does not envisage or mandate furnishing of such explanations to the Registrar
of Companies (Respondent No.2). Thus, the entire premise of the complaint
proceeds on a fundamental misinterpretation of the statutory scheme. It was
further submitted that the initiation of the criminal proceeding at the instance
of Respondent No.2 is triggered by the subjective dissatisfaction of the
Respondent No.2 with the reply furnished by the Petitioners to the show
cause notice. Such dissatisfaction cannot constitute a valid basis for invoking
penal provisions and criminal liability cannot be fastened on Directors on

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account of an erroneous understanding of statutory requirements by the
Regulatory Authority.

9. It was submitted on behalf of the Petitioners that the complaint itself
is barred by limitation. Section 217(5) of the said Act describes punishment
for non-compliance with sub-sections 1 to 3, which may extend to
imprisonment for a term not exceeding six months or a fine or both. In terms
of Section 468(2)(b) of the Cr.P.C., no Court can take cognizance of an
offence punishable with imprisonment for a term not exceeding one year after
the expiry of a period of one year from the date of the offence. Consequently,
any complaint under Section 217 of the said Act, must necessarily be
instituted within one year from the date on which the alleged offence was
committed. It was argued that in the present case, the allegations pertain to
the Audito Ȗঢ়s ȖepoȖt ǟoȖ ǟiǿaǿǉial ΡeaȖ s 2006-07, 2007-08 and 2008-09. Thus,
the institution of the complaint on 11.12.2014, after the lapse of one year from
the date of the offence, is grossly delayed and barred by limitation. Even
assuming that the Respondent No.2 had knowledge of the alleged violation at
least by 01.05.2012 (on the basis of the letter dated 01.05.2012 by the Registrar
of Companies to the Regional Director, Ministry of Corporate Affairs,
seeking scrutiny of documents and, inter alia , alleging violation of Section
217(3) of the said Act) the complaint came to be filed only on 11.12.2014, i.e.
after a delay of more than two and a half years, which is well beyond the
prescribed period of limitation.

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10.
Lastly, it was also argued on behalf of the Petitioners that the order
taking cognizance being the substratum of the initiation of criminal
proceedings against the Petitioners, must reveal some application of mind.
However, the said order is not only cryptic and unreasoned but also
demonstrates non-application of mind by the learned JMFC.
11. Countering these submissions, on behalf of Respondent No.2, it was
submitted that the order taking cognizance and consequent proceedings
initiated at the instance of Respondent No.2 require no interference. Firstly,
it was submitted that the o ǈseȖΚatioǿ iǿ the AuditoȖঢ়s ȖepoȖt that the
Company has an internal audit system which needs to be strengthened fulfils
the ingredients set out in Section 217(3) of the said Act. The aforesaid
observation constitutes a qualification/reservation and cannot be brushed
aside as a routine or innocuous remark. It was also argued that the aforesaid
observation is consistent across multiple years, thereby evidencing a
ǉoǿtiǿuiǿǠ deǟiǉieǿǉΡ iǿ the iǿteȖǿal audit ǟȖaǾeΛoȖk oǟ PetitioǿeȖsঢ়
Company. This aspect is further compounded by the lack of reply to the show
cause notice.
12.
The argument of the Petitioners that the complaint is barred by
limitation is countered on behalf of the Respondents by arguing that the
৚saǿǉtioǿ৛ to pȖoseǉute ǈeiǿǠ a ǾaǿdatoȖΡ pȖeǉoǿditioǿ Λas ǠȖaǿted ǈΡ a
৚ǉoǾpeteǿt৛ AuthoȖitΡ oǿ ࢲࢲ.ࢱࢷ.ࢳࢱࢲࢵ. The saǾe Λas ȖeǉeiΚed ǈΡ the oǟǟiǉe
of the Respondent No.2 on 16.06.2014. The complaint was thereafter filed
on 11.12.2014, well within the prescribed period of limitation. It was sought

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to be argued that the period of limitation is to be reckoned from the date of
k ǿoΛledǠe. HoΛeΚeȖ, the ৚kǿoΛledǠe৛ Λould haΚe to ǈe iǿteȖpȖeted as
actionable knowledge. It was also canvassed that the Registrar of Companies
is ǿot eǾpoΛeȖed to lauǿǉh pȖoseǉutioǿ Λithout oǈtaiǿiǿǠ pȖioȖ ৚saǿǉtioǿ৛
from the Regional Director in the Ministry of Corporate Affairs and hence
the computation of limitation commences from 16.06.2014, i.e. the date of
receipt of the sanction by Respondent No.2. Lastly, it was submitted that at
the stage of issuance of process this Court ought not to conduct a meticulous
or elaborate examination of the allegations in the complaint since the challenge
to the order taking cognizance and the issuance of process mounted by the
Petitioners essentially deals with triable issues.
13. Appreciating the rival contentions of the respective parties, the issue
that falls for consideration before this Court is firstly , whether the order taking
cognizance and the summoning order passed by the jurisdictional Magistrate
discloses application of mind as envisaged by law, secondly, whether the
complaint taken at face value makes out a prima facie case for invoking the
penal provisions of the Companies Act as alleged and thirdly, whether the
complaint is barred by limitation.
14. At the outset, it would be necessary to examine the averments in the
complaint to see whether they make out a prima facie case for attracting
offence punishable under Section 217(3), punishable under Section 217(5) of
the said Act. The relevant extracts of the complaint dated 11.12.2014 are
reproduced herein below:

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"4. That it is observed by the Complainant, office of Registrar of
Companies, Goa during technical scrutiny under section 234 of the
Companies Act, 1956 that from the para 7 of the annexure to the
Auditor's Report to the Balance Sheet as on 31.03.2007, 31.03.2008
and 31.03.2009 that company is required to strengthen its internal
audit system. In this regard Board failed to furnish fullest
information/ explanation on the said remarks pursuant to
requirements of sub-section 3 of section 217 of the Companies Act,
1956. Thereby the directors have violated the said provisions and are
liable for penal action under sub-section 5 of section 217 of the
Companies Act, 1956. Copy of the above Auditor's Report are
enclosed as Annexure "A" (for financial year ended on 31 March,
2007), Annexure "B" (for financial year ended on 31 March, 2008) and
Annexure "C" (for financial year ended on 31 March, 2009)
respectively.
6. That the complainant issued Show Cause Notice No.
ROCGDD/SCN/217(3)/Timblo/P3/21/1333, 34, 35, 36, 37 on
09/09/2014 to the Managing Director/ Directors/Officers of the
company being accused No.01 to 05 for violation of the provisions of
Section 217(3) of the Companies Act, 1956. Reply dated 18/09/2014
is received from the Director of the Company is not found to be
satisfactory. Copy of above show cause notice and reply of the
Accused are enclosed herewith and marked as Annexure "D" and
Annexure "E" respectively.
7. That the Complainant's office received sanction Letter No.
RD/STA/234/ Misc/ 2011/ 1864, dated 11/06/2014 16/06/2014
from Joint Director, Office of the Regional Director, Western
Region, Mumbai to launch prosecution for violation under section
217 of the Companies Act, 1956 and the default came to the
knowledge of the Complainant's office on 16/06/2014. A copy of
above sanction Letter is enclosed herewith and marked as annexure
"F". ৛

15. The basis of the allegations against the Petitioners stem from para 7
o ǟ the aǿǿeΠuȖe to the AuditoȖঢ়s ȖepoȖt to the ǈalaǿǉe sheets as iǿdiǉated iǿ

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para 4 (supra). Hence, it Λould ǈe ǿeǉessaȖΡ to ȖepȖoduǉe the ৚oǟǟeǿdiǿǠ৛
part of para 7, which reads as:
৚ࢸ. The Company has an internal audit system which needs
to be strengthened. ৛
16. The genesis of this allegation is seen from the show cause notice dated
09.09.2014 issued by Respondent No.2 against the Petitioners alleging that
the Board has failed to furnish the fullest information/explanation on the
aforesaid remark. The relevant portion of the show cause notice dated
09.09.2014 is reproduced as under:
৚ࢶ. It is suǈǾitted that the Ǡeǿesis oǟ the aǉǉusatioǿ aǠaiǿst the
Petitioners arise out of para 7 of the Annexure to Auditor's Report
dated 12.09.2007, 20.09.2008 and 11.09.2009, received by the
office of the Respondent no.2, during the process of scrutiny of the
company Balance Sheets of the year 31.03.2007, 31.03.2008 and
31.03.2009, based on which Show Cause Notice dated 09.09.2014
came to be issued against the Petitioners alleging that the Board has
failed to furnish the fullest information/explanation on the said
remark at para 7 of the Annexure to the Auditor's Report. The
relevant portion of the Show Cause Notice dated 09.09.2014 is
reproduced hereunder:
৚AND WHEREAS it Λas oǈseȖΚed ǟȖoǾ the paȖa ࢸ oǟ the
annexure to the Auditor's Report to the Balance Sheet as
on 31.03.2007, 31.03.2008 and 31.03.2009 that company
is required to strengthen its internal audit system. In this
regard Board fails to furnish fullest information/
explanation on the said remarks pursuant to requirements
of sub-section 4 of section 217 of the Companies Act,
1956. Thereby the directors have violated the said
provisions and are liable for penal action under sub-section
5 of section 217 of the Companies Act, 1956."

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17.
Firstly, save and except for the aforesaid reference to para 7 of the
a ǿǿeΠuȖe to the AuditoȖঢ়s ȖepoȖt, theȖe is ǿo otheȖ ǈasis ǟoȖ attȖaǉtiǿǠ the
offence defined under Section 217(3) of the said Act and made punishable
under Section 217(5). It would not be out of place, therefore, to reproduce
Section 217 of the said Act.
৚ 217. Board's report . - (1) There shall be attached to every
balance-sheet laid before a company in general meeting, a report by
its Board of directors, with respect to-
(a) the state of the company's affairs;
(b) the amounts, if any, which it proposes to carry to any reserves in
such balance-sheet;
(c) the amount, if any, which it recommends should be paid by way
of dividend;
[(d) material changes and commitments, if any; affecting the
financial position of the company which have occurred between
the end of the financial year of the company to which the balance-
sheet relates and the date of report;]
[(e) the conservation of energy, technology absorption, foreign
exchange earnings and outgo, in such manner as may be
prescribed.]
(2) The Board's report shall, so far as is material for the appreciation
of the state of the company's affairs by its members and will not in
the Board's opinion be harmful to the business of the company or
of any of its subsidiaries, deal with any changes which have occurred
during the financial year-
(a) in the nature of the company's business;
(b) in the company's subsidiaries or in the nature of the business
carried on by them; and

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(c) generally in the classes of business in which the company has an
interest.
(2A) (a) The Board's report shall also include a statement showing
the name of every employee of the company who-
(i) if employed throughout the financial year, was in receipt of
remuneration for that year which, in the aggregate, was not less than
[such sum as may be prescribed]; or
(ii) if employed for a part of the financial year, was in receipt of
remuneration for any part, of that year, at a rate which, in the
aggregate was not less than [such sum per month as may be
prescribed; or]
[(iii) if employed throughout the financial year or part thereof, was
in receipt of remuneration in that year which, on the aggregate, or
as the case may be, at a rate which, in the aggregate, is in excess of
that drawn by the managing director or whole-time director or
manager and holds by himself or along with his spouse and
dependent children, not less than two per cent, of the equity shares
of the company.]
(b) The statement referred to in clause (a) shall also indicate,-
(i) whether any such employee is a relative of any director or
manager of the company and if so, the name of such director, and
(ii) such other particulars as may be prescribed.
Explanation. "Remuneration" has the meaning assigned to it in the
explanation to section 198.]
'[(2AA) The Board's report shall also include a Directors'
Responsibility Statement, indicating therein,-
(i) that in the preparation of the annual accounts, the applicable
accounting standards had been followed along with proper
explanation relating to material departures;

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(ii) that the directors had selected such accounting policies and
applied them consistently and made judgments and estimates that
are reasonable and prudent so as to give a true and fair view of the
state of affairs of the company at the end of the financial year and
of the profit or loss of the company for that period;
(iii) that the directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with
the provisions of this Act for safeguarding the assets of the company
and for preventing and detecting fraud and other irregularities;
(iv) that the directors had prepared the annual accounts on a going
concern basis.]
[(2B) The Board's report shall also specify the reasons for the
failure, if any, to complete the buy-back within the time specified
in sub-section (4) of section 77A.]
(3) The Board shall also be bound to give the fullest information
and explanations in its report aforesaid, or in cases falling under the
proviso to section 222, in an addendum to that report, on every
reservation, qualification or adverse remark contained in the
auditors' report.
(4) The Board's report and any addendum thereto shall be signed
by its chairman if he is authorised in that behalf by the Board; and
where he is not so authorised, shall be signed by such number of
directors as are required to sign the balance-sheet and the profit and
loss account of the company by virtue of sub-sections (1) and (2) of
section 215.
(5) If any person, being a director of a company, fails to take all
reasonable steps to comply with the provisions of sub-sections (1)
to (3), or being the chairman, signs the Board's report otherwise
than in conformity with the provisions of sub-section (4), he shall,
in respect of each offence, be punishable with imprisonment for a
term which may extend to six months, or with fine which may
extend to [twenty thousand rupees], or with both:

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Provided that no person shall be sentenced to imprisonment for
any such offence unless it was committed wilfully:
Provided further that in any proceedings against a person in respect
of an offence under sub-section (1), it shall be a defence to prove
³[*] that a competent and reliable person was charged with the
duty of seeing that the provisions of that sub-section were complied
with and was in a position to discharge that duty.
(6) If any person, not being a director, having been charged by the
Board of directors with the duty of seeing that the provisions of
sub- sections (1) to (3) are complied with, makes default in doing
so, he shall, in respect of each offence, be punishable with
imprisonment for a term which may extend to six months, or with
fine which may extend to ²[twenty thousand rupees], or with both:
Provided that no person shall be sentenced to imprisonment for
any such offence unless it was committed wilfully. ৛
18.
Examining the Scheme of Section 217 of the said Act, it is clear that
the requirement of furnishing explanations under sub-section 3 of Section 217
is directed towards the shareholders of the Company and is to be complied
Λith thȖouǠh the BoaȖdঢ়s ȖepoȖt plaǉed ǈeǟoȖe the aǿǿual ǠeǿeȖal ǾeetiǿǠ. It
is evident that this provision does not envisage furnishing of explanations to
the Registrar of Companies. Now juxtaposing paragraph 6 of the complaint
reproduced hereinabove, it is seen that the Respondent No.2 has premised the
entire criminal complaint on the fact that the reply of the Petitioners to the
show cause notice was not found to be satisfactory. It is a settled position of
law that initiation of prosecution cannot be predicated solely on the subjective
dissatisfaction of the Respondent No.2 with the reply of the Petitioners to the
show cause notice. Criminal liability can only be fastened against the

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Petitioners if they are independently found to be in violation of Section 217(3)
of the said Act.

19. Thus, the core issue that arises is whether paragraph 7 of the annexure
to the Audito Ȗঢ়s ȖepoȖt ǉaǿ, ǈΡ aǿΡ stȖetǉh oǟ iǿteȖpȖetatioǿ, ǈe ǉoǿstȖued to
Ǿeaǿ a ৚ reservation ৛, ৚ qualification ৛ oȖ ৚ adverse remark ৛ . Even a liberal
construction of para 7 as reproduced hereinabove would reveal that the
ȖeǾaȖk Λhiǉh ǟoȖǾs paȖt oǟ the AuditoȖঢ়s ȖepoȖt addȖessed ǈΡ iǿteȖǿal
Auditors to the Company and states that the Company has an internal audit
system , which needs to be strengthened . The first part of the remark, thus,
is a positive statement that the Company has an internal audit system. The
second part is, at best, a general observation or recommendation made by the
Auditors for improvement of internal processes. I find force in the submission
of the Petitioners that the aforesaid remark is generic and advisory in nature.
Such remarks are routinely made by Auditors as part of best governance
practices and do not, by themselves, indicate any deficiency attracting penal
liability. Thus, this Court finds that the averments in the complaint and its
annexures do not make out any offence within the definition of Section 217(3)
of the said Act. Needless to say, as a corollary thereof, Section 217(5), which
penalises the offence defined under Section 217(3), cannot be attracted. In
other words, the Respondent No.2 has failed to make out an offence
punishable under Section 217(5) of the Companies Act, 1956.
20.
Dealing with the argument that the complaint was barred by
limitation, the Petitioners in their submissions in rejoinder, submitted that a

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plain reading of Section 217 of the said Act would demonstrate that no prior
sanction is required for initiating prosecution under the said provision. On
behalf of the Respondents, a feeble attempt was made to rely on Departmental
Circular No.3/76/2015-CL.II dated 20.06.2016, a Notification dated
31.12.2015 and another communication dated 01.04.1976 issued by the
Ministry of Law, Justice and Company Affairs. The notification dated
31.12.2015 is issued by the Ministry of Corporate Affairs. An attempt was
made by the counsel for Respondents to demonstrate that the aforesaid
do ǉuǾeǿts stipulate the ȖeȕuiȖeǾeǿt ǟoȖ oǈtaiǿiǿǠ ড়saǿǉtioǿঢ় to lauǿǉh
prosecution under Section 217 of the said Act. This was used to buttress the
submission on behalf of the learned counsel for the Respondents that the
the
ড়saǿǉtioǿঢ় Λas ȖeǉeiΚed ǈΡ theǾ ǟȖoǾ the Joiǿt DiȖeǉtoȖ, Oǟǟiǉe oǟ
Regional Director, Western Region, Mumbai on 16.06.2014, thereby
bringing the complaint within limitation. This submission was countered by
the Advocate for the Petitioners strenuously by way of three-fold submissions.
Firstly , he would submit that there is no statutory requirement for obtaining
a sanction to launch prosecution under Section 217 of the said Act, either in
the Companies Act itself or any other statute. Secondly , he would submit that
there is not even a passing reference to Section 217 of the said Act, nor any
reference to the Petitioners is made in these documents sought to be relied
upon by the Respondents. Thirdly , he would submit that even assuming that
these do ǉuǾeǿts ȕualiǟΡ to ǈe ড়saǿǉtioǿঢ়, theΡ do ǿot ȖeΚeal aǿΡ appliǉatioǿ oǟ
mind as envisaged while granting sanction for prosecution. Examining this
aspect, I find force in the argument of the Petitioners that there is no statutory

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requirement for obtai ǿiǿǠ ড়saǿǉtioǿঢ় to lauǿǉh pȖoseǉutioǿ uǿdeȖ Seǉtioǿ ࢳࢲࢸ
of the Companies Act, 1956 and hence, there would be no question of the
dela Ρ iǿ oǈtaiǿiǿǠ ড়saǿǉtioǿঢ় to lauǿǉh pȖoseǉutioǿ. EΚeǿ otheȖΛise, the
documents relied upon on behalf of the Respondents seem to be
Circulars/Notifications/internal communications at the highest. It is evident
from a bare perusal of these documents that by no stretch of interpretation
can they ǈe teȖǾed as aǿΡ ড়saǿǉtioǿঢ়. TheȖe is ǿo ȖeǟeȖeǿǉe eitheȖ oǟ the
Petitioners nor a ǿΡ pȖoΚisioǿ oǟ laΛ ǠȖaǿtiǿǠ ড়saǿǉtioǿঢ় iǿ the aǟoȖesaid
documents. Thus, the argument on behalf of the Respondents that the delay
Λas oǉǉasioǿed oǿ aǉǉouǿt oǟ the ȖeȕuiȖeǾeǿt to oǈtaiǿ ড়saǿǉtioǿঢ় aǿd that
the ড়saǿǉtioǿঢ় Λas ȖeǉeiΚed oǿ ࢲࢷ.ࢱࢷ.ࢳࢱࢲࢵ, is ǿ ot legally tenable and hence,
must fail. Even otherwise, the reliance placed by the learned Advocate for the
Respondents on Section 470(3) of Cr.P.C. for exclusion of time is
misconceived and inapplicable to the facts of the present case. It is further
pertinent to note that the complaint was filed in the year 2014. The present
Petition was filed in the year 2021. However, there was no attempt or effort
on the part of the Respondents to seek condonation of delay by way of any
application. In such circumstances, this Court is constrained to accept the
contention of the Petitioners that the complaint is barred by limitation.

21. Finally, dealing with the argument of the Petitioners that the order
taking cognizance dated 11.12.2014 requires to be set aside since the same does
not reflect any application of mind, which is a sine qua non for taking
cognizance of an offence under Section 190 of Cr.P.C. Since the learned
JMFC has taken cognizance of a private complaint filed by the Respondents,

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Section 190(a) of Cr.P.C. would be triggered. It is a settled position of law
that although the order taking cognizance need not contain detailed reasons,
it must at least reflect some application of mind on the part of the learned Trial
Court. The order taking cognizance which is impugned by the Petitioners, is
to be found cumulatively across three dates as seen from the roznama of
JMFC, Panaji, Goa dated 11.12.2014, 22.06.2015 and 25.06.2015, which is
reproduced herein below:-
৚ 11.12.2014 – Before Smt. Saee Prabhudessai, Judicial Magistrate
Fi Ȗst Class at Paǿaji ড়Dঢ় CouȖt.
Received complaint U/S 217(5) of the Companies
Act, 1956 for violation.
List of documents.
List of witnesses.
Placed for order.
22.06.2015 – Taken up today
Issue notice to complainant and summons to
accused for appearance r/o
JMFC ড়Dঢ় CouȖt
25.06.2025 – S/S issued ৛
From a bare perusal of the aforesaid roznamas, on 11.12.2014, the
learned JMFC received the complaint filed by the Respondents under Section
217(5) of the Companies Act, 1956. The next roznama dated 22.06.2015
records that a notice was issued to the complainant and the last roznama dated
25.06.2015 only notes that summons were issued. It is evident that there is no
application of mind or any reflection thereof to the facts of the complaint on
the part of the learned JMFC either before taking cognizance of the offence or
before issuing summons/process to the Petitioners. Here a profitable
ȖeǟeȖeǿǉe ǉaǿ ǈe Ǿade to the JudǠǾeǿt oǟ the Hoǿঢ়ǈle SupȖeǾe CouȖt iǿ the

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1
matter of State of Gujarat V/s. Afroz Mohammed Hasanfatta , which
at paragraph 17 observes thus:
2
৚ࢲࢸ. AǟteȖ ȖeǟeȖȖiǿǠ to Bhushaǿ KuǾaȖ v. State (NCT of Delhi) ,
3
Chief Enforcement Officer v. Videocon International Ltd. and
other decisions, in Mehmood Ul Rehman v. Khazir Mohammad
4
Tunda , it was held as under: (Mehmood Ul case, SCC p. 429, para
20).
"20. The extensive reference to the case law would clearly
show that cognizance of an offence on complaint is taken
for the purpose of issuing process to the accused. Since it is
a process of taking judicial notice of certain facts which
constitute an offence, there has to be application of mind
as to whether the allegations in the complaint, when
considered along with the statements recorded or the
inquiry conducted thereon, would constitute violation of
law so as to call a person to appear before the criminal court.
It is not a mechanical process or matter of course. As held
by this Court in Pepsi Foods Ltd. v. Special Judicial
5
Magistrate to set in motion the process of criminal law
against a person is a serious matter."
Thus, i ǿ the liǠht oǟ the oǈseȖΚatioǿs oǟ the Hoǿঢ়ǈle SupȖeǾe CouȖt aǿd iǿ
the facts of the present case, this Court holds that the order taking cognizance
and order issuing process, both are without application of mind and hence
deserve to be set aside.

1
(2019) 20 SCC 539
2
(2012) 5 SCC 424
3
(2008) 1 SCC (Cri) 471
4
(2015) 12 SCC 420
5
(1998) 5 SCC 749

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22.
From a conspectus of the aforesaid facts and circumstances, this Court
holds that the allegations in the complaint, even if taken at face value, do not
disclose the commission of any offence under Section 217 of the Companies
Act, 1956. The initiation and continuation of the impugned proceedings in
the absence of the ingredients of the offence amounts to an abuse of the
process of law. The complaint, which forms the basis of the impugned order
issuing process, is barred by limitation and hence not maintainable. Apart
from the above reasons, the order taking cognizance and the subsequent order
issuing process are bereft of application of mind. In view thereof, the order
taking cognizance dated 11.12.2014, the summoning order dated 25.06.2015
passed ǈΡ leaȖǿed JMFC, ড়Dঢ় CouȖt, Paǿaji, iǿ LaǈouȖ Case No.ࢶࢵ/ࢳࢱࢲࢵ/A
and all consequential proceedings arising therefrom pending before learned
JMFC, ড়Dঢ় CouȖt, Paǿaji, aȖe ȕuashed aǿd set aside.

23. The Criminal Writ Petition No.6 of 2024 is allowed. Rule is made
absolute in the aforesaid terms.

ASHISH S. CHAVAN, J.

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