GAURANG SHETHWALA S/O MULCHANDAS SHETHWALA vs STATE OF GUJARAT

R/CR.MA/15664/2021 JUDGMENT DATED: 23/10/2026
(GJHC240547652020)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 15664 of 2021
FOR APPROVAL AND SIGNATURE:


HONOURABLE MR.JUSTICE P. M. RAVAL

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Approved for Reporting Yes No
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GAURANG SHETHWALA S/O MULCHANDAS SHETHWALA
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR.NANDISH H THACKAR(7008) for the Applicant(s) No. 1
MR CHAITANYA S JOSHI(5927) for the Respondent(s) No. 2
ROHAN N SHAH APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE P. M. RAVAL

Date : 23/10/2026

ORAL JUDGMENT
1. The petitioner before this court invoking Section 482 of
Criminal Procedure Code,1973 to quash Criminal Case No. 136 of
2002 pending before the court of learned Additional Chief Judicial
Magistrate, Ahmedabad.
2. Facts in a nutshell giving rise to the present petition can be
narrated as follows:-
2.1 The petitioner is a Chartered Accountant and is thus, a
member of Institute of Chartered Accountants of India and has
been granted certificate to practice by the same institute on
01.04.1989 and ever since then, the petitioner is practicing as a
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chartered accountant.
2.2 The petitioner came to be appointed as a professional non-
executive director with effect from 06.07.1995 in NISU Fincap
Limited, a company having its registered office at 301, Samudra
Complex, C.G. Road, Sardar Patel Nagar, Ellisbridge, Ahmedabad,
which was formally known as “Mega Finance and Securities
Limited”, and it is around the same time that the company came
up with a public issue of equity shares.
2.3 The petitioner resigned as a director from the company with
effect from 01.04.1997, which would be evident from the Form
No. 32 available with the Registrar of Companies reflecting the
date of resignation as 01.04.1997.
2.4 It is the case of the prosecution that the Registrar of
Companies, respondent No. 2 herein, lodged a criminal case
bearing No. 136 of 2002 before the court of Additional Chief
Metropolitan Magistrate, arraigning the present accused as
accused No.6, alleging to have committed default under Sections
63, 68 and 628 of the Companies Act, 1956, inter alia contending
that all the accused, including the present petitioner, were the
managing/whole-time/director of the company during the
relevant period and signatory to the prospectus to which the
complaint relates and are thus liable for default/violation of the
Companies Act.
2.5 It is further the case of the prosecution that the signatories
of the prospectus being directors of the company have failed to
implement the project for which the public issue was made
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and/or forecast made by the signatories to the prospectus.
2.6 It is also the case of the prosecution that a show cause
th
notice was issued on 29 of May 2022. However, there being no
satisfactory reply, and all the accused having contravened and
committed default under Sections 63, 68 and 628 of the
Companies Act, inasmuch as, immediately after the public issue,
there were numerous complaints against the company from
public or the investors about non-availability of the company and/
or not achieving the targets as stated/promised in the
prospectus.
2.7 That on the basis of investors' complaint, 229 companies in
the country were shortlisted as vanishing companies by the SEBI,
which are also available on the website of Department of
Company Affairs also.
2.8 It is also the case of the prosecution that the present
company, namely NISU Fincap Limited, is in the list of those
vanishing companies and that the Government of India,
Department of Company Affairs, contemplated to ensure that all
such companies which collected huge funds through public issue,
but utilized the proceeds of the issue for the purpose other than
those for which the issue was brought, are required to be
punished in the public interest for their misdeeds and offense
committed under the Companies Act, and thus, the accused
having committed offense as stated hereinabove, lodged the
private complaint in terms of the provisions of Section 220 of the
Criminal Procedure Code, 1973.
3. Learned advocate for the petitioner, Mr. Nandish Thackar,
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would submit that during the short tenure in the company as a
director, the petitioner never participated in the day-to-day
affairs of the company, nor did he attend any board meetings or
general meeting of the company, nor did he receive any sitting
fees from the company, nor any remuneration either direct or
indirect, and was also not a shareholder or subscriber to its
memorandum of association, but in fact, being a Chartered
Accountant, was only saddled with the responsibility of
compliance with regard to issuance of the IPO.
3.1 Learned advocate further submitted that upon receiving
show cause notice, the petitioner submitted a detailed reply also,
inter alia, contending that he had already resigned way back in
1947 more particularly, on 01.04.1997. However, to the utter
surprise and shock of the petitioner, despite of submitting the
aforesaid stated reply to the show cause notice, received its
process pursuant to criminal case No. 136 of 2002 for the alleged
offenses under the Companies Act.
3.2 Learned advocate for the petitioner would further submit
that impugned FIR came to be registered as C.R. No. I-861 of
2003 before the Navrangpura Police Station for offense
punishable under Sections 403, 406, 415, 418, 420 and 424 of
the IPC, which came to be challenged by way of Criminal
Miscellaneous Application No. 1032 of 2007, and by order dated
18.12.2012, this Court was pleased to quash and set aside the
above referred FIR by clear-cut finding that the essential
allegations are not made out by the complainant for the year
1999 and the petitioner had resigned from the post of director
way back in 1997, and thus had committed no offense as alleged.
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3.3 Learned advocate further submitted that despite of the FIR
having been quashed, wherein the allegations were with regards
to the year 1999 onwards, the present complaint is lodged
without there being any justifiable reason to file criminal case,
inasmuch as he had resigned way back in 1997, more particularly
01.04.1997, and has thus, wrongly implicated the present
petitioner, which is nothing but abuse of process of law.
4. Per contra, learned advocate Mr. Chaitanya S. Joshi for the
Original Complainant(Registrar of Companies), would submit that
when the petitioner herein was also a signatory to the prospectus
and was also director in the said company, though he had
resigned in the year 1997, makes no difference, and there are
allegations against the company as well as the directors for
violation of Section 63, 68 and 628 of the Companies Act.
5. Section 63 relates to Criminal liability for mis-statements in
prospectus, Section 68 relates to Penalty for fraudulently inducing
persons to invest money and Section 628 relates to Penalty for
false statements and when various complaints were received
against the company from the public or the investors about the
non-availability of the company and/or not achieving the targets
as stated/promised in the prospectus, to which the present
petitioner was also a signatory, on basis of such investors'
complaint, the present company was also shortlisted as vanishing
companies by the SEBI. Hence, it cannot be said that there is no
prima facie case against the present petitioner, and has thus
argued to dismiss the present petition.
6. Heard learned advocates for the respective parties. This
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R/CR.MA/15664/2021 JUDGMENT DATED: 23/10/2026
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Court has gone through the averments made in Criminal Case No.
136 of 2002, pursuant to which process came to be issued
against the present petitioner.
6.1 At Annexure B, Page 25, Form No. 32 is placed on record,
which clearly reflects that the petitioner resigned as a director
from 'Megh Finance and Securities Limited' on the 1st of April,
1997.
6.2 It is also a matter of record that the petitioner was merely a
professional director being a Chartered Accountant, acting solely
as a non-executive director. The relevant provisions of Section 63
provide as follows:
"63. Criminal liability for mis-statements in
prospectus.—(1) Where a prospectus issued
after the commencement of this Act
includes any untrue statement, every
person who authorised the issue of the
prospectus shall be punishable with
imprisonment for a term which may extend
to two years, or with fine which may extend
to fifty thousand rupees, or with both,
unless he proves either that the statement
was immaterial or that he had reasonable
ground to believe, and did up to the time of
the issue of the prospectus believe, that the
statement was true.
(2) A person shall not be deemed for the
purposes of this section to have authorised
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the issue of a prospectus by reason only of
his having given—
(a) the consent required by section 58 to the
inclusion therein of a statement purporting
to be made by him as an expert, or
(b) the consent required by sub-section (3)
of section 60."
6.3 If sub clause (a) of clause (2) of Section 63 is taken into
consideration, the consent required by Section 58 for the
inclusion of a statement purporting to be made by an expert shall
not be deemed for the purpose of Section 63 to have authorized
the issue of the prospectus. Section 58 provides for an expert's
consent to issue a prospectus containing a statement made by
him. Thus, giving consent as an expert under Section 58 is not to
be treated as authorizing the issue of the prospectus, and cannot
attract criminal liability under Section 63 of the Companies Act
merely by reason of having given such consent. Even the factum
of reply to the show cause notice issued to the present petitioner
is not controverted by the complainant where also similar stand is
taken by the petitioner.
6.4 As far as Section 68 of the Companies Act is concerned, it
provides a penalty for fraudulently inducing persons to invest
money. In view of the operation of sub-section (2) of Section 63,
Section 68 would not be applicable merely because the director,
being a Chartered Accountant, had given consent as required
under Section 58 and as such there is no averment in the entire
complaint against the present petitioner to the effect that he had
induced persons to invest money in the company.
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R/CR.MA/15664/2021 JUDGMENT DATED: 23/10/2026
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6.5 As far as Section 628 of the Companies Act is concerned, it
relates to the penalty for false statements in any return, report,
certificate, balance sheet, prospectus, statement, or other
document required by or for the purposes of any of the provisions
of the Companies Act. The essence of an offence under this
section is not merely the submission of an inaccurate or defective
document, but the conscious, deliberate, and intentional
introduction of falsehood coupled with the requisite mens rea
(guilty mind). Criminal penal liability of this severity can never be
fastened vicariously, on the basis of loose suspicion, or through
abstract association. The gist of this section is mens rea , which
can be established only when mala fides or a want of good faith
on the part of the director is shown. From the facts of the present
case, the petitioner had merely made a statement as required
under Section 58 as an expert. An independent professional who
relies upon books, records, and data furnished by the
management cannot be hauled up under Section 628 without
specific, concrete allegations and material evidence showing
direct complicity or conscious knowledge of falsification. The
complaint before the trial court miserably failed to disclose any
such legal nexus qua the petitioner.
6.6 The penal provisions invoked against the petitioner, Section
628 read with Section 75 of the 1956 Act, carry a maximum
substantive punishment of imprisonment for a term of up to two
years. Under Section 468(2)(c) of the Cr.P.C., the strict period of
limitation prescribed for taking cognizance of an offence
punishable with imprisonment exceeding one year but not
exceeding three years is three years. The complaint itself alleges
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that the company came out with a public issue of equity shares
vide prospectus dated 05.01.1996 wherein the present petitioner
was a signatory to the prospectus. The complaint itself establish
that the prospectus was dated 05.01.1996 whereas the compliant
is dated 21.06.2002 reflecting an inordinate, unexplained, and
colossal delay of nearly six years, which is two times the outer
limit prescribed by Parliament under Section 468.
6.7 The Apex Court in the case of Sarah Mathew v. Institute of
Cardio Vascular Diseases by its Director, Dr. K.M. Cherian
reported in (2014) 2 SCC 62 , held that for the purpose of
computing limitation under Section 468, the relevant and decisive
date is the date of filing of the complaint or the initiation of
criminal proceedings. Although Section 473 of the Cr.P.C.
empowers a court to take cognizance after the expiry of the
limitation period if the delay has been properly explained and
condonation of such delay is necessary in the interest of justice, a
thorough perusal of the complaint and records reveals an
absolute absence of any application for condonation of delay, nor
is there any plausible explanation offered by the ROC for the
lapse of nearly six years in filing of the complaint.
7. In view of the above, the captioned petition stands allowed.
Criminal Case No. 136 of 2002 pending before the Court of the
learned Additional Chief Metropolitan Magistrate, Ahmedabad,
along with all consequential proceedings arising therefrom qua
the present petitioner, stands quashed and set aside.
8. Rule is made absolute to the aforesaid extent.
(P. M. RAVAL, J)
MMP
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