Cognizant Technology Solutions (CTS), a leading Information Technology consultancy service provider in the country, has moved the Madras High Court fearing possibility of criminal prosecution being launched against it by Registrar of Companies for alleged violation of the provisions of the Companies Act of 2013 and the Companies (Appointment and Disqualification of Directors) Rules of 2014.
Justice T. Raja on Friday ordered notices returnable by March 20 to the Registrar of Companies, functioning under the Union Ministry of Corporate Affairs, since the petitioner’s counsel Srinath Sridevan pointed out that the possibility of prosecution was looming large. The Registrar had issued six individual notices to the company on December 8, 2018 seeking explanation as to why it should not be prosecuted. Questioning all six notices through individual writ petitions, CTS said, “A decision to prosecute the petitioner would have serious civil consequences on the petitioner. Not only will the petitioner (and its officers) have to face a criminal prosecution with all that it entails, but also the said decision would ipso facto label the petitioner as a defaulter. The petitioner verily believes its stand is correct. It is believes it is not liable to prosecution.”
The company wanted a direction to the Registrar to consider the replies submitted by it on January 3 to the show-cause notices, take a decision thereafter and communicate the decisions to it expeditiously. It apprehended that the Registrar might straight away initiate prosecution since the Companies Act does not contain a specific provision necessitating the official to communicate the decisions taken on petitioner’s replies.
‘Feudal privilege’
“The principles of administrative law have developed too far in India for the respondents to continue to assert the feudal privilege that they will take decisions in private, in their ivory towers, and that the citizens will not be told of the same. The respondents must communicate their decisions to the petitioner and the petitioner will have the right, if such decisions are wrong, to challenge the same before the courts of the land,” the company claimed.
In identical affidavits filed on behalf of CTS, its Director-Legal M. Lenin recalled that the office of the Registrar of Companies on November 21, 2017 initiated an inquiry against the company under Section 206 of the Companies Act and sought answers for as many as 18 queries. The queries were raised regarding alleged discrepancies in the balance sheets between March 31, 2013 and March 31, 2017.
One of those questions was as to why the company had not disclosed complete information on stock options of its parent holding company — CTS Corporation in the United States — having been given to the employees, including its directors, and the payments running to several hundred crores of rupees having been paid to the parent company in the US towards stock compensating recharge.
The other queries included reported discrepancies in appointment of whole time directors. Though the company had submitted a detailed reply to each of the 18 queries on November 29, 2017 itself, the office of the Registrar had rehashed some of those queries once again during December last and issued individual show-cause notices calling upon the company to explain why prosecution should not be launched against it, the petitioner said.
