Delhi HC Refuses to Quash Case as Coal Beneficiation Issue Requires Trial Evidence

Aryan Engery Pvt. Ltd. Vs Union of India (Delhi High Court)

Criminal Complaint Over Cost Auditor Appointment Sustained Because Coal Washing Dispute Needs Adjudication; Delhi HC Declines Relief Because Coal Beneficiation Cannot Be Excluded from Manufacturing at Threshold; Cost Audit Prosecution to Continue Because Coal Processing May Fall Within Manufacturing Framework; Delhi HC Says Coal Beneficiation Classification Dispute Must Go to Trial Before Quashing Proceedings.

The Delhi High Court dismissed a petition seeking quashing of criminal proceedings initiated under Section 148(8)(a) read with Section 147(1) of the Companies Act, 2013 against a company engaged in coal beneficiation activities. The company had challenged the complaint pending before the Additional Chief Metropolitan Magistrate, contending that it merely provided coal washing services and was not engaged in the production or manufacture of coal products, thereby negating any obligation to appoint a Cost Auditor under the Companies (Cost Records and Audit) Rules, 2014.

The company had received notices from the authorities regarding non-appointment of a Cost Auditor and non-submission of a Cost Audit Report for the financial year 2015-16. In response, it maintained that coal beneficiation services did not fall within the categories specified under Rules 3 and 4 of the Companies (Cost Records and Audit) Rules, 2014. It further relied on its statutory auditors’ observations that maintenance of cost records had not been prescribed for services rendered by the company.