The Indian legal landscape is seldom an exception to the regulatory overreach done in the name of procedure. Nevertheless, when such procedure is voluntarily adopted, it ought to align with the tenets of law. This is an analyses of a recent order passed by the Madras High Court in M/s. Jks Constructions Private Limited v The Assistant Registrar of Companies (2026)^[1] and poses a pertinent question before us: When a regulatory authority adopts a procedure not mandated by law, how far can that procedure give rise to a cause of action that can be evaluated against the touchstone of fairness?

In the present case, the Assistant Registrar of Companies launched criminal prosecution under Section 207 (3) of the Companies Act, 2013 (referred to as the Act) against the directors of M/s. Jks Constructions Private Limited (referred to as the Accused) for failure to appear for inspection summons, punishable under Section 207 (4) of the Act and failure to hold Annual General Meetings (AGMs), punishable under Section 99 of the Act. Aggrieved by the same, the Accused being the Directors of the Company approached the Madras High Court under Section 482 of The Code of Criminal Procedure, 1973 (now, Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023) which preserves the inherent powers of the High Court to quash legal proceedings that abuse the legal process, in order to secure the ends of justice. The Accused sought to quash the criminal proceedings by highlighting the statutory irregularities and the maintainability of the proceedings itself.

The Prosecution chose to issue a Show Cause Notice, giving the Accused a 15-day window to respond before initiating criminal proceedings against them. The Accused was unable to respond because the said Show Cause Notice as the same was never served to them. On this premise, the Accused challenged the criminal proceedings initiated against them. The Prosecution's focal contention remained that the Show Cause Notice was not mandated by the Act and claimed that its non-delivery cannot serve as grounds for quashing the proceedings against the Accused. Notably, the Prosecution was a mute spectator on the aspect that the Show Cause Notice was not duly served to the Accused keeping it open to interpretation. The Madras High Court rejected the Prosecution's argument due to the absence of proof on whether the Show Cause Notice was served. The Court also adjudged that this constituted a clear violation of the principles of natural justice since the Accused was deprived of their right to be heard.

It is imperative to examine the merits of the Prosecution's usage of the Show Cause Notice in their complaint to establish a cause of action. A crucial question is to be addressed: Can a regulatory authority raise a cause of action through a non-mandatory procedure that it has chosen to adopt? In situations where a statute is silent regarding the procedure to be followed, there are two choices available to the authority: first, the initiation of proceedings based on statutory default and second, subscribing to a viable procedure, such as the Show Cause Notice, to offer a window for compliance, thus abiding by the principles of natural justice. The Prosecution in the present case has followed the latter.

To determine the merits of such a cause of action, we examine two principles:

First, the principle of administrative estoppel which essentially prevents a government agency from going back on its word. Justice Frankfurter's opinion in Vitarelli v. Seaton (1959)^[2] extended this principle to proceedings that fall outside of what is mandated by law. It was held that the actions of an authority must be held to the standards it professes. The Indian Constitutional realm further indigenized these principles through Amarjit Singh Ahluwalia v. State of Punjab (1975)^[3] under Article 14. Applying the same to the present case, the Prosecution buttressed its argument on the Act's silence and chose to issue a Show Cause Notice but failed to ensure its proper delivery to the Accused. When challenged, the Prosecution asserted that it was irrelevant to the cause of action contradicting their own issuance of such a notice in the first place. The above-mentioned precedents express that even if the chosen procedure is not mandated by law, it must adhere to the principles of natural justice which can give rise to a cause of action. Prompt delivery ensures that the concerned party to whom the notice is issued, is able to exercise their right to be heard. This was reasserted through the findings of the Madras High Court in the present case.

Second, on the existence of a right to sue without delivery: To understand when the right to sue arises, we must first understand the definition of a cause of action. The Supreme Court in Sonic Surgical v. National Insurance Company Ltd. (2010)^[4] established the definition of cause of action to include a bundle of facts that gives rise to a right or liability. Consequently, this cause of action matures into a right to sue. In cases involving a notice and its prompt delivery to the concerned party, the right to sue remains dormant until the notice's time limit comes to an end. This can be closely analogised with claims under Section 138 of the Negotiable Instruments Act, 1881. The maturing of a right to sue can be traced along similar lines because the cause of action doesn't arise as soon as the cheque bounces; it requires the following chain of events to take place: the demand service must be served, followed by a 15-day compliance window and the expiration of this window results in the right to sue. Similarly, the Prosecution voluntarily opted to issue a Show Cause Notice giving a 15-day window to explain the missed AGMs. The expiration of that specific time period gives rise to the right to sue. If that notice was never delivered, the time period never actually begins and no right to sue arises. The prosecution has to bear in mind that when there is a violation of the principles of natural justices in such cases, it leads to fastening a criminal liability on the Accused and the onus is on the prosecution to ensure the due process of law is followed and the failure of which goes against the principles of criminal jurisprudence.

It suffices to say that an authority cannot substantiate an alleged cause of action through a non-mandatory procedure that it has arbitrarily adopted, unless it executes that chosen procedure in compliance with principles of natural justice. The Accused had tactfully identified the anomaly in the actions of the Prosecution and had presented it before the Court, resulting in the judiciary's reaffirmation that once a procedure that is compliant with the principles of natural justice is adopted, it must be promptly adhered to, regardless of its mandate by law.

1. Crl.O.P. No. 11803 of 2023, Crl.O.P. No.11822 of 2023. ↑

2. Vitarelli v Seaton 359 US 535 (1959). ↑

3. Amarjit Singh Ahluwalia v State of Punjab (1975) 3 SCC 503. ↑

4. Sonic Surgical v National Insurance Co Ltd (2010) 1 SCC 135. ↑

   Author Priyankashri A & Devi G Kundavai Nachiyar are Law students and Shabnam Banu is an Advocate practicing at Madras High Court. Views are personal.