SECTIONs 159 TO 162
Annual
returns
[1961] 31 COMP. CAS. 1 (SC)
SUPREME COURT OF INDIA
v.
Bandhan Ram Bhandani
S.
J. IMAM, A.K. SARKAR AND K. C. DAS GUTA, JJ.
CRIMINAL
APPEAL NOS. 93 AND 94 OF 1958
SEPTEMBER 23,
1960
SARKAR,
J.-The respondents were directors of Hirjee Mills Ltd. They were prosecuted
before the Chief Presidency Magistrate, Bombay, for two offences under the
Companies Act, 1913, as amended by Act XXII of 1936. The first offense was that
they knowingly and wilfully authorised the failure to file the summary of share
capital for the year 1953 and thereby became punishable under sub-section [5]
of section 32 of the Act, for a default in carrying out the requirements of
that section. The second offense was that they were knowingly and wilfully
parties to the failure to lay before the company in general meeting the
balance-sheet and profit and loss account as at March 31, 1953, and thereby
became punishable under section 133[3] of the Act for a default in complying
with the requirements of section 131. There was a separate trial in respect of
each offense.
The learned
magistrate found that no general meeting of the company had been held in the
year concerned. Following Imperator v. Pioneer Clay and Industrial Works Ltd. [1948]
18 comp.cas. 31 he acquitted the respondents, being of the view, that no
offense under either section could be committed till the general meeting had
been held. The learned magistrate did not go into the merits of the cases on
the facts. Appeals by the appellant to the High Court at Bombay from the orders
of the learned magistrate were summarily dismissed. It has preferred the
present appeals from the decisions of the High Court at Bombay with special
leave granted by this court. The appeals have been heard together and are both
disposed of by this judgment.
It appears
that respondent No. 7, N.K. Firodia, was discharged by the learned magistrate
because it was conceded at the trial that he was not a director of the company
at any material time. He has been made a respondent to the present appeals
clearly through some misapprehension. The appellant, the State of Bombay, does
not and cannot proceed against him. The name of the respondent, Firodia,
should, therefore, be struck out from the records of this appeal. Respondent
no.5, Fateh Chand Jhunjhunwala, died while this appeal was pending in this
court. The appeal is, therefore, concerned with the remaining five respondents
only.
Sub-section
(1) of section 32 requires a company once at least in every year to make a list
of its shareholders as on the date of the first or only ordinary general
meeting in the year. Sub-section (2) requires that the list shall contain a
summary specifying various particulars mentioned in it. Sub-section (3) states
that the list and summary shall be completed within twenty-one days after the
day of the first or only ordinary general meeting in the year and the company
shall forthwith file a copy with the Registrar together with a certificate from
a director or the manager or the secretary of the company that the list and
summary state the facts as they stood on the day aforesaid. Sub-section (5)
contains the penal provision, that “If a company makes default in complying
with the requirements of this section, it shall be liable to a fine not
exceeding fifty rupees for every day during which the default continues, and
every officer of the company who knowingly and wilfully authorises or permits
the default shall be liable to the like penalty.”
It is said on
behalf of the respondents that there is no default in complying with the
requirements of the section until a general meeting is held. That, it is said,
follows from the language of the section, for it requires certain things as at
the date of the meeting to be stated in the list and summary and also requires
these to be filed within a certain time of the meeting. So, it is said, that,
the section requires certain things to be done only after the meeting has been
held and no question of performing those things arises till the meeting has
been held.
A contrary
view has been taken in England on the corresponding provisions of the English
Companies Acts of 1862 and 1908: See Gibson v. Barton [1875] LR 10 QB 329
Edmonds v. Foster [1875] 45 LJ. MC 41 and Park v. Lawton[1911] 1 K.B. 588. It
was said in these cases that a person charged with an offense could not rely on
his own default as an answer to the charge, and so, if the person charged was
responsible for not calling the general meeting, he cannot be heard to say in
defence to the charge that the general meeting had not been called. It was also
said that the company and its officers were bound to perform the condition
precedent, if they could do that, in order that they might perform their duty.
This seems to us to be the correct view to take. If the person charged with the
failure to carry out the requirements of the section could have called the
meeting, he cannot defeat the provisions of the section simply by not calling
the meeting wilfully.
It is true
that under section 76 of the Act a general meeting of a company has to be held
once at least in every calendar year and if a default is made, the company and
every director or the manager of the company who is knowingly and wilfully a
party to the default shall be liable to a fine not exceeding five hundred
rupees. That, however, is, in our opinion, no reason for saying that a person
charged with a failure to file the list and summary as required by section 32
where a meeting had not been held, could only be prosecuted under section 76
and not under section 32. Section 76 imposes an obligation to hold a meeting
and attaches a penalty to a failure to perform that obligation. In the case of
section 32 it is necessary that the meeting should be held in order that the
requirements of that section may be carried out. It is no less necessary to
call a meeting for performing the obligations imposed by section 32, because
under section 76 there is an obligation to call a meeting the breach of which
entails an independent penalty. The two sections deal with different matters
and section 76 in another part of the Act or not. Without a provision like
section 76 a delinquent officer of the company may make section 32 infructuous,
and, therefore, as already stated, it must be held that liability under section
32 would be incurred where the officer has wrongly assisted in the meeting not
being held. The result cannot be different because of the presence of a
provision like section 76.
Nor do we
think that sub-section (5) of section 32 by imposing a daily fine during the
continuance of the default indicates that the default is not committed till the
meeting has been held. In order that the default may continue it has, no doubt,
first to occur. In our view, it occurs after the expiry of 21 days from the day
when the meeting should have been held within the year.
The
respondents referred to the case of Queen v. Newton[1879] 48 LJ. MC 77, where
it having been proved that the general meeting was not held, the persons
charged with the default were acquitted. That case, however, is clearly
distinguishable, “because the decision proceeded on the ground that, the
summons having alleged in terms that the default was made after the general
meeting had been held, it because essential to prove when the meeting was held
as a matter of fact, and in the absence of proof the court held that the
summons was rightly dismissed.” In this case COCKBURN C.J. expressed some
doubts about the correctness of the decision in Edmond’s case (supra). In
Park’s case (supra), however, LORD ALVERSTONE said that he was unable to share
these doubts, and with this view we agree. We may add that such doubts have not
been shared by anyone up to now.
Another case
to which we were referred on behalf of the respondents was Dorte v. South African
Super-Aeration Ltd.[1984] 20 TLR 425 There, a company was convicted for a
failure to file the list and summary in a case where the general meeting had
not been held and fined 1d. and 1d. per day up to a certain day. Subsequently,
a further summons against it was taken out in respect of the same default for
further penalties from that day to another later day. It was held that the word
“default” implied a willful and continued neglect to do an act required and
that the company could not be liable to a continuing daily fine for an omission
which it was impossible to remedy. The report does not set out the arguments
nor the judgment and it is not clear on what grounds the decision was given. It
appears, however, that LORD ALVERSTONE was one of the judges who decided that
case. In Park’case (supra). LORD ALVERSTONE himself observed with regard to
Dorte’s case (supra) that there, “there was no question of the defendant being
also in default as to the general meeting, and that decision, therefore, in no
way conflicts with the earlier authorities.” We do not think, therefore, that
Dorte’s case (supra) assists the respondents at all. It is authority only for
the proposition that a continuing daily fine will not be exacted where, owing
to no meeting having been held, it is impossible to remedy the default: see
Buckley’s Company Law [13th edition], page 311.
Turning now to
section 131, we find that it requires the directors of a company, once at least
in every calendar year, to lay before the company in general meeting a
balance-sheet and profit and loss account of the company. Sub-section [3] of
section 133 makes the company and every officer of it who is knowingly and
wilfully a party to the default in carrying out the provisions of section 131,
punishable with fine which may extend to five hundred rupees. As in the case of
section 32 and for the same reasons, here also it is no defence to the charge
for breach of section 131 to say that a meeting was not called.
As regards
Imperator v. Pioneer Clay and Industrial Works Ltd.[1948] 18 comp.cas.31 on
which the courts below held that the respondents must be acquitted, we find
that it turned on section 134 of the Companies Act, 1913. The language of that
section is to a certain extent different from the language used in sections 32
and 131. The section 134(1) says, “After the balance-sheet, and profit and loss
account....have been laid before the company at the general meeting, three
copies thereof.....shall be filed with the Registrar....” Sub-section (4) of
this section provides a penalty for breach of section 134, in terms similar to
those contained in sub- section (5) of section 32. If the language of section
134(1) makes any difference as to the principle to be applied in ascertaining
whether a breach of it has occurred or not-as to which we say nothing in this
case- then that case can be of no assistance to the respondents. If, however,
no such difference can be made, then we think that it was not correctly
decided. We observe that CHAGLA C.J., who delivered the judgment of the court
in that case, did not question the correctness of the decision in Park’s case
(supra) asked to follow. All that he said with regard to that case was that the
scheme and terms of the section on which it turned were different from section 134
of the Companies Act, 1913. That may or may not be so. There is, however, no
difference between section 26 of the English Companies Act, 1908, on which
Park’s case (supra) turned, and which apparently through some mistake CHAGLA
C.J. cited as section 36, and section 32 of the Indian Companies Act of 1913,
except that the English section required the summary to include a statement in
the form of a balance-sheet containing certain particulars mentioned, whereas
our section does not require that. Section 131 of our Act contains some
provision about the laying of the balance-sheet before the general meeting.
This provision was inserted in the Act by the amending Act of 1936. The fact,
that one of the requirements of the English section 26 is not present in section
32 of our act cannot create any material difference between section 32 of our
Act and section 26 of the English Act. If the principle that a person charged
with an offense cannot rely on his own default as an answer to the discharge is
correct, as we think it is, and which we do not find CHAGLA C.J. saying it is
not, then that principle would clearly apply when a person is charged with a
breach of section 32 of our Act.
We think, therefore,
that the appeal should be allowed. The case will now go back to the learned
Presidency Magistrate and be tried on the merits according to the law as laid
down in this judgment.
Appeals
allowed.
[1978] 48 COMP. CAS. 106
(ORI)
HIGH COURT OF ORISSA
v.
Utkal Distributors Pvt. Ltd.
P.K. MOHANTI J.
CRIMINAL APPEAL NO. 237 OF 1973.
AUGUST 11, 1975
R.K.
Mohapatra for the Petitioner.
P.K.
Mohanti J.—This appeal has
been preferred by the Registrar of Companies, Orissa, Cuttack, against a
judgment of the learned S.D.M., Cuttak Sadar, acquitting the respondents of the
charge under section 162 of the Companies Act, 1956 (hereinafter referred to as
"the Act").
Respondent
No. 1 is the Utkal Distributors (Private) Ltd., a company registered under the
Act, and respondents Nos. 2 to 4 are its directors. Accusation against the
respondents was that they failed to comply with the provisions of section 159
of the Act in not filing before the Registrar of Companies the annual return for
the year ended September 30, 1969, and thereby became punishable under section
162(1) of the Act.
Respondents
Nos. 2 and 4 pleaded not guilty to the charge. Their contention was that no
annual general meeting for the relevant period having been held for want of
quorum, the annual return could not be filed with the Registrar of Companies.
At the trial,
the appellant examined a clerk, of the office of the Registrar of Companies,
Orissa, who stated that the respondents failed to submit the annual return for
the year ending on 30th September, 1969, and that they did not respond to the
notices issued to them to make good the default.
The learned
S.D.M. found that no general meeting of the company had been held during the
relevant period. Following the decisions in Vulcan Industries (P.) Ltd. v.
Registrar of Companies, Orissa [1972] 42 Comp Cas 326 (Orissa) and Andhra
Provincial Potteries Ltd. v. Registrar of Companies [1969] 39 Comp Cas 1000
(AP) [FB], he acquitted the respondents being of the view that failure to
comply with the provisions of section 159 is punishable only when it is wilful.
The learned
S.D.M. has wrongly applied the two decisions which relate to cases under
section 220 of the Act and have no application to a case under section 162 of the
Act. Sub-section (1) of section 162 of the Act corresponds to sub-section (5)
of section 32 of the Indian Companies Act, 1913 (hereinafter referred to
as the "old Act"). In State of Bombay v. Bandhan Ram Bhandani [1961]
31 Comp Cas 1 (SC), one of the charges against the accused persons was that
they knowingly and wilfully authorised the failure to file the summary of share
capital for the year 1953 and thereby became punishable under sub-section (5)
of section 32 of the old Act. The accused persons had been acquitted on the
finding that no general meeting of the company was held in the year concerned
and no offence under section 32 of the old Act could be committed till the
general meeting had been held. Their Lordships held that a person charged with an
offence under section 32 of the old Act could not rely on his own default in
not holding the annual meeting as an answer to the charge. It was further held
that the meeting should be held in order that the requirements of section 32
may be carried out and that the liability under the section would be incurred
where the officer has wrongly assisted in the meeting not being held.
Obviously, this decision of the Supreme Court was not brought to the notice of
the learned S.D.M.
In Andhra
Provincial Potteries Ltd. v. Registrar of Companies [1969] 39 Comp Cas
1000 (AP) [FB], the question for consideration was whether under section 220 of
the Act the holding of an annual general meeting of the company and laying
before it the balance-sheet and the profit and loss account are pre-requisites
for a prosecution under section 220(3) of the Act. Their Lordships held that
while it was open to the Registrar to prosecute the persons who had committed
default under sections 166, 159 to 161 and 210 by wilfully not holding the
meeting and not fulfilling the requirements of these provisions, any
prosecution under section 220 would be premature without such a meeting being
in fact held. Their Lordships observed as follows (page 1017):
"It is clear that the default in not holding an
annual general meeting and preparing statements or returns and filing them
before the Registrar, or in not laying the balance-sheet and the profit and
loss account before that meeting as required under sections 166, 159 to 161 and
210 cannot be pleaded in defence of the prosecution".
This decision was affirmed by the Supreme Court in
State of Andhra Pradesh v. Andhra
Provincial Potteries Ltd. [1973] 43 Comp Cas 514.
Under the provisions of section 166(1) of the Act the
company has to hold in each year, a general meeting as its annual general
meeting not more than fifteen months from the date of the previous general
meeting, unless of course the Registrar, for any special reason, extends the
time within which any annual general meeting, not being the first annual
general meeting, shall be held, by a period not exceeding three months. It is
apparent from these provisions that an annual general meeting, not being the
first annual general meeting, is to be held within fifteen months or eighteen
months, where it is extended from the date of the last general meeting.
According to section 174 of the Act if the quorum is not formed it cannot be a
good ground for not holding the annual general meeting. As provided under
sub-section (4) of section 174 the meeting shall stand adjourned to the same
day in the next week, at the same time and place, or to such other day and at
such other time and place as the board may determine and according to
sub-section (5), if at the adjourned meeting also, a quorum is not present within
half an hour from the time appointed for holding the meeting, the members
present shall be a quorum.
The directors of the company are responsible for
calling a general meeting and having failed to call such a meeting and thereby
contravened section 166 of the Act, they cannot be permitted to take advantage
of their own wrong and then plead that they could not file the annual return
because no meeting was called.
Now, turning to the findings of the learned S.D.M.
that there can be no conviction under section 162 of the Act unless the default
was wilful, it is to be noted that there is a vital difference between
sub-section (5) of section 32 of the old Act and sub-section (1) of section 162
of the Act. Subsection (5) of section 32 of the old Act provides:
"If a company makes default in complying with the requirements of this section, it shall be liable to a fine not exceeding fifty rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty".
Sub-section (1) of section 162 of the Act runs as
follows:
"If a company fails to comply with any of the
provisions contained in section 159, 160 or 161, the company, and every officer
of the company who is in default, shall be punishable with fine which may
extend to fifty rupees for every day during which the default continues".
It will thus be seen that the words "knowingly
and wilfully" occurring in sub-section (5) of section 32 of the old Act
have been omitted from the corresponding provisions in sub-section (1) of
section 162 of the Act. The position, therefore, is that the company and every
officer of the company who is in default shall be punishable even if the
default has not been committed wilfully. This view finds support from the
decisions in State v. Linkers Put. Ltd. [1970] 40 Comp Cas 17 (Pat) and Gopal
Khaitan v. State [1969] 39 Comp Cas 150 (Cal).
In view of my above findings the order of acquittal
passed by the learned S.D.M. is liable to be set aside. It appears, however,
that respondent No. 3, Naba Kishore Mohanty, did not appear in the trial court
and by order dated May 25, 1973, it was directed that the case should be split
up against him. By the subsequent order dated July 3, 1973, the learned S.D.M.
directed issue of non-bailable warrant of arrest against respondent No. 3 but
the case was heard and disposed of before execution of the non-bailable warrant
and all the respondents were directed to be acquitted by the judgment dated 5th
September, 1973. As respondent No. 3 had not entered appearance and had no
opportunity of defending himself the learned S.D.M. went wrong in proceeding
with the trial in his absence. The case against this respondent should,
therefore, be remanded for re-trial.
Under section 159 of the Act every company shall
prepare and file with the Registrar the annual return within sixty days from
the date on which each annual general meeting referred to in section 166 is
held. The complainant's case was that the annual general meeting of the company
should have been held latest by September 30, 1969, and the annual return made
up to that date should have been filed with the Registrar on or before November
29, 1969. The respondents Nos. 1, 2 and 4 failed to submit the annual return
with the Registrar by that date and, therefore, they were in default from
November 30, 1969, up to the date of decision of the trial court, that is,
September 5, 1973.
The result, therefore, is that the appeal is allowed and
the order of acquittal passed against the respondents is set aside. Respondents
Nos. 1, 2 and 4 are convicted under section 162 of the Act and each of them is
sentenced to pay a fine of Re. 0.50 for every day during the period from
November 30, 1969, to September 5, 1973. I also direct under section 626 of the
Act that out of the fine amount a sum of Rs. 500 (five hundred) shall be paid
to the Registrar of Companies towards the costs of the proceedings.
The case against respondent No. 3, Naba Kishore Mohanty,
is remanded to the trial court for re-trial.
[1966]
36 COMP.CAS. 7 (MAD)
Nagmani Transports Private Ltd.
V.
RAMAKRISHNAN, J.
CRIMINAL REVISION CASE NOS.1263 AND 1264 OF 1964
CRIMAINAL REVISION PETITION NOS.1237 AND 1236 OF 1964
AUGUST
20, 1965
JUDGMENT
There are six
petitioners in these revision cases. The first petitioner, Nagamani Transports,
is a private limited company, and petitioners Nos. 2 to 6 are its directors.
The second petitioner is the husband of the third petitioner. The fourth
petitioner is their daughter and the sixth petitioner is the fourth
petitioner's husband. The fifth petitioner is a third party. On the allegation
that they failed to furnish to the Registrar of Companies copies of the annual
return for the year ending September 30, 1962, and thereby contravened section
159 read with section 162 of the Companies Act, they were prosecuted before the
Sixth Presidency Magistrate, Saidapet, Madras. On the further allegation that
they failed to furnish to the Registrar of Companies copies of the
balance-sheet for the year ending September 30, 1962, amounting to a
contravention of section 221 read with section 223 of the Companies Act they
were also prosecuted before the same magistrate. These criminal complaints were
numbered as C.Cs.Nos. 900 and 899 of 1964 respectively. The accused pleaded
that the company had become defunct but as there was no proof of that fact the
learned Magistrate found them guilty and in each of the cases fined each of the
accused Rs.100. The accused have filed the present revision cases.
The second
petitioner died after the revision cases were filed.
Learned
counsel for the petitioners urged as a preliminary ground that the offences in
question were committed in Tiruchi district where the head office of the
company is situate, and not in Madras City and therefore the Presidency
Magistrate, Madras, had no jurisdiction to try the case. This contention is
obviously untenable. Sections 159 and 221 of the Companies Act provide that the
return or the balance-sheet as the case may be has to be filed before the
Registrar of Companies who has his headquarters in Madras City. So the offence
is committed not in Tiruchi where the company has got its head office, but,
since the offence involves failure to file a particular return or a particular
balance sheet in the office of the Registrar at Madras City, the offence is one
which is committed in Madras City.
A decision of
the Calcutta High Court, Debendra v. Registrar of Joint Stock Companies ([1917]
22 C.W.N. 96), dealing with the earlier Companies Act was cited before me. In
that case there was default in filing the balance-sheet before the Registrar
whose office was at Calcutta. The relevant provision (section 134 of the old
Act) provided for the filing of the balance-sheet with the Registrar of
Companies at Calcutta. The Calcutta High Court held that the offence was
cognisable in the Presidency Magistrate's Court at Calcutta and that, in any
event, section 182, Criminal Procedure Code, as well as section 531, Criminal
Procedure Code, would cure the defects, if any, in the jurisdiction. It was
also held that failure to convene a general meeting could not be pleaded as an
excuse for not complying with the obligation to file the balance-sheet. This
last mentioned principle also applies in this case and the accused cannot take
shelter in extenuation under the plea that they could not convene a meeting. It
is equally clear that the fact that the company has become defunct cannot be
pleaded in extenuation of the offence. The company still remains in the
register, and no steps have been taken for striking off the name of the company
from the register either under section 560 of the Companies Act or under any
other provision for voluntary winding up. Thirdly, the learned counsel for the
petitioners urged that there was a provision in the earlier Act of 1913,
section 3, dealing with jurisdiction of different courts to take cognisance of
offences and which stated that the contravention of any provision in that
section would not invalid a proceeding by reason of its being taken in the
wrong court. The learned counsel urged that this provision has been deleted in
the new Act. But it has to be noticed that the general provisions enunciated in
the Criminal Procedure Code regarding jurisdiction including sections 182 and
531, Criminal Procedure Code, will continue to apply. Certain provisions in the
new Companies Act like section 622 giving jurisdiction to a First Class Magistrate
or a Presidency Magistrate as the case may be to try offences under the Act,
and section 623 giving power of summary trial to the Presidency Magistrate deal
with different matters, and do not affect the main question that the powers
under sections 182 and 531, Criminal Procedure Code, are still available for
dealing with the validity of prosecutions under the Act. However, there is no
need to resort to these sections in this case, because of the finding in the
earlier part of this judgment.
I therefore confirm
the convictions of the petitioners in both the cases but the fine levied
appears to be excessive, especially as the second accused, the principal man
concerned is dead, I reduce the fine to Rs.40 in the case of each accused in
each of the cases, in default to simple imprisonment to one month each. With
this modification the revisions are dismissed.
Time to pay
the fine, three months.
[1972] 42 COMP. CAS. 408 (DELHI)
HIGH COURT DELHI
v.
S. RANGARAJAN, J.
Criminal Procedure
NO. 52 OF 1971
NOVEMBER 1, 1971
Satish Chandra for the
petitioners.
A.B. Saharya for the
Registrar of Companies.
Voss India (P.) Ltd. was
incorporated on 5th May, 1966; the three petitioners were the
promoters-directors. The authorised capital of the company was Rs. 50,000
divided into 500 equity shares of Rs. 100 each. The petitioners had subscribed
100, 50 and 50 shares each respectively in the memorandum. It is stated that
they merely signified their willingness to subscribe shares as mentioned in the
memorandum of association at the time of incorporation but that they did not
actually pay any sum towards the said subscription.
It is further alleged that
the third petitioner had informed the Registrar of Companies by her letter
dated April 7, 1969, that she had resigned from the directorship of the company
in the year 1964 but due intimation of the same had not been communicated by
the company to the Registrar (Respondent). It is further stated that
petitioners Nos. 1 and 2 felt discouraged on account of the resignation of the
third petitioner and on that account the idea of running the business of the
company was dropped.
On April 7, 1969, the third
petitioner wrote to the Registrar (copy of which is annexure “B” to the petition)
that two years earlier she had resigned and was left with the impression that
her resignation had been forwarded to him for necessary action. She requested
that she may be relieved of the consequence of any default. It is stated that
there was a reply (which is not on record) to the above said letter, on May 28,
1969. On June 5, 1969, the third petitioner wrote to the Registrar (exhibit
R-1) informing the Registrar that the company did not start functioning, that
due to certain unavoidable circumstances the requirements under the Act for
submitting the accounts, etc., could not be completed well in time and so a
default notice had been served. She again referred to her being under the
impression that her resignation had been accepted and requested for an
opportunity to explain the matter personally to the Registrar.
Four prosecutions for
alleged violation of sections 160, 161 and 220 of the Companies Act for the
years 1966-67 and 1967-68 were laid. It is seen, however, from the copies of
the judgment that in the prosecutions launched under section 220 read with
section 162 of the Companies Act, the petitioners had pleaded guilty and
sentenced to payment of fines The judgments also contained the following
directions:
“The relevant documents if
not already filed will be filed by the accused directors within a period of 2
months from the date of the commencement of these orders, failing which they
shall be liable for action under section 614 (2) of the Act.”
The said orders were made
on August 21, 1969.
Subsequently, on June 2,
1970, the Registrar issued a notice under section 614(2) and directed them to
file the balance-sheet for 1966-67 and 1967-68 as well as the annual return up
to November 24, 1967, and December 31, 1968, within two months from August 21, 1969.
The third petitioner also joined in writing to the Registrar on May 12, 1970,
and July 2, 1970, informing him that the statement of accounts as prepared by
the auditors will be ready within a few days and would be submitted as soon as
possible, within 15 days. The Assistant Registrar replied by letter dated
September 21, 1971, (exhibit R-9), that the letter under reply, dated July 2,
1970, was received in the office on July 8, 1970, and that there was no
provision under which the Registrar could grant extension for filing documents.
On July 27, 1970 (the date
has been wrongly given in paragraph 7 of the petition as July 7, 1970), the
advocate for Voss India (P.) Ltd., requested that the name of the company may
be removed from the register of companies under section 560 of the Companies
Act. An affidavit of the third petitioner (R-11) was also sent to the Registrar
stating that the company had never worked after its incorporation, that it had
no intention to work and no shareholders had been taken by the company which
had no assets and no liabilities. On October
23, 1970, the Assistant Registrar informed the advocate for the company that
since some prosecution cases were pending against the directors no action could
be taken under section 560.
The following issues were
framed on August 23, 1971:
“(i) Whether the petitioners should not be relieved of their
liabilities from filing the return under the Companies Act in respect of the years
1969 and 1970 in spite of the Registrar of Companies having been informed that
the company has never functioned and never did any business?
(ii) Whether the
pending prosecutions are not liable to be quashed?”
It was stated by Shri A.B. Saharia,
learned counsel for the Registrar that he was not letting any evidence except
to tender exhibits R-1 to R-13 Shri Satish Chandra, learned counsel for the
petitioners, also did not insist to examine any one.
Issue No. 1:
The contention of Shri Satish
Chandra that it was the duty of the Registrar to strike off from the registers
a defunct company does not receive any support from the language of section
560, the material portion of which reads as follows:
“560(1).Where the
Registrar has reasonable cause to believe that a company is not carrying on
business or in operation, he shall send to the company by post a letter
inquiring whether the company is carrying on business or in operation.”
“560(5)At the expiry
of the time mentioned in the notice referred to in sub-section (3) or (4), the
Registrar may, unless cause to the contrary is previously shown by the company,
strike its name off the register, and shall publish notice thereof in the
Official Gazette; and on the publication in the Official Gazette of this
notice, the company shall stand dissolved:
Provided
that ‑‑
(a) the liability, if any, of every director, the managing agent,
secretaries and treasurers, manager or other officer who was exercising any
power of management, and of every member of the company, shall continue and may
be enforced as if the company had not been dissolved; and
(b) nothing in this sub-section shall affect the power of the court
to wind up a company the name of which has been struck off the register.”
A plain reading of the
above provision shows that the Registrar has the power, as opposed to a duty,
of striking off a defunct company. It is also worth recalling that even as late
as July 2, 1970, the third petitioner had requested (under exhibit R-8) the
Registrar to grant time for filing the statement of accounts as prepared by the
auditors. Until the company is wound up or until such time as the company is
struck off by the Registrar under section 560, the company is under a duty to
submit the returns prescribed by the Companies Act.
It was, however, stated in
paragraphs of the reply filed on behalf of the Registrar as follows:
“That since the company has
filed an affidavit on July 30, 1970, mentioned in paragraph 10 of the petition,
the deponent do not oppose the application as far as the granting of relief
under section 633(2) in respect of default in the years 1969 and 1970 is
concerned.”
In spite of this reply
issue No. 1 was raised obviously because the above statement in paragraph 9
does not represent the correct position in law. It was seen that the liability
to file the statutory returns would continue, in law, until the company is
wound up or it is struck off the register. The Registrar having stated in
exhibit R-12 that action under section 560 could not be considered on account
of the pendency of prosecutions, and it is not being stated that such action
under section 560 has since been taken, it is not posible to grant the relief
claimed by the petitioners, namely, that they should be relieved of the
liability from filing the returns under the Companies Act in respect of the
years 1969 and 1970. It would be a different matter for the Registrar himself
to take action, even suo moto if he is satisfied, that a company is defunct and
strike off the name (of the company) from the Register. Though no such relief
could be granted to the petitioner, still I would like to express the hope that
the Registrar would himself take steps under section 560 at least after the
pending prosecutions are over, as he himself indicated in exhibit R-2.
Issue
No. 2:
P. Jaganmohan Reddy C.J.
(as his Lordship then was), speaking for the Full Bench in Andhra Provincial Potteries v. Registrar of
Companies,
held that an annual general meeting and laying
before it of a balance-sheet and profit and loss account is essential for a
prosecution under section 220(3} but that the holding of such meeting was not
necessary for prosecution for default committed under sections 159 to 166 and
210. The case law as well as the relevant statutory provisions were discussed
at length. His Lordship explained- that the relevant provisions unmistakably
indicated that the holding of the annual general meeting and the laying before
it of the balance-sheet and the profit and loss account is sine qua non for
filing of copied thereof before the Registrar and, consequently, if no general
body meeting is held, the persons concerned cannot be said to have committed a
default in complying with those provisions. But his Lordship also pointed out
that the default in not holding any genera meeting and preparing statement of
returns and filing them before the Registrar, or in not laying the
balance-sheet and the profit and loss account before that meeting as required
by sections 159 to 161 and 210 cannot be pleaded in defence of a prosecution
under these sections. The earlier, but contrary view of the same High Court in
Public Prosecutor v. H. R. Basawa Raj was held to
be no longer good law in view of the decision of the Supreme Court on the
analogous provision of the old Companies Act (vide State of Bombay v. Bandham
Ram Bhandani).
I respectfully concur with the observations and the view taken by the Full
Bench decision of the Andhra Pradesh High Court.
The fact that the company
itself did not function could not be a ground by itself for the Registrar not
to enforce compliance with the submissions of returns and documents as
prescribed by the Act. I am in respectful agreement with the following
observations of T.P. Mukerjee J. in Madam Gopal Dey v. State:
“So far as the present
cases are concerned, it would appear that, since its incorporation, nothing was
done either by the company or by its two directors to comply with the
provisions of the Indian Companies Act. It if the petitioner’s case that the
company did not function and so it was, impossible either to call a general
meeting of the company or to prepare a balance-sheet and the profit and loss
account or to submit the annual return. If the company did not function, the
Act provides for winding up proceedings. It is not for the Registrar of Joint
Stock Companies to, know whether a company is functioning or not. All that he
is concerned with is compliance with the provisions of the Act which are meant
for protecting the interests of the shareholders. So long as the company is not
wound up, nothing stood in the way of the company and its directors holding a
meeting or in preparing blank balance-sheet and profit and loss account and in
submitting the annual returns. The fact that the company did not function is,
in my view, no excuse, though it might extenuate the offence to some extent.”
To say anything else, it
seems to me, would be to detract from the duties which have been squarely laid on
the Registrar in the matter of enforcing the submission of returns, etc., in
order to safeguard the interests of sharer holders.
The Companies Act also
specifically excludes metis rea as a constituent element of the offence.
According to section 162 of the Companies Act, a fine extending to Rs. 50 for
every day during which the default continues hasbeen prescribed in respect of a
company which “fails to comply with any of the provisions contained in section
159, 160 or 161”. Gopal Khaitan v. State pointed out
other offences under the Companies Act, where different considerations apply
and where metis rea has not been excluded. Where there is “failure” to comply
with the statutory provisions concerned and where mere failure is made
punishable, it is a clear indication that metis rea is ruled out.
There is yet another reason
for not granting the relief of quashing the criminal prosecutions. These are
applications under the Companies Act. which have to be dealt with by the judge
in charge of company work. In this situation this court will not have
jurisdiction to grant relief under sub-section (2) of section 633 of the Act,
if proceedings have been instituted in a criminal court (sic) in section
633(1). Support is to be had for this view from the observations of Shri S.N.
Andley J. (vide In re Auto Link Financiers Pvt. Ltd.) The
unreported decision of D.K. Mahajan J. in C.L. Sabharwal v. Registrar of
Companies, Delhi,
does not help the petitioners because that was a petition under section 561A of
the Code of Criminal Procedure for quashing the proceedings taken by the
Registrar under sections 159 and 220 of the Companies Acts of 1936 and 1959. It
was observed, however, in that Context that the proper course for the Registrar
was to act under section 560. Nor can any observation made by the Division
Bench of the Punjab High Court in the State v. Moggavi Ltd. be of any
assistance to the petitioners for the same reason. In that case the Registrar
was informed about the company having become defunct and it was, therefore,
pointed out that the launching of prosecution was inadvisable.
While I cannot thus
interfere, for the reasons mentioned, in order to quash the prosecutions that
are now pending, I may still observe that the violation in this case of the
statutory provisions has not injured any one. There are only three shareholders
who themselves did not contribute anything by way of subscription for shares
and the company did not actually transact any business. The violation, for which
the prosecutions have been launched are purely technical. This is, however, an
aspect for the learned Magistrate to consider.
As I have already observed,
as soon as the prosecutions are over, the Registrar may also consider taking
action under section 560 of the Companies Act. In any case the remedy will lie
in the hands of the petitioners themselves selves who can also wind up the
company voluntarily.
The petition is accordingly
dismissed but, in the circumstances, without costs.
[1983]
54 COMP. CAS. 100 (PAT.)
HIGH COURT OF PATNA
Calculating & Business
Machines (Pvt.) Ltd.
v.
State of Bihar
MANORANJAN PRASAD J.
CRIMINAL REVISION NO. 1097 OF 1978
APRIL 21, 1981
Ugra
Singh and AM. Mati-ur Rahman for the Petitioner.
Dinesh Kumar Singh
for the State.
Manoranjan
Prasad J.—This
revision application by the petitioners is directed against the judgment dated
July 11, 1978, passed by the Second Additional Sessions Judge, Patna, in
Criminal Appeal No. 583 of 1977, confirming the
judgment dated September 21, 1977, passed by Smt. Vidyut Prabha Singh, Judicial
Magistrate, 1st Class, Patna, in Case No. 518(2) of 1973/1227 of 1977,
convicting the petitioners under s. 162 of the Companies Act, 1956 (hereinafter
referred to as "the Act") for contravention of the provisions of s.
159 of the Act and sentencing them to pay a fine of Rs. 500 each or in the
alternative to undergo simple imprisonment for three months.
On May 30, 1973, the
Registrar of Companies, Bihar, had filed a complaint petition in the court of
the Sub-divisional Officer, Sadar, Patna against the petitioners out of whom
petitioner No. 1 is M/s Calculating and Business Machines P. Ltd., a private
company incorporated under the Act on November 1, 1966, having its registered
office at Giddhour, District Monghyr and the rest of the petitioners are said
to be the directors of the company. In the complaint petition, it was alleged
that according to the provisions of s. 159 of the Act, the company and its
directors are under the statutory obligation to file with the Registrar of
Companies, Bihar, an annual return in the prescribed form made up to the date
of the annual general meeting of the company, for the financial year ending
December 30, 1977, which should have been held latest on June 30, 1972, should
have been filed with the Registrar of Companies on or before August 30, 1972.
The petitioners, however, did not file the annual return made up to June 30,
1972, before the Registrar of Companies in spite of the service of notices as
such they knowingly and wilfully continued to contravene the provisions of s.
159 of the Act from August 30, 1972, onward, which is punishable under s. 162
of the Act.
The defence of the
petitioners was that the company had not been carrying on any business since
its incorporation in 1966 and as such in pursuance of a resolution passed by
the members of the company at an extraordinary general meeting the Registrar of
Companies, Bihar, was requested in the company's letter dated May 28, 1969, to
strike the name of the company off the Register under s. 560 of the Act, and it
was in those circumstances that neither any annual general meeting of the
company was held nor any annual return was filed with the Registrar of
Companies and that there was no mens rea on the part of the petitioners in not
doing so.
The fact that the company
in its letter dated May 21, 1969, had intimated the Registrar of Companies that
the company had not been carrying on any business since its incorporation in
1966 and had requested the Registrar to strike the name of the company off the
register under s. 560 of the Act was not disputed by the prosecution, but it
was contended by the prosecution that in reply to the said letter dated May 28,
1969, of the company, the Registrar of Companies in his letter dated August 19,
1969, (Ex. A) had
informed the company that its request for taking action under s. 560 of the Act could not be acceded to as the company
had got some liability and, therefore, it should take steps to put the company
into voluntary liquidation after following the provisions of the Act and the
Rules made thereunder. The stand of the prosecution, therefore, was that since
the Registrar of Companies had not acceded to the request of the company to
strike its name off the Register under s. 560 of the Act, its liability to
submit the annual return under s. 159 of the Act continued and the company
having failed to do so it had become liable for penalty under s. 162 of the
Act.
Section 560 of the Act
empowers the Registrar of Companies to strike a defunct company off the
Register where he has reasonable cause to believe that the company is not
carrying on business or is not in operation, and there are certain procedures
provided under the said section for the said purpose. In the letter dated May
28, 1969, the company had intimated the Registrar of Companies that the company
had not been carrying on any business since its incorporation in 1966, and had
requested the Registrar to strike the name of the company off the Register under
s. 560 of the Act. In reply thereto the Registrar of Companies in his letter
dated September 19, 1969, (Ex. A) had not, however, disputed the stand of the
company that it had not been carrying on any business since its incorporation
in 1966, which is the only ground under s. 560 of the Act for striking the name
of a company off the Register, and he had declined to concede to the request of
the company to strike its name off the Register on some other ground, namely,
that the company had got some liability and had advised the company to take
steps to put the company under voluntary liquidation after following the
provisions of the Act and the rules made thereunder. In the peculiar facts and
circumstances of the case I am, therefore, of the opinion that these was no
mens rea on the part of the petitioners in not submitting the annual return as
required under s. 159 of the Act and hence the conviction of the petitioners
under s. 162 of the Act and the sentence of fine imposed thereunder appear to
be not warranted.
In the result, the application is allowed
and the conviction and the sentence of fine imposed on the petitioners under s.
162 of the Act for contravention of the provisions of ss. 159 of the Act are
set aside.
[1957] 27 COMP. CAS. 550 (MAD.)
Arcot Citizen Bank Ltd., In Re.
Criminal Revision case Nos. 772 to 775 of
1956
and Criminal Revision Petition Nos. 723 to
726 of 1956
RAMASWAMI J.
JANUARY 11, 1957
RAMASWAMI
J. - These are four
connected revisions arising from prosecutions under the Indian Companies Act,
1913.
The revision
petitioners in Crl. R.C. No. 772 of 1956 were prosecuted for not filing within
21 days after the date of the first or only ordinary general meeting in the
year 1952, a complete list of members and summary under section 32, clause (3),
of the Indian Companies Act. The revision petitioners in Crl. R.C. No. 773 of
1956 were prosecuted for not filing within 21 days after the date of the first
or only general meeting in the year 1953 a complete list of members and summary
under section 32, clause (3), of the Indian Companies Act. The revision
petitioners in Crl. R.C. No. 774 of 1956 were prosecuted for not laying the
balance sheet and profit and loss account for the year 1952 at a general body
meeting held during the year 1953 as required by section 131(1) of the Indian
Companies Act. The revision petitioners in Crl. R.C. 775 of 1956 were
prosecuted for not laying the balance sheet and profit and loss account for the
year 1953 at a general body meeting held during the calendar year 1954 as
required by section 131(1) of the Indian Companies Act.
The facts
leading to the institution of these prosecutions are as follows : The Arcot
Citizen Bank Ltd. was registered as a public limited company under the Indian
Companies Act on 2nd November, 1935. It has a registered office in Nos. 48 to
51 Bazar Street, Arcot. Sri A. E. Chandrasekhara Nayagar, the second revision
petitioner, was the supervising director and the other petitioners were the
directors of this bank. On 18th May, 1955, the Registrar of Companies appointed
by the Central Government assumed charge of the companies in the State of
Madras. A list of members and summary made upto 22nd July, 1952, which should
have been submitted within 21 days after the date of the first ordinary general
body meeting held on that date, was not furnished. An incomplete list was
received on 30th August, 1952, by the Assistant Registrar of Joint Stock
Companies, Vellore, along with a covering letter, Exhibit P. 2, signed by
accused 2 as the supervising director of the said bank. This was returned for
rectification and complete furnishing of information, as required under law.
But in spite of several reminders a completed correct list was not submitted
and there was no compliance with section 32 of the Indian Companies Act.
On 21st
October, 1953, the first ordinary general body meeting for the year 1953 was
held. A list of members and summary made upto 21st October, 1953, which should
have been submitted within 21 days after the date of said meeting was not field
in spite of several reminders. A balance sheet and profit and loss account for
the year ending 31st December, 1952, was not laid before the meeting as
required by the Indian Companies Act. On 30th December, 1954, there was a general
body meeting of the bank at Arcot and in that meeting a balance sheet and
profit and loss account for the year ending 31st December, 1953, was not laid
as required by the companies Act.
The plea of the
accused persons in all these cases was nothing more than an argument drawn from
misery. In the case of the bank, which is accused 1, it was urged that a
correct and complete return could not be re-submitted as a number of accounts
and registers of the bank were filed in civil and criminal proceedings arising
out of embezzlement cases, and auditors could not therefore be appointed for
preparation of the balance sheet and profit and loss account in time. In the
case of the director accused, the plea was that they had not knowingly or
willingly committed default. The ordinary directors blamed the supervising
director and stated that he was in charge of the entire day to day
administration of the company.
The learned
Sub-Divisional Magistrate did not accept the pleas of the accused and convicted
them as charged and sentenced them to pay fines. The convicted persons have
preferred these revision cases.
The plea put
forward, viz., that the lists and summaries could not be furnished and the
balance sheets and profit and loss accounts could not be prepared on account of
the accounts and registers of the company being filed in civil and criminal
proceedings arising out of embezzlement cases, was effectively repelled by the
learned Sub-Divisional Magistrate. According to the defence the defalcation was
effected somewhere in August, 1952, and it should have taken place sometime
before the accounts and registers were filed in courts. It is not as if all the
registers and records were seized and taken away. But even if the records and
registers were in the custody of the court, it was the duty of the supervising
director to either apply for the return of such of the registers as are
required for compiling this statement or if the courts refused to return the
registers to make an application for the inspection of the accounts and
registers for the said purpose. In fact the preparation of the list of A class
shareholder members alone was filed on 30th August, 1952, after 21 days and
this shows that all the registers and records could not have been in the
custody of the court. The registrar’s office also sent several reminders. But
the bank, the supervising director, and the directors remained callously
indifferent to these reminders. The learned Sub-Divisional Magistrate therefore
rightly refused to accept this plea as exonerating each of these revision
petitioners from the discharge of their plain duties.
It is now
argued, therefore, that though this could be said of the bank and the
supervising directors, this could not be said of the other directors in regard
to whom it must be further shown that they knowingly and wilfully defaulted as
contemplated by the provisions of the Indian Companies Act.
The
fundamental principle of English criminal jurisprudence, to use a maxim which
has been familiar to English lawyers for nearly 800 years is, actus non facit
reum nisi mens sit rea. An act does not make a man guilty without a guilty
intention to do the guilty act which is made penal by the statute or common
law. But there is generally no room for the application of this doctrine in the
Indian penal statutes as their terms are precise and contain within themselves
the precise and particular elements that go to make up the offences referred to
in those statutes. So, in the Indian penal statutes where the doctrine of mens
rea is intended to come into operation and a guilty mind is deemed essential
for the proof of an offence, the statute itself uses the words like
“knowingly,” “willingly,” “fraudulently”, “negligently” and so on.
Such knowledge
can always be brought home by adducing circumstantial evidence - in fact as
pointed out by Dr. Kenny at page 396 of his Outlines of Criminal Law (14th
Edn.) mens rea must necessarily be proved by circumstantial evidence alone
(except where the accused actually confesses and what is more in India sticks
to it and which is highly problematical).
It may also be
useful to recall that, in establishing such guilty knowledge, actual or direct
knowledge is not absolutely essential, there being no doubt that a person who
deliberately shuts his eye to an obvious means of knowledge is equally liable.
Less certainty
is felt in regard to negligence when used in the sense of blameful
inadvertence. This interpreted negligence describes the state of mind of a
person who ought to have known, and is obviously not so reprehensible as the
state of mind of a person who wilfully shuts his eyes to the obvious. Hitherto,
strong objection has been voiced to basing criminal liability upon mere
inadvertence. But where the phrase mens rea is used to denote a state of mind,
its possible to argue that the only state of mind which is pertinent is the
positive form known as advertence, i.e., realisation or foresight of
consequences, in which even the ambit of mens rea is restricted to intention
and subjective recklessness. Conversely, it is possible to argue that although
inadvertence involves the negative form of absence of realisation or foresight
of consequences, it too can justifiably be termed a state of mind and therefore,
as forming, in certain conditions, part of the doctrine of mens rea. To those
who would deny the validity of this conclusion it may come as a surprise as
pointed by Professor Edwards on his valuable monograph Mens rea in Statutory
Offences (English Studies in Criminal Science Series Vol. VIII, p. 205 and
foll.) to realise that there exists a wide range of judicial dicta (Hearne v.
Garton, Croasdill v. Ratcliffe, Bosley v. Davies) in which the view is expressed that if a statutory offence is
based upon proof of knowledge such crimes can be committed negligently. I
respectfully agree with Professor Edwards’ conclusion at page 206 that so far
as this particular filed of criminal liability is concerned negligence or
blameful inadvertence or failure to supervise may properly be designated as
mens rea. Therefore, we must look to the qualifying words used in the statutes
like “maliciously”, “wilfully” and “knowingly” which show that liability of a
guilty mind should be based in the form of actual knowledge or connivance or
the absence of any such qualifying words making out a case of absolute
prohibition, where the doing of the act prohibited could itself furnish the
mens rea, or qualifying words like “permitting”, “suffering”, “causing” and
“allowing” constituting the intermediate theory of liability based upon
blameful inadvertence. Of course the acceptance of negligence as a sufficient
degree of mens rea would be restricted to those statutory offences in which the
legislature intends to use the criminal law as a means of securing the
maintenance of certain standards of behaviour in such matters as road traffic,
food and drugs, weights, and measures licencing and public health.
To sum up, in
regard to the proof of mens rea in the large class of penal Acts, the State as
well as Central Acts, which are really not criminal but which are prohibited by
the levy of a penalty in the interests of the public, unless qualifying words
are used, the prosecution in the language of Dr. Kenny, need only prove the
prohibited act and then must the defendant bring himself within the statutory
defence (Ibid p. 48). The absence of qualifying words connotes that the offence
is intended to be one of absolute prohibition. On the other hand, if qualifying
words like “knowingly”, “wilfully”, “fraudulently” and “negligently” are used,
the prosecution must bring home to the offender either by direct or
circumstantial evidence the precise and particular elements connoted by these
terms, i.e., showing liability of a guilty mind based in the form of actual
knowledge or connivance. Where the offence is intended to be dependent upon a
blameworthy mind in the form of knowledge of the facts constituting the
offence, the term “wilfully” is used to denote this requirement. It denotes the
necessity for proving that the accused had a guilty mind. If qualifying words
like “permitting”, “suffering”, “causing” or “allowing” are used, to would be
enough if the evidence makes out blameful inadvertence on the part of the
offender, i.e., first, the accused must be shown under this third group to have
had guilty knowledge that the forbidden event is happening; secondly, that the
accused with such knowledge and being in a position to prevent the event
happening does nothing about it.
Bearing these
principles in mind, if we examine the facts of this case, we find that the
prosecution has brought home to these revision petitioners by circumstantial
evidence knowing and wilful non-compliance. The revision petitioner knew what
they had to do and deliberately refrained from complying with those obligations
and that too in spite of repeated reminders from the registrar, on pretexts
which cannot bear scrutiny. This knowing and wilful default on the part of the
revision petitioners cannot be better put than in the words of the Calcutta
High Court in Bhagirath Chandra Das v. Emperor:
“If director,
who are responsible for the management of a company and who presumably know the
duties imposed upon them by law, make no attempt to see that those duties are
carried out, there is justification for holing, in my opinion, that they have
wilfully and knowingly permitted the company to fail to carry out those duties.
The suggestion that these various directors were mere figureheads not taking
any active part in the control of the company is, in my opinion, not worthy of
serious consideration. They were directors, they attended meetings throughout
the period with which we are concerned and they were responsible for the
management of the company.”
“But these
provisions of the Companies Act have been deliberately enacted to protect
shareholders and in some cases to protect the general public and they impose a
definite duty upon directors. It is necessary that those duties should be
properly carried out and it is necessary, in my opinion, that when directors
fail to do so, the penalties provided for in the Act should be imposed and the
directors should be substantially penalised.”
The
convictions are correct and they are confirmed. Having regard to the
extenuating circumstances pressed by Mr. Srirangachariar the fines and default
sentences are halved and excess fines, if collected, will be refunded.
[1986]
59 COMP. CAS. 0261 (KER.)
HIGH COURT OF KERALA
v.
Registrar of Companies
U.L. BHAT, J.
CRIMINAL MISCELLANEOUS CASE NOS. 21 AND 24 OF 1984.
MARCH 27, 1984
K.P. Dandapani, Sumathi Dandapani
and Jaju Babu for the Petitioners.
U.L.
Bhat, J.—The
first and second petitioners in the two cases are common. The first petitioner is
a company under the Companies Act, 1956 (for short "the Act"), and
petitioners Nos. 2 to 4 are its directors. The common respondent is the
Registrar of Companies, Kerala, Ernakulam. The company was required to file
before the Registrar of Companies, the balance-sheet and the profit and loss
account for the periods ending April 30, 1980, and July 31, 1980, before
November 30, 1980, and March 2, 1981, respectively. The company, however, did
not file the balance-sheets and, therefore, the Registrar filed two complaints
before the Chief Judicial Magistrate, Ernakulam, against the company and its
directors alleging the commission of offences punishable under section 220(3)
of the Act. The accused filed petitions before the trial court in Crl. M.P.
Nos. 890 of 1983 and 894 of 1983, respectively, praying for dismissal of the
complaints and acquittal of the accused on the ground that the complaints are
barred by limitation and the court had no territorial jurisdiction to entertain
the complaints. The trial court rejected these contentions and dismissed the
petitions and the Sessions Court in revision declined to interfere. Hence,
these petitions are filed by the accused under section 482 of the Code of
Criminal Procedure (for short "the Code") seeking to quash the orders.
Sub-section
(1) of section 220 of the Act states that after the balance-sheet and the
profit and loss account have been laid before a company at an annual general
meeting as required by the provisions of the Act, there shall be filed with the
Registrar within thirty days from the date on which the balance-sheet and the
profit and loss account were so laid or where the annual general meeting of a
company for any year has not been held, there shall be filed with the Registrar
within 30 days from the latest day on or before which that meeting should have
been held in accordance with the provisions of the Act, three copies of the
balance-sheet and the profit and loss account signed by the managing director,
managing agent, secretaries and treasurers, manager or secretary of the company
or if there be none of these, by a director of the company, together with three
copies of all documents which are required by this Act to be annexed or
attached to such balance-sheet or profit and loss account. Sub-section (3)
states that if default is made in complying with the requirements of
sub-sections (1) and (2), the company, and every officer of the company who is
in default, shall be liable to the like punishment as is provided by section
162 for a default in complying with the provisions of section 159, 160 or 161.
Sections 159 and 160 deal with preparation and filing with the Registrar of
returns containing the particulars as stated therein, in the case of companies
having share capital and companies not having a share capital respectively. The
returns are to be filed within sixty days from the day on which each of the
annual general body meetings referred to in section 166 is held. Section 161
contains further provisions regarding the annual return and certificate to be
annexed thereto. Sub-section (1) of section 162 deals with penalty. If a
company fails to comply with any of the provisions contained in section 159 or
160 or 161, the company, and every officer of the company who is in default,
shall be punishable with fine which may extend to Rs. 50 for every day during
which the default continues.
The
Act does not prescribe any period of limitation for filing complaints.
Therefore, by virtue of sub-section (2) of section 4 of the Code, the
provisions of Chapter XXXVI of the Code, namely, sections 467 to 473, will
apply to prosecutions under the Companies Act. Section 468 prescribes the
period of limitation for taking cognizance of offences. Under clause (a) of
sub-section (2) of this section, if the offence is punishable with fine only,
the period of limitation would be six months. Therefore, in the present case,
the period of limitation is six months. Section 469 deals with commencement of
the period of limitation. It shall commence on the date of the offence (clause
(a)), or where the commission of the offence was not known to the person
aggrieved by the offence or to any police officer, the first day on which such
offence comes to the knowledge of such person or to any police officer,
whichever is earlier (clause (b)), or where identity of the offender was not
known, the first day on which it became known to the person aggrieved or the
police officer. The day from which the period is to be computed has to be
excluded. In the present case, the period of limitation commences on the date
of the offence. Section 472 states that in the case of a continuing offence, a
fresh period of limitation shall begin to run at every moment of time during
which the offence continues.
In
these two cases, the balance-sheets were required to be filed at the latest on
November 30, 1980, and March 2, 1981, respectively. The complaints were filed
more than six months thereafter. Obviously, the complaints were filed long
after the expiry of six months from the last dates on which the balance-sheets
were required to be filed, these dates being the dates of offences. The
Registrar of Companies contends that the offences alleged in these cases are
continuing offences and, therefore, a fresh period of limitation begins to run
at every moment of time during which the offences continue and, hence, there is
no bar of limitation. The accused denies that the offences are continuing
offences and, as such, the prosecutions are barred by limitation.
Learned
counsel for both sides submitted that the only direct decision on the point is
the one of a learned single judge of the Calcutta High Court in Ajit Kumar
Sarkar v. Assistant Registrar of Companies [1979] 49 Comp Cas 909. The case
related to failure to submit returns dealt with in sections 159 and 161 of the
Act. The complaint filed by the Registrar was not proceeded with following the
decision of the High Court that the proceedings were void on account of
violation of section 200 of the Code. The decision of the High Court was set
aside by a decision of the Special Bench. Thereafter, the Registrar filed fresh
complaint on the same facts. It was contended that the prior order amounted to
discharge or acquittal and, therefore, a fresh complaint did not lie and also
that the fresh complaint was barred by limitation. Both the contentions were
overruled by the Calcutta High Court. After referring to the decisions in State
of Bihar v. Deokaran Nenshi, AIR 1973 SC 908 (a case which arose under the
Mines Act), Murlidhar Ram Narayan v. Corporation of Calcutta, AIR 1928 Cal 387,
32 CWN 591, (a case which arose under the Calcutta Municipal Act), Wire
Machinery Manufacturing Corporation Ltd. v. State [1979] 49 Comp Cas 197 (Cal),
(a case which arose under the Provident Funds Act), G.D. Bhattar v. State, AIR
1957 Cal 483 (a case which arose under the Mines Act), the Calcutta High Court
held that the offence involved was a continuing offence and the bar of
limitation did not apply.
I
am also referred to a decision in Provident Fund Inspector v. Parvathi Mills
Ltd. [1980] KLT 272. The case dealt with a complaint for violation of certain
provisions of the Employees' Provident Funds and Miscellaneous Provisions Act,
1952, and the Employees' Provident Funds Scheme. The accused were required to
make payment to the fund of contributions for every month within the 15th day
of the following month. In connection with the plea of limitation, the question
arose whether the offence is a continuing offence. Balagangadharan Nair J.
referred to the decisions in State of Bihar v. Deokaran Nenshi, AIR 1973 SC
908, Wire Machinery's case [1979] 49 Comp Cas 197 (Cal), and other decisions
and took the view that the offence involved was not a continuing offence. The
learned judge distinguished the provisions of the Act under consideration with
certain other acts and observed as follows :
"It is also
significant that the Act does not provide that the offence is a continuing
offence such as is provided in sections 92 and 102, Factories Act, 1948, sections
162 and 272, Companies Act, 1956, etc."
The
law on the point has been succinctly explained by the Supreme Court in State of
Bihar v. Deokaran Nenshi, AIR 1973 SC 908. The Supreme Court in that case had
to consider the provisions of the Mines Act, 1952, and the regulations
thereunder. The owner and manager of every mine is required to forward to the
District Magistrate and the Chief Inspector, annual returns in respect of the
preceding year on or before the 21st of January, each year. Omission to furnish
the returns within the prescribed time is punishable under section 66 of the
Mines Act, with fine which may extend to Rs. 1,000. It was held that the
offence involved is not a continuing offence. The court observed (at page 909):
"Continuing
offence is one which is susceptible of continuance and is distinguishable from
the one which is committed once and for all. It is one of those offences which
arises out of a failure to obey or comply with a rule or its requirement and
which involves a penalty, the liability for which continues until the rule or
its requirement is obeyed or complied with. On every occasion that such
disobedience or non-compliance occurs and recurs, there is the offence
committed. The distinction between the two kinds of offences is between an act
or omission which constitutes an offence once and for all and an act or
omission which continues and, therefore, constitutes a fresh offence every time
or occasion on which it continues. In the case of a continuing offence, there
is thus the ingredient of continuance of the offence which is absent in the
case of an offence which takes place when an act or omission is committed once
and for all."
In
these cases, we are construing the provisions of the Companies Act. The
judicial decisions in regard to provisions under other Acts cannot be the
guiding factor in interpreting the provisions of this Act, though, however, the
broad principles of law are the same. Every decision turns on the provisions of
a particular Act and cannot as such be applied in interpreting the provisions
of a different Act. Sub-section (1) of section 220 of the Act which requires
filing with the Registrar, of balance-sheet and profit and loss account, fixes
a time-limit for the performance of the Act and sub-section (3) makes a default
punishable. It has been argued that the default and the offence would take
place once and for all on the expiry of the period of thirty days mentioned in
section 221 and no such default would occur on the succeeding days. That was
the conclusion arrived at by the Supreme Court in the above decision on the
construction of the Mines Act, and of this court on a construction of the
provisions of the Provident Funds Act. The Calcutta High Court took a similar
view on the provisions of the Provident Funds Act in Wire Machinery's case
[1979] 49 Comp Cas 197 (Cal), and the Bombay High Court took a similar view on
the provisions of the Industrial Disputes Act in State of Maharashrta v. Ajit
Maneklal Choksey [1979] 1 LLJ 423. But in none of these decisions were the
relevant provisions of the Companies Act considered. These provisions, however,
were considered by the Calcutta High Court in Ajit Kumar Sarkar's case [1979]
49 Comp Cas 909 to come to the conclusion that the offence involved is a
continuing offence.
It
appears to me on a comparison of the provisions of the various Acts dealt with
in these decisions that there is a vital difference between the relevant
provisions of the Companies Act and the other Acts. If this offence under the
Companies Act is not a continuing offence but an offence which takes place once
and for all, then the provision for punishment would have been imprisonment or
fine up to a particular limit irrespective of other considerations. The
punishment provided in section 162 is not imprisonment or fine up to a limit
but fine which may extend to Rs. 50 for every day during which the default
continues. Such a provision is absent in the statutes dealt with in most of the
above decisions. Section 162 makes it clear that the default or offence is not
something which takes place once and for all but is one which continues. That
is why, instead of prescribing fine up to a limit as punishment as in certain
other statutes, the Legislature prescribed punishment of fine for every day
during which the default continues. The idea implicit in this provision is that
the offence is a continuing offence notwithstanding the fact that for the
performance of the particular act, a time limit has been prescribed. This has
to be taken in the light of the provisions in section 611(2) of the Act which
enables filing of documents with the Registrar after the time prescribed on
payment of additional fees as prescribed therein. Sections 629(a) of the Act
also makes a distinction between the offences of the two types. That is a
residuary provision prescribing punishment. The punishment prescribed is fine
which may extend to Rs. 500 and where the contravention is a continuing one,
with a further fine which may extend to Rs. 50 for every day after the first
during which the contravention continues. Thus, it can be seen that the scheme
of the provisions is to constitute an offence punishable under section 162 of
the Act, a continuing offence. In this view, I have to hold that section 472 of the Code applied to the instant case
and it has not been shown that the complaints are barred by limitation.
The next contention relates
to territorial jurisdiction of the court. The offence relates to default in
filing documents with the Registrar. The Registrar in question is the Registrar
of Companies, Kerala, with the office at Ernakulam. The performance of the Act
which is in default is to take place at Ernakulam and, therefore, the court at
Ernakulam has certainly jurisdiction.
I find no ground to
interfere and, therefore, the Crl. M. Cs. are dismissed.
patna High court
[2004] 54 scl 424 (patna)
High
Court of Patna
Punyark Credit & Investment
(P.) Ltd.
v.
State of Bihar
Mridula
Mishra, J.
Criminal Misc. No. 7219 of 2003
March 19,
2004
Offences falling under
sections 220 and 162 of Companies
Act are continuing offence
Section 220, read with section 162, of the
Companies Act, 1956, and section 468 of the Code of Criminal Procedure, 1973 -
Balance-sheet - Default in filing copies of - Whether offences falling under
sections 220 and 162 are continuing offences and plea of limitation under
section 468(1) of Code of Criminal procedure, 1973 has no application in such
cases - Held, yes
Facts
Petitioner No. 1 was a Private Limited Company and
petitioner Nos. 2 and 3 were its directors. The Registrar of the Companies
filed a complaint under sections 220(3) and 162(1) against the petitioners
before the Court, Economic Offences. The Court of Special Judge, Economic
offences took cognizance of the offence under section 220(3). The case
thereafter proceeded and one witness was also examined on behalf of the
complainant. The statement of the accused persons under section 313 of the Code
of Criminal Procedure, 1973 [‘the Code’] was also recorded. At the fag end of
the trial, the accused persons filed two applications before the Special Judge,
Economic Offences stating that the complaint had been filed after more than two
years of the commission of the alleged offence so it was barred of limitation
under section 468(2) of the Code. The Special Judge rejected the application on
the ground that the accused petitioners had filed application at the fag end
with a view only to delay the disposal.
On application
to the High Court for quashing the criminal prosecution :
Held
In the instant case, the petitioners had raised the
question of limitation at the fag end of the trial when the witness of the
complainant was already examined and the statement of the accused was also
recorded under section 313 of the Code. The question of limitation could not be
raised at such a belated stage and it had rightly been decided by the court
below that the accused petitioners had raised such question at the fag end of
the trial with a view to delay the trial of the case. Further, the offences falling
under sections 220(3) and 162(1) are continuing offences and the plea of
limitation under section 468(1) of the Code has no application in such cases.
[Para 14]
Therefore, the
application was to be dismissed. [Para 15]
Cases
referred to
K.K. Mehra v. Registrar of Companies [1991] 71 Comp.
Cas. 669 (Delhi) (para 10), State of Punjab v. Sarwan Singh AIR 1981 SC 1054
(para 10), CWT v. Suresh Seth [1981] 129 ITR 328/6 Taxman 35 (SC) (para 10),
Smt. Maya Rani Punj v. CIT [1986] 157 ITR 330/24 Taxman 1 (SC) (para 10),
Bhagirath Kanoria v. State of Madhya Pradesh AIR 1984 SC 1688 (para 10) and Ram
Kripal Prasad v. State AIR 1986 Pat. (FB) 254 (para 13).
Nawal
Kishore Singh, Sanjeev Mishra and J.N. Tiwary for the Petitioner. Harendra
Pd. Singh for the Opposite Party.
Order
1.
The application has been filed by the petitioners for quashing the criminal
prosecution in Special Case No. 799 (M)/84 including the order dated
12-12-2002, passed by the Special Judge, Economic Offences, Patna, refusing to drop
the criminal prosecution.
2. Petitioner No. 1 namely
Punyark Credit & Investment Private Limited is a registered Private Limited
Company with the office of the Registrar of Companies, Bihar and Jharkhand. The
petitioner Nos. 2 and 3 are the Directors of the Company petitioner No. 1. Case
No. 799M/84 was filed by the Registrar of the Companies against the petitioners
on 26-7-1984 before the Court, Economic Offences, Patna with the allegation
that according to the provisions of section 220 of the Companies Act, 1956, the
Company and its directors are under the statutory obligation to file with the
Registrar of the Companies three copies of the balance sheet and profit and
loss account in prescribed form duly placed in the annual general meeting
within 30 days of the date of the annual general meeting and in case no annual
general meeting was held within 30 days of the due date of the annual general
meeting. The company was required to file the balance sheet and profit and loss
account of the company as on 31-12-1980 and not later on 30-6-1981, i.e.,
within six months of the close of the financial year. The company and its
officers are in default as they did not file the balance sheet of profit and
loss account of the company before the Registrar of the Companies as such
non-compliance and failure to file the said balance sheet under section 220(1)
of the Companies Act, 1956 they have committed offence under section 220(1) of
the Companies Act. In the petition it has also been stated that the said
contravention of section 220(1) of the Companies Act, 1956 is a continuing
offence. As such the accused Nos. 1 to 3 are liable for punishment under
section 220(3), read with section 612(1) of the Companies Act, 1956.
3. The court of Special
Judge, Economic Offences, Patna on the same day took cognizance of the offence
under section 220(3) of the Companies Act. The case thereafter proceeded and
one witness was also examined on behalf of the complainant. The statement of
the accused persons under section 313 Cr. P.C. was also recorded on 15-9-2001,
but it was not signed by the Presiding Officer, as such to remove the defect
the accused persons were again directed to be present in court for recording
statement under section 313 Cr. P.C. The case was lingering for final argument
since 15-10-2001.
4. On 7-9-2002 at the fag
of the present case the accused persons filed two applications before the
Special Judge, Economic Offences. In the petition it is stated that the
complaint of this case has been filed after more than two years of the
commission of the alleged offence so it is barred under section 468(2) Cr. P.C.
as the period of limitation prescribed under section 468(2)(a) Cr. P.C. is six
months only if the punishment for the alleged offence is only fine. Under
section 220(3) of the Companies Act the punishment awarded is only fine. It has
also been stated that the complainant has not filed any petition for condoning
the delay in filing of the complaint as such the order taking cognizance
without condoning the delay is barred under the provisions of section 468 Cr.
P.C.
5. The opposite party
filed its rejoinder to this petition and the Special Judge, Economic offences,
after hearing both the parties rejected this petition by his order dated
12-12-2002 with the finding that the accused petitioners have filed
applications at the fag end of the present case with a view only to delay the
disposal of the present case. Such petitions should have been filed at the
earlier stage of this case.
6. Against the order
refusing to drop the proceeding under the provision of section 468(1) Cr. P.C.
the present application has been filed by the petitioners. The petitioners in
his application has challenged the impugned order stating that the Registrar
for the Companies, Bihar, Patna has filed two complaints against the
petitioners on 26-7-1984 under section 220(3) of the Companies Act for
non-compliance of the requirement under section 220(1) of the Act to file the
balance sheet and profit and loss account with the Registrar within 30 days of
such general meeting of the company. On the aforesaid complaint two cases were
registered as Special Case Nos. 797(M)/84 and 799(M) of 1984 on the same day.
The complainant Registrar of the Company filed another three complaint
petitions under section 162(1) of the Companies Act against the petitioners,
which were registered as Special Case Nos. 794, 795 and 796 of 1984 for
non-compliance of the provisions for filing report within sixty days of annual
general meeting under section 169 of the Companies Act. In all the aforesaid
five cases cognizance has been taken much after the limitation prescribed under
section 468 Cr. P.C. without condoning the delay. As the complainant had not
filed any petition for condoning the delay and also because the offence under
sections 159 and 220(1) of the Companies Act are not continuing offence, the
limitation prescribed under section 468 Cr. P.C. is applicable in the present
case.
7. The opposite party No.
2, i.e., the Registrar of the Companies, Bihar has filed a counter affidavit
controverting the statement made by the petitioners in his petition. It is
stated in the counter affidavit that the petitioners’ company is required to
file balance sheet and annual return every year irrespective of the fact that
the company has not carried out any business and in default the petitioners’
company and its directors are punishable with fine as prescribed in the Act for
every day during which the default continues. The offence committed by the
petitioners’ company and its Director are continuing offence and liability
exist under section 162 of the Companies Act, 1956 till compliance is made. It
has also been stated that the petitioners have filed only one application
against the order passed in six different cases, which is not maintainable.
8. Section 162(1) of the
Companies Act reads if a company fails to comply with any provisions contained
in sections 159, 160 or 161, the Company and every officer of the company who is
in default shall be punishable with fine which may extend to five hundred
rupees for every day during which the default continues.
9. Section 220(3) of the
Companies Act reads if default is made in complying with the requirements of
sub-sections (1) and (2), the Company, and every officer of the company who is
in default shall be liable to the like punishment as is provided by section 162
for a default in complying with the provisions of sections 159, 160 or 161.
10. From the reading of
these two sections now the question arises whether offence is a continuing
offence and whether the provisions of section 468(1) Cr. P.C. will be
applicable in the present case. The petitioners relied on two decisions:
firstly in the case of K.K. Mehra v. Registrar of companies [1991] 71 Comp.
Cas. 669 (Delhi), and secondly the case of State of Punjab v. Sarwan Singh AIR
1981 SC 1054. In the case of K.K. Mehra (supra) the Hon’ble single Judge of
Delhi High Court following the dictum of the Supreme Court in CWT v. Suresh Seth
[1981] 129 ITR 328 held that the provisions extending the fine for every day of
default after the first indicate only the multiplier to be adopted in
determining the quantum of penalty and do not have the effect of making the
defaults in question continuing ones. But Suresh Seth’s case (supra) did not
find approval in the subsequent Supreme Court decision in the case of Smt. Maya
Rani Punj v. CIT [1986] 157 ITR 330 and another Supreme Court decision in
Bhagirath Kanoria v. State of Madhya Pradesh AIR 1984 SC 1688. The Supreme
Court in Bhagirath Kanoria’s case (supra) has laid down a guideline to
determine the question, whether a particular offence is a continuing offence.
In para 19 of the reported judgment, it has been stated that the nature of the
offence whether it is continuing must be determined from (a) the language of
the statute which creates that offence, (b) the nature of the offence, and (c)
above all the purpose which is intended to be achieved by constituting a
particular act as an offence. Examining with the help of these guidelines on
the fact of the case, the Supreme Court has held that the offence of
non-payment of contribution by the employer to the provident fund is a
continuing offence.
11. In later Supreme Court
case Maya Rani Punj’s case (supra),
the Supreme Court held that in default of non-filing of the return within the
time stipulated by law was under consideration, and the Supreme Court did not
favour its earlier decision in CWT v. Suresh Seth [1981] 129 ITR 328.
12. Applying the norms and
guidelines given by the Supreme Court in Bhagirath Kanoria’s case and all the
more looking to the purpose which has been intended to be achieved by
constituting a particular act as the offence, it is held that the default in
filing the balance sheet of the profit and loss of the Companies within the
prescribed statutory period was a continuing offence.
13. The Patna High Court in
a Full Bench decision in the case of Ram Kripal Prasad v. State A.I.R. 1986
Pat. 254, has also held that failure of the employer to deposit the
contribution to employees provident fund was a continuing offence. In this Full
Bench decision it has also been held that the failure of the employer to
deposit the contributions in contravention of paragraphs 38 and 76 of the Employees
Provident Fund Scheme, 1952, read with section 15 of the Employees Provident
Funds and Miscellaneous Provisions Act, 1952, would be a continuing offence. In
this Full Bench it has also been held that even though it is established that
the prosecution is beyond the period of limitation and further the delay has
not been satisfactorily explained, the court is given power to override if the
interest of justice requires the same. In the Full Bench decision it has also
been decided that the disputed issues of limitation under sections 468 and 473
of the Code of Criminal Procedure can appropriately be raised at the earliest
as a preliminary issue and it cannot be raised at the fag end of a proceeding.
14. In the instant case the
petitioners have raised the question of limitation at the fag end of the trial
when the witness of the complainant was already examined and the statement of
the accused was also recorded under section 313 Cr. P.C. The question of
limitation cannot be raised at such a belated stage and it has rightly been
decided by the court below that the accused petitioners have raised such
question at the fag end of the trial with a view to delay the trial of the
case. Regarding the nature of the offence I must say that it has already been
decided by the Supreme Court as well as by this Court in a Full Bench Decision
that such offences are continuing offence and the plea of limitation under
section 468(1) Cr. P.C. has no application in such cases.
15. In
the facts and circumstances of the case this application is dismissed.
[1990] 69 COMP. CAS. 442 (CAL)
v.
Assistant Registrar of Companies
A.M. BHATTACHARJEE AND A.K. NANDI JJ.
Criminal Revision Nos. 844
and 845 of 1983
JULY 26, 1989
R.N.
Chakraborty for the Petitioner.
A.R.
Saha for the Respondent.
Bhattacharjee,
J.— The only
point urged on behalf of the petitioners in these two cases is that the
impugned prosecutions are barred by limitation under the provisions of section 468,
Criminal Procedure Code. The alleged offences for which the prosecutions have
been launched and processes issued are punishable under section 162(1) and
section 220(3) of the Companies Act with fine only and having undisput Edly
been filed beyond six months after the alleged defaults were made, would be
barred under section 468 of the Code, unless they can be treated as
"continuing offences" within the meaning of section 472 of the Code.
The only question, therefore, arising for our consideration in these cases is
whether the offences punishable
under sections 162(1) and under section 220(3) of the Companies Act are
"continuing offences" within the meaning of section 472, Criminal
Procedure Code. An affirmative answer will warrant the discharge of the rules ;
but a negative answer would require us to make the rules absolute and quash the
prosecutions. We have decided to return an affirmative answer both on principle
as well as on authorities. Here are the reasons.
The
expression "continuing offence", far from being a stranger, was quite
a regular visitor to our criminal domain, particularly in respect of offences
which are not mala in se, but are only mala prohibita, e.g, running a factory
without a proper licence or using a structure erected without the necessary
permission or a proper plan and the like ; but, after the passing of the Code
of Criminal Procedure, 1973, it has now become a permanent entry in our
criminal jurisdiction in view of section 472 of the Code and applies to all
offences, whether mala in se or mala prohibita, which are punishable with fine
only or with imprisonment for a term not exceeding three years.
The
expression "continuing offence" or "continuous offence"
does not appear to have any
fixed concept; its meaning, nuances and effect vary from statute to statute. The Supreme Court, in Bhagirath Kanoria v. State,
AIR 1984 SC 1688, at page 1690 ; [1986] 68 FJR 98 has observed that the
expression, not having any fixed connotation or static import, is difficult to
be defined and put into a strait-jacket formula A Division Bench of this court,
in Eastern Paper Mills Ltd. v. State [1988] Cal Crl. LR (HC) 176 ;
[1989] 2 Cal LT (HC) 38 has, however, observed that
"the difficulty in interpreting as to whether a particular offence is a
continuing one or not has been removed by the decision" of the Supreme
Court in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68 FJR 98. With respect,
we would only say how we wished that it was so.
The
expression "offence" means, as would appear from its definition in
the Criminal Procedure Code or the Penal Code or the General Clauses Act,
"any act or omission made punishable by any law for the time being in
force". An offence is not "continuing" or "continuous"
merely because the effect thereof continues. An offence of hurt or grievous
hurt is not a continuing one simply because the effect of the hurt caused has
continued for quite a length of time. A distinction must be made between the
offence and its effect and the continuation of the latter would not make the former
a continuing offence and reference may be made to the observation of the
Supreme Court in Balakrishna
Savalram, AIR 1959 SC 798, 807, made in the context of section
23 of the preceding Limitation Act, 1908, dealing with "continuing
wrong". But "wrongful restraint" or "wrongful
confinement" may be a continuing offence so long as the restraint or the
confinement continues because it would be within the power of the offender to
continue or to discontinue
the offence even after the offence or restraint or confinement is committed for
the first time. The offence of constructing mills or factories without a permit
or licence required by law would be complete with the completion of the
construction ; but when the law provides that no mill or factory shall be run
without a permit or a licence, the offence may be one continuing for the entire
period during which the mill or factory is so run. For, as we have said, in
that case, the offender could continue the commission of the offence as well as
discontinue the same. We would like to think that if, once an offence is
committed, it is no longer in the power of the offender to effect its
continuance or discontinuance, the offence cannot be said to be a continuing
one.
From
that point of view, an offence committed as a result of failure to submit
return, balance-sheet, profit and loss account or other documents within the
date or period prescribed therefor, as required under section 160, 161 or 220
should not, ordinarily, be a continuing offence, but an offence completed on
the expiry of the date or the period. Because, once documents are not submitted
and the period prescribed for their submission has expired, it is no longer in
the hands of the defaulter to continue the default or to discontinue the same.
The default already being complete, the defaulter could not continue to do or
repeat that very default any more or undo it.
The
decision of the Supreme Court in State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908 ; [1973] Cri. LJ 347 is a clear
authority for the view that when law requires
submission of returns within a certain period, and there is failure to do so,
such non-compliance is ordinarily complete on the expiry of the period and is
not a continuing offence. That was a case under the Mines Act, 1952, section 66
whereof enjoined submission of the annual return within the time prescribed and
the Supreme Court rules (at p. 910) that since the relevant "regulation
does not lay down that the owner, manager, etc., of the mine concerned would be
guilty of an offence if he continues to carry on the mine without furnishing
the returns or that the offence continues until the requirement of the
regulation is complied with", non-compliance with the provisions
resulting from non-submission of the return within
the prescribed period could not be a "continuing offence". As a
logical corollary, the inference would be that, if the relevant law has not
only made the default punishable as an offence, but has further provided that
the penal liability therefor would also continue until the default is removed
and that the continuance of the default is also punishable so long it
continues, the continuance of the default would be a "continuing
offence".
If
that is so, then, looking at the provisions of section 162(1) and section 220(3)
of the Companies Act, it would, in our view, be legitimate to hold that the offence punishable
thereunder is and has been made a continuing one. As already noted, an
"offence" is an act or omission made punishable by law. Section
220(3) provides that the offence thereunder, i.e , failure to submit the balance-sheet, etc., within the period
prescribed shall be punishable with like punishment as provided in section 162
and section 162(1) provides that if a company fails to comply with any of the
provisions contained in section 159, section 160 and section 161, which enjoin
filing of the annual return and other documents within the period prescribed,
"the company and every officer of the company who is in default shall be
punishable with fine which may extend to fifty rupees for every day during
which the default continues". If an "offence" is, as it
obviously is, a commission or omission, contravention or non-compliance,
violation or default, made punishable by law and if the penal liability for the
omission or default in filing the return etc. within the prescribed period has
been continued till the omission or default is made good and has been made
punishable de die in diem for the entire period during which the omission or
default continues, then such omission or default has obviously been made a
continuing offence. In the Supreme Court decision in Deokaran Nenshi [1973] Crl. LJ 347 ; AIR 1973 SC
908, the failure to submit the annual return within the prescribed period was
held not to be a continuing offence because, as
already noted (at page 910 of AIR 1973 SC and at page 349 of Crl. LJ), there
was nothing in the relevant law making the penal liability continue as long as
the default in filing the return continued. This Supreme Court decision in
Deokaran Nenshi, AIR 1973 SC 908; [1973] Crl. LJ 347, therefore, should be
treated as an authority for the view that, if the penal liability for the
default is continued and continuance of the default is also made punishable,
say, with fine for each day of such continuance, as in section 162(1) of the
Companies Act, the offence would be a continuing one.
It
must be noted, however, that, in the later decision of the Supreme Court in Bhagirath Kanoria, AIR 1984 SC 1688 ;
[1986] 68 FJR 98, failure to pay the employer's contribution under the
Employees' Provident Funds and Miscellaneous Provisions Act, 1952, within the
time prescribed therefor has been held to be a continuing offence. A number of
decisions of different High Courts, including two Division Bench decisions of
our High Court, noted hereafter, have, however, held
the offence not to be a continuing one. As already indicated, even where an
offence does not intrinsically appear to be of continuing nature, it would
nevertheless have to be treated as a continuing one if the Legislature
indicates to that effect. It is true that the object of the Act weighed very
much with the Supreme Court in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68
FJR 98. But even that apart, we are inclined to think that there are indications
in the Act itself, e.g, in section 14C, that the Legislature viewed the offence
of non-payment
of the contribution to be a continuing one. Section 14C(1) provides that, while
convicting an offender for the offence of making default in payment of any
contribution, the court may, in addition to the awarding of punishment, direct
the offender to pay the amount within a specified period and section 14C(2)
provides that, as and when such an order is made directing payment of the
amount within a specified period, the offender, i.e, "the employer shall
not be liable under this Act for the continuation of the offence during the
period". If the Legislature regarded the offence not to be a continuing
one, but to be complete once for all with the expiry of the period prescribed
by the law for payment, it would have been all the more so after conviction,
and it could not have been necessary for the Legislature to provide, as
provided in section 14C(2), that
the offender "shall not be liable.... in respect of continuation of the
offence" during the period allowed by the court for post-conviction
payment. If the offence was not a continuing one, the question of continuation of the offence during the period allowed by the
court for post-conviction payment could not at all arise. But as indicated
hereinbefore, even without the aid of this decision in Bhagirath Kanoria, AIR
1984 SC 1688; [1986] 68 FJR 98, we have already, on principle as well as on the
authority of the Supreme Court in Deokaran Nenshi, AIR 1973 SC 908, held the
offences under section 162(1) and section 220(3) to be continuing offences.
This
should have been sufficient to dispose of the cases and to discharge the rules.
But, our attention has been drawn to a series of Division Bench decisions of
this court which appear to have taken a contrary view and as a later Bench
should ordinarily and, as far as possible, follow decisions rendered by Benches
of co-ordinate jurisdiction, we would have to govern ourselves accordingly
unless we can justify our departure.
The
Divison Bench decision in National Cotton Mills v. Assistant Registrar of Companies [1984] 56 Comp Cas 222 (Cal) ;
[1984] Tax LR 2043 appears to be one directly on the
point holding that an offence under section 162(1) of the Companies Act, 1956,
is not a "continuing offence" within the meaning of section 472,
Criminal Procedure Code, and, therefore, a complaint therefor would be barred
by limitation under section 468(2), if filed beyond the period prescribed. The
Division Bench appears to have relied mainly on the Supreme Court decision in
Deokaran Nenshi [1973] Crl LJ 347 ; AIR 1973 SC 908 and also on two earlier
Division Bench decisions of this court in Wire Machinery Manufacturing
Corporation v. State [1978] Cal HN 293 ; [1978] Crl LJ 839 ; [1979] 49 Comp Cas
197 and in Krishna Kumar Dalmia v. State [1981] 2 Cal HN 301, both being decisions under the Employees'
Provident Funds and Miscellaneous Provisions Act, 1952.
In both these earlier Division Bench decisions, the offence for the failure to
deposit the employer's contribution within the time prescribed was, no doubt,
held not to be a continuing offence. But this view has now been fully overturned by the
Supreme Court in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68 FJR 98 and,
therefore, the Division Bench decision
of this court in National Cotton Mills [1984] 56 Comp Cas 222 ; [1984] Tax LR 2043, being based to a great extent on the ratio of
the aforesaid two earlier Division Bench decisions, must be taken to have lost
a good deal of its force.
As
for the Supreme Court decision in Deokaran Nenshi, AIR 1973 SC 908, where the
offence of failure to submit the return within the prescribed period under the
Mines Act was held not to be a continuing one in the absence of any provision
continuing the penal liability for such non-compliance after the period
prescribed, the Division Bench in National Cotton Mills [1984] 56 Comp Cas 222
purportedly relied thereon and held
that continued non-compliance under section 162(1) of the Companies Act was
also not a continuing offence. Apart from our view that section 162(1) by
making the penal liability for the default in submission of the return to continue even after the period prescribed and
providing punishment for every day till the default is removed, has made such continued
non-compliance a continuing offence, we would like to point out that the later
decision of the Supreme Court in Bhagirath Kanoria, AIR 1984 SC 1688 ; [ 1986]
68 FJR 98 appears to be an authority for the view that such express provision
making continued non-compliance also an offence is not always a sine qua non
for an offence becoming a continuing one.
It
should be noted that the Supreme Court in Deokaran Nenshi, AIR 1973 SC 908 ; [1973] Crl LJ 347 as well as in
Bhagirath Kanoria, AIR 1984 SC 1688, both rendered by
two-judge Benches, have referred to the same set of five precedents,
three English and two Indian and while in Deokaran Nenshi,
AIR 1973 SC 908 ; [1973] Crl LJ 347, the approval might not have been that
explicit, in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68 FJR 98, the
two-judge Bench expressly declared that it did "adopt the reasoning in
those cases". One such decision is London County Council v. Worley [1894]
2 QB 826 where, construing the provisions of section 85 of the
Metropolis Management Amendment Act, 1862, prohibiting
erection of a building on the side of a new street in certain circumstances and
providing penalty for such erection and a further penalty for every day during
which the offence would continue, it was held that, while the offence of
erection of the building was complete with its erection, its continuance made
punishable de die in diem was a continuing offence. In fact, this is in perfect
consonance with the observation made in Deokaran Nenshi, AIR 1973 SC 908, 909
that a continuing offence "is one of those offences which arise out of
failure to obey or comply with a rule or its requirement and which involve a
penalty the liability for which continues until the rule or its requirement is
obeyed or complied with". We would like to think that the offences
punishable under section 162(1) and also section 220(3) of the Companies Act squarely come within this
principle, as they arise out of failure to obey or comply with the provisions
of sections 159, 160, 161 and 220(1) requiring submission of returns, balance-sheet and other documents and which, as the penal provisions
therefor in section 162(1) provide in express terms, involve a penalty
of daily fine the liability for which continues for every day till the default
continues and the requirement is not obeyed or complied with. As already
pointed out, the offence of failure to submit return in Deokaran Nenshi, AIR
1973 SC 908; [1973] Crl LJ 347 was held not to be a continuing offence in the absence of analogous provisions in the Mines Act, 1952,
and the regulations thereunder and the later Supreme Court decision in
Bhagirath Kanoria, AIR 1984 SC 1688, 1691 ; [1986] 68 FJR 98 has accordingly
ruled that the decision in Deokaran Nenshi, AIR 1973
SC 908 ; [1973] Crl LJ 347 "must be confined" to such cases only,
that is, cases where such default in submitting the return has been made penal,
but the penal liability has not been continued so long as the default
continues.
The
observations in the later Supreme Court decision in Bhagirath Kanoria, AIR 1984
SC 1688, 1692 ; [1986] 68 FJR 98, 105, would a fortiori make the offence
punishable under section 162(1) or section 220(3) a continuing offence. As
already indicated, that was a decision under the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, the provisions whereof require the
employers to deposit the contribution within the period prescribed, but the
penal section does not expressly provide that non-compliance therewith would
render the employer liable to any continued or further penalty until payment. But still the Supreme Court observed
thus :
"The
appellants were unquestionably liable to pay their contribution to the
provident fund before the due date and it was within
their power to pay it, as soon after the due date had expired as they willed.
The late payment could not have absolved them of their original guilt but it
would have snapped the recurrence. Each day that they failed to comply with the
obligation to pay their contribution to the fund, they committed a fresh
offence".
We
have no manner of doubt that these observations would apply to an offence under
section 162(1) or section 220(3) with all their rigour. True, late submission
of the documents beyond the period prescribed would not absolve the offenders
of their initial guilt under those sections, but would at once snap the
recurrence of the offence made punishable from day to day. In view of the principle enunciated in Deokaran
Nenshi [1973] Crl LJ 347 ; AIR 1973 SC 908, 909, 910
and amplified further in Bhagirath Kanoria, AIR 1984 SC 1688, 1692 ; [1986] 68
FJR 98, 105, we would have to hold the offences under section 162(1) and section 220(3) to be
continuing offences and would hold further, and this we say with all respect,
that the decision of the
Division Bench in National Cotton Mills [1984] 56 Comp Cas 222 (Cal) can no longer be taken to be good law, particularly in
view of the earlier Division Bench decisions in Wire Machinery [1978]
Crl LJ 839 ; [1979] 49 Comp Cas 197 and in Krishna
Kumar [1981] 2 Cal HN 301 relied on in National Cotton Mills [1984] 56 Comp Cas
222 (Cal), having been overturned by the Supreme Court and the earlier decision
of the Supreme Court in Deokaran Nenshi, AIR 1973 SC 908 ; [1973] Crl LJ 347,
referred to therein, having been duly explained and distinguished by the
Supreme Court in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68 FJR 98. The
Division Bench in National Cotton Mills [1984] 56 Comp Cas 222 (Cal) could not
obviously consider the Supreme Court decision in Bhagirath Kanoria, AIR 1984 SC
1688 ; [1986] 68 FJR 98 as the latter was decided later.
But
there appears to be yet another Division Bench decision of this court in
Eastern Paper Mills [1988] Cal Crl LR (HC) 176 where, after referring to the
decisions of the Supreme Court in Deokaran Nenshi, AIR 1973 SC 908, as well as
in Bhagirath Kanoria, AIR 1984 SC 1688 ; [1986] 68 FJR 98, a view has been
taken contrary to what we propose to take here, though, on the basis of those
very two Supreme Court decisions, but without any reference to any of the
Division Bench decisions of this court referred to hereinbefore and it has been
held that the offences under section 162(1) or section 220(3) are not
continuing offences.
It
is trite to say that a Bench of this court should normally accept a decision of
a co-equal Bench as binding. But there are high authorities, for the view that,
even though the same should be the normal practice, there are circumstances
where a Bench may not follow and may have to depart from a precedent of co-ordinate
jurisdiction. To borrow from the announcement of the House of the Lords on July
26, 1966, while the use of precedent is an indispensable foundation upon which
to decide what is the law and its application to individual cases and the same
provides some degree of certainty upon which individuals can rely in the
conduct of their affairs, as well as a basis for orderly development of legal
rules, too rigid adherence to precedent may lead to injustice in a particular
case and also unduly restrict the proper development of law. While certainty,
in the field of law, may be, and in fact is, most desirable, the craze for
certainty cannot be allowed to stultify the proper and logical development of
law. We have also the high authority of Sir Asutosh speaking for a Division
Bench of this court in Virjiban Dass Moolji, AIR 1921 Cal 169, 171, where the
eminent judge, after referring to various English decisions on the point, ruled
thus :
"The
answer to the question, what regard is to be had to an earlier decision of this
court of co-ordinate jurisdiction, must depend upon a variety of circumstances.
One important factor is the length of time during which it stood unchallenged. Another factor, possibly
of greater importance, is whether the decision gives
adequate reasons for the conclusion embodied therein. But the position is
indefensible on principle, that although a judge may feel absolutely
convinced that the decision produced before him is erroneous in law, he is
still bound to decide against his own opinion. To take such a view is to hold
that the judge may be reduced to an automaton by the
production of an earlier judgment".
Now,
the decision in Eastern Paper Mills [1988] Cal Crl LR (HC) 176, having been decided on May 13, 1988 (and reported obviously later), cannot be regarded to have stood for
such length of period so as to attract the first factor referred to in those
observations. And we may add, obviously with great respect, that the decision,
after referring to the Supreme Court decisions in Deokaran Nenshi, AIR 1973 SC
908 ; [1973] Crl LJ 347 and in Bhagirath Kanoria, AIR 1984 SC 1688; [1986] 68
FJR 98, has not spelt out any adequate reasons as to how those two decisions,
under two other different enactments, could lead us to hold that the offences
under section 162(1) and section 220(3) of the Companies Act are not continuing
offences. No notice at all appears to have been taken of the observation in
Deokaran Nenshi, AIR 1973 SC 908, 909 that a continuing offence "is one of
those offences which arises out of failure to obey or comply with a rule or its
requirement and which involves a penalty the liability for which continues
until the rule or its requirement is obeyed, nor of the indication in that
judgment (at page 910) that the absence of any provision in the relevant law
continuing the penal liability for the continued disobedience or non-compliance
was the ground for holding the offence to be non-continuous, nor the provisions
of section 162(1) and section 220(3) providing for continuation of the penal
liability and for continued punishment for the continuance of the default were
duly taken note of. The observations in Bhagirath Kanoria, AIR 1984 SC 1688,
1692 that even though belated compliance "could not have absolved them of
their original guilt, it would have snapped the recurrence" and that
"each day they failed to comply with the obligation to pay their
contribution to the fund, they committed a fresh offence" were not also
properly adverted to in the context of section 162(1) and section 220(3),
whereunder, the offence was made punishable till the default continued and
belated submission of return and other documents would have snapped the
continuance of the offence.
We
would, accordingly, with great
respect, regret our inability to follow the decision in Eastern Paper Mills [1988] Cal Crl LR (HC) 176 and, for the reasons
stated hereinbefore, we would, to use a
jurisprudential phrase, hold the decision, to have been arrived at sub silentio. A
decision passed sub-silentio
ceases to have, as pointed out in Salmond's Jurisprudence, 12th edition, pages 153 and 154, any binding efficacy. That is
also what was held by Sir Asutosh in Virjiban Das Moolji, AIR 1921 Cal
169. To borrow from Salmond, a decision passes sub
silentio in the technical sense that has come to be attached to that phrase,
when the particular point of law involved in the decision is not perceived by
the court or present to its mind. The court may consciously decide in one way
because of point A, which it considers and pronounces upon. It may be shown,
however, that logically the court should not have decided in that manner unless
it also decided point B in the same manner ; but that point B was not adverted
to and considered in the manner it was necessary and thereby point B is said to
pass sub silentio.
We
would, therefore, dismiss the revisional applications and discharge the rules
and would direct the records of the two cases, along with a copy of our order,
to go down at once to the court below for disposal of the cases as
expeditiously as possible and in accordance with law.
A.K.
Nandi, J. —I have had the
advantage of going through the judgment of my learned
brother Bhattacharjee J. While agreeing with the process of his reasoning and
the conclusion arrived at, I prefer to add a few lines to express views of my
own.
No
precise definition of a continuing offence has been given in any statute, and the Supreme Court has held that it is not
possible either to give a precise definition.
Nevertheless, it has been sought to be defined in different judgments of the
Supreme Court as also of the High Courts. Bhattacharjee J. has dealt with
different decisions in his judgment. 1 shall deal with some of them only in
order to express as to how I have understood them. In State of Bihar v.
Deokaran Nenshi, AIR 1973 SC 908 ; [1973] Crl LJ 347, it was held that
an act which continued constituted a fresh offence everyday on which it
continued. A distinction is sought to be struck down
an offence committed once and for all and a continuing offence. If law does not
render a continued disobedience or non-compliance an offence, it is not a
continuing offence. In order to constitute a continuing offence, it must arise
out of failure to obey or comply with a rule or its requirement and which
involves a penalty the liability for which continues until the rule or its
requirement is obeyed or complied with. A continuing offence is one which is
susceptible of continuance and is distinguishable from one which is committed
once and for all. It was a case under section 66 of the Mines Act. Applying
these tests, the Supreme Court held that the offence was committed once and for
all, and in that view of the matter, the offence complained of was held to be
not a continuing offence.
In Bhagirath Kanoria v. State of Madhya Pradesh, AIR 1984 SC
1688 ; [1986] 68 FJR 98, the default in payment of contribution by the employer
to the provident fund was held to be a continuing offence. It was an offence under
section 14(2)(a) of the Employees' Provident Funds and Miscellaneous Provisions
Act. The Hon'ble judges noticed the case of State of Bihar v. Deokaran Nenshi,
AIR 1973 SC 908 ; [1973] Crl LJ 347 and did not strike a note of dissent. Nevertheless the offence was held to be a continuing
offence. It is evident from paragraph 19 of the judgment that the object
and purpose of the statute very much weighed with the Hon'ble judges in holding
the offence to be a continuing offence.
We
must not confuse between omission day to day constituting a continuing offence
and an omission visited with a daily fine. An act or omission visited with
daily fine is not necessarily a continuing offence.
The
distinction is eloquent in
United Savings and Finance Co. P Ltd. v. Deputy Chief Officer, Reserve Bank of
India [1980] 50 Comp Cas 518 (Cal). It was an offence under section 58(b)(2) of
the Reserve Bank of India Act. The default was not only
punishable with a fine but the continuance of default was visited with daily
fine. The relevant part of the provision reads as follows (at page 522)
:
".... if he
persists in such failure or refusal, with further fine which may extend to one
hundred rupees for everyday, after the first, during which the offence
continues".
In
view of the above authorities, I am of the opinion that the imposition of daily
fine was not the reason for characterising it as a continuing offence. On the
contrary, the persistent failure or refusal to comply was the reason for
holding it to be a continuing offence. Daily fine prescribes only the measure
of penalty, the object being enforcement of strict compliance with law and
early compliance after default. The initial default thereby does not
necessarily become a continuing offence. Initial default is an offence committed
once and for all.
We may, therefore, say that a continuing
offence is an act or omission over which the offender can exercise his control
irrespective of the penal provision of daily fine. Law may cast an obligation
upon a person either to discontinue an act or abstain from continuing an
omission. If the obligation continues and it is not discharged, the default
constitutes a continuing offence. If continuance of an act or omission is an
offence, it shall be a continuing offence until the act is discontinued or the
omission is abated. If this test is applied in the cases before us, the
offences are to be regarded as continuing offences.
[1995] 5 SCL 145 (KER.)
HIGH COURT OF KERALA
v.
Registrar of Companies
B.M.
THULASIDAS AND P.V. NARAYANAN NAMBIAR, JJ.
CRL. M.C. NOS. 1034, 1041, 1043 AND 1044
OF 1992
JUNE 2, 1995
Section 162, read with
sections 159 and 220, of the Companies Act, 1956, further read with sections
468 and 472 of the Code of Criminal Procedure, 1973 - Annual return - Penalty for failure to
file - Whether offences contemplated under sections 159 and 220(1) and (2) are
continuing offences and unless legal requirements contained therein are
complied with, company and personnel in charge of company are liable to be
prosecuted and complaints against such offences cannot be quashed on ground of
limitation - Held, yes
FACTS
Complaints under section 162 were filed by the respondent (Registrar of Companies)
against the petitioner, who was the Managing Director of a company, GC, for the
alleged violation of provisions of sections 159 and 220(1) and (2). It was
alleged in the complaints that the annual return of GC as provided for under
section 159 which was due on 2-3-1989 and the copies of the balance sheet and
the profit and loss account of GC which were also due to be filed on 2-3-1989
were not filed. Though it was stated in the complaint that the default
commenced on 2-3-1989, the complaints were filed on 30-6-1992, i.e., after a
lapse of more than three years. The complaints were taken cognizance by the
magistrate and process was issued to the petitioner-accused who filed petition
under section 482 of the code seeking quashing of the complaints on ground of
limitation. The Single Judge, doubting the correctness of decision in Sudarsan
Chits (India) Ltd. v. Registrar of Companies [1984] KLT 560, referred the
matter to the Division Bench. It was contended by the petitioner that as the
offences alleged were liable to be punished with fine only, the trial court was
not justified in taking cognizance of the offence beyond the period of six
months from the date of the commission of the offence, as it was barred by
limitation under section 468 of the Code. The prosecution, on the other hand,
contended that the offences alleged were continuing offences and as such
section 472 and not section 468 of the Code was applicable to the facts of the
case and, therefore, the complaints were not liable to be quashed.
HELD
The Supreme Court has held in the case of State of Bihar v. Deokaran AIR
1973 SC 908 that a continuing offence is one which is susceptible of
continuance and is distinguishable from the one which is committed once and for
all and that it is one of those offences which arise out of a failure to obey
or comply with a rule or its requirement and which involve a penalty, the
liability for which continues until the rule or its requirement is obeyed or
complied with. Also in Bhagirath Kanoria v. State of M.P. AIR 1984 SC 1688, the
Supreme Court held that non-payment of the employer's contribution to the
Provident Fund before the due date is a continuing offence and, therefore, the
period of limitation fixed by section 468 could not have any application and the
offence would be governed by section 472, according to which, a fresh period of
limitation begins to run at every moment of the crime during which the offence
continues. The Supreme Court also added that the question whether a particular
offence is a continuing one must necessarily depend upon the language of the
statute which creates the offence, the nature of the offence and the purpose
which is intended to be achieved by the statute.
In view of the authoritative pronouncements of the Supreme Court in the
aforementained two cases, the only possible conclusion which one can
legitimately arrive at in the instant case is that the offences which are the
subject-matter of the complaints for violation of the provisions of sections
159 and 220 are continuing in nature and until and unless the legal
requirements contained in the provisions mentioned above are complied with, the
company and the personnel in charge of the company are liable to be prosecuted
and the complaints are not liable to be quashed on the ground of limitation. A
fresh period of limitation starts on each day until the requirements of the
provisions are satisfied. One could take only this interpretation, bearing in
mind the social object of the legislation which is intended to be achieved.
Therefore, the complaints which were challenged in the instant case were not liable to be quashed on the ground of limitation. The court below was justified in taking cognizance of the complaints.
JUDICIAL REVIEW
Sudarsan Chits (India) Ltd. v. Registrar of Companies [1984] KLT 560
affirmed.
CASES REFERRED TO
Sudarsan Chits (India) Ltd. v. Registrar of Companies [1984] KLT 560,
State of Bihar v. Deokaran Nenshi AIR 1973 SC 908, Best v. Butler and
Fitzgibbon [1932] 2 KB 108, Vernev v. Mark Fletcher & Sons Ltd. [1909] 1 KB
444, Rex v. Taylor [1908] 2 KB 237, London County Council v. Worley [1994] 2 QB
826, Emperor v. Karsandas AIR 1942 Bom. 326, State v. Bhiwandiwala AIR 1955
Bom. 161, State of Bihar v. J.P. Singh 1963 BLJR 782, State v. Laxmi Narain AIR
1957 All. 343, Hole v. Cherd Union [1894] 1 Ch.293, Balakrishna Savalram Pujari
Waghmare v. Shree Dhyaneshwar Maharaj Sansthan AIR 1959 SC 798, Bhagirath
Kanoria v. State of M.P. AIR 1984 SC 1688, Velayudhan v. ESI Corpn. [1990] (3)
ILR Ker. 928, National Cotton Mills v. Asstt. Registrar of Companies [1984] 56
Comp. Cas.222 (Cal.), Chandra Spg. & Wvg. Mills v. Registrar of Companies
[1990] 69 Comp. Cas. 117, K.K. Mehra v. Registrar of Companies [1991] 71 Comp.
Cas. 669 (Delhi) and Shivalik Ice Factory v. Registrar of Companies [1988] 64
Comp. Cas. 113.
Dinesh Mathew J. Murikan for the Applicant. George C.P. Tharakan for the Respondent.
ORDER
Nambiar, J. - These cases were referred by
Chettur Sankaran Nair, J. to be heard by a Division Bench for an authoritative
pronouncement as the correctness of the decision in Sudarsan Chits (India) Ltd.
v. Registrar of Companies [1984] KLT 560 was doubted.
2. The petitioner and the respondent in all the four cases are one and the same. The respondent, Registrar of Companies, Kerala filed complaints under section 162 of the Companies Act, 1956 ('the Act') for violation of certain provisions of the Act. These complaints are sought to be quashed by filing the Crl. M.Cs. ST 323 of 1992 of the Court of the Additional Chief Judicial Magistrate (Economic Offences), Ernakulam and ST 326 of 1992 of the same Court, which were filed for violation of section 159 of the Act, are sought to be challenged in Crl. M.Cs. 1041 of 1992 and 1044 of 1992 respectively. In the other two cases, Crl. M.Cs. 1034 of 1992 and 1043 of 1992, proceedings in ST 324 of 1992 and ST 325 of 1992 of the same Court, relating to violation of the provisions of section 220(1) and (2) of the Act are challenged. All the cases were taken cognizance by the learned Magistrate and process was issued to the petitioner, who is alleged to be the Managing Director of Geo Ceramics (P.) Ltd.
3. Though several grounds were urged in the Crl. M.Cs., the only point which was pressed and argued before us is that the complaints are barred by the law of limitation and those should not have been taken cognizance by the learned Magistrate.
4. Section 159 makes it obligatory on the part of the company to prepare and file with the Registrar a return containing the particulars specified in Part I of Schedule V regarding the various items enumerated there-under. Section 162 deals with penalty and interpretation. Going by section 162(1) if a company fails to comply with any of the provisions contained in section 159, 160 or 161 of the Act, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.
Section 220(1) mandates that after the balance sheet and the profit and
loss account have been laid before a company at an annual general meeting as
aforesaid, there shall be filed with the Registrar within thirty days from the
date on which the balance sheet and the profit and loss account were so laid or
where the annual general meeting of a company for any year has not been held,
there shall be filed with the Registrar within thirty days from the latest day
on or before which that meeting should have been held in accordance with the
provisions of this Act: (a) three copies of the balance sheet and the profit
and loss account, signed by the managing director, manager or secretary of the
company, or if there be none of these, by a director of the company, together
with three copies of all documents which are required by the Act to be annexed
or attached to such balance sheet or profit and loss account. Section 220(3)
says that if default is made in complying with the requirements of sub-sections
(1) and (2), the company, and every officer of the company who is in default,
shall be liable to the like punishment as is provided by section 162 for a
default in complying with the provisions of section 159, 160 or 161.
5.
Annexure A.1 in Crl. M.C. 1041 of 1992 is a copy of the complaint in ST 323 of
1992. It shows that the annual return as provided under section 159 in respect
of an annual general meeting was not filed and so the default commenced on
2-3-1989. The complaint is seen filed on 30-6-1992, after a period of more than
three years. In ST 326 of 1992, the allegation is that the returns were not
submitted in respect of the annual general meeting held in 1989. That complaint
was also filed on 30-6-1992. In the other two cases, which deal with violation
of section 220, the allegation is that copies of the balance sheet and the
profit and loss account for the period ending with 30-6-1988 and 30-6-1989 were
not filed. These complaints were also filed on 30-6-1992.
6.
Argument of the counsel appearing for the petitioner is that as the offences
alleged are liable to be punished with fine only, the trial court was not
justified in taking cognizance of the offences beyond the period of six months
from the date of commission of the offence as it is barred by limitation.
Provisions of section 468 of the Code of Criminal Procedure, 1898 which deal
with limitation regarding cognizance of the offence, are pressed into service
to advance the argument.
On the other hand, the counsel for the respondent contended that the
offences which gave rise to the complaints are 'continuing offences' and so
when the provisions of the section are not complied with, offences must be held
to be continuing and, therefore, section 468 is not at all applicable to the
facts of the present cases and section 472 of the Code will be applicable.
7. So,
we are called upon to decide the question whether the offences are continuing
or not. If the offences are not continuing offences, all the complaints are
barred by limitation and on the other hand, if we take the decision that the
offences are continuing, there is no difficulty in arriving at the conclusion
that the complaints are not barred by limitation and cognizance was rightly
taken by the trial court.
8. The
expression 'continuing offence' is not defined in the Code. That is because the
expressions which do not have a fixed connotation or a static import are very
difficult to be defined. The expression 'continuing offence' cannot be put in a
strait-jacket. The Supreme Court, after considering the various judicial
pronouncements including that of the Privy Council, tried to summarise what a
'continuing offence' is :
"Continuing offence is one which is susceptible of continuance and
is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a
failure to obey or comply with a rule or its requirement and which involves a
penalty, the liability for which continues until the rule or its requirement is
obeyed or complied with. On every occasion that such disobedience or
non-compliance occurs and recurs, there is the offence committed. The
distinction between the two kinds of offences is between an act or omission
which constitutes an offence once and for all and an act or omission which
continues and therefore, constitutes a fresh offence every time or occasion on
which it continues. In the case of a continuing offence, there is thus the
ingredient of continuance of the offence which is absent in the case of an
offence which takes place when an act or omission is committed once and for
all."
(See the
decision in State of Bihar v. Deokaran Nenshi AIR 1973 SC 908).
9. To formulate the above expression which gives an intelligible meaning
to the expression 'continuing offence', the Supreme Court relied on Best v.
Butler and Fitzgibbon [1932] 2 KB 108, Vernev v. Mark Fletcher & Sons Ltd. [1909]
1 KB 444, Rex v. Taylor [1908] 2 KB 237, London County Council v. Worley [1984]
2 QB 826, Emperor v. Karsandas AIR 1942 Bom. 326, State v. Bhiwandiwala AIR
1955 Bom. 161, State of Bihar v. J.P. Singh 1963 BJLR 782 and State v. Laxmi
Narain AIR 1957 All. 343.
10. The statement in the American Jurisprudence, Second Edn., Volume 21 at
page 424 which deals with 'continuing offence' is worth extracting:
"Significantly, the
determination of the timeliness of a prosecution hinges on the nature of the
particular offence involved. Some offences are complete upon the commission of
certain acts, whereas other so-called continuing offences are not. Typically,
the statute of limitations begins to run as soon as every element of the crime
occurs and the offence is complete. For a continuing offence, however, the
crime is not exhausted for purposes of the statute of limitations as long as
the prescribed course of conduct continues. Thus, for example, the crime of
conspiracy has been held to continue as long as the conspirators engage in
overt acts in furtherance of their plot, and the statute of limitation for a
conspiracy generally continues to run from the time the last overt act in
furtherance of the conspiracy was committed. The determination whether a given
crime is a continuous offence is a matter of statutory interpretation. It has
been held that the doctrine of continuing offences should be applied only in
limited circumstances, since the doctrine effectively extends the statute of
limitations beyond its stated term. A particular offence should not be deemed
continuous unless the explicit language of the substantive criminal statute
compels such a conclusion or the nature of the crime involved is such that
Congress must have intended that it be treated as a continuing one."
11. A continuing offence gives rise to a continuing cause of action. What
is a continuing cause of action ? Lord Lindley in Hole v. Cherd Union 1894 1 Ch
293 has expressed thus :
"What is a continuing cause of action ? Speaking accurately, there
is no such thing; but what is called a continuing cause of action is a cause of
action which arises from the repetition of acts or omissions of the same kind
as that for which the action was brought." (p. 295)
In the same decision, Lord Justice A.L. Smith,
agreeing with the view of Lord Lindley, said:
"If once a cause of action arises, and the acts complained of are
continuously repeated, the cause of action continues and goes on de die in diem
It seems to me that there was a connection in the present case between the
series of acts before and after the action was brought; they were repeated in
succession, and became a continuing cause of action. They were an assertion of
the same claim - namely, a claim to continue to pour sewage into the stream -
and a continuance of the same alleged right. In my opinion, there was here a
continuing cause of action within the meaning of the rule."
12. In
Balakrishna Savalram Pujari Waghmare's case (supra). His Lordship Justice
Gajendragadkar (as he then was), dealing with the essence of a continuing
wrong, observed as follows :
"... It is the very essence of a continuing wrong that it is an act
which creates a continuing source of injury and renders the doer of the act
responsible and liable for the continuance of the said injury. If the wrongful
act causes an injury which is complete, there is no continuing wrong even
though the damage resulting from the act may continue. If, however, a wrongful
act is of such a character that the injury caused by it itself continues, then
the act constitutes a continuing wrong. In this connection it is necessary to
draw a distinction between the injury caused by the wrongful act and what may
be described as the effect of the said injury...." (p. 807)
13. A
similar question came before the Supreme Court in Bhagirath Kanoria v. State of
M.P. AIR 1984 SC 1688 in which provisions of Employees' Provident Fund and
Family Pension Fund Act (19 of 1952) came for consideration. As per the Act,
non-payment of the employers' contribution was made an offence. A complaint was
filed long after the period of limitation on the basis of the initial
commission of the offence. The argument was that the offence is a continuing
offence and until and unless the requirements of the section are satisfied, the
offence continues and fresh period of limitation begins to run at every moment
of the crime during which the offence continues. This argument was accepted by
the Supreme Court. The Supreme Court also adopted the reasoning in the decision
of Deokaran Nenshi's case (supra). It was also held by the apex court that
non-payment of the employers' contribution to the Provident Fund before the due
date is a continuing offence and, therefore, the period of limitation fixed by
section 468 cannot have any application. The offence will be governed by
section 472 of the Code of Criminal Procedure,
according to which, a fresh period of limitation begins to run at every moment
of the crime during which the offence continues. The Supreme Court also added
that the question whether a particular offence is a continuing one must
necessarily depend upon the language of the statute which creates the offence,
the nature of the offence and the purpose which is intended to be achieved by
the statute. Failure to add employers' contribution before the due date,
considering the object and purpose of the provision which is to ensure the
welfare of the workers, cannot be said to be an offence which is not
continuing. The Supreme Court further held where a controversy is raised as to
whether an offence is of a continuing or non-continuing nature, considering be
object and purpose of the act, cognizance of the offence ought to be taken even
after the expiry of the period of limitation if such period is applicable,
because the interest of justice so requires. Section 473 of the Code of
Criminal Procedure empowers a court to take cognizance of an offence after the
period of limitation, if it is satisfied on the facts and circumstances of the
case the delay has been explained or that it is necessary to do so in the
interests of justice.
14. This Court in Sudarsan Chits (India) Ltd.'s case (supra) dealt with
the provisions of section 220 read with section 162 and held that the offence
for violating the provisions of section 220 can be treated as a continuing
offence and so provisions of section 468 of the Code has no application and on
that basis refused to quash a complaint pending before the trial court. In the
said decision, this Court also relied on the penalty provision contained in
section 162(1) which is already extracted above.
15. A similar view was taken by this Court in Velayudhan v. ESI Corpn.
[1990] (3) ILR Ker. 928. This Court in extenso dealt with the Employees' State Insurance
Act, 1948 and considering the various decisions of the Supreme Court and other
High Courts, came to the conclusion that non-payment of contribution by the
employer constitutes a continuing offence and the offence continues till the
requirements in the section are complied with. The contention that the
complaint in the case was filed beyond the period of six months, taking shelter
under section 468 was rejected by the learned Judge.
16. Though we have dealt with the decisions of various courts which
conclude that the offence similar in nature contained in sections 159 and 220
is a continuing one until it is performed, there is a cleavage of judicial
opinion on this point, a set of decisions are there which deal with similar
question in which it is held that the offence cannot be treated as a continuing
offence and as the complaint was not filed within the period prescribed under
section 468, it should be treated as barred by limitation. The High Courts of
Calcutta, Punjab and Haryana, Delhi and Karnataka have taken this view.
17. In National Cotton Mills v. Asstt. Registrar of Companies [1984] 56 Comp. Cas. 222 (Cal.), a similar question regarding violation of the provisions under section 159 came up for consideration and a Division Bench of the Calcutta High Court held that the offence is complete as the default in submission of the return is made and so the offence cannot be said to be continuing in nature and held that the complaint is liable to be quashed. In Chandra Spg. & Wvg. Mills v. Registrar of Companies [1990] 69 Comp. Cas. 117, a learned single Judge of the Karnataka High Court considered the question in detail and came to the conclusion that failure to submit balance sheet and profit and loss account within the prescribed time as provided under section 220 is not a continuing offence and the complaint should have been filed within the time prescribed by the Code of Criminal Procedure. In K.K. Mehra v. Registrar of Companies [1991] 71 Comp. Cas. 669, a learned single Judge of the Delhi High Court dealt with the provisions of sections 159 and 220 of the Act and held that the offences under the above sections are not continuing in nature. Similar is the view taken by the Punjab & Haryana High Court in Shivalik Ice Factory v. Registrar of Companies [1988] 64 Comp. Cas. 113.
18. We have carefully gone through the judgments referred to above. In view of the authoritative pronouncement of the Supreme Court in Deokaran's case (supra) and in Bhagirath Kanoria's case (supra), we cannot agree with the view expressed by the High Courts of Calcutta, Karnataka, Delhi and Punjab and Haryana. The only possible conclusion which we can legitimately arrive at is that the offences which are the subject-matter of the complaints for violation of the provisions of sections 159 and 220 are continuing in nature and until and unless the legal requirements contained in the provisions mentioned above are complied with, the company and the personnel in charge of the company are liable to be prosecuted and the complaints are not liable to be quashed on the ground of limitation. Fresh period of limitation starts on each day until the requirements of the provisions are satisfied. We can take only this interpretation bearing in mind the social object of the legislation which is intended to be achieved. We also hold that the decision of Justice Bhat (as he then was) in Sudarsan Chits (India) Ltd.'s case (supra) is correctly decided and we affirm the same.
19. In this view of the matter, we hold that the complaints which are challenged in the Crl. M.Cs. are not liable to be quashed on the ground of limitation. The Court below was justified in taking cognizance of the complaints. We make it clear that we have dealt only with the question of limitation and the other points available to the petitioner are left open to be urged before the trial court.
With this observation, the Crl. M.Cs. are dismissed.
[1985] 58 Comp. Cas. 672 (Cal.)
High Court OF
Calcutta
v.
UMESH CHANDRA BANERJEE, J.
Matter No. 1430
of 1983.
MARCH 21, 1984
S.B. Mukherjee for the Petitioner.
P.C.
Sen for the Respondents.
Umesh Chandra Banerjee,
J.—This application arises out of com
plaints filed by the Registrar of Companies, being Case Nos. C/2083/82, C/2085/82,
C/2103/82, C/2112/82, C/2138/82, C/216/82, C/2151/82 and C/2163/82 in the Court
of the Chief Metropolitan Magistrate. While some of the proceedings were
commenced on an allegation that the accused persons have not filed the annual
return up to September 30, 1977, to the office of the complainant though the
same ought to have been filed with the complainant on or before November 28,
1977, and the default alleged is the non-compliance with the provisions of ss.
159 and 162 of the Companies Act, 1956, the other proceedings were commenced
for non-compliance of s. 220(1) of the Companies Act.
In this writ petition, the
petitioner prays for quashing of the proceedings and canvasses in support of
the application, only the bar of limitation.
Before adverting to the
question of limitation, the relevant provisions of the Companies Act should be
considered. Section 159 of the Companies Act provides that every company having
a share capital shall, within sixty days from the day on which each of the
annual general meetings referred to in s. 166 is held, prepare and file with
the Registrar a return containing the particulars specified in Pt. I of Sch. V,
as they stood on that day. Section 160 provides that every company riot having
a share capital shall, within sixty days from the day on which each of the
annual general meetings referred to in s. 166 is held, prepare and file with
the Registrar a return stating the particulars as they stood on that day.
Section 161 provides further provisions regarding annual return and certificate.
Section 162(1) provides that if a company fails to comply with any of the
provisions contained in s. 159, s. 160 or's. 161, the company, and every
officer of the company who is in default, shall be punishable with fine which
may extend to fifty rupees for every day during which the default continues.
Section 220(1) provides that after the balance-sheet and the profit and loss
account have been laid before a company at an annual general meeting, they
shall be filed with the Registrar within thirty days from the date on which the
balance-sheet and the profit and loss account were so laid.
Sub-section (3) of section
220 further provides that if default is made in complying with the requirements
of sub-ss. (1) and (2), the company, and every officer of the company who is in
default, shall be liable to the like punishment as is provided by s. 162 for a
default in complying with the provisions of s. 159, s. 160 or s. 161 of the
Companies Act.
Section 468 of the Cr. PC
prescribes the period of limitation and provides that for offences punishable
with fine, the period of limitation would be six months from the date of
accrual of the right to prosecute. The right to prosecute in this case accrued
on November 28, 1977. Admittedly, the complaint was filed on June 25, 1982,
which is beyond the period of six months.
Mr. P.C. Sen, appearing on
behalf of the Registrar of Companies, contended that the offence is continuing
in nature. Mr. Sen submitted that the language used in s. 161(1), namely,
"during which default continues", makes the position very clear in
regard to continuity and a fine of Rs. 50 for every day during which the
detault continues further clarifies the intent of the Legislature to make the
offence a continuing one.
Mr. S.B. Mukherjee, counsel
appearing for the petitioner, however, contended that the offence contemplated
by s. 162(1) cannot be a continuing one and, as such, he submitted that the
complaint filed beyond the period of limitation cannot be taken cognizance of
by the parties.
In regard to the question
of a continuing offence, the Supreme Court in the State of Bihar v. Deokaran
Nenshi, AIR 1973 SC 908, observed that (at p. 909) a continuing offence is one
which is susceptible of continuance and is distinguishable from the one which
is committed once and for all. It is one of those offences which arises out of
a failure to obey or comply with a rule or its requirement and which involves a
penalty, the liability for which continues until the rule or its requirement is
obeyed or complied with. On every occasion that such disobedience or
non-compliance occurs and recurs, there is the offence committed. The
distinction between the two kinds of offences is that between an act or an
omission which constitutes an offence once and for all and an act or omission
which continues and, therefore, constitutes a fresh offence every time or
occasion on which it continues. In the case of a continuing offence, there is
thus the ingredient of continuance of the offence which is absent in the case
of an offence which takes place when an act or omission is committed once and
for all.
The Supreme Court, in the
aforesaid decision, further observed that as in the case of a construction of a
wall in violation qf a rule or a bye-law of a local body, the offence would be
complete once and for all as soon as such construction is made.
The said decision of the
Supreme Court was considered by the Division Bench of this court in the matter
of Wire Machinery Manufacturing Corporation Ltd v. State [1978] Cal HN 293 ;
[1979]49 Comp Cas 197 (Cal). In that case, the petitioners were being
prosecuted in the Court of the Metropolitan Magistrate, 7th Court, Calcutta,
under the provisions of ss. 14(1A), 14(2), 14A(1) and 14AA of the Employees'
Provident Funds and Family Pension Fund Act, 1952, read with para 76(b) of the
Employees' Provident Funds Scheme. According to the petition of complaints, the
petitioners, who were directors, had not paid the employers' and employees'
share of the contributions and administrative charges for the different months
which is the subject-matter of the cases started against them. While
considering the facts of that case, this court observed that once defaults were
made, the offences were committed once and for all and became complete on the
close of the due date. As such, there would not be any ingredient of
continuance in the offence to make it a continuing one. It was further observed
that the provision in s. 14C of the Act for penalising a defaulting employer
with a day-to-day fine till the deposit is made good does not make an initial
infringement a continuing offence and in the result, this court made the rule
absolute on the ground that complaints were filed beyond the stipulated period
of limitation under s. 468(2)(b) of the Cr. PC. The said decision of the
Supreme Court was also considered by another Division Bench ot this court in
the case of National Cotton Mills v. Assistant Registrar of Companies, [1983]
Cal HN 180 ; [1984] 56 Comp Cas 222 (Cal). While considering ss. 159 and 162(1)
of the Companies Act, this court observed that in order to constitute a
continuing offence, the offence must arise out of a failure to obey or comply
with a rule or its requirement and which involves a penalty, the liability for
which continues until the rule or its requirement is obeyed or complied with.
The court observed that s. 159 of the Companies Act does not impose any
liability which so continues. The offence on the breach thereof is complete
with the failure to furnish the return in the manner or within the time
stipulated. Such an offence is committed once and for all as and when one
commits the default. That provision does not contemplate that the obligation to
submit such returns continues from day-to-day until the return is actually
submitted nor does it provide that continuance of business without filing of
such returns is prohibited so that non-fulfilment of a continuing obligation or
continuing of business without filing of such returns becomes a continuing
offence. When s. 162 of the Companies Act prescribed the penalty of fine
which may extend to fifty rupees for every day during which the default
continues, it merely prescribed the' measure of penalty—such a prescription
being made with the object of enforcing strict compliance with the requirement
of s. 159 under the threat of enhanced penalty and getting relief from
such penalty on enhancing scale by early submission of return even after the
default. That does not render the initial default a continuing one. The offence
cannot be said to be repeated or committed from day-to-day after the initial
default. It is only where the offence is committed from day-to-day or repeated
from day-to-day, then and in that event only, it can be called a continuing
offence. The language of s. 162 does' not warrant any continuity as they are in
ss. 234, 294, 372 and 598 of the Companies Acti The judgment of the learned
single judge in Ajit Kumar Sarkar v. Assistant Registrar of Companies [1979] 49
Comp Cas 909; 83 Ca HN 108 has beeri expressly disapproved by the later decision
of this court and, as such, in my opinion, cannot be treated as a precedent.
Mr. P.C. Sen, however, drew
my attention to an unreported decision of this court in Criminal Revision No.
40-402 of 1980 (Parshva Properties Ltd. v. Registrar of Companies. In that
decision, this court considered the provisions of s. 372(8) of the Companies
Act. Sub-section (8) of s. 372 expressly provides that if a default is made in
complying with the provisions of sub-ss. (6) and (7) of s. 372, the company and
other officers o'f the company, who are in default, shall be penalised with a
fine which may extend to Rs. 500 and also with a further fine which may extend
to Rs. 50 for every day after the first day during which the default continues.
The section, by its term, indicates that the penalty may extend to a period
even after the initial default so long as the default continues. Mr. Sen,
however, "contended strongly that the expression" during which the
default continues also appears in s. 162 and, as such, the offence under s.
162(1) is a continuing offence. I am, however, unable to agree with the
contention of Mr. Sen inasmuch as the said unreported decision was specifically
dealing with the provision of s. 372(8) and the element of continuity is
apparent but that is not the case in regard to s. 162(1).
In that view of the matter,
since, in my opinion, the offence under s. 162(1) cannot be termed as a
continuing offence arid since the complaint has admittedly been filed beyond
the period of six months, the complaint is wholly barred by the law of
limitation.
The rule is thus made
absolute. The Criminal Cases being No. C/2083/82, C/2085/82, C/2103/82,
C/2112/82, C/2138/82, C/2146/82, 0/2151/82 and C/2163/82 before the Chief Metropolitan
Magistrates, Calcutta, are quashed. There will, however, be no order as to
costs.
Oral prayer for stay made
but refused.
[1984] 56 COMP. CAS. 222 (CAL.)
v.
Assistant Registrar of Companies,West
Bengal
B. C. CHAKRABARTI AND JITENDRA NATH CHAUDHURI JJ.
Criminal Revisions Nos. 921
to 928 of 1980
AUGUST 1, 1983
A.P.
Chakraborti and Milan Bhattacharya for the petitioner.
Dipak
Kumar Sengupta for opposite party No. 1.
Arun
Kumar Mukherjee for the State.
Chakrabarti
J.—These
revision cases arise out of as many cases under s. 159/162(1) of the Companies
Act, 1956, on the complaints made by the Assistant Registrar of Companies, West
Bengal, alleging violation of the provisions of s. 159 of the Act. The
petitioner company and some of its officers obtained the present rules for
quashing the prosecutions pending against them
in different Courts of the Metropolitan Magistrate, Calcutta. The cases have
been heard together and this order shall govern all of them.
Mr. Chakraborti, appearing
on behalf of the petitioners in all these cases, contends that the learned
Magistrates erred in law in taking cognizance of the cases without examining
the complainant or his witnesses, that the company had been previously given
exemption from filing returns due to circumstances beyond their control on
account of the Indo-Pak War, that the company is also entitled to exemption for
subsequent periods as well, that the company is. also entitled to relief under
s. 633 of the Companies Act, 1956, and that the prosecution in each case is
barred by limitation.
The first point taken by
Mr. Chakraborti may be forthwith disposed of upon a reference to s. 200 of the
Cr. P.C., 1973. The obligation on the part of a Magistrate taking cognizance of
an offence on complaint to examine upon oath the complainant and the witnesses
present is dispensed with under the terms of the section when the complaint is
made in writing by a public servant acting or purporting to act in the
discharge of his official duties. In the instant case, the complainant is a
public servant purporting to act as such.
The other point urged by
Mr. Chakraborti really touches the merits of the prosecution and the possible
defence of the petitioners. That is a question which may be conveniently
considered at the trial if the proceedings ultimately turn out to be
maintainable and competent. Section 633 may be invoked in appropriate cases by
the court if the conditions for granting the relief to the persons found guilty
is made out. It may, however, be noted that the section cannot apply to the
company itself in respect of any default on its part, but can apply to its
officers. This, however, is a question which goes to the merits of the case and
we do not propose to dwell at length on this aspect of the matter at this stage
in exercise of our revisional jurisdiction.
Mr. Chakraborti, however,
seems to have a stronger point in support of the prayer for quashing the
proceedings. His contention, in short, is that all the proceedings are barred
by limitation. In order to appreciate the point it may be useful to refer to
the provisions of s. 159 and s. 162 of the Companies Act. Section 159 requires
every company to file with the Registrar the particulars specified in the
section in the form of a return within 60 days from the date on which the
annual general meeting is held. The penal provision for failure to comply with
the aforesaid provisions is contained in s. 162, which reads as follows:
"S. 162. Penalty and
interpretation.—(1) If a company fails to comply with any of the provisions
contained in sections 159, 160 or 161, the company, and every officer of the
company who is in default, shall be punishable with fine which may extend to
fifty rupees for every day during which the default continues.
(2) For the purpose of this
section and sections 159, 160 and 161, the expressions 'officer' and 'director'
shall include any person in accordance with whose directions or instructions the
board of directors of the company is accustomed to act."
The cases, out of which the
present revision applications have arisen, were filed on different dates in the
month of November, 1978. The due date of filing of returns was 28th November of
different years from 1967 to 1977. Even the latest in point of time, namely,
Complaint Case No. 1698 of 1978 (Criminal Revision No. 922 of 1980), was
initiated nearly one year after the due date had expired, while the complaint
in respect of the earliest default, namely, Complaint Case No. 1586 of 1978,
was filed nearly eleven years thereafter.
The penalty for the default
is only fine. Section 468 of the Code of Criminal Procedure provides that no
court shall take cognizance of an offence after the expiry of the period of
limitation. The limitation for an offence punishable with fine only is six
months. It is, therefore, contended by Mr. Chakraborti that the learned
Magistrate could not have, in view of the bar of limitation, taken cognizance
in these cases. Mr. Sengupta, appearing on behalf of the opposite party, on the
other hand, contends that the offence being a continuing offence, the bar of
limitation would not be attracted in these cases. The argument is founded upon
the wording of s. 162 of the Companies Act which provides that the defaulting
company and every officer thereof shall be punishable with fine for every day
during which the default continues. Considerable emphasis was laid on the use
of the expression "during which the default continues". It is contended
by Mr. Sengupta that the offence continues from day to day and is, therefore, a
continuing one. Mr. Chakraborti, on the other hand, argues that the offence is
complete as soon as the default in submitting the return is made. The provision
for payment of fine on daily basis after the default, according to Mr.
Chakraborti, is only to ensure speedy submission of return on pain of penalty
for each day the default is not made good. This, according to Mr. Chakraborty,
does not render the default a continuing offence.
In the first place, Mr.
Sengupta referred to the case of G.D. Bhattar v. State, AIR 1957 Cal 483 (Cal),
in support of his contention. There the question involved was whether an
illegal omission to comply with certain statutory requirements, namely, the
pithead baths and the mines creches, was a continuing offence or not. It was
held that the mere fact that the specified date within which the baths and the
creches were required to be constructed expired, would not possibly mean that
the duty of the owner ended with the expiry of the date. If a duty continues
from day to day the non-performance of that duty from day to day is a
continuing wrong. The very nature of the omission amounting to the wrong in
that case is entirely different from the wrong alleged in the cases before us.
The
case of State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908, seems to be more to the point. That was a case under the
Mines Act. Section 66 of the Act provides that any person omitting, inter alia,
to furnish any return, notice, etc., in the prescribed form or manner or at or
within the prescribed time required by or under the Act to be made or furnished
shall be punishable with fine which may extend to rupees one thousand. Section
79 lays down that no court shall take cognizance of any offence under this Act
unless a complaint thereof has been made within six months from the date on
which the offence is alleged to have been committed. The Explanation to the
section provides that if an offence in question is a continuing offence, the
period of limitation shall be computed with reference to every point of time
during which the said offence continues. In that case, the complaint was filed
more than six months after the default. The question that fell for
consideration was whether the offence was a continuing one or not so that the
Explanation to s. 79 might be invoked. It was observed that a continuing
offence is one which is susceptible of continuance and is distinguishable from
the one which is committed once and for all. It was held that the offence was
complete on the owner failing to furnish the annual return by the date
prescribed. Continued disobedience or non-compliance was not made an offence
under the regulation under which the prosecution was started. In that view of
the matter, the complaint was found to be time-barred.
In the case of Wire
Machinery v. State [1978] CHN 293, similarly a complaint under the Employees'
Provident Funds and Family Pension Fund Act filed more than a year after the
offence was committed was found to be barred under s. 468 of the Cr. P.C. The
provision for penalising a defaulting employer with day to day fine until the
deposit is made good, it was held, does not make the initial infringement a
continuing offence.
In the next case cited by
Mr. Sengupta, United Savings & Finance Co. v. Deputy Chief Officer, RBI
[1980] Crl. LJ 607 (Cal), the prosecution was under s. 58B(2) of the Reserve
Bank of India Act. The section makes a person failing to produce any books of
account or other documents or to furnish any statement, information or
particulars which, under the Act, it is his duty to produce or furnish,
punishable with fine which may extend to two thousand rupees in respect of each
offence and if he persists in such failure or refusal, with further fine which
may extend to "one thousand rupees for every day, after the first during
which the offence continues". In view of the language of the section
quoted above, it was held that the offence was a continuing offence. There is
nothing in s. 159 or s. 162 of the Companies Act which provides for continuance
of the offence in case the offender persists in disobeying the requirement. It
cannot be disputed even on the authority of this decision that the offence is
complete once the default is made. The absence of any specific provision as in
s. 58B (2) of the Reserve Bank of India Act distinguishes that case from the
cases before us.
The next case cited,
Krishna Kumar v. State [1981] 2 CHN 301 (Cal), is a case under the Employees'
Provident Funds and Family Pension Fund Act and follows the decision in Wire
Machinery v. State [1978] CHN 293 (Cal).
Finally, Mr. Sengupta
referred to a Single Bench decision of this court in the case of Apt Kumar
Sarkar v. Assistant Registrar of Companies [1979] 49 Comp Cas 909 ; 83 CHN 108,
in which case the question whether an offence under s. 159/162 of the Companies
Act is a continuing offence or not came to be considered. It was held that the
liability to furnish the return under s. 159 continues until it is complied
with and each day's failure is visited with penalty. This, however, is the only
decision dealing with the identical question before us.
On a careful review of the
legal position, it is difficult for us to agree with the view expressed by the learned
single judge in the above case. As pointed out by the Supreme Court, in order
to constitute a continuing offence, the offence must arise "out of a
failure to obey or comply with a rule or its requirement and which involves a
penalty, the liability for which continues until the rule or its requirement is
obeyed or complied with". Section 159 of the Companies Act does not impose
any liability which so continues. The offence on the breach thereof is complete
with the failure to furnish the return in the manner or within the time
stipulated. Such an offence is committed once and for all as and when one
commits the default. That provision does not contemplate that the obligation to
submit such returns continues from day to day until the return is actually
submitted nor does it provide that continuance of business without filing of
such return is prohibited so that non-fulfilment of a continuing obligation or
continuing of business without filing of such returns becomes a continuing
offence. When s. 162 of the Companies Act prescribed the penalty of fine which
may extend to fifty rupees for every day during which the default continues, it
merely prescribed the measure of penalty—such a prescription being made with
the object of enforcing strict compliance with the requirement of s, 159 under
the threat of enhanced penalty and getting relief from such penalty on
enhancing scale by early submission of return even after the default. That does
not render the initial default a continuing one. It cannot be said that the
offence is repeated or committed from day to day after the initial default. It
is only where the offence is committed from day to day or repeated from day to
day that it can be called a continuing offence. There being no express
provision in s. 162 in that behalf as there are in ss. 234, 598, etc., of the
Companies Act, it will not be proper to hold that the offence under s. 162 is a
continuing offence. When the statute itself provides for continuance of offence
irrespective of initial default in some cases but does not make similar
provisions in respect of some other offences, it would not be correct to say
that the latter class of cases also would be continuing offences.
That being our view, we
respectfully disagree with the view expressed in the case of Apt Kumar Sarkar
v. Assistant Registrar of Companies [1979] 49 Comp Cas 909 (Cal). Accordingly,
we hold that the cognizance of all these cases was bad in view of the bar of
limitation and s. 468, Cr.P.C., and the pending proceedings are liable to be quashed.
The rules are accordingly
made absolute.
Jitendra Nath Chaudhuri
J.—I Agree.
[1988] 64 COMP. CAS. 113 (P&H)
Shivalik Ice Factory and Cold
Storage Pvt. Ltd.
v.
Registrar of Companies
PRITPAL
SINGH, J.
CRIMINAL
MISC. NO. 7861 OF 1986
MAY
28, 1987
J.L. Gupta, Rajiv
Atma Ram and Subash Ahuja for the petitioner.
H. S Brar, for the
Respondents.
Pritpal Singh, J.—In this petition, the complaints (annexures P-2 to P-9), filed
by the Registrar of Companies, Punjab, Himachal Pradesh and Chandigarh, against
the petitioners are sought to be quashed.
The first petitioner is a
private limited company. Petitioners Nos. 2 and 3 are its shareholders and
directors. The Registrar of Companies instituted the aforesaid eight complaints
against the petitioners in the Court of the Chief Judicial Magistrate,
Jalandhar, on March 18, 1986. The allegations contained in these complaints are
that the petitioners did not submit the annual returns and balance-sheets for
the years 1981-82, 1982-83 and 1983-84 in accordance with sections 159 and 220
of the Companies Act (hereinafter called "the Act"). It is prayed
that the petitioners be, therefore, punished under section 162 of the Act.
Section 159 provides that
every company having a share capital shall, within sixty days from the day on
which each of the annual general meetings is held, prepare and file with the
Registrar a return containing the specified particulars. Section 220 lays down
that three copies of balance-sheet and profit and loss account shall be filed
by the company each year within a specified period. For non-compliance of
sections 159 and 220 of the Act, the company and every officer of the company
who is in default are punishable with a fine which may extend to Rs. 60 for
every day during which the default continues under section 162 of the Act.
The impugned complaints are
sought to be quashed on the ground of being barred by limitation. It is
contended that the offences under sections 159 and 220 of the Act being
punishable only with fine, no court could take cognizance of the impugned
complaints after six months of commission of the offence as provided in section
468 of the Code of Criminal Procedure, 1973, were committed during 1981-82 and
1983-84 but the complaints were filed on March 18, 1986. The contention, on
behalf of the petitioners, therefore, is that the complaints were manifestly
barred by time and the same could not be entertained by the trial court.
The position taken up by
learned counsel for the respondent-Registrar of Companies is that the offences
under sections 159 and 220 of the Act are continuing offences. As such section
468 of the Code of Criminal Procedure did not stand as a bar in the filing of
the impugned complaints.
Thus, the important point
for consideration in this case is whether the offences under sections 159 and
220 of the Act are continuing offences or not. It was held by the Calcutta High
Court in Ajit Kumar Sarkar v. Assistant Registrar of Companies [1979] 49 Comp
Cas 909, that failure to file annual returns under section 159 is a continuing
offence. This view was followed by the Kerala High Court in Sudarsan Chits
(India) Ltd. v. Registrar of Companies, Kerala [1986] 59 Comp Cas 261. However,
a Division Bench of the Calcutta High Court overruled the judgment in the case of Ajit Kumar Sarkar [1979] 49
Comp Cas 909 in National Cotton Mills v. Assistant
Registrar of Companies, West Bengal [1984] 56 Comp Cas 222. The learned judges
held that in order to constitute a continuing offence, it must arise "out
of a failure to obey or comply with a rule or its requirement and which
involves a penalty, the liability for which continues until the rule or its
requirement is obeyed or complied with". It was observed that section 159
of the Act, which requires every company to file with the Registrar the
particulars specified in the section in the form of a return within sixty days
from the date on which the annual general meeting is held, does not impose any
liability which so continues. The offence on the breach thereof is complete
with the failure to furnish the return in the manner or within the time
stipulated. Such an offence is committed once and for all as and when one
commits the default. The provision does not contemplate that the obligation to
submit the returns continues from day-to-day until the return is actually
submitted nor does it provide that continuance of business without filing of
such returns is prohibited so that non-fulfilment of a continuing obligation or
continuing business without filing of such returns becomes a continuing
offence. It was further held that when section 162 of the Act prescribed the
penalty of fine "which may extend to fifty rupees for every day during
which the default continues," it merely prescribes the measure of penalty.
Such a prescription being made with the object of enforcing strict compliance
with the requirement of section 159 under the threat of enhanced penalty and
getting relief from such penalty on enhancing scale by early submission of
returns even after the default. That does not render the initial default a
continuous one. It cannot be said that the offence is repeated or committed
from day-to-day after the initial default. It was clarified that it is only where
the offence is committed from day-to-day or repeated from day-to-day that it
can be called a continuing offence. This view was reiterated by the Calcutta
High Court subsequently in Nripendra Kumar Ghosh v. Registrar of Companies,
West Bengal [1985] 58 Comp Cas 672.
Similar penalty being
provided for the non-fulfilment of the requirement of section 220 of the Act in
section 162, the failure to file balance-sheet and accounts was not considered
to be a continuing offence on the same reasoning as in Central Manbhum Coal Co.
P. Ltd. v. Assistant Registrar of Companies, West Bengal [1986] 59 Comp Cas 176
(Cal).
Agreeing with the Division
Bench judgment of the Calcutta High Court in the case of National Cotton Mills
[1984] 56 Comp Cas 222, I am not inclined to accept the contention of the
learned respondent's counsel that the petitioners had committed continuing
offences. Since the offences were not continuing ones, the cognizance thereof
after the expiry of the period of limitation provided in section 468 of the
Code of Criminal procedure could not be taken by the trial Magistrate. Hence,
the impugned complaints and the proceedings taken by the trial court are hereby
quashed.
[1991] 71 Comp. Cas. 669 (DelHI)
High Court of
Delhi
v.
Registrar of Companies
C.A. NO. 827 OF
1987
N.S. Gupta
for the Respondent.
Sapra J.—By the present application filed under
section 446 of the Companies Act, 1956 (hereinafter called "the Act"),
the petitioner prays that this court be pleased to call for the files of Cases
Nos. 9459/5 of 1981, 9460/5 of 1981, 9461/5 of 1981, 9462/5 of 1981, and 8521/5
of 1981, titled Registrar of Companies v. Anand Finance (P.) Ltd., now pending
in the court of the Additional Chief Metropolitan Magistrate, Delhi, and quash
all the proceedings.
Briefly, the facts are that a creditor
filed a petition, being Company Petition No. 34 of 1966, against Anand Finance
Private Ltd., hereinafter referred to as "the company", for its
winding up, on the ground that it was unable to pay its debts.
During the
pendency of the petition for winding up, a scheme of arrangement, between the
creditors and the company, was approved by this court, vide order dated July
29, 1968, whereby 65 per cent. of the amount due to the creditors was to be
paid within a period of two years and for the balance 35 per cent. shares of
the company were to be allotted. The scheme also divested the shareholders of
their right to vote etc. A new board of directors was appointed by the court to
supervise the affairs of the company and make payment to the creditors.
In C.A. No.
516 of 1973, vide order dated February 7, 1974, the court superseded the
previous board of directors, as was appointed under the scheme, and in its
place, appointed the petitioner, as the chairman of the board of directors.
According to
the petitioner, he continued to discharge the functions of the chairman till
such time when the company was ordered to be wound up, vide order dated February
3, 1982, pursuant to the report of the chairman, as, the court was satisfied
that the scheme, as sanctioned under section 391 of the Act could not be worked
out, with or without modification. The official liquidator attached to this
court was appointed as the liquidator of the company.
It is further
alleged that the Registrar of Companies was in full knowledge of all the
proceedings. The scheme had also been filed with the respondent, and he was
aware that the rights of the shareholders of the company had been suspended.
There was thus no question of holding an annual general meeting of the company,
as the shareholders had been divested of their rights to vote. Notwithstanding
this fact, the respondent launched five prosecutions against the petitioner for
not holding the annual general meeting and laying the balance-sheet, etc., in the annual general
meeting which are now pending in the Court of the Additional Chief Metropolitan
Magistrate, Delhi.
Thus, the
prosecutions launched against the petitioner are unwarranted and illegal.
Moreover, the petitioner was appointed the chairman by the court. As such, no
such prosecutions could be launched against him as he was functioning under the
direct supervision of the company court as per the scheme of arrangement.
In its reply,
the respondent has stated that the prosecutions have been launched for the year
1979-80, while the company went into liquidation by the order passed by the
court on February 3, 1982. The prosecutions are for the period when the company
was very much in existence and, moreover, the prosecutions were launched on
September 17, 1981, for the offences committed under sections 220 and 159 of
the Act while, for the offence. committed under section 210 of the Act, the
complaint was filed in the Court of the Additional Metropolitan Magistrate,
Delhi, on July 29, 1981. As the prosecutions have since been launched against
the company and its directors, prior to the going into liquidation of the
company, the accused cannot claim any advantage whatsoever.
Thus, the
Registrar of Companies has launched prosecutions against petitioner for the
offences of not holding the annual general meeting and non-filing of the
returns with the Registrar of Companies, in accordance with section 159 of the
Act, for not laying before the company; at its annual general meeting, the
balance-sheet and profit and loss account, as per section 210 of the Act, and
for non-filing of the balance-sheet and profit and loss account with the
Registrar of Companies.
Though the
petition has been filed under section 446 of the Act, yet, I will treat the
same as one filed under section 633(2) of the Act.
The following
three questions arise, for decision in the present case :
(1) Whether, under section 633(2) of the
Act, this court has jurisdiction to relieve the petitioner from the liabilities
relating to the aforesaid defaults, in view of the fact that the respondent had
already filed complaints against the petitioner, prior to the filing of the pre
sent application ;
(2) Whether the offences for which the
criminal complaints have been filed against the petitioner are continuing
offences, and
(3) Whether, under the facts and
circumstances of the present case, cognizance of the offences for which the
complaints have been filed against the petitioner has been taken by the learned
Additional Chief Metropolitan Magistrate, Delhi.
Identical
questions arose in Company Petition No. 133 of 1989, S.P. Punj v. Registrar of
Companies, [1991] 71 Comp Cas 509 (Delhi). In that case, the petitioners filed
a petition under section 633(2) of the Act for being relieved from prosecution
for their alleged liability for non-filing of returns, under rule 10 of the
Companies (Acceptance of Deposits) Rules, 1975. The petition was filed after
launching of the prosecutions by the Registrar of Companies. Vide my judgment
dated September 11, 1990, I allowed that petition, and relieved the petitioners
therein from their liabilities for not filing of the returns under section 10
of the aforesaid Rules.
Admittedly,
the petitioner has filed the present petition during the pendency of the
prosecution in the Court of the Additional Chief Metropolitan Magistrate,
Delhi, for the aforesaid offences.
In Sri
Krishna Parshad v. Registrar of Companies [1978] 48 Comp Cas 397 (Delhi), Mr.
Justice D.K. Kapur (as he then was) was considering the question with regard to
the jurisdiction of the court under section 633(2) of the Act. In that case,
the facts were that the petitioners who were directors of M/s. Western U.P. Electric
Power and Supply Co. Ltd. committed defaults in respect of holding the annual
general meeting, for the period ending March 31, 1976. It was held (at page
400) :
"I may
also indicate that the other court covered by section 633(1) need not
necessarily be a criminal court because there may very well be a civil
proceeding, criminal proceeding or even a revenue proceeding in respect of
which section 633(1) may apply. In all such cases if a proceeding is
anticipated, the officer concerned can move the High Court at an early stage
and get relief in a suitable case. This has the great advantage of avoiding
that other proceeding if the High Court grants relief. If that other proceeding
has commenced then the officer concerned has no other course open but to apply
to the relevant court under section 633(1) to say that whatever negligence,
default, breach of trust, misfeasance, breach of duty or any other default
complained of there may be, he in fact, acted reasonably and honestly keeping
in view the circumstances of the case. The court can then grant relief. Thus,
the section, as it were, operates in two stages. The High Court can grant
anticipatory relief and if a case
is actually initiated, only the court before which the complaint or trial is
going on can grant relief. The preliminary objection has, therefore, to be
accepted."
I am in
respectful agreement with the view expressed above.
It may,
however, be noted that in Sri Krishna Parshad [1978] 48 Comp Cas 397 (Delhi),
it appears that the prosecution had already been launched and the cognizance of
the offence had already been taken by the learned Magistrate, and the question
of limitation was not involved.
Now, it is to
be seen whether, the offences/defaults, allegedly committed by the present
petitioner, are continuing ones or not.
In CWT v.
Suresh Seth [1981] 129 ITR 328, their Lordships of the Supreme Court were
considering the question whether the default committed under section 18(1)(a)
of the Wealth-tax Act, 1957, was a single default or a continuing one. The
facts, in that case, were that the assessee filed his wealth-tax returns for
the assessment years 1964-65 and 1965-66, on March 18, 1971, while he was
required, by section 14(1) of the Wealth-tax Act, to file the same, for the
year 1964-65, on or before June 30, 1964, and the return, for the assessment
year 1965-66, on or before June 30, 1965. The Supreme Court held (at pages 338,
339) :
"Section
18 of the Act, with which we are concerned in this case, does not require the
assessee to file a return during every month after the last day to file it is
over. Non-performance of any of the acts mentioned in section 18(1)(a) of the
Act gives rise to a single default and to a single penalty, the measure of
which, however, is geared up to the time lag between the last date on which the
return has to be filed and the date on which it is filed. The default, if any
committed, is committed on the last date allowed to file the return. The
default cannot be one committed every month thereafter. The words "for every"
month during which the default continued" indicate only the multiplier to
be adopted in determining the quantum of penalty and do not have the effect of
making the default in question a continuing one. Nor do they make the amended
provisions modifying the penalty applicable to earlier defaults in the absence
of necessary provisions in the amending Acts. The principle underlying section
6 of the General Clauses Act is clearly applicable to these cases. It may be
stated here that the majority of the High Courts in India have also taken the
same view."
In Assistant Registrar of Companies v. R.
Narayanaswamy [1985] 57 Comp Cas 787,
the Madras High Court held (at pages 788 and 789) :
"It is
not disputed before me by learned counsel for the petitioner that the respondents
became directors of the first accused-company only from July, 1975, and they
were not directors on April 1, 1975, when the excess deposits had to be
returned as per section 58A(3)(c) of the Act. It is, however, contended by him
that the failure to repay the deposit on or before April 1, 1975, is a
continuing offence and persons who became directors even subsequent to April 1,
1975, are liable, for the default, so long as the excess deposits are not
repaid. But, there is nothing in section 58A(3Xc) or any other provision of the
Act to hold that the non-repayment of the excess deposits on or before April 1,
1975, is a continuing offence. In CWT v. Suresh Seth [1981] 129 ITR 328 (SC),
the question that came up before the Supreme Court was whether the failure to
file a wealth-tax return by the assessee after the last date was over, was a
continuing offence. It was held by the Supreme Court that such a failure gave
rise to a single default and to a single penalty the measure of which, however,
is geared up to the time lag between the last date on which the return has to
be filed and the date on which it is actually filed. The default, if any,
committed, is committed on the last date allowed to file the return ; the
default cannot be one committed every month thereafter. The words in section
18(1)(a) of the Act 'for every month during which the default continued'
indicate only the multiplier to be adopted in determining the quantum of
penalty and do not have the effect of making the default in question a continuing
one. The principle enunciated therein applies on all fours to the case on hand.
The failure to repay the excess deposits on or before April 1, 1975, is a
single default, which gets completed on the expiry of the aforesaid period and
cannot be said to be a continuing one."
Following the
dictum of the Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328, and
relying upon the judgment in Asst. Registrar of Companies, Madras v. R.
Narayanaswamy [1985] 57 Comp Cas 787 (Mad), I, in my judgment in S.P. Punj
[1991] 71 Comp Cas 509 (Delhi), held that the principles of law, enumerated
above, apply on all fours to the default under rule 11 of the Rules. The words
in rule 11 that the fine may extend to Rs. 50 for every day after the first
indicate only the multiplier to be adopted in determining the quantity of
penalty, and did not have the effect of making the default in question a
continuing one.
The
principles of law enumerated above apply on all fours to the defaults/offences,
allegedly committed by the petitioner in the present case. The provisions
thereby extending the fine for every day after the first indicate only the
multiplier to be adopted in deter-mining the quantity of penalty, and do not
have the effect of making the defaults in question continuing ones.
In the
present case, the period of limitation for filing the complaints for the
offences/defaults under sections 159, 210 and 220 of the Act is six months
because, under section 467 of the Criminal Procedure Code, these offences are
punishable with fine only.
Sections 467,
468, 469 and 473 of the Criminal Procedure Code read as under :
"467. For the purposes of this
Chapter, unless the context otherwise requires, 'period of limitation' means
the period specified in section 468 for taking cognizance of an offence.
468. (1) Except as otherwise provided
elsewhere in this Code, no court shall take cognizance of an offence of the
category specified in sub-section (2), after the expiry of the period of
limitation.
(2) The period of limitation shall be—
(a) six
months, if the offence is punishable with fine only ;
(b) one year, if the offence is punishable with
imprisonment for a term not exceeding one year ;
(c) three years, if the offence is punishable
with imprisonment for a term exceeding one year but not exceeding three years.
(3) For the purposes of this section, the period of
limitation, in relation to offences which may be tried together, shall be deter
mined with reference to the offence which is punishable with the more severe
punishment or, as the case may be, the most severe punishment.
469. (1) The period of limitation, in relation to an
offender, shall commence—
(a) on
the date of the offence ; or
(b) where the commission of the offence was not
known to the person aggrieved by the offence or to any police officer, the
first day on which such offence comes to the knowledge of such person or to any
police officer, whichever is earlier ; or
(c) where it is not known by whom the offence
was committed, the first day on which the identity of the offender is known to
the person aggrieved by the offence or to the police officer making
investigation into the offence, whichever is earlier.
(2) In computing the said
period, the day from which such period is to be computed shall be excluded.
473.
Notwithstanding anything contained in the foregoing provisions of this Chapter,
any court may take cognizance of an offence after the expiry of the period of
limitation, if it is satisfied on the facts and in the circumstances of the
case that the delay has been properly explained or that it is necessary so to
do in the interests of justice."
In Hindustan
Wire and Metal Products [1983] 54 Comp Cas 104 (Cal), the facts were that a
petition under section 633 of the Act for relieving the petitioner as a consequence
of default and violation of section 295 of the Act in granting a loan to
another company was filed on June 28, 1980. The Registrar of Companies filed a
complaint before the Chief Metropolitan Magistrate, Calcutta, on June 12, 1980.
An interim stay was granted by the court, on July 2, 1980, whereby the
Registrar of Companies was personally restrained from commencing any
prosecution against the petitioners for the default and the delay was condoned
by the Chief Metropolitan Magistrate, on November 4, 1980, ex parte. The fact
remains that the complaint was filed on June 12, 1980, i.e., 16 days prior to
the filing of the petition under section 633 of the Act. The following points
arose (1) whether the application under section 633 of the Act was maintainable
after the complaint had been filed and cognizance of the same having been taken
by the Magistrate, and (2) whether filing the complaint and making an
application for condoning the delay could be said to be the initiation of a
criminal proceeding or initiation of proceedings, before the delay was condoned
and the offence was taken cognizance of by the criminal court where the
proceedings had been filed. The Calcutta High Court held (at pages 112, 113) :
"I am of the view that there is no
substance or merit in the contention raised on behalf of the respondent as the
said criminal proceeding is clearly in violation of the order of injunction
passed by this court and it is strange enough that before the criminal court
the respondent has not brought to the notice of the court the order of this
court dated 2nd July, 1980, by which the respondent was restrained from
proceeding or taking any step against the petitioners pursuant to the letter
dated 12th May, 1980, by way of initiating any criminal proceeding. It must be
held, according to the provisions of the Criminal Procedure Code, which I have
set out before, that there was no pending criminal proceeding or initiation of
any criminal proceeding against the petitioners before the present application
was made. It is only after the present application was made and an ad interim
order was issued, as hereinbefore stated, that the said order condoning the
delay was passed ex parte without any notice to the accused and cognizance of
the offence was taken at the instance of the respondent, who was restrained by
an injunction of this court from taking any steps in the matter."
I am in respectful agreement
with the view expressed by the Calcutta High Court in the said judgment.
Relying upon the
said judgment, I, in S.P. Punj [1991] 71 Comp Cas 509 (Delhi), held that as the
complaints were filed after the period of limitation and no application for
condonation of delay was filed, it could not be said that the cognizance of the
offence had been taken merely on the filing of the complaint.
In the
present case, the complaints against the petitioner have been filed after the
period of six months and it appears that no steps have been taken for
condonation of delay in filing the complaints.
Section 468
of the Criminal Procedure Code lays down that, except as otherwise provided
elsewhere in the Code, no court shall take cognizance of an offence of the
category specified in sub-section (2) after the expiry of the period of
limitation.
It means
that, in the facts and circumstances of the present case, unless the bar of
limitation was lifted by condonation of delay by an order of the Magistrate
made under section 473 of the Criminal Procedure Code, it cannot be said that
cognizance of an offence has been taken on the mere filing of the complaint
against the accused.
Coming to the
merits of the present case, it is not disputed that the petitioner was
appointed chairman by this court, under a scheme of arrangement.
Vide order
dated July 29, 1968, in C.A. No. 128 of 1968, it was directed that the
shareholders of the company would not exercise any voting and any other right
until and unless unsecured creditors had been paid 65% of their dues in
accordance with the terms of the aforesaid scheme of arrangement, and then
until the shares have been allotted to the creditors under the scheme. It is
also not disputed that before 60 per cent. could be paid to the creditors as
per the scheme of arrangement, the company went into liquidation.
The company
was wound up on the basis of the report submitted by the chairman. Thus, by the
order of the court, the rights of the shareholders of the company with regard
to the voting were suspended. Thus, there is force in the arguments of the
petitioner that the question of holding an annual general meeting of the
company did not arise, as the shareholders had been divested of their rights.
Similarly, for this reason, the balance-sheets and profit and loss accounts
could not be laid before the annual general meeting.
Taking into
consideration the totality of the circumstances, I am of the view that the
petitioner has been able to establish that he is entitled to be relieved of the
alleged liabilities and defaults for which the prosecutions have been launched
against him under sections 159, 210 and 220 of the Act.
Under the
facts and circumstances of the case, the petitioner is hereby relieved from the
aforesaid liabilities/defaults for which the complaints have been filed under
the aforesaid provisions and also from the consequences of the said defaults.
C.A. No. 827
of 1987 stands disposed of. No order as to costs.
ALLAHABAD HIGH COURT
HIGH
COURT OF ALLAHABAD
v.
State of U.P.
B.K.
Rathi, J.
Criminal Revision Nos. 943, 966 to 969, 971 to
976 of 1999
Section 162, read with section 159, of the
Companies Act, 1956 and section 468 of the Criminal Procedure Code, 1973 -
Annual return - Penalty for failure to file annual return - Whether failure to
file return under section 159 is a continuing offence - Held, no - Whether
cognizance of such offence can be taken within six months only from date of
offence, as prescribed under section 468 Cr. P.C. - Held, yes
Facts
The revisionist-petitioners were directors of
a limited company incorporated under the Companies Act. The Registrar of
Companies, opposite party No. 2, filed complaints that as the company had not
filed the returns as required by section 159, from 1986 to 1991, the
revisionists had committed an offence punishable under section 162. The
complaints were filed in 1991. The objection filed by the revisionists were
rejected and requests for dismissal of complaints and discharge of the accused
were rejected by the Chief Judicial Magistrate. Aggrieved, the instant
revisions were preferred.
According to the revisionists, the alleged
offences were committed in 1991 and for the offence under section 162, the
limitation for taking cognizance under section 468 Cr. P.C. was six months
only. It was contended that cognizance in all the complaints was barred by
time. The opposite party, however, contended that the offence in question was a
continuing offence and, hence, complaints were not barred by limitation.
Held
The Supreme Court in the case of CWT v. Suresh
Seth AIR 1981 SC 1106 in the matter of Wealth-tax Act, which was a similar
provision, has held that omission to file a return is not a continuing
offence. In the instant case, it was found that all the offences were committed
prior to 1991 and were not continuing offences. The cognizance could have been
taken within six months from date of the commission of the offence. The
cognizance in all the case was, therefore, barred under section 469 Cr. P.C.
The revisionists had also contended, that no
AGM of the company as had been mentioned in section 166, had been held and,
therefore, the question of filing the return within sixty days under section
159 did not arise and, therefore, the
revisionists had not committed any offence under section 162. It was contended
that the annual general meeting under section 166 can be held only after a
statutory meeting is held and since no statutory meeting was held, there was no
question of annual general meeting and submission of return under section 159.
In the circumstances, therefore, it was clear that no offence had been
committed by the revisionists under section 162.
Accordingly, it was to be held that the
complaints were not maintainable because they were barred by time and secondly
prima facie, no offence under section 162 had been committed. The Special Chief
Judicial Magistrate, therefore, had erred in rejecting the application of the
revisionists. All the revisions were, accordingly, allowed and the complaint
against all the revisionists were quashed.
Cases referred to
Bhagirath Kanoria v. State of M.P. AIR 1984 SC
1688, National Cotton Mills v. Asstt. Registrar of Companies [1984] 56 Comp.
Cas. 222 (Cal.), K.K. Mehra v. Registrar of Companies [1991] 71 Comp. Cas. 669
(Delhi), Shivalik Ice Factory & Cold Storage (P.) Ltd. v. Registrar of
Companies [1988] 64 Comp. Cas. 113 (Punj. & Har.), Chandra Spg. & Wvg.
Mills (P.) Ltd. v. Registrar of Companies [1990] 69 Comp. Cas. 117 (Kar.),
Rakesh Kumar v. Registrar of Companies [1995] 82 Comp. Cas. 681 (Punj. &
Har.), Nripendra Kumar Ghosh v. Registrar of Companies [1985] 58 Comp. Cas. 672
(Cal.) and CWT v. Suresh Seth AIR 1981
SC 1106.
R.P. Agarwal and Kamal Krishna for the petitioner. S.N. Srivastava Aga
for the Respondent.
Judgment
Rathi, J. - All the above eleven revisions involve the same questions for
decision and, therefore, they are being disposed of by this common judgment.
2. Modern Adhesive
Application Systems Limited was a private limited company incorporated under
the Companies Act, 1956 on 28-8-1986. The Registrar of Companies, opposite
party No. 2, filed eleven complaints against the revisionists alleging that
they are directors of the said company. That the returns as required by section
159 of the Act has not been filed from the years 1986 to 1991 and, therefore,
the revisionists have committed an offence punishable under section 162 of the
Act. All the eleven complaints were filed in the year 1991.
3. The
learned Special Chief Judicial Magistrate, Allahabad, summoned all the
revisionists in all the complaints. The revisionists filed objections and
requested for the dismissal of the complaints and discharge of accused under
section 245(2) of the Code of Criminal Procedure. The applications have been
rejected in all the cases by order dated 29-4-1999. Aggrieved by same, the
present revisions have been preferred.
4. I have heard Sri R.P. Agarwal and Sri Kamal Krishna, the learned
counsel for the revisionists and Sri S.N. Srivastva, learned A.G.A., and have
considered the argument.
5. The
first argument of the learned counsel for the revisionists is that the complaints
were filed in the year 1991. That according to the complaints, the return for
the period from 1986 to 1991 were not submitted. Therefore, all the offences
were committed prior to year 1991. That the offence under section 162 is punishable
with fine only for which the limitation for taking cognizance under section
468 of the Code is for six months only. That cognizance in all the complaints
are, therefore, barred by time.
6. As against this, the learned counsel for the opposite party No. 2 has argued
that section 162 provides for punishment of fine which may extend to Rs. 50 for
every day during which the default continues regarding the filing of the
return. It is, therefore, contended that the offence is continuing offence and
the cognizance is not barred by limitation prescribed under section 468. The
learned counsel in support of the argument has referred to the case of
Bhagirath Kanoria v. State of M.P. AIR 1984 SC 1688. This was a case of
non-payment of contribution by the employer towards the provident fund. It was
held that the offence is continuing one and section 468 of the code does not
apply and the provision of section 472 of the Code applies. However, this is
regarding a different dispute and is not regarding an offence under section 162.
Therefore, this decision has no application.
7. As against this, the learned counsel for the revisionists has referred
to the following cases, in which many High Courts of this country have taken a
consistent view that offence under section 159/162 is not a continuing offence,
and limitations prescribed under section 468 applies. It was held in all the
cases that failure to file the return did not constitute a continuing offence
and, therefore, cognizance could not be taken by the Magistrate after the
expiry of period of limitation prescribed under section 468. This view has
been taken in the following cases :
(1) National Cotton Mills v. Asstt. Registrar of Companies
[1984] 56 Comp. Cas. 222 (Cal.) decided by a Division Bench of Calcutta High
Court.
(2) K.K. Mehra v. Registrar of Companies [1991] 71 Comp. Cas.
669 (Delhi) decided by Delhi High Court.
(3) Shivalik Ice Factory & Cold Storage (P.) Ltd. v.
Registrar of Companies [1988] 64 Comp. Cas. 113 (Punj. & Har.) decided by a
Division Bench of Punjab & Haryana High Court.
(4) Chandra Spg. & Wvg. Mills (P.) Ltd. v. Registrar of
Companies [1990] 69 Comp. Cas. 117 (Kar.) decided by Karnataka High Court.
(5) Rakesh Kumar v. Registrar of Companies [1995] 82 Comp.
Cas. 681 (Punj. & Har.) decided by Punjab & Haryana High Court.
(6) Nripendra Kumar Ghosh v. Registrar of Companies [1985] 58
Comp. Cas. 672 (Cal.) decided by Calcutta High Court.
8. The Hon’ble
Supreme Court in the case of CWT v.
Suresh Seth AIR 1981 SC 1106 in the matter of Wealth-tax Act which has similar
provision has held that omission to file a return is not a continuing offence.
I, accordingly, find that all the offences are committed prior to 1991 and are
not continuing offence. The cognizance could have been taken within six months
from date of the omission of the offence. The cognizance in all the case is,
therefore, barred under section 469.
9. The next
contention of the learned counsel for the revisionists is that no offence is
made out against the revisionists. It is contended that section 159 provides
that the company should file return within sixty days of the annual general
meeting. Section 162 provides penalty for non-compliance and it provides that
every officer of the company, who is in default, shall be punishable. It is
contended that ‘officer, who is in default’, has been defined in section 5 of
the Act in clauses (a) to (g). Clause (a) provides regarding the managing
director and clause (b) regarding the whole-time director. In para 2 of the
complaint it has been mentioned that the revisionists are the directors of the
company and are responsible for the compliance of the provisions laid down
under section 159 of the Act. According to clause (b) of section 5, the
director of the companies [company] can also be considered to be ‘officer, who
is in default’. Therefore, the question as to whether the revisionists are
‘officers, who are in default’ can be decided after the evidence. The
contention of the learned counsel is that ordinary director like revisionists
are not included in the definition of the ‘officer, who is in default’, cannot
be accepted. This is a question of fact and can be decided after the evidence
only. It may also be mentioned in this connection that in para 6 of the
complaint it has been mentioned that the company has not filed the return in
spite of the notice and the revisionists as directors/officers are guilty as
such officers are in default. Therefore, at this stage, it cannot be
adjudicated that the revisionists are not covered within the definition of
‘officer, who is in default’.
10. The last
contention of the learned counsel for the revisionists is that it is admitted
in the complaint itself that the company was incorporated on 28-8-1986, as
public limited company. It is alleged that the company remained on the paper
only and did nothing after incorporation. That after incorporation the public
limited company became entitled to carry on business only after obtaining a
certificate of the commencement of the business from the Registrar of the
Companies under section 149 of the Act. It is contended that the company did
not apply for obtaining any such certificate. That the company also did nothing
after incorporation. Section 165 further provides that every newly incorporated
company shall hold a statutory meeting within six months from the date at which
the company is entitled to commence the business and shall file a statutory
report with the Registrar of Companies. It is contended that provisions of
sections 149 and 165 have not been complied with. Therefore, all directors and
officers in default became liable to punishment under sub-section (9) of
section 165 of the Act and they could be prosecuted under the said provisions.
The company shall also be liable to be bounded [wound up ?] under clause (c) of
section 433 of the Act. The winding up [petition] in such eventuality should be
filed by the Registrar of Companies under section 439 of the Act. Therefore,
the Registrar could have prosecuted the revisionists and other directors under
clause (9) of section 165 and could have applied for winding up of the company.
That no annual general meeting of the company as has been mentioned in section
166 of the Act had been held and, therefore, the question of filing the return
within sixty days under section 159 of the Act does not arise. Therefore, the
revisionists have not committed any offence under section 162 of the Act. It is
contended that the annual general meeting under section 166 can be held only
after a statutory meeting is held. That no statutory meeting was held and,
therefore, there was no question of annual general meeting and submission of
return under section 159 of the Companies Act.
11. In the circumstances,
therefore, it is clear that no offence has been committed by the revisionists
under section 162 of the Act.
12. Accordingly, I
find that the complaints are not maintainable because they are barred by time
and secondly prima facie, no offence under section 162 has been committed. The
learned Special Chief Judicial Magistrate, Allahabad, therefore, has erred in
rejecting the application of the revisionists. All the revisions are,
accordingly, allowed and the complaint against all the revisionists are
quashed.
[1979] 49 COMP. CAS. 909 (CAL.)
HIGH COURT OF CALCUTTA
v.
Assistant Registrar of Companies
JYOTIRMOYEE NAG, J
Criminal Revision Cases Nos. 732 to 734 of
1977
JUNE 21, 1978
Balai Chandra
Roy and L.N. Datta for the Petitioner.
Alok K.
Biswas and M.P. Mukherjee for the State.
J.N. Ghosh
and Anjan K. Mukherjee for the Asst. Registrar of Companies.
JUDGMENT
Jyotirmoyee
Nag, J.—Criminal Revision
Nos. 732-34 of 1977 are taken up together as they involve the same points of law
and will accordingly be governed by this judgment. The rules in these cases are
directed against criminal proceedings pending before the learned Metropolitan
Magistrate for prosecution of the petitioner and others for offences under the
Companies Act, viz., under ss. 159 and 162(1) of the said Act. The petitioner
along with the other members of the family is a shareholder of the company
carrying on a business in coal trade named A. Sircar Sons (Private) Ltd. of
60/20, Gouri Bari Lane, Calcutta. The petitioner is the managing director of
the said company. It is the case of the petitioner that day-to-day management
along with the management of the business was entrusted to his elder brother,
Rajendra Nath Sarkar, one of the directors of the said company, as the
petitioner had to manage another business as managing agent/contractor of a
small colliery at Asansol and he was so engaged during the period 1954 to 1960.
The petitioner would come to Calcutta on casual visits and then he enquired
from his brothers about the functioning of the business at Calcutta and being
assured by his brothers that the company was functioning smoothly and the
statutory compliances were being regularly and timely made and relying upon
such statements and assurances the petitioner did not make any further enquiry.
After 1960, due to inundation by flood of the colliery, the business at Asansol
had to be closed and the petitioner came to reside permanently in Calcutta. It
is then that he began taking interest in the business of the company but his
brothers refused to give him any access to the books of accounts, documents,
papers and to the management of the company and declined to disclose any
account and/or particulars about the affairs of the company during the period
1954 to 1960. In the meantime, serious disputes also arose amongst the members
of the family and the company ceased to function from 1960 and its State
Government license for coal trade was cancelled, of which the Registrar of
Companies was well aware, for notices were issued under ss. 560(1) and 560(2)
of the Companies Act, dated March 21, 1960 and April 27, 1960, asking the
company to show cause why the name of the company should not be struck off from
the register in order to bring about its dissolution. Owing to misunderstanding
and/or disputes amongst the members, i.e., shareholders, the petitioner was
kept in complete darkness about the affairs of the company by the said brothers
and the petitioner in spite of his best efforts could not know as to whether
annual returns by the company had been filed under s. 159 of the Companies Act.
In such a predicament, the opposite party, Assistant Registrar of Companies,
filed complaints against the petitioner and others, being Cases Nos. 3798 to
3813 of 1969, 8 cases for alleged non-filing of annual returns under ss. 159
and 162(1) and 8 cases for alleged non-filing of balance-sheets under s. 220(3)
of the Companies Act for the financial years 1960 to 1967. In these 16 cases
summons could neither be served upon the company nor upon the additional
director, Nishit Bhattacharjee, in the result the cases against them were
marked as "filed" and the cases proceeded only against the present
petitioner. The petitioner appeared in these cases and challenged the
maintainability of the proceedings by appropriate applications. On June 9,
1975, the proceedings in all the cases were stopped and order of release was
made in respect of the petitioner by the learned 11th Presidency Magistrate,
Calcutta. This was done in pursuance of the judgment of the Division Bench of
this Hon'ble court presided over by N. C. Talukdar and A. N. Banerji JJ.
reported in 79 CWN 601, Brahmanand Goyal v. N. C. Chakraborty, wherein their
Lordships held that the violation of the mandatory provision of s. 200 of the Code
of Criminal Procedure was fatal to the prosecution. This judgment of their
Lordships was overruled by a Special Bench decision of this court, on December
16, 1975, reported in AIR 1975 Cal 450, Tar a Dutta v. State. Eight complaint
cases were again started by the opposite party before the Chief Metropolitan
Magistrate on the self same allegations as made in the previous cases (3798 to
3813 of 1969). In each of the said complaints, there was a statement that the
offences for violation of ss. 159 and 162 of the Companies Act are continuing
offences and hence the complaints are not barred by limitation as provided
under ss. 468 and 469(1)(b) of the Code of Criminal Procedure as the
offences complained of were for non-filing of annual returns within 60 days from
holding of the annual general meeting and the default having continued till
this date the complaints are within time. In these complaints, there is no
averment as to when the annual general meeting should have been held and on
what date the returns ought to have been filed. The only allegation is that the
annual general meeting ought to have been held by "due date" and the
annual returns ought to have been filed "in time".
Several points of law have been raised in these cases
for quashing the proceedings that are pending before the learned Metropolitan
Magistrate, Calcutta. The first and foremost point raised is that the offences
are not continuing ones as stated in the petitions of complaint. Secondly, in
the absence of specific averments regarding the dates of the annual general
meetings and the "due time" within which the annual returns should
have been filed, cognizance for violation of the provisions of the Companies
Act is bad. The third ground taken is that under the Companies Act the Registrar
alone is competent to launch prosecution for offences under the Companies Act
and he can file complaints but the Assistant Registrar is incompetent to do so
and, as such, the proceedings in the instant cases are bad and liable to be
quashed inasmuch as the complaints have been filed by the Assistant Registrar.
The fourth ground taken is that without the company being proceeded against the
prosecution against the other directors or the managing director is not
maintainable. The last point taken is that in view of the earlier proceedings
on the self same facts having been stopped and the petitioner released, the
subsequent proceedings on the same facts cannot go on, in view of the
provisions of s. 300(5) of the Code of Criminal Procedure.
In respect of the 1st ground taken that the offences
are not continuing offences and that s. 472 of Criminal Procedure Code protects
the present proceedings, I must hold that the contention made by the learned
advocate for the petitioner in this regard is not acceptable. What is a
continuing offence has been clarified in the case reported in AIR 1973 SC 908,
State of Bihar v. Deokaran Nenshi. Before I go into the principles laid down in
that case I may advert to the relevant sections of the Companies Act. Section
162 of the Companies Act provides that if a company fails to comply with any of
the provisions contained in ss. 159, 160 and 161 the company and every officer
of the company who is in default shall be punished with fine which may extend
to Rs. 50 for every day during which the default continues. It is argued by the
learned advocate for the petitioner that as soon as the annual general meeting
is not held by the due date, the default occurs and it becomes a completed
offence on the expiry of the "due date" and no return is filed within
the time provided under s. 159 of the Companies Act. Therefore, it cannot be
said to be a continuing offence just because
the section provides that for each day's default a penalty which may extend to
Rs. 50 is provided. In this connection, the learned advocate for the petitioner
has referred me to a judgment reported in 32 CWN 591, Muralidhar Ram Narayan v.
Corporation of Calcutta. That was a case under s. 385(1) read with s. 488(2) of
the Calcutta Municipal Act, 1923 (III B.C. of 1923). In that case, the
petitioner set up a flour mill in a room at premises No. 139/1, Russa Road,
intending to work it by electricity without the previous written permission of
the Corporation and was convicted under s. 385(1) read with s. 488(1) of the
Calcutta Municipal Act and was sentenced to pay a fine of Rs. 10. Since the
said conviction the accused, to quote the words of the Sanitary Officer,
"worked the mill from the 1st April onwards". That officer further
deposed thus:
"I
inspected the mill in May and I found it working. After the last conviction the
accused did not apply for permission under section 385 nor has he got any. If
the accused had applied, the permission would have been refused as the site and
locality are unsuitable for the working of an electrical mill. The accused was
prosecuted for violation of section 385(1) read with section 488(2) of the Act
for a period of 30 days commencing from the 1st April, 1927, and was sentenced
to pay a daily fine of Rs. 10, i.e., an aggregate fine Rs. 300. He preferred a
revisional application against his conviction."
The question
that arose for consideration in that case was whether what was done by the
petitioner amounted to a continuance of the offence mentioned in s. 385(1) of
the Act. It was held in that case that the offence under s. 385(1) is not the
same offence prescribed under s. 488(2) of the Calcutta Municipal Act. The
offence under s. 488(2) is not a continuation of the offence under s. 385(1).
It is provided under s. 488(2) that after having committed an offence referred
to in cls. (a), (b) or (c) of sub-s. (1) if he continues to commit such an
offence he shall be punished, for each day after the first during which he
continues so to offend, with fine, which may extend to the amount mentioned in
this behalf in the fourth column of the said table. On an analogy of that case
it has been argued that the offence under s. 162 of the Companies Act is not a
continuing offence. It must be observed that the language of s. 162 of the
Companies Act is quite different from that of s. 488(2) of the Calcutta
Municipal Act, 1923. In the latter Act, sub-s. (2) of s. 488 reads as follows :
"Whoever,
after having been convicted of any offence referred to in clause (a), (b) or
(c) of sub-section (1), continues to commit such offence shall be punished, for
each day after the first, during which he continues so to do, with fine which
may extend to the amount mentioned in this behalf in the fourth column of the
said table."
The condition precedent for imposition of fine under
the latter part of sub-s. (2) of s. 488 is that there should be a conviction
first of an offence under cl. (a), (b) or (c) of sub-s. (1), therefore, it is
argued that under the Companies Act also first there must be a conviction for
non-filing of annual return and thereafter if the default continues that gives
rise to an offence for which a daily fine may be imposed. I am afraid I cannot
agree with this submission of the learned advocate as under the Companies Act
under s. 162(1), it is clearly stated that whoever is in default under s. 159
or 160 or 161 shall be punished with fine which may extend to Rs. 50 for every
day, during which he continues to be in default. Here there is no indication
that there must be conviction first as indicated in the Calcutta Municipal Act.
I, accordingly, hold that the offences under ss. 159 and 160 of the Companies
Act are continuing offences and, therefore, the bar imposed under s. 468 of the
Criminal Procedure Code does not operate in the present cases. The case
referred to by the petitioner's advocate reported in [1978] Calcutta High Court
Notes page 293(2) (Wrie Machinery Manufacturing Corpn. Ltd. v. State) related
to the offences under the Provident Funds Act, where there is a provision for
daily fine if the default continues after conviction, and an order is made by
the Magistrate to deposit the amount of contribution after conviction. That
case has no bearing to the facts of the present case. In this connection as to
what is a continuing offence has been explained in the decision reported in AIR
1957 Cal 483 (G. D. Bhattar v. State). A continuing wrong or a continuing
offence is after all, a continuing breach of a duty which itself is continuing.
If a duty continues from day-to-day, the non-performance of that duty from day-to-day
is a continuing wrong. The contention that the continuance of the offence
contemplated under s. 73 of the Mines Act comes into existence after there has
been a conviction and not till then cannot be accepted as the conviction has
got nothing to do with the question of limitation. When dealing with the
provisions of s. 488(2) of the Calcutta Municipal Act, in this connection,
their Lordships observed (at p. 488, para 14):
"The question which arises under section 488(2)
of the Calcutta Municipal Act, 1923, is... whether a particular person
continues to commit the offence after having been convicted and if so whether
he is liable to a daily fine such as is mentioned in the section,......it is
not enough that the offence is continuing but it will have to be proved that it
continued after a conviction."
Now I may refer to the principles laid down in this
connection in the case reported in AIR 1973 SC 908. State of Bihar v. Deokaran
Nenshi (at p. 909, para 5). "(A) continuing offence is one which is
susceptible of continuance and is distinguishable from the one which is
committed once and for all. It is one of those offences which arises out of a
failure to obey or comply with a rule
or its requirement and which involves a penalty the liability for which continues
until the rule or its requirement is obeyed or complied with."
The case
before their Lordships of the Supreme Court was for violation of regln. 3 read
with s. 66 of the Mines Act which makes failure to furnish annual returns for
the preceding year by 21st January of the succeeding year, an offence. The
infringement, therefore, occurs on the 21st of the relevant year and is
complete and the owner failing to furnish the annual return by that day. It was
sought to be argued before me on the analogy of the Mines Act that the dead
line for submitting return under the Companies Act is given under s. 159 of the
Companies Act and if the return is not furnished by the date fixed therein the
offence is completed and, therefore, it is not a continuing offence. It will,
however, be seen that unlike the Mines Act, s. 162 of the Companies Act
provides that "if a company fails to comply with any of the provisions
contained in section 159, 160 or 161 the company...shall be punishable with
fine which may extend to fifty rupees for every day daring which the default
continues." Therefore, the liability to furnish return continues until it
is complied with and each day's failure is visited with penalty. Section 162 of
the Companies Act is conspicuous by the absence of such expression as
"every day that the breach continues after conviction" as provided
under s. 29 of the Industrial Disputes Act, 1947, and in s. 14A of the
Provident Fund and Family Pension Fund Act, 1952, such words as " where
the order has not been complied with." There is no express provision in
regln. 3 or in any other provision in the Mines Act or the Regulations, which
renders the continued non-compliance an offence until its requirement is
carried out as in the Companies Act. Moreover continued contravention after
conviction has no connection with the question of limitation. In this
connection, the case of Public Prosecutor v. B. V. A. Lury Co., AIR 1942 Mad
75, 76, may be referred to.
The present
cases were filed for defaults made for the financial years ending 1962 to 1967
on 27th December, 1969. The learned Magistrate on May 9, 1975, released the
accused persons and stopped the proceedings in view of the Division Bench
judgment of this Hon'ble court in Brahmanand Goyal v. N. C. Chakrdborty [1975]
79 CWN 601 followed in Jitendra Nath Mitra v. State of West Bengal, the latter
case reported in 79 CWN 325. In this case it was held that the proceeding is
void for non-compliance with the provisions of s. 200, Cr. P.C. This decision
was set aside by a decision of a Special Division Bench reported in AIR 1975
Cal 450 (Tara Dutta v. State). Thereafter, on 16th December, 1975, the
Assistant Registrar of Companies again filed fresh petitions of complaint on
the self-same facts before the learned Metropolitan Magistrate who took cognizance
of the same. These cases are under challenge before me. It has been argued
before me that the learned Magistrate could not have entertained fresh
complaints on the self-same facts inasmuch as the provisions of s. 300(5) of
the Criminal Procedure Code are offended thereby, as, when the learned
Magistrate released the accused persons previously, that would operate as res
judicata as such release will amount to discharge within the meaning of s.
300(5) of the Code. It must be remembered that the learned Magistrate did not
discharge the accused persons nor did he acquit them. As cognizance was bad for
non-compliance with the mandatory provision of s. 200 of the Code of Criminal
Procedure, the learned Magistrate had no jurisdiction to go on with the said
proceeding and, therefore, he had no jurisdiction to acquit or discharge the
accused. All that he could do is to release the accused and stay the
proceedings. Hence, the provision of s. 300(5), Criminal Procedure Code, are
not attracted as the learned Magistrate did not make the order under s. 259,
Cr. P.C., as provided thereunder nor did he acquit the accused. The power to
discharge presupposes that the learned Magistrate had jurisdiction to take
cognizance of the matter. Therefore, this branch of the argument of the learned
advocate for the petitioner that the proceedings are bad for violation of the
section, must fail.
The next point which has been urged by the learned
advocate for the petitioner and also by the petitioner himself personally later
on, is that the complaint filed by the Registrar is incompetent inasmuch as the
Assistant Registrar is not a person entrusted with the task of registering a
company under the Companies Act or by the regulations framed under the
Companies Act.
In the previous Act of 1913, a Registrar means
"Registrar, Additional, Joint, Deputy or an Assistant Registrar having the
duty of registering companies under this Act". Stress is laid on the
conjunction "or". If the Registrar includes an Assistant Registrar, the
conjunction "or" would not be before the words "Assistant
Registrar" only, the conjunction would be "and". Under the
regulations the duty of registering companies is left only to the Registrar and
as the Registrar includes an Additional, Joint and Deputy Registrar they may
file petitions of complaint under the Act but not so the Assistant Registrar
who has not been authorised with the duties of registering companies under the
Act or the Regulations. Therefore, the petitioner argues that the complaint having
been filed by the Assistant Registrar who is incompetent to do so, the
prosecution should fail on that ground alone. The petitioner has cited a case
reported in [1910] 8 Indian Cases 190 (Emperor v. Sela Shib Das), wherein it
has been held that under the regulations framed by the Local Government under
s. 220(b) of the Act VI of 1882, the Registrar is the only officer authorised
for instituting and conducting all prosecutions under the Act, specially where
the prosecutions are in connection with breach of the rules relating to
submission of balance-sheets and other periodical returns. So a complaint under
s. 74 of the Indian Companies Act VI of 1882 for willful default in filing a
balance-sheet, not brought by the Registrar but by a clerk of his office and
countersigned by the Public Prosecutor, is bad in law and not entertain able by
a Criminal Court. Where by any law or Regulation a certain person is duly
authorised to complain about a particular offence, the proceedings of a
Magistrate based on a complaint relating to that offence, made by any
unauthorised person is ultra vires and liable to be set aside in revision by
the High Court at any time during the pendency of the case. In that case, the
complaint was filed by a clerk of the office of the Registrar, and therefore,
cognizance on that complaint was struck down as bad. For prosecution under s.
162 of the Companies Act, the Assistant Registrar is competent to file a
complaint by the amended Act as in the defining s. 2(40) "Registrar"
means Registrar or Additional, Joint, Deputy Registrar or Assistant Registrar.
That so far as Additional, Joint and Deputy Registrars are concerned, they can
function as Registrar in the matter of filing of complaint is not denied but it
is contended that the expression "having duty of registering companies
under this Act.", applies only to the Assistant Registrar and as under the
Regulations no such power is given to the Registrar, he is incompetent to file
complaints. That power must be presumed to be given to the Assistant Registrar
also as the expression. "having the duty of registering companies under
the Act" applies to all the Additional, Joint, Deputy Registrar and
includes the Assistant Registrar, It is not contended that the Additional,
Deputy and Joint Registrars do not have the power of registering companies
under the Act. If that be so, I have no hesitation in holding that an Assistant
Registrar is also competent to file a complaint for contravention of the
provisions of the Act under the Companies Act as he along with the others,
i.e., the Additional, Deputy, Joint Registrars is empowered to register
Companies under the Act. Thus, this limb of the argument of the petitioner
fails.
The next point taken is that the case against the
company and one of the directors has not been filed as service could not be
effected on them. Without the company being prosecuted along with the
petitioner the present proceedings cannot go on. That the company is a
necessary party goes without saying. Only if the company is convicted the
others may be convicted as the directors derive their liability from the
company. Hence, the company is a necessary party and the prosecution should be
conducted only in the presence of the company, as accused.
Further, it is contended by the petitioner that the
petition of complaint is liable to be quashed on the ground that there is no
specific averment in it as to the officers who are in default apart from the
company. In this connection, my attention has been drawn to s. 5 of the
Companies Act wherein "officer in default" has been denned and
explained. It means "an officer who is knowingly guilty of default".
In s. 162 of the Companies Act it is provided that "the company and every
officer of the company who is in default shall be punishable" which is
further clarified in s. 162(2) that the expression "officer" shall
include "any person in accordance with whose directions or instructions
the Board of Directors of the company is accustomed to act".
Here it was incumbent on the prosecution to fix the
liability with respect to the particular "officer in default" and
there should have been a specific averment to that effect in the complaint. In
the petition of complaint it is only stated that "the accused Nos. 2 to 5
are the officers and directors of the company" and in para. 3 there is an
averment that "the company and its directors are under a statutory
obligation to file with the complainant an annual return." This statutory
obligation is imposed under ss. 159 and 162 of the Companies Act. If all the
directors are liable for every default then the expression "every officer
who is in default" becomes redundant and meaningless. As already stated
above "an officer includes a director".
In this connection, the case reported in [1978] CLJ
336 (sic) lends support to this contention of the learned advocate for the
petitioner.
In view of what I have stated above on the last two points taken by the petitioner, I hold that the cognizance taken on the basis of such petitions of complaint is bad and accordingly the proceedings are quashed.
MADRAS HIGH COURT
[1999] 21 SCL 1 (MAD.)
v.
A. RAMAN, J.
CRIMINAL REVISION CASE NO. 114 TO 117 OF 1996
CRIMINAL REVISION PETITION NO. 114 TO 117 OF 1996
AND CRL. M.P. NOS. 444 TO 447 OF
1996
FEBRUARY 2, 1999
Section
162 of the Companies Act, 1956 - Annual return - Since company failed to comply
with provisions of sections 159 and 220, default notices were issued on company
and its MD and other directors including petitioner who was also wife of MD -
On non compliance even after notice complaint was filed by ROC against company
and MD - Pending proceedings MD died and petitioner was impleaded as accused -
Whether not only MD but also a director of a company is liable to be proceeded
against for default committed by company in complying with mandatory provisions
of sections 159 and 220 - Held, yes - Whether where petitioner herself was a
director and other directors could not be traced, on death of MD, petitioner
was correctly proceeded against and there would be no merit in petitioner's
contention that she was picked out alone for penal proceedings - Held, yes
FACTS
For the years 1991 and 1992 the company neither placed its balance sheet and profit and loss account before the annual general meeting nor did it file the annual returns with ROC. Default notices were issued to the company and its MD and other directors, including the petitioner, who was also wife of the MD. Since statutory requirements were not fulfilled even then, a complaint under sections 159 and 220, read with sections 161 and 162, was filed by ROC against the company and the MD. Pending proceedings MD died and her wife, the petitioner, was impleaded as an accused. The petitioner filed an application for her discharge from the case which was dismissed by the SDM. In instant revisions the petitioner argued that since she was not the MD and notice was not served upon her she could not be proceeded with. She complained that the complainant had only picked out the petitioner while there were other directors available.
HELD
In this case, the husband of the petitioner who was
the managing director died. Admittedly, the returns as required under the relevant
sections had not been furnished by the company. Section 5 defines that the
officer in default includes a director. The petitioner was a director of the
company, during the relevant point of time, about, which there was not
controversy. Therefore, for the non-compliance of the provisions of sections
159 and 221, the director is also liable to be proceeded under law and is
punishable under law. In such circumstances, the contention of the petitioner
that the petitioner was not the managing director and therefore, she could not
be proceeded against under law, was without merit. A director of the company is
liable to do proceeded against for the default committed by the company in
complying with the mandatory provisions of sections 159 and 221 of the Act. It
was not an answer for the director to say that it was not liable, more so, when
the MD was dead.
The contention that no notice had been issued to the
petitioner and it had not been served upon the petitioner, could not be
accepted The complainant had alleged that default notice was issued by the
complainant to the company and the directors. According to the allegation made
in the complaint, the notice was acknowledged by the MD and the notice issued
to the company was returned as 'Door Closed'. Moreover, whether notice had been
served or not was a question of fact, which was to be established only in the
course of trial Therefore, on the basis of an allegation made by the
petitioner, the matter could not be decided. Therefore, this ground must also fail.
Lastly, it was contended by the petitioner that when
there were other directors, the complainant had picked out the petitioner
herein to proceed against. As stated already, the complaint had been filed
against the company and the MD of the company. Pending the proceedings or
pending the service of notice, the MD of the company died. The petitioner
herein was the wife of the then MD. The petitioner was a director of the
company. Therefore, on the death of the said MD, proceeding had been initiated
against the petitioner herein to bring her into the array of the accused. At
the time, the complaint was presented, the MD was alive, and he died only after
initiation of the proceedings. On the death of the MD under law, the existing
director or person responsible had to be proceeded against. It was the duty of
the petitioner herein, as the surviving director, to comply with the provisions of the Companies Act.
Therefore, the complainant had impleaded the petitioner herein as accused on
the death of her husband, not merely because she was the wife of the deceased
managing director, but because she was a director as well of the said company
and thus liable to comply with the mandatory requirements of the Companies Act.
As to the other directors, the Department had filed a counter, stating that
they could not trace the whereabouts of the other directors and, therefore,
they had impleaded the available director viz. the petitioner. Hence, it was
not a question of picking out the petitioner herein to proceed against. Hence,
this contention would also fail
Therefore, on
an analysis, there was no merit in these revisions and hence, the same were to
be dismissed.
T.P.
Menoharan for the
Petitioner. P.R. Sundaram for the Respondent.
ORDER
Criminal
Revision Case No. 114 of 1996
A complaint
was filed by the Registrar of Companies under sections 159 and 162 of the
Companies Act, 1956 against South India Oil Complex Limited as the 1st accused
and Sri K.K. Kunichi Krishna Poduval, the managing director of the 1st accused
Company, as 2nd accused. The allegation is as follows :
The Company
and its Directors are under statutory obligations to file with the complainant
and Annual Return in the prescribed form made upto the date of annual general
meeting and in default, the Company and every Officer of the Company, shall be
punishable with fine which may extend to Rs. 50 for every day, during which the
default continues. The annual general meeting of the Company in the year 1991
should have been held latest by 30-9-1991 and the annual return made upto that
date should have been filed with the complainant on or before 28-11-1991. A
default notice was issued by the complainant to the accused, which was
acknowledged by the 2nd accused. But the notice issued to the company was
returned undelivered. The accused have not filed the annual return inspite of
service of notice. Thus, they have willfully and knowingly contravened the
provisions of section 159.
2. Pending the proceedings, the 2nd accused
Kunni Krishna Poduval, the managing director of the 1st accused Company died.
The petitioner herein Smt. Seethalakshmi was impleaded as an accused after the
death of her husband viz., Kunni Krishna Poduval. At that stage, the petitioner
herein, who was impleaded as an accused, on the death of her husband, filed an
application for her discharge from the case under section 204 of the Code of
Criminal Procedure 1873 ('the Code'). The Sub-Divisional Magistrate, Mahe, by
his order dated 14-11 -1995, dismissed the application filed by the petitioner
herein in Crl. M.P. No. 360 of 1995 in STR No. 587 of 1994. Hence, this
Revision.
CrLR.C.No. 115 of 1996:
3. A complaint was filed by the Registrar of
Companies, under sections 159 and 162 against South India Oil Complex Limited
as the 1st accused and Sri. K.K. Kunchi Krishna Poduval, the managing director
of the 1st accused Company as the 2nd accused. The allegation is as follows :
The company
and its Directors are under statutory obligations to file with the complainant
an annual return in the prescribed form made up to the date of annual general
meeting and in default, the Company and every Officer of the Company, shall be
punishable with fine which may extend to Rs. 50 for every day during which the
default continues. The annual general meeting of the Company in the year 1992
should have been held latest by 30-9-1992 and the annual return made upto the
date should have been filed with the complainant on or before 28-11-1992. A
default notice was issued by the complainant to the accused, which was
acknowledged by the 2nd accused. But the notice issued to the Company was
returned undelivered. The accused have not filed the annual return in spite of
service of notice. Thus, they have willfully and knowingly contravened the
provisions of section 159.
4. Pending the proceedings, the 2nd accused
Kunni Krishna Poduval, the managing director of the 1st accused Company died.
The petitioner herein Smt. Seethalakshmi, was impleaded as an accused after the
death of her husband viz., Sri Kunni Krishna Poduval. At that stage, the
petitioner herein, who was impleadeid as an accused, on the death of her
husband, filed an application for her discharge from the case under section 204
of the Code. The Sub Divisional Magistrate, Mahe, by his Order dated
14-11-1995, dismissed the application filed by the petitioner herein in Crl.
M.P. No. 361 of 1995 in STR No. 588 of 1994. Hence, this Revision.
Crl R.C. No. 116 of 1997:
5. The Registrar of Companies filed a complaint
against South India Oil Complex Limited as the 1st accused and Sri. K.K. Kunchi
Krishna Poduval, the managing director of the 1st accused Company, as the 2nd
accused, under section 220 read with section 162 of the Act. The gist of the
complaint is as follows :—
According to
the provisions of section 210(1) of the Act, at every annual general meeting of
a company, the company shall lay before the company balance sheet at the end of
the period specified in sub-section (3) and a profit and loss account for the
period. The company and its director are under statutory obligations to file
with the Registrar of Companies within 30 days from the date on which the
balance sheet and profit and loss account were laid before the company at the
annual general meeting, three copies of the balance sheet and profit and loss
account, in the prescribed form or where the annual general meeting of a
Company for any year has not been held, they shall be filed with the Registrar
within 30 days from the latest day on or before which the meeting should have
been held. If default is made in complying with the requirements of
section 220 of the Act, the company and every officer of the company, who is in
default shall be punishable with fine. The first balance sheet and profit and
loss account of the company were required to be placed in the annual general
meeting by a date not later than 30-9-1991, that is to say, within six months
of the close of the financial year. Three copies of the said balance sheet were
further required to be filled in the office of the Registrar of Companies not
later than 29-10-1991. But the accused have not filed the balance sheet. A
default notice was issued by the complainant to the accused. The notice
addressed to the company was returned undelivered, while the notice issued to
the 2nd accused has been duly acknowledged. As the accused have not filed the
copies of the said balance sheet and profit and loss account, they have
contravened the provisions of section 220. Hence, they are liable to be
punished.
6. Pending the proceedings, the managing director of the 1st
accused company, who was impleaded as the 2nd accused, died. On his death, the
petitioner herein was impleaded as an accused. Therefore, the petitioner herein
filed an application under section 204 of the Code, praying for her discharge.
The application which was taken on file in Crl. M.P. No. 362 of 1995 in STR No.
589 of 1995 was dismissed by the Sub Divisional Magistrate, Mahe, on
14-11-1995. Hence, this Revision.
Crl. R. C. No. 117 of 1996:
7. The Registrar of Companies filed a complaint against South
India Oil Complex Limited as the 1st accused and Sri K.K. Kunchi Krishna
Poduval, the managing director of the 1st accused Company, as the 2nd accused,
under section 220 read with section 162. The Gist of the complaint is, as
follows :
According to the provisions of section 210(1), at
every annual general meeting of a Company, the company shall lay before the
Company Balance Sheet at the end of the period specified in sub-section (3) and
a profit and loss account for the period. The company and its directors are
under statutory obligations to file with the Registrar of Companies within 30
days from the date on which the balance sheet and profit and loss account were
laid before the company at the annual general meeting, three copies of the
balance sheet and profit and loss account in the prescribed form or where the
annual general meeting of a company for any year has not been held, they shall
be filed with the Registrar within 30 days from the latest day on or before
which the meeting should have been held in accordance with the provisions of
the Act. If default is made in complying with the requirements of section 220,
the company and every Officer of the company, who is in default shall be
punishable with fine. The first balance sheet and profit and loss account of
the company for the year 1992 were required to be placed in the annual general
meeting by a date not later than 30-9-1992, that is to say within six months of
the close of the financial year and three copies of the said balance sheet were
further required to be filled in the
Office of the Registrar of Companies not later than 29-10-1992. But, the
accused have not filed the balance sheet. A default notice was issued by the
Registrar of Companies to the accused. The notice addressed to the company was
returned undelivered, while the notice issued to the 2nd accused has been duly
acknowledged. As the accused have not filed the copies of the said balance
sheet and profit and loss account, they have contravened the provisions of section
220. Hence, they are liable to be punished.
8. Pending the
proceedings, the managing director of the 1st accused company, who was
impleaded as the 2nd accused, died. On his death, the petitioner herein was
impleaded as an accused. Therefore, the petitioner herein filed an application
under section 204 of the Code praying for her discharge. The application which
was taken on filed in Crl. M.P. No. 363 of 1995 in STR No. 590 of 1994 was
dismissed by the Sub Divisional Magistrate, Mahe, on 14-11-1995. Hence, this
Revision.
9. The petitioner is the same in all the above
four cases. The 1st accused/ company is the same and the complainant is the
same in all the complaints. Common questions of fact and law arise in all the
above four Revision Cases. Hence, all these four Revision Cases have been taken
up together and were heard. Hence, these cases are disposed of by a common
order, as hereunder.
10. The learned counsel for the petitioner
submitted that during the relevant point of time, the petitioner was not the
managing director and therefore, she cannot be proceeded against under law. He
further con tended that notice has not been served upon the petitioner. It is
also his contention that the complainant has picked out the petitioner to
proceed against when there are other directors available.
11. The gist of the complaint is that under
section 159, the company and its directors are under statutory obligation to
file the annual return in the prescribed form within a particular period of time.
The complaint concerned in Crl. R.C. Nos. 114 of 1996 and 115 of 1996, relate
to the years 1991 and 1992. According to the complainant. The accused ought to
have filed the annual return made up to 30-9-1991, on or before 28-11-1991 and
they have contravened the said provision. The gist of the complaint in Crl.
R.C. No. 115 of 1996 is that the annual return should have been filed within
the complainant before 28-11-1992, and the same has not been done. As regards
the Revision Case No. 116 of 1996, the gist of the offence alleged is that the
first balance sheet and profit and loss account ought to be placed in the
annual general meeting for the year 1991 not later than 30-9-1991 and three
copies of the said balance sheet ought to be filed with the complainant not
later than 29-10-1991, and the same has not been done. As regards Crl. R.C. No.
117 of 1996, the offence alleged is that the first balance sheet and profit and
loss account of the Company for the year 1992 ought to be placed in the annual
general meeting not later than 30-9-1992, and three copies of the said balance
sheet ought to be filed with the complainant not later than 29-10-1992, and the
same has not been done. Thus, there is contravention of the provisions of
sections 159, 221 read with section 162 of the said Act.
12. Section 159 reads as follows :—
"Annual
return to be made by company having a share capital—(1)Every Company having a
share capital shall, within (sixty) days from the day on which each of the
annual general meetings referred to in section 166 is held, prepare and file
with the Registrar a return containing the particulars specified in Part I of
Schedule V, as they stood on that day, regarding—
(a) its
registered Office,
(b) the
register of its members,
(c) the
register of its debenture holders,
(d) its
share and debentures,
(e) its
indebtedness,
(f) its
members and debenture holders, past and present, and
(g) its directors, managing directors (managing
agents, Secretaries and treasurers), (managers and Secretaries), past and
present:
Provided that
if any of the (five) immediately proceeding returns has given as at the date of
the annual general meeting with reference to which it was submitted, the full
particulars required as to past and present members and the shares held and
transferred by them, the return in question may contain only such of the
particulars as relate to persons ceasing to be or becoming members since that
date and to shares transferred since that date or to changes as compared with
that date in the number of shares held by a member.
Explanation.—Any
reference in this section or in section 160 or 161 or in any other section or
in Schedule V to the day on which an annual general meeting is held or to the
date of the annual general meeting shall, where the annual general meeting for
any year has not been held, be construed as a reference to the latest day on or
before which that meeting should have been held in accordance with the
provisions of this Act.
(2) The said
return shall be in the Form set out in Part II of Schedule V or as near thereto
as circumstances admit (and where the return is filed even though the annual
general meeting has not been held on or before the latest day by which it
should have been held in accordance with the provisions of this Act, the
company shall file with the return a statement specifying the reasons for not
holding the annual general meeting):
Provided that
where the Company has converted any of its shares into stock and given notice
of the conversion to the Registrar, the list referred to in paragraph 5 of part
I of Schedule V shall state the amount of stock held by each of the members
concerned instead of the shares so converted previously held by him."
13. Section 220 reads as follows :—
"220. Three
copies of balance sheet, etc., to be filed with Registrar.—(1) After the
balance sheet and the profit and loss account have been laid before a Company
at an annual general meeting as aforesaid, there shall be filed with the
Registrar (within thirty days, from the date on which the balance sheet and the
profit and loss account were so laid, (or where the annual general meeting of a
company for any year has not been held, there shall be filed with the Registrar
within thirty days from the latest day on or before which that meeting should
have been held in accordance with the provisions of this Act),—
(a) three copies of the balance sheet and
the profit and loss account, signed by the managing director, (Managing agent,
secretaries and treasurers), manager or secretary of the company, or if there
be none of these, by a Director of the company, together with three copies of
all documents which are required by this Act to be annexed or attached to such
balance sheet or profit and loss account:
Provided that in the case of a private company,
copies of the balance sheet and copies of the profit and loss account shall be
filed with the Registrar separately)
Provided further that,—
(i) in the case of a private company
which is not a subsidiary of a public company, or
(ii) in the case of a private company of
which the entire paid-up share capital is held by one or more bodies corporate
incorporated outside India, or
(iii) in the case of a company which becomes
a public company by virtue of section 43 A if the Central Government directs
that it is not in the public interest that any person other than a member of
the Company shall be entitled to inspect, or obtain copies of, the profit and
loss account of the Company, no other person other than a member of the company
concerned shall be entitled to inspect, or obtain copies of, the profit and
loss account of that company under section 610.
(2) If the annual
general meeting of a company before which a balance sheet is laid as aforesaid
does not adopt the balance sheet, (or is adjourned without adopting the balance
sheet) (or, if the annual general meeting of a company for any year has not
been held) statement of that fact and of the reasons therefore shall be annexed
to the balance sheet and to the copies thereof required to be filed with the
Registrar.
(3) If default is made
in complying with the requirements of sub-sections (1) and (2), the Company,
and every Officer of the Company, who is in default, shall be liable to the
like punishment as is provided by section 162 for a default complying with the
provisions of sections 159, 160 or 161."
14. Section 5 of the Companies Act, is to the
following effect:— Meaning of 'officer who is in default'.—
"For
the purpose of any provision in this Act which enacts that an officer of the
company, who is in default shall be liable to any punishment or penalty,
whether by way of imprisonment, fine or otherwise, the expression 'officer who
is in default' means all the following officers of the company, namely:—
(a) the
managing director or managing directors;
(b) the
whole-time director or whole-time directors;
(c) the
manager;
(d) the
Secretary;
(e) any person in accordance with whose
directions or instructions, the board of directors of the company is accustomed
to act;
(f) any person charged by the Board with the
responsibility of complying with that provision;
provided that the persons so
charged has given his consent in this behalf to the Board;
(g) where any company does not have any of the
officers specified in clauses (a) to (c), any director or directors who may be
specified by the board in this behalf or where no director is so specified, all
the directors;
Provided that
where the Board exercises any power under clause (f) of clause (g), it shall,
within thirty days of the exercise of such powers, file with the Registrar a
return in the prescribed form."
15. Now, in the background of the above
provisions of the Act, we have to decide the submissions made by the learned
counsel for the petitioner. It is no doubt true that during the relevant point
of time, the petitioner herein was not the managing director. It was her
husband, who was the managing director. But, the petitioner has admitted that
she was a director of the company, during the relevant period. Under section
159, the Company has to file with the Registrar a return containing certain
particulars, and if it is not done, it is a contravention of the Act. Section 5
defines the Officer, who is in default. It includes whole-time director of a
company, within its definition. Section 220 reads that if default is made in
complying with the requirements of sub-sections (1) and (2), the company, and
every Officer of the company, who is in default, shall be liable to the like
punishment as is provided by section 162 for a default in complying with the
provisions of sections 159, 160 or 161. Section 162 provides that if a company
fails to comply with any of the provisions contained in sections 159,160 or
161, the company, and every Officer of the company, who is in default, shall be
punishable with fine which may extend to fifty rupees for every day during
which the default continues. Section 162 further provides that the expressions
'Officer' and 'director' shall include any person in accordance with
those directions or instructions, the board of directors of the company is
accustomed to act.
16. In this case, the husband of the petitioner, who was the
managing director died. It is the admitted case that the returns as required
under the relevant sections having not been furnished by the company. Section 5
defines that the Officer in default includes a director. The petitioner herein
was a director of the company, during the relevant point of time, of which
there is no controversy. Therefore, for the non-compliance of the provisions of
sections 159 and 221, the director is also liable to be proceeded under law and
is punishable under law. In such circumstances, the contention of the learned
counsel for the petitioner that the petitioner was not the managing director
and therefore, she cannot be proceeded against under law, is without merit. A
director of the company is liable to be proceeded against for the default
committed by the company in complying with the mandatory provisions of sections
159 and 221. It is not an answer for the director to say that he is not liable,
more so, when the managing director is dead.
17. The contention that no notice has been issued to the petitioner
and it has not been served upon the petitioner cannot be accepted. The
complainant has alleged that default notice was issued by the complainant to
the company and the directors viz., Kunhi Krishna Poduval, Managing Director,
Mrs. Seethalakshmi and Velliyar Kulangara Kurotti Narayanan, Directors.
According to the allegation made in the complaint, the notice was acknowledged
by the 2nd accused and the notice issued to the company was returned as 'Door
Closed'. Moreover, whether notice has been served or not is a question of fact,
which is to be established only in the course of trial. Therefore, on the basis
of an interested allegation made by the petitioner, the matter cannot be
decided. Therefore, this ground urged by the learned counsel for the petitioner
must also fail.
18. Lastly, it is contended by the learned counsel for the
petitioner that when there are other directors, the complainant has picked out
the petitioner herein to proceed against. As stated already, the complaint has
been filed against South India Oil Complex Limited, as the 1st accused and
Kunhi Krishna Poduval as the 2nd accused, who is the managing director of the
1st accused Company, pending the proceedings or pending the service of notice,
the 2nd accused Kunhi Krishna Poduval, the managing director of the 1st accused
company died. The petitioner herein is the wife of Kunhi Krishna Poduval, the
then managing director. The petitioner herein is admittedly a director of the
company. Therefore, on the death of Kunhi Krishna Poduval, Proceeding has been
initiated against the petitioner hereinto bringing her into the array of the
accused. At the time, the complaint was presented, the managing director was
alive, and he died only after initiation of the proceedings. On the death of
the managing director, under law, the existing director or person responsible
has to be proceeded against. It is the duty of the petitioner herein, as the
surviving director to comply with the provisions of the Companies Act.
Therefore, the complainant has impleaded the petitioner herein as accused on
the death of her husband, not merely because she is the wife of the deceased
managing director, but because she is a director as well of the said company
and thus liable to comply with the mandatory requirements of the Act. As to the
other director, the Department has filed a counter, stating that they could not
trace the whereabouts of the other director Valliyar Kulangar Kurotti Narayanan
and therefore, they have impleaded the available Director viz., the petitioner
herein. Hence, it is not a question of picking out the petitioner herein to
proceed against. Hence, this contention would also fail.
19. Therefore, on an
analysis, I am satisfied that there are no merits in these revisions. Hence,
these revisions are dismissed, confirming the order passed by the Court below.
Consequently, Crl. M.P. Nos. 444 to 447 of 1996 shall stand closed.
[1996]
86 COMP. CAS. 641 (ORI)
HIGH COURT OF ORISSA
v.
Bipini Behari Nayak
B.N. DASH J.
CRIMINAL APPEAL NO. 41 OF 1985.
C.M.K.
Murty for the Appellant.
R.K.
Nayak and G.D. Tripathy for the Respondent.
B.N.
Dash J.—The
Registrar of Companies, Orissa, Cuttack (complainant-appellant), assails the
judgment of the learned Second Additional Sessions Judge, Cuttack, whereby he
has set aside the judgment and order of conviction and sentence passed by the
learned Additional Chief Judicial Magistrate-cum-Special Court, Cuttack, by
acquitting the accused-respondent.
The
appellant-complainant filed a complaint petition in 2(C) C.C. Case No. 233 of
1977 against Kalinga Advertising and Marketing Private Limited, a company
incorporated under the Companies Act, 1956 (for short "the Act"), and
its directors including the respondent alleging that they were under statutory
obligation to file with the Registrar of Companies an annual report in the
prescribed form made up to the date of the annual general meeting. The said
meeting of the company should have been held latest by March 11, 1976, and the
annual return made up to that date should have been filed with the Registrar of
Companies on or before May 11, 1976. The company and its directors including
the respondent having not filed the return made up to March 11, 1976, before
the complainant in spite of service of notice, the complaint petition was filed
against them under section 162 of the Act for contravention of section 159 of
the Act. Since the attendance of the accused-respondent could not be secured
for a very long time, the case against him was split up and after his
attendance in court the trial against him took place and, by judgment dated
March 10, 1983, the trial court convicted him under section 162 of the Act and
sentenced him to pay a fine of 25 paise per day, in default, to undergo simple
imprisonment for 15 days. On appeal being preferred, the learned Second
Additional Sessions Judge, Cuttack, having acquitted him of the charge by
judgment dated May 10, 1984, the present appeal has been filed.
When
the appeal came up for hearing on June 18, 1993, there was no appearance from
the side of the appellant and the hearing was concluded after hearing the
learned counsel for the respondent. The only point for consideration is whether
the order of acquittal recorded by the learned Second Additional Sessions Judge
is liable to be interfered with. As already indicated above, the
respondent-accused faced trial for the offence punishable under section 162 of
the Act which, so far as material, is extracted below :
"162.
Penalty and interpretation. — (1) If a company fails to comply with any of the
provisions contained in section 159, 160 or 161, the company, and every officer
of the company who is in default, shall be punishable with fine which may
extend to fifty rupees for every day during which the default continues."
(emphasis
supplied)
There
is no controversy that in this case there had been non-compliance with the
provisions contained in section 159 of the Act. The trial court clearly
recorded a finding that the respondent-accused was an officer of the company at
the material time. Such finding was not challenged before the learned Second
Additional Sessions Judge but it was contended that there was no pleading or
evidence that for non-compliance with the provisions contained in section 159
of the Act, the respondent-accused was in default and, therefore, the
conviction against him was not sustainable. Relying on the principle laid down
by the Calcutta High Court in Ajit Kumar Sarhar v. Assistant Registrar of
Companies [1979] 49 Comp Cas 909 ; [1979] Tax LR 2001, the learned Second
Additional Sessions Judge, came to hold that under section 162 of the Act all
the officers of the company are not liable but only those who are in default
and since there was neither any specific averment in the complaint petition nor
evidence showing any default on the part of the respondent-accused, he was
acquitted. On a scrutiny of the materials on record, I also find that there is
neither any specific averment nor evidence as to how for non-compliance with
the provisions contained in section 159 of the Act, the respondent-accused
could be said to be in default. Since section 162 of the Act makes only the
officer of the company who is in default liable and as the respondent-accused
had not been shown or proved to be an officer in default, his acquittal is not
liable to be interfered with.
In
the result, I do not find any merit in the appeal which is accordingly
dismissed.
[1947] 17 Comp Cas 93 (CAL.)
v.
Emperor
Lodge, J.
Criminal Revisions Nos. 859, 860, 946 and 947 of 1946
January 9,
1946
S.C. Talukdar, A.K. Ghose, Gour
Mohan Saha Choudhury, N.C. Talukdar and Biswanath Roy for the petitioners.
S.B. Sinha and Nirmal Kumar Sen
for the Crown.
JUDGMENT
These four Rules arise out of a
prosecution under Sections 32 and 134 of the Indian Companies Act. The four
petitioners were tried jointly by the Chief Presidency Magistrate, Calcutta,
the allegation against them being that they were directors of a company known
as the City Commercial Bank Ltd., that that company held an annual general
meeting on October 29, 1944, and that that was the only general meeting of the
company held during the year 1944. The further allegation was that no list of
shareholders and summary were submitted within 21 days of that meeting as
required by Section 32 of the Indian Companies Act; and that the accused
persons, as directors, knowingly and wilfully authorised and permitted the
company to commit the default and that they thereby committed an offence
punishable under Section 32(5) of the Indian Companies Act. The other charge
was that they omitted to file with the Registrar three copies of the balance
sheet and profit and loss account made up to a date not earlier than the date of
the meeting by more than nine months as required by Section 134 of the Indian
Companies Act and that they as directors of the company knowingly and wilfully
authorised or permitted the company to make this default and that they thereby
committed an offence punishable under Section 134(4) of the Indian Companies
Act.
One witness was examined and a
large number of documents were produced.
The learned Magistrate held that
of the present petitioners B.C. Das was guilty only under Section 134 but not
guilty under Section 32(5) of the Act and sentenced this petitioner to pay a
fine of Rs. 200 and in default to undergo simple imprisonment for three months.
The remaining three petitioners were found guilty on both charges, they were
sentenced under Section 134(4) of the Indian Companies Act each to pay a fine
of Rs. 100 and in default to undergo one month's simple imprisonment. No
separate sentence was imposed under section 32(5) of the Indian Companies Act.
It has been argued before me on
behalf of all the petitioners that there was no material before the Court to
show that the present petitioners knowingly and wilfully authorised or
permitted the default in these cases. It is suggested that these petitioners
were directors with no real control of the affairs, were mere figureheads who
did not know that the law had not been complied with and who did not wilfully
authorise or permit the default. It is true that apart from the evidence to
show that Mr. B.C. Das was the Chairman of the Managing Committee, there is no evidence
to show that any particular duties were assigned to the various directors, but
the Articles of Association and the Companies Act make it perfectly clear that
all directors of a company are responsible to see that the duties imposed upon
a company by the Indian Companies Act are properly carried out. It is clearly
the duty of all directors to see that the particular returns, the list and
summary under section 32 and the copies of the balance sheet and profit and
loss account are submitted under Section 134. There is nothing on record to
show that these directors made any attempt to see that these returns, list and
statement were properly submitted, or that they were prevented in any way from
seeing that the proper list, statement and returns were submitted. The
presumption of law is that these directors knew their duties. The Articles of
Association set out in some detail the duties imposed upon the directors by the
Companies Act and it is obvious that the directors must have known what were
the duties imposed upon them by the Articles of Association and presumably, by
the Indian Companies Act. If directors, who are responsible for the management
of a company and who presumably know the duties imposed upon them by law, make
no attempt to see that those duties are carried out, there is justification for
holding, in my opinion, that they have wilfully and knowingly permitted the
company to fail to carry out those duties. The suggestion that these various
directors were mere figureheads not taking any active part in the control of
the company is, in my opinion, not worthy of serious consideration. They were
directors, they attended meetings throughout the period with which we are
concerned and they were responsible for the management of the company. There was
nothing so far as we know to prevent them seeing that the duties imposed upon
the company were properly carried out. It has been argued in the case of Mr.
B.C. Das that he submitted his resignation on November 16, 1944, that is,
before the date on which the default complained of had occurred and that,
therefore, he at all events cannot be held to have knowingly and wilfully
permitted the default. The general meeting held in 1944 was held on October 29
that year. 21 days from that date elapsed on November 19, 1944. Mr. B.C. Das
submitted a resignation of his post as director to the Board of Directors on
November 16, 1944. That letter of resignation was considered apparently at a
meeting held on November 24, 1944, and accepted on that date. From this it is clear,
therefore, that Mr. B.C. Das continued to exercise his functions as a director
until November 24, 1944, that is, until some days after the expiry of the
period within which the list of shareholders and summary required by Section 32
and the copies of balance sheet and profit and loss account required to be
submitted by Section 134 had to be submitted. It cannot, therefore, be said
that Mr. B.C. Das was not a director at the time when the default occurred.
It has been argued that even after
the default occurred, the Registrar of Joint Stock Companies carried on
correspondence with the company and extended the time within which they should
comply with the provisions of Sections 32 and 134 and that, therefore, the
Registrar of Companies condoned the default. My attention has been drawn in
particular to two communications from the Registrar of Joint Stock Companies.
The first of these letters is dated December 8, 1944, in which an Assistant
Registrar acknowledged receipt of the balance sheet as at December 31, 1942,
and the corresponding profit and loss account and directed the company to send
the summary of share capital and the annual list of members as required by law.
The letter proceeds :—
"With regard to the 2nd
paragraph of your letter under reply I have to say that in the circumstances
stated therein, the time for placing the balance sheet for the year 1943 at the
general meeting is extended till December 31, 1944."
From this it is argued that the
Registrar condoned the default. The power of the Registrar to extend the period
within which returns and statements are to be made is contained in the proviso
to Section 131(1) of the Indian Companies Act. Section 131(1) provides that the
directors of the company shall lay before the company at the general meeting a
balance sheet and profit and loss account made up to a date not earlier than
the date of the meeting by more than 9 months in the case of companies trading
in British India. The proviso reads :
"Provided that
the Registrar may for any special reason extend the period by a period not
exceeding 3 months."
The effect of this is merely to
enable the directors of a company to lay before the general meeting of a
particular year the balance sheet and profit and loss account made up to a date
not earlier than the date of the meeting by more than 12 months. It does not
authorise the Registrar to condone the failure to hold the meeting in any
particular year ; it does not authorise the Registrar to condone the failure to
lay before the general meeting a balance sheet and profit and loss account made
up to a date earlier than the date of the meeting by more than 12 months.
Therefore, the letter of the Registrar to which I have referred at best
extended the period laid down in Section 131 and permitted the company to hold
a general meeting on December 31, 1944, and to present a balance sheet and
statement of account made up to December 31, 1943, at that meeting. The other
letter to which my attention has been drawn is a Post Card, Ex. N, from the
Registrar addressed to the Managing Director of the City Commercial Bank Ltd.,
dated December 20, 1945. In this letter—it is a printed reminder—reference was
made to the letter of December 8, to which I have already referred and a
warning was given that failure to submit the documents in question mentioned
therein within 7 days would result in prosecution without further reference. It
is suggested that by this correspondence the Registrar condoned the default at
least until December 8, 1944, and that, therefore, the persons who ceased to be
directors earlier than December 8, 1944, ought not to have been prosecuted. I
am unable to find any provision in the Indian Companies Act authorising the
Registrar to condone default.
It was suggested tentatively that
the Registrar was the only person entitled to institute a prosecution for
contravention of any provision of the Indian Companies Act. But no authority in
support of this view was shown to me. Reference was made to a Punjab case and
to a Nagpur case, but both these cases turned upon the effect of Regulations
made under Section 248(2) of the Indian Companies Act. No such Regulation has
been made in Bengal and these rulings are, therefore, of no assistance. There
is nothing whatever in the Indian Companies Act, so far as I have been able to
discover, to suggest that the complaint of the Registrar of Joint Stock
Companies is necessary before a prosecution of a company, or of a director can
be entertained, nor is there anything to suggest that the Registrar of Joint
Stock Companies can condone defaults other than as provided for in the proviso
to Section 131 of the Indian Companies Act.
I am unable to hold, either that
the Registrar condoned the default, or that if he did, that would be any
defence to the present petitioners.
It is next argued that after this
prosecution was instituted, the company went into liquidation and therefore, by
virtue of the provisions of Section 171 of the Indian Companies Act, the
proceedings against the directors ought to have been dropped. Section 171 merely
provides that when a winding-up order has been made or a provisional liquidator
has been appointed, no suit or other legal proceedings shall be proceeded with
or commenced against the company except by leave of the Court and subject to
such terms as the Court may impose. It does not require the leave of the Court
for institution of proceedings against directors as such and there is no bar
whatever in Section 171 to proceed with the case against the directors and
officers of the company for defaults of the kinds with which we are concerned.
In my opinion, Section 171 is no bar whatever to the prosecution in the present
case.
Mr. Talukdar on behalf of three of
the petitioners before me pointed out that the balance sheet and profit and
loss account as at December 31, 1943, was not placed before the general meeting
on October 29, 1944, and that, therefore, copies thereof could not be filed
with the Registrar as required by Section 131(1); and he argued that as it was
impossible to comply with the provisions of Section 131(1), the directors
should not be held guilty under Section 134(4), or at all events they should
not be held guilty under Section 134(4) until an enquiry had been held into the
reasons for their failure to lay the balance sheet and profit and loss account
as at December 31, 1943, before the meeting audit had been found that they were
knowingly a party to the default in respect of laying the balance sheet and
profit and loss account before the meeting. This very argument has come before
the Court on a number of occasions. In England, it has been consistently held
that a director, who is prosecuted for knowingly and wilfully permitting a
company to default in respect of filing the balance-sheet and profit and loss
account with the Registrar, cannot plead the impossibility of doing so when
that impossibility is due to his own previous default. The same view has been
taken in India and the latest case in this Court to which reference has been
made is that of Ballav Das v. Mohan Lal Sadhu. In view of
the reported decisions, I have no hesitation in holding that the directors can
be held liable under Section 134(4) for knowingly and wilfully permitting the
default even though owing to their previous default it was impossible for them
to comply with the provisions of Section 134(1).
Lastly, Mr. Talukdar argued in
this case that the default if any, was of a technical nature, that there was no
suggestion of fraud and that even if the accused be found guilty, it would be
sufficient to impose a nominal sentence on them. I am unable to accept this
view. There is no suggestion in this case of any dishonesty or fraud on the
part of directors. But these provisions of the Companies Act have been
deliberately enacted to protect shareholders and, in some cases, to protect the
general public and they impose a definite duty upon directors. It is necessary
that those duties should be properly carried out and it is necessary, in my
opinion, that when directors fail to do so, the penalties provided for in the
Act should be imposed and the directors should be substantially penalised. It
was never intended, in my opinion that these sections should only be enforced
in cases where fraud or dishonesty was suspected or proved. I am unable to hold
that a mere nominal sentence would meet the ends of justice in this case.
I am of opinion, after considering
all the arguments before me, that I have no justification whatever for interfering
with the convictions and sentences imposed by the Chief Presidency Magistrate.
I, therefore, order that these Rules be discharged.
[1980] 50 COMP. CAS. 247
(KER.)
HIGH COURT OF KERALA
v.
Registrar of Companies
K. BHASKARAN J.
CRIMINAL REVISION PETITION NO. 240 OF 1977
NOVEMBER 13, 1978
Varghese
Kalliath and Joseph A. Vadakkel for the Petitioner.
K.
Bhaskaran J.—The petitioner
has been convicted and sentenced under s. 162 of the Companies Act, 1956 (Act 1
of 1956), shortly, the Act, for the company, of which he was alleged to have
been a director, having committed default in filing the annual return
due under s. 159 of the Act for the year 1975. In the complaint, as originally
filed, the petitioner was arrayed as the third accused; therein the company was
the first accused and its managing director was the second accused. The
aforesaid accused 1 and 2 having pleaded guilty, the case against the
petitioner, who pleaded not guilty, was split up and renumbered.
The court below on a consideration of the materials
placed before it found the petitioner guilty. The counsel for the petitioner
contended that it was by overlooking the provisions of ss. 45 and 73 of the
Evidence Act and without putting to the petitioner the evidence appearing
against him on this particular aspect when questioned under s. 313 of the Cr.
PC. that the court below concluded that the petitioner was a director of the
company during the material time. The further contention of the counsel for the
petitioner is that even assuming without conceding that the petitioner was a
director during the material time, he was not liable to be convicted under s.
162 of the Act unless he was also found to be an officer who was in default.
Section 162 of the Act reads as follows:
"Penalty and interpretation.—(1) If a company fails to comply with
any of the provisions contained in section 159, 160 or 161, the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to fifty rupees
for every day during which the default continues.
(2) For the
purposes of this section and sections 159, 160 and 161, the expressions
'officer' and 'director' shall include any person in accordance with whose
directions or instructions the board of directors of the company is accustomed
to act." (Emphasis
supplied.)
We have noticed that the company and the managing
director had already pleaded guilty; and they had also been convicted and
sentenced. In this case, what we have to consider is whether the petitioner, on
the assumption that he was a director during the material time, was an officer
who was in default to render him liable to be punished under s. 162 of the Act.
From the wording in sub-s. (1) of s. 162, it is clear that while the company is
liable to be punished for failure to comply with any of the directions
contained in s. 159, 160 or 161, it is not every officer, but only those
officers of the company who are in default who would be liable to be punished.
The meaning of "officer who is in default" is as given in s. 5 of the
Act which reads as follows:
"For the purpose of any provision in this Act which enacts that an
officer of the company who is in default shall be liable to any punishment or
penalty, whether by way of imprisonment, fine or otherwise, the expression
'officer who is in default' means any officer of the company who is knowingly guilty of the default,
non-compliance, failure, refusal or contravention mentioned in that provision,
or who knowingly and wilfully authorises or permits such default,
non-compliance, failure, refusal or contravention." (Emphasis
supplied).
To be treated as an officer who is in default the petitioner
ought to have been one who was knowingly guilty of the default or who knowingly
and wilfully had authorised or permitted such default. The counsel for the
respondent submitted that from Ex. F-2, it could be seen that the company had
only two directors, the petitioner and the managing director who was the second
accused in the original complaint, others having already resigned, and the annual
returns could have been filed only after getting the signatures of the
petitioner and the managing director. This is stressed to emphasise that when
his signature was not obtained in the annual returns to be filed, he had known
that the returns were not filed, and, therefore, he had knowingly and wilfully
authorised or permitted the default or non-compliance. This argument could be
upheld only if the correct position was that without the signature of the
petitioner the company could not have filed the return, and when the petitioner
did not subscribe his signature to the return, impliedly at least, he knowingly
and wilfully authorised or permitted such default. To decide this question, it
would be useful to make a reference to sub-s. (1) of s. 161 of the Act which
reads as follows:
"(1)
The copy of the annual return filed with the Registrar under section 159 or
160, as the case may be, shall be signed both by a director and by the managing
agent, secretaries and treasurers, manager or secretary of the company, or
where there is no managing agent, secretaries and treasurers, manager or
secretary, by two directors of the company, one of whom shall be the managing
director where there is one."
(The effect of insertion of section 324A of the Act
by Act 17 of 1969 also may be noticed.)
The return could be signed by a director and the manager or secretary of the company. It is, therefore, evident that the return in the present case could have been signed by the managing director and the manager or secretary of the company to comply with the requirements of s. 159 of the Act. PW-1, the clerk in the office of the respondent, examined in court has not stated that the company had no manager or secretary. The learned Chief Judicial Magistrate appears to have been under an erroneous impression that it was absolutely necessary that at least two directors ought to have signed the annual return. There is nothing to show that the petitioner had known that the annual return which should have been filed with the signature of the managing director and the manager or the secretary had not been filed in time in compliance with s. 159 of the Act. No doubt, after the time was over, the original of Ex. P-4 letter was addressed by the respondent to the petitioner, but as disclosed by Ex. P-5 it had come back without being served. It cannot, therefore, be said that in spite of the petitioner having been cautioned in time the default took place and, therefore, he had knowingly and wilfully authorised or permitted the default or non-compliance. On a proper construction of the provisions contained in s. 159, sub-s. (1) of s. 161, s. 162 and s. 5 of the Act, it could be seen that the prosecution has not succeeded in establishing that the petitioner was an officer of the company who was in default. That being the position, the conviction and sentence of the accused-petitioner by the court below under s. 162 of the Act are without any legal basis. Accordingly, I allow this revision, setting aside the conviction and sentence passed by the court below. Fine, if any, paid shall be refunded to the petitioner.
[1936] 6 Comp. Cas. 432 (CAL.)
High Court of calcutta
v.
Mohan Lal Sadhu
R.C.
Mitter, J.
Criminal Revision Petition No. 490 of 1935
June 12, 1935
Binode Lal Ghose for Petitioner.
Anil Chandra Roy Chowdhury for the
Crown.
R.C. Miiter, J. —In this case the petitioner Ballav Das who is a
Director of the Cash Insurance Bank Ltd. has been convicted under Cl. (4) of S.
32, Cl. 6 of S. 77 and Cl. (4) of S. 134 of the Indian Companies Act, and
sentenced to pay a fine. The Company commenced business under a commencement
certificate on 16th May 1933. The statutory meeting of the Company ought to
have been held on or before the 15th November 1933. Admittedly this was not
held, and there can be no doubt that the petitioner knew that the statutory
meeting had not been held within the time mentioned in S. 77 of the Act. The
statutory report required to be forwarded under Cl. (2) of S. 77 was not
forwarded to any member of the Company, and there can be no doubt that the
petitioner knew of the said fact. Although the prosecution was started on 14th
April 1935, the register of shareholders was not prepared in accordance with
the provisions of S. 32, and there cannot be any doubt on the evidence that the
petitioner also knew of the fact. The balance-sheet of the Company was not
prepared and placed at a general meeting nor filed with the Registrar of Joint
Stock Companies. In fact the General Meeting was never held, and the petitioner
also knew of the fact. The provisions of S. 134 were therefore not complied
with. It appears that he took no steps to have the abovementioned requirements
under the Companies Act complied with. Under the circumstances, it can be
safely held that he permitted the defaults to continue. In order that a
conviction, under these sections, of an officer of the Company, may be
sustained, the only thing the prosecution has to prove is that that particular
officer knowingly and wilfully authorised or permitted these defaults.
The sections speak also of authorization of those defaults, but it is not
necessary to prove that, as the offence is also complete if the officer of the
Company knew of the defaults and permitted the defaults. Although in the
judgment of the learned Chief Presidency Magistrate these points are not fully
stated, the evidence amply supports the conclusion which I have stated above.
In this view of the matter, I uphold the conviction of and sentence passed on
the petitioner, and discharge this Rule. In the order of the learned Magistrate
the conviction is stated to be under S. 34, Cl. (4) and S. 73, Cl. (3).
Obviously there is a mistake here and for Ss. 34 (4), and 73 (3) it should be
read as Ss. 32 (4) and 77 (6).
[1988] 63 COMP. CAS.126
(BOM)
HIGH COURT OF BOMBAY
v.
F.S. Cabral
G.D. KAMAT, J.
CRIMINAL APPEAL NOS. 12, 13, 14, 15 OF 1987.
NOVEMBER 6, 1987
G.U.
Bhobe for the Appellant.
F.
Rebello and G.D. Kirtani for the Respondent.
G.D.
Kamat, J.—All these
four appeals could be conveniently disposed of by a common judgment as the
parties involved are the same and the offences alleged under the Companies Act,
1956, are the various contra- ventions of not holding the first annual general
meeting and not taking appropriate measures as per the mandate under that Act.
Having
regard to the controversy involved, I will set out a few facts in each case,
the common facts which are indisputable and show how the respondents came to be
prosecuted by the Registrar of Companies, Goa, Daman and Diu for various
lapses.
The
respondents, Mr. F.S. Cabral and Mrs. Ivy Ina Cabral, are the directors of M/s.
Cabral & Co. P. Ltd. which was incorporated under the Companies Act, 1956,
on April 26, 1980.
In
Labour Case No. 329 of 1982, the complaint filed against the directors is for
contravention and non-compliance of section 210(1) and (3) as they failed to
place before the annual general meeting of the company the balance-sheet and
the profit and loss account for the year ending June 30, 1981. In that, the
allegation is that despite the fact that the company was incorporated on April
26, 1980, by virtue of the provisions of section 166 read with section 210, it
was clearly incumbent upon the directors to have convened and held the first
annual general meeting within 18 months therefrom, in any case before October
26, 1981. No meeting was held and the contravention was that no profit and loss
account and balance-sheet were placed at the meeting. Indisputably, a notice of
non-observance and non-compliance of the provisions was addressed by the
Registrar to the respondents on January 23, 1982, and the reply duly made by
the respondents by their communication dated January 30, 1982, accepted that
position. The learned Magistrate on the conclusion of the trial, despite the
facts being not disputed with regard to not placing the balance-sheet and
profit and loss account at the first annual general meeting, held that the
respondents are liable to be acquitted and, in fact, acquitted them. He held
that the company is a private company having shareholders from the same family
and no money from the public is involved and further that the contraventions
committed by them are not wilful.
In
so far as the contravention of non-compliance of section 210(1) and (3) of the
Companies Act is concerned, sub-section (5) provides imprisonment for a term which may extend to 6 months or with
fine which may extend to Rs. 1,000 or with both. But, however, the proviso
mentions that no person shall be sentenced to imprisonment for any such offence
unless it was committed wilfully. In other words, sub-section (5) of section
210 read with the proviso makes it clear that if the Magistrate comes to hold
that the offence committed is not wilful, the only course open to him is to
award a sentence of fine and the mandate clearly provides that there cannot be
any substantive imprisonment. It is against the acquittal recorded by the
Judicial Magistrate, First Class, by the judgment dated March 31, 1987, that
the Registrar of Companies has come in appeal, being Criminal Appeal No. 12 of
1987.
Criminal Appeal No. 13 of
1987 arises in Labour Case No. 330 of 1982 in which again by the judgment dated
March 31, 1987, the learned Judicial Magistrate, First Class, Margao, has recorded
the acquittal of. the respondents but, however, this time for the contravention
and non-compliance of section 166 of the Act. The requirement of section 166 is
that the first annual general meeting must be held within 18 months from the
date of incorporation and, as mentioned earlier, it is common ground that such
meeting had to be held on or before October 26, 1981, and being not held, an
offence was committed under section 168 of the Act. This section provides that
for a default of the company in that behalf, the directors of the company are
liable to be punished with fine which may extend to Rs. 5,000 and in case of
continuous default with a further fine which may extend to Rs. 250 for every
day after the first during which the default continues. This time again, the
story of acquittal as recorded by the learned Judicial Magistrate is no better
as he mentions that the company is a family matter, no capital from the public
is involved and the default being not wilful because the defence was that the accountant
had suddenly left the services of the company with the result that the accounts
were in a disarray and, therefore, no meeting could be held within the
stipulated time.
Criminal Appeal No. 14 of
1987 arises in Labour Case No. 331 of 1982. The judgment is again of the same
date March 31, 1987. The complaint, however, this time is under section 162 for
having contravened the provisions of sections 159 and 161 of the Act in that
the company had not filed its annual returns within 60 days from the date of
the first annual general meeting. The facts are again not disputed and the
annual return had not been filed and again the defence had been that the
directors thereof are family members, the accountant had left the services of
the company and there was nothing wilful on the part of the directors in
committing any breach of the provisions of the Act. An acquittal was again
recorded.
The story in Criminal
Appeal No. 15 of 1987, which arises out of Labour Case No. 332 of 1982, is no
better and for want of repetition, a brief reference need be made. This time,
the complaint filed by the Registrar was under section 220(3) read with section
162 for having contravened the provisions of section 220, in not having filed
three copies of the balance-sheet and the profit and loss account for the year
ending January 30, 1981, before the Registrar by November 24, 1981.
In fact, the requirement of
the law in this connection is that the profit and loss account and the
balance-sheet in three copies have to be submitted to the Registrar within 30
days from the date of the first annual general meeting. The acquittals recorded
are for the same reasons as in the earlier three cases.
The reasoning of the
learned Magistrate who records acquittals lands the Registrar of Companies in
this court in four different appeals after obtaining leave to appeal under
section 378 of the Code of Criminal Procedure. On taking me through the
impugned judgments, it must be at once mentioned that there is hardly any
reasoning worth the name by which the learned Judicial Magistrate has recorded
the acquittals of the company and its directors for the various contraventions
alleged against them in the matter of the several provisions of the Companies
Act. There is considerable grievance made by Shri Bhobe, counsel for the
appellants, that merely because the company involved is a private limited
company and the shareholders are from one family, no distinction can be made
from a public limited company in the nature of lapses. Secondly, no ground can
be permitted that no capital or money from the public is involved to grant any
benefit, for, the provisions of the Companies Act make no such discrimination
and, therefore, these reasons are untenable if not perverse.
The learned Magistrate
having accepted facts on behalf of the Registrar in respect of which there can
be no dispute qua the contraventions, what Mr. Bhobe urges has great merit. On
the facts admitted, there is hardly any scope for recording acquittals of the
company and its directors. Their plea that their accountant left the services
of the company and left the accounts in a disarray also cannot be a ground for
acquittal. Shri Bhobe rightly contends that this circumstance may be a
consideration for taking a lenient view-in the matter of imposition of penalty
of sentence but, however, that by itself cannot be a ground for acquitting the
respondents. He next brings to bear that the Department is not interested in
witch-hunting and have no axe to grind against the company or its directors or
securing substantive imprisonment of the respondents.
But if this type of
judgment is made to stand, it may create bad precedents and thereby affect
several cases in future as, according to him, offences of this nature are not
infrequent. He, therefore, submits that having regard to what is said by the
Magistrate, all these appeals are liable to be allowed but, however, he, in all
fairness, leaves the matter of sentence to the discretion of the court and
thereby submitting to whatever orders that may be finally made.
Mr. Rebello, learned
counsel for the respondents, attempted to justify the orders of the learned
Judicial Magistrate. He mentions that for whatever reasons the learned Judicial
Magistrate has recorded the acquittals, this court ought to be slow in interfering
therewith. According to him, the major consideration which prevailed upon the
Magistrate is that the contraventions are not wilful. In any event, he further
urges that if the court is inclined to take a different view, the various
circumstances of the matter be taken into consideration and in that he lists
out in the first place that the directors were new to the provisions of the
Companies Act and the company had been incorporated by them only in April,
1980. Secondly, they were relying upon their accountant who suddenly left the
services of the company and this being the position, they were unable to comply
with the provisions of the Act. Thirdly, he mentions that no sooner the
statutory notices were given to the company by the Registrar of Companies, on
January 23, 1982, than a due reply was filed dated January 30, 1982, seeking
extension of time for carrying out and complying with the requirements. In any
event, he next points out that the requirements were thereafter duly carried
out and what is more, the company has been complying with the different
provisions from time to time for the subsequent years.
The attempt on the part of
learned counsel for the respondents is feeble and he knows the limitations in
his way to support the acquittals. The contraventions as such are not disputed
by the respondents and in any case they cannot be disputed and, therefore, it
must be held that whatever is alleged against the respondents by the Registrar
of Companies must be held to have been duly proved and there was no scope
whatsoever for the learned Magistrate on these facts to have recorded
acquittals of the company and its directors.
But, however, Mr. Rebello
seems to have some justification when he contends that the court ought to take
a lenient view of the matter, being the first lapses committed and which are
connected with one another. An imposition of fine, in my opinion, that too, in
a token amount, will meet the ends of justice. Apart from the fact that the
directors were novices to the Companies Act and the company itself was
incorporated only in April, 1980, in their statement, the directors have
clearly stated that their accountant on whom they had been relying left the
services and as a result the company's accounts were in a disarray and,
therefore, no meeting could be held within 18 months from the date of the
incorporation, i.e., on or before October 26, 1981, and, therefore, no
balance-sheet and profit and loss account could be placed at that meeting nor
within 30 days from the date thereof, copies of such accounts were filed before
the Registrar of Companies and the same reasons prevailed for not filing the
annual return as required in Labour Case No. 331 of 1982, vide Criminal Appeal
No. 14 of 1987. I have, therefore, no alternative but to quash and set aside
the impugned orders dated March 31, 1987, in each of the four cases. The
respondents in each case are guilty of the contraventions of the provisions
alleged against them.
In Criminal Appeal No. 12
of 1987, vide Labour Case No. 329 of 1982, the respondents are held guilty for
having contravened and not complied with the provisions of section 210(1) and
(3) and, therefore, are ordered to pay a fine under section 210(5) in the sum
of Rs. 75 each. In Criminal Appeal No. 13 of 1987, vide Labour Case No. 330 of
1982, the respondents are held guilty of contravention of and non-compliance
with section 166 and, therefore, are punished under section 168 and are
directed to pay a fine of Rs. 60 each. In Criminal Appeal No. 14 of 1987, vide
Labour Case No. 331 of 1982, the respondents are held guilty of having
contravened the provisions of sections 159 and 161 and, therefore, directed to
pay a fine of Rs.25 each. In Criminal Appeal No. 15 of 1987, vide Labour Case
No. 332 of 1982, the respondents are held guilty of having contravened section
220 and are directed to pay a fine of Rs.25 each. In default of the payment of
fine of Rs. 75 each in the first case, Rs.60 each in the second and Rs.25 each
in the third and fourth cases, the directors to undergo 5, 3, 2 and 2 days of
simple imprisonment, respectively. All the appeals are, accordingly, allowed.
[1989]
66 COMP. CAS. 410 (DELHI)
HIGH COURT OF DELHI
Technical Consultancy House
Private Ltd
v.
Kuldip Raj Narang
D.P. WADHWA J.
CRIMINAL
ORIGINAL NO. 2 OF 1981
DECEMBER 12, 1986
V.V. Shastri, Indermeet
Kaur, for the Petitioner.
Ved Vyas, Rajiv Behl and
P.K. Seth for the Respondent.
D.P. Wadhwa J.—M/s Technical Consultancy House (P.) Ltd., the company,
was ordered to be wound up by order dated October 20, 1978 (O.P. No. 74 of
1977). This was on a creditor's petition filed under section 439(1)(b) of the
Companies Act, 1956 (for short "the Act"), on the ground that the
company was unable to pay its debts (section 433(e)). The company was incorporated
on November 24, 1971, and was established with the object of providing
technical consultancy to companies. The company had various other objects also.
On the making of the
winding-up order, the statement of affairs was to be filed as required under
section 454 of the Act. This was not done within the prescribed time and the
official liquidator, therefore, as a complainant, filed the present complaint
under section 454(5) of the Act. This sub-section (5) is as under :—
"(5)If any person, without
reasonable excuse, makes default in complying with any of the requirements of
this section, he shall be punishable with imprisonment for a term which may
extend to two years, or with fine which may extend to one hundred rupees for
every day during which the default continues, or with both."
There are three accused.
The case against accused No. 2 was separated and the present complaint,
therefore, proceeded only against accused No. 1, Kuldip Raj Narang, and accused
No. 3 Mokan Singh. In the complaint, it is mentioned that on the passing of the
winding-up order, the complainant came to be in charge of the affairs of the
company and that he caused the registered office of the company and the records
of the company maintained in the office of the Registrar of Companies, Delhi,
to be inspected. A visit to the company's registered office at 3, Cavalry
Lines, Delhi, showed that those premises were used by "The Narang Group of
Industries" which appeared to be the proprietary concern of Kuldip Raj Narang
as the head. An inspection of the records in the office of the Registrar of
Companies showed that accused Nos. 1, 2 and 3 were the directors of the company
at the relevant date. The complainant called upon the accused to submit the
statement of affairs as required and for this purpose he sent notices dated
November 18, 1978, and January 25, 1979, addressed to all the accused. In his
reply dated November 29, 1978 (exhibit OW 3/1), accused, Kuldip Raj Narang,
said that he was on the board of the company but for the last about two years
he had not received any notice calling the board meeting and as such he had not
attended any meeting of the board held during that period. It was also
mentioned that he was out of India for about 11 months and that when he came
back in March, 1978, he could not find any trace of the office of the company.
He further said that he was not in possession of any money, property, books of
account or any other paper or document of the company. He said he understood
that all the books of account and other documents were in the possession of
A.P. Sehgal, a director of the company who had since expired. Narang,
therefore, said that he was not in a position to submit the statement of
affairs as required in the notice of the complainant. Narang was summoned to
appear before the complainant and his statement under rule 130 of the Companies
(Court) Rules, 1959 (for short "the Rules"), was recorded. This
statement, however, did not advance matters as far as the complainant was
concerned. Narang was unable to say where the records were or who were the
former employees or the auditors of the company or in which bank the company
had an account. It is further mentioned in the complaint that it appeared that
some time in 1975, accused, T.P.S. Randhawa, A.P. Sehgal and Mokan Singh, were
inducted into the board of directors of the company. A.P. Sehgal is stated to
have died and the notices sent to the other two accused, Randhawa and Mokam
Singh, were returned respectively with the postal remarks "left India"
and "out of station". The complainant also issued a show-cause notice
to the directors before filing the complaint and only Narang acknowledged the
same but failed to comply with that. The complainant, therefore, says that the
accused failed, without reasonable excuse, to file a statement of affairs as
required and that the complainant is unable to carry on the liquidation
proceeding. He says it was the duty of the former directors to file the
statement of affairs and having failed to do so, they are guilty of an offence
punishable under section 454(5) of the Act.
The court took cognizance
of an offence and summoned the accused. On notice being issued to them on May
16, 1983, under section 251 of the Code of Criminal Procedure, 1973, the
accused pleaded not guilty. Thereafter, evidence of the complainant was
recorded. Meanwhile and prior to the issue of the aforesaid notice, an
opportunity was granted to the accused to file a statement of affairs. In this
connection, reference may be made to the order dated April 15, 1981. It appears
that a statement of affairs was in fact filed by the accused Narang on or about
September 6, 1982, but it was defective in many ways and did not fulfil the
requirements of the section or rule 127 of the Rules. It did not give the names
of the creditors or the auditors of the company. The complainant took time to
send a formal requisition to the accused for further particulars. The matter
rested at that.
In support of his case, the
complainant examined three witnesses. The first witness is S.M. Talwar, an
upper division clerk from the office of the Registrar of Companies, New Delhi.
He said that the latest annual return of the company was for the period ending
September 30, 1976, but this could not be registered because of certain objections
raised by the office. He said that as per this return, there were four
directors of the company, namely, the three accused and A.P. Sehgal. The last
annual return which was taken on record was for the year ending May 25, 1974,
and that showed three directors, namely, Kuldip Raj Narang, A.P. Sehgal and
Vijay Lal. A form No. 32 dated May 22, 1975, filed on record by the company
showed that accused, T.P.S. Randhawa, and Mokan Singh were taken as additional
directors of the company. The record brought by this witness, however, did not
show whether Mokam Singh was elected as director by the general body of the
shareholders or whether he was co-opted. The witness was unable to say if Mokam
Singh had signed any balance-sheet, profit and loss account or any other
document in the record brought by him. A copy of form No. 32 which is dated
December 20, 1971, was brought on record. It showed that the accused, Narang,
was appointed director (organisation) and A.P. Sehgal was appointed director
(finance) and they were both so appointed as per the articles of association of
the company. They were directors since the inception of the company. There was
no balance sheet of the company in the records of the Registrar of Companies
after 1973. The annual return which was made up to May 25, 1974, was delivered
for filing by A.P. Sehgal. The annual return made up to September 30, 1976,
which was lying under objections was also delivered for filing by A.P. Sehgal.
Another annual return made up to June 30, 1975, was delivered for filing by one
J.K. Lal secretary of the company. It was also lying under objection. The
profit and loss account for the year 1975-76 was lying under objection along
with the balance-sheet and it was signed by the accused T.P.S. Randhawa. The
name of the other person who had also signed could not be deciphered by the
witness. The profit and loss account for the year 1974-75 was not filed. The
witness, S.M. Talwar, denied that it was A.P. Sehgal who was responsible for
the day-to-day affairs of the company. I may also note here that the winding-up
petition (O.P. No. 74 of 1977) was filed on October 18, 1977, and the affidavit
in answer to show cause why the petition be not admitted was filed by T.P.S.
Randhawa on behalf of the company.
The second witness of the
complainant is V.N. Sharma, a technical assistant in the office of the official
liquidator. He referred to the issue of notices requiring the directors of the
company to file the statement of affairs and for handing over the records and
assets of the company. Since notices remained uncomplied with, the present
complaint came to be filed. He said that during the pendency of these
proceedings, a statement of affairs was filed but that was defective and it was
prepared from the bank accounts of the company and not from the account books.
The witness said that the account books were with the directors and they had
not surrendered the same to the complaintant. He said in the statement of
affairs that the names of the banks, account numbers, etc., had not been
mentioned and that other details were also incomplete. He said that in one of
the columns of the statement of affairs, it was mentioned that an amount of Rs.
5,55,645.68 was due to the creditors but the names and particulars of the debts
due were not given. Similarly, no details of trade debtors, loans and advances
were given. According to the witness, the official liquidator thus had no
details of the creditors, loans and advances, etc., of the bank and it was not
possible to trace them from the statement of affairs. He said a letter dated
February 26, 1983, was written by the official liquidator requiring the
directors to file a revised statement of affairs and to remove the defects.
Though a list of creditors was attached with the statement of affairs, their
addresses were not mentioned. He said that as per the record of the Registrar
of Companies, accused, Narang, was a director on the date of the winding-up
order, but he said he could not say as to what were the functions of the
accused Narang. He also could not say what were the functions performed by A.P.
Sehgal The letter dated February 26, 1983, which the official liquidator sent
was exhibit R-1. This letter was not addressed to the accused, Mokam Singh, as
the statement of affairs was filed only by the accused, Narang. This witness
could not say whether the accused, Mokam Singh, was co-opted as alternate
director of the company in 1975 or whether he did not participate in the
management as well as other affairs of the company.
The third witness of the
complaintant is V.P. Verma, assistant official liquidator. He stated that the
accused, Narang, was summoned to the office of the official liquidator for
examination under rule 130 of the Rules, but the accused Narang, however,
wanted questions in writing which were given to him and he later replied to
them in writing. This witness referred to notices being issued to the directors
of the company requiring them to file the statement of affairs and also about
the filing of a defective statement of affairs by the accused Narang. When
cross-examined by accused No. 1, the witness said that the official liquidator
was not in possession of the account books, bills, vouchers and minute books of
the company as these were not filed with him. He said that as such there was no
question of the official liquidator asking Narang to inspect those documents.
The witness said that he could not say whether the accused, Narang, was not
in-charge of the day-to-day affairs of the company or whether he was not in
possession of the account books, vouchers, minute books, etc. He said that he
did not know in whose possession the entire record of the company was kept and
he also could not say if A.P. Sehgal was the finance director. He said that the
accused Narang was a director of the company on the date of its winding up.
This, he said, was on the basis of the records of the Registrar of Companies.
Statements of the accused
Narang and Mokam Singh were recorded under section 313 of the Code of Criminal
Procedure. In this statement, Narang said that he was not a director of the
company on October 20, 1978, the date of its winding up. He said he remained a
director from the inception of the company until he left India for Berkeley in
the year 1977. He said he did not file the statement of affairs within the time
prescribed because he was not in charge of the conduct of the affairs of the
company at the material time and he remained out of India from 1977 to 1978 and
could not have, therefore, submitted the statement of affairs. He said he did
submit a statement of affairs after the institution of the present proceedings.
The accused, Mokam Singh, said that he was not a director of the company on the
date of its winding up and, therefore, the question of his submitting the
statement of affairs did not arise.
The accused also appeared
as witnesses in their defence. In his statement recorded as DW-1, the accused
Narang said that he left for Berkeley, United States, in the end of March,
1977, on a teaching assignment and returned in the first week of February,
1978. He said A.P. Sehgal was the managing director of the company and he left
the country while the accused Narang was abroad and that A.P. Sehgal died in
Nairobi. The accused said that he was director (organization) of the company in
terms of its articles. In this connection, he referred to form No. 32 filed by
the company which was registered in the office of the Registrar of Companies on
January 14, 1972. A "certified copy" of this form No. 32 has been
brought on record. The accused Narang deposed that he did not look after the
financial matters or the maintenance of books of account at any material time
and these were being looked after by A.P. Sehgal who, he said, was a chartered
accountant. He said he did not know to whom Sehgal handed over charge when he
left for Nairobi. He also said that A.P. Sehgal and T.P.S. Randhawa were the
two active directors of the company at that time and the accused Narang said
that he presumed that Sehgal had handed over charge to T.P.S. Randhawa. He narrated
the circumstances under which he got the statements of affairs prepared in the
absence of the records. He said he got the accounts reconstructed from the bank
records. He said the official liquidator did not inform him that the books of
account and other records of the company were available with the official
liquidator. In his cross-examination, he said that he was not ousted from the
management of the company "in the sense that I was free to participate in
the conduct of its affairs, if I chose to do so."
The accused, Mokan Singh,
in his statement said that he was elected as an alternate director of the
company some time in 1975 and that that election was, however, not confirmed in
any general meeting of the company. He said he did not take any part in the
conduct of the affairs of the company and that he was elected director only
because his tenanted premises were being used by the company. He said that as
far as he knew the relevant record of the company was in the possession of the
other two directors, Sehgal and Randhawa. In his cross-examination, he denied
the suggestion that his appointment as a director of the company was in fact
confirmed in the board meeting of the company. He said he became aware of form
No. 32 filed by the company showing him as an alternate director only during
the pendency of these proceedings. He said he was never aware of any such form
No. 32 having been filed earlier.
That is all the evidence in
the case.
During the course of
arguments, a copy of the memorandum of association and articles of association
of the company were also placed on record which was admitted by both the
parties. It is mentioned in the articles of association that where no specific
provisions have been made, provisions of Schedule I, Table A of the Act, shall
apply. This would also be, to an extent, the effect of section 28(2) of the
Act. Article 21 gives the names of the first directors who are seven in number.
The accused, Narang, is described as organisation director and A.P. Sehgal as
director (finance). Other directors have been described as technical director,
director (banking), director (marketing), director (accounts and law), and
director (company law). Under article 23, the powers and responsibilities of
the directors of the company are those as given in the Act and in Table A
except in so far as these stood modified by the provisions of the articles of
association. Under article 22, each director is to be paid out of the funds of
the company by way of remuneration for services rendered to the company such
amount as may be decided by the board from time to time and each director is
also to be paid such fee as may be decided by the board for every meeting
attended by him. Under article 26, the directors may appoint one or more of
them to the office of the managing director for such period and on such terms
as they think fit. Then articles 27 and 28 prescribe the remuneration to be
paid to the managing director and also the powers to be conferred upon him.
Sub-section (1) of section 454
of the Act prescribes that where the court has made a winding up order, there
shall be made out and submitted to the official liquidator a statement as to
the affairs of the company in the form prescribed. The particulars to be given
in the statement of affairs are also mentioned in the sub-section. These are :
(a) the assets of the company, stating separately the cash
balance in hand and at the bank if any, and the negotiable securities, if any,
held by the company ;
(b) its debts
and liabilities ;
(c) the names, residences and occupations of its creditors,
stating separately the amount of secured and unsecured debts ; and in the case
of secured debts, particulars of the securities given, whether by the company
or an officer thereof, their value and the dates on which they were given ;
(d) the debts due to the company and the names, residences
and occupations of the persons from whom they are due and the amount likely to
be realised on account thereof;
(e) such further or other information as may be prescribed,
or as the official liquidator may require.
Sub-section (2) prescribes
that such a statement snail be submitted and verified by one or more of the
persons who are at the relevant date, the directors and by the person who is at
that date the manager, secretary or other chief officer of the company. Then
sub-section (3) says that the statement shall be submitted within 21 days from
the relevant date or within such extended time not exceeding three months from
that date as the official liquidator or the court may for special reasons
appoint. The relevant date of course would be the date of the winding up order.
Sub-section (5) which prescribes punishment for the default has already been
set out above. I have set out sub-sections (1) and (2) above so far as these
are relevant to this case. At this stage, some of the provisions of the Act
which have a bearing on the case may also be referred to. Section 163 requires
that register of members, copies of all annual returns, etc., are to be kept at
the registered office of the company. Under section 193, minutes of the general
meeting and board meetings of the company are be kept and under section 196,
these are required to be kept at the registered office of the company. Then,
under section 209, the requirement is that every company shall keep at its
registered office proper books of account with details as mentioned therein and
the persons responsible for securing compliance with the provisions of this
section are liable to be punished for default. Under sub-s. (6) of s. 209,
these persons would be the managing directors, or a manager, if there is one,
and otherwise every director of the company. Section 291 refers to the powers
of the board of directors and says that the board of directors shall be
entitled to exercise all such powers and to do all such acts and things as the
company is authorised to exercise and do. Thus, the board of directors is
responsible for the overall conduct and management of the affairs of the
company and to comply with the statutory requirements under the Act and other
laws. Under section 260, the board of directors is entitled to appoint
additional directors but these additional directors are to hold office only up
to the date of the annual general meeting of the company. Then article 72 of
Table A in Schedule I would be relevant as this article would be applicable in
the present case. Under this article, the board has again power to appoint a
person as additional director and that person is to hold office only up to the
date of the annual general meeting but shall be eligible for appointment by the
company as a director at that meeting subject to the provisions of the Act.
Under section 283, the office of a director becomes vacant if he absents
himself from three consecutive meetings of the board of directors or from all
meetings of the board for a continuous period of three months, whichever is
longer, without obtaining leave of absence from the board [clause (g) of
sub-section (1)]. Under section 285, a meeting of the board of directors is to
be held at least once in every three months and at least four such meetings
shall be held every year. Then under section 286, notice of every meeting of
the board of directors of a company is to be given in writing to every director
for the time being in India and at his usual address in India to every other
director. Sections 540 to 545 contain provisions regarding liability of certain
persons for fraudulent conduct of the business of the company, etc. Under
section 541, where a company is being wound up and if it is shown that proper
books of account were not kept by the company during a particular period, every
officer of the company is liable to be punished unless he shows that he acted
honestly. Under section 2(26), "managing director", means a director
who, either by virtue of an agreement with the company or of a resolution
passed by the company in general meeting or by its board of directors or by
virtue of its memorandum or articles of association, is entrusted with
substantial powers of management which would not otherwise be exercisable by
him; and it would also include a director occupying the position of managing
director by whatever name called. A managing director is, however, to exercise
his powers subject to the superintendence, control and direction of the board
of directors. Certain powers of routine nature as given in the proviso to this
sub-section would not be deemed to be substantial powers of management. Under
section 303, every company is to keep at its registered office a register of
its directors, managing director etc. containing particulars as given in the
section. Under sub-section (2) of this section, a company is to send to the
Registrar of Companies a return in the form prescribed containing particulars
as specified in the register of its directors mentioned above and is also to
send a notification, again in the form prescribed (Form No. 32), of any change
among its directors, managing directors, managers or secretaries, etc.,
specifying the date of the change. These returns are to be filed within the
specified period as given in the sub-section.
Reference to two decisions
may also be made. In a Full Bench decision of this court in O.L. of Security
and Finance P. Ltd. v. B.K. Bedi [1974] 44 Comp Cas 499 (Delhi); ILR [1974] I
Delhi 809 [FB], the court held that it would be for the official liquidator to
prove that the default under section 454(5) of the Act was committed without
reasonable excuse and as to how that was to be proved, the court observed as
under (p. 506):
"It appears to us as that the official
liquidator need only prove that notice was sent to the concerned director to
submit a statement of affairs, that prescribed time has lapsed and that no
extension has been sought for from him or from the court and that the necessary
books of the company were available for inspection by the concerned director.
These are facts which are conveniently available to the official liquidator and
if he shows these facts prima facie he would have proved that the director has,
without reasonable excuse, made the default in complying with the requirements
of section 454. In such a case, it would obviously be for the concerned
director to prove circumstances to justify his conduct and to show that he had
a reasonable excuse in making the default."
In In re, Beejay
Engineering Pvt. Ltd. [1983] 53 Comp Cas 918, the court was examining the
question whether relief could be given under section 633 of the Act in respect
of liability under Acts other than the Companies Act and one of the questions
was whether a director could be exonerated merely on the ground of being a
technical director. The court was of the view that no distinction could be
drawn amongst the directors for fastening liability or granting relief from
liability on the consideration that a person was on the board purely by virtue
of his technical skill or because he represented certain special interests and
there were other directors who were in effective control of the management and
affairs of the company.
Prof. Ved Vyas, learned
counsel for accused Narang, submitted that in view of the provisions of
sections 283(1)(g) and 285, Narang ceased to be a director of the company and
he could not be fastened with liability under section 454. It was also
submitted that the whole of the working of the company was in the hands of A.P.
Sehgal who was a chartered accountant by profession and was shown as director
(finance) and it was he who was to maintain the account books and other
statutory records of the company. It was also stated that the accused Narang
was unaware of the affairs of the company and in spite of that he tried his
best to submit a statement of affairs and which he did though it was not in the
form prescribed and did not contain the relevant particulars. It was also submitted
that the court should exercise discretion and dispense with the filing of the
statement of affairs in the circumstances of the present case. It was submitted
that though the petition was advertised, no creditor was forthcoming. Strong
reliance was placed on the decision of this court in B.K. Bedi's case [1974] 44
Comp Cas 499 (Delhi) [FB].
Mr. B.K. Seth, learned
counsel for Mokam Singh, adopted the arguments of Prof. Ved Vyas but stated
that Mokam Singh was appointed as additional director and that there was
nothing on the record to show that his appointment was approved in the annual
general meeting of the company. He also said that it was A.P. Sehgal who was
looking after the affairs of the company and that after the death of Sehgal,
accused Randhwa was looking after the affairs of the company.
Mr. V.V. Shastri, learned
counsel appearing for the complainant, however, stated that there was nothing
in the Act to describe a director as active, dormant or nominal and that the
Act imposed statutory duty on the whole body of directors to comply with the
provisions of section 454 of the Act.
Books of account, statutory
books or any other record or asset of the company were not found at its
registered office and nor were these handed over to the official liquidator.
Where is then the question of the official liquidator making available to the
accused the necessary books of the company for inspection by them so as to
enable them to file the statement of affairs ? The official liquidator made the
accused aware of their statutory duty and under the circumstances, he could do
no more. The Full Bench decision of this court in B.K. Bedi's case [1974] 44
Comp Cas 499 (Delhi) [FB] is inapplicable in the present case. As will be seen,
the accused are trying to plead in their defence default committed by them in
their statutory body. This cannot be permitted: The State of Bombay v. Bhandhan
Ram Bhandani [1961] 31 Comp Cas 1 (SC); [1961] 1 SCR 801.
The board of directors of a
company is to exercise such powers and to do all such acts and things as the
company is authorised to exercise and do. The general management and conduct of
the affairs of the company are vested in the board of directors. This board is
collectively responsible for the management and conduct of the business of the
company. Each and every act which a company is required to do under the
provisions of the Act including the maintenance of books of account, minute
books etc., is the collective responsibility of the board of directors as the
general administration of the company vests in the board. Sometimes, it is
usual to appoint one or more of the directors as whole-time working directors
including the managing director of the company to look after the day-to-day
administration of the company. This is so as it may not be possible for the
board of directors to collectively act and conduct each and every act or thing
on behalf of the company. In the case of a private limited company, mostly all
the directors exercise some functions in the day-to-day working or affairs of
the company. In the case of a public limited company, however, the day-to-day
administration is usually left to one or two directors who are termed as
managing director or a whole-time director. Again, a managing director or a
whole-time director delegates various functions to the officers of the company
when it is not possible for him to attend to the same. The board of directors
is duty-bound in the management of the affairs of the company to ensure that
statutory records and other records of the company are maintained in accordance
with the provisions of law. If, however, the directors are in a position to
explain that the responsibility for the maintenance of the minutes books etc.
were delegated or otherwise entrusted to any particular director or officer of
the company and that they bona fide believed that the said minutes books, etc.,
were being kept in a proper and safe manner by the said director or officer of
the company, then in that case, they might not be held responsible for the loss
or non-maintenance of the minutes books. It is the duty of each and every
director to explain as to why he should not be held responsible for the loss,
non-maintenance and non-availability of the minutes books in the facts and
circumstances of each case. A director cannot escape liability merely by
pleading that he was not directly responsible for the loss of the minutes books
and other records. He has to show that he had in the usual circumstances
reposed confidence in the directors and/or officers of the company who were
entrusted with the responsibility of maintaining the minutes books and that
there was no occasion for him to warrant any inquiry into the fact that the
minutes books were not properly kept or were in danger of being lost and that
he acted in a bona fide manner and in the interests of the company. The
following paragraph from Palmer's Company Law, 23rd edition would be relevant—
"On principle, the management of the
company is vested in the board of directors collectively and the directors
must, as a general rule, act at board meetings, but the articles, or rules made
by the directors under powers vested in them by the articles, may otherwise
provide. This principle ensures that the collective wisdom of the board is
available to the company on important decisions, and enables discussion to take
place before a decision is taken."
(Paragraph
62-01, page 823)
All this discussion has
been necessary to show the liability of the directors constituting the board in
the conduct of the affairs of the company under certain provisions relevant to
the case and to examine the various pleas of the accused in the background of
these provisions.
In the present case, the
accused have stated that the responsibility for maintaining the statutory
records of the company was on A.P. Sehgal and after him on Randhawa. Accused
Narang even went to the extent of saying that A.P. Sehgal was the managing
director of the company. No document has been brought on record to show that
the board of directors had entrusted the management of the affairs of the
company to A.P. Sehgal or that he was the managing director of the company. In
the absence of any records, I am unable to accept this contention. Accused
Narang relied on Form No. 32 registered with the Registrar of Companies on January
14, 1972, in which he has been shown as director (organisation) and A.P. Sehgal
as director (Finance). As mentioned above, other directors have also been given
various designations as director (technical, banking, marketing, accounts and
law, and Company Law). No advantage can be derived by the accused Narang from
the fact that A.P. Sehgal had been shown as director (finance) and as such he
was required to keep the minutes books and other statutory records of the
company. These descriptions of the directors do not explain or define the
functions of the directors. Accused Narang has been unable to show as to what
were his functions when he was shown as director (organisation). Again, I would
reject this argument that merely because A.P. Sehgal was described as director
(finance), it was he who was solely responsible for the conduct of the affairs
of the company.
The accused also said that
they were not the directors on the date of the making of the winding up order. Accused
Narang said that he did not attend any board meeting for about two years and
that he received no notice of any such board meeting and also that he was out
of India for a certain period. There is nothing on the record to show that any
board meeting was held during this period or that any notice of any such
meeting was at all issued or that accused Narang did not obtain any leave of
absence to attend any such board meeting. For all that matter, there might have
been default in holding the meetings of the board of directors. As per the
records of the Registrar of Companies, the accused Narang was a director of the
company. He contended that the last available record was for the period 1976
which showed him as a director and that while the winding up order was made on
October 20, 1978, there was nothing on the record of the Registrar of Companies
to show that accused Narang was a director on that day. This argument is again,
to my mind, misconceived. It is on record that though the annual returns of the
company filed for the period ending September 30, 1975 and September 30, 1976,
were with the Registrar of Companies ; but these were not registered because of
certain objections. Thereafter, no annual return or Form No. 32 was filed when
there was any change in the board. Thus again, the accused is trying to plead
in his defence his own default in not complying with the provisions of law
regarding filing of annual returns and Form No. 32 and other documents with the
Registrar of Companies.
It was also contended by
Prof. Ved Vyas that after the winding up petition was advertised, no creditor
of the company had come forward and that the court should dispense with the
filing of the statement of affairs. I cannot accept this submission. To my
mind, the statement of affairs is a basic document from which proceedings after
the winding up order start. It is an important document. It must not be
forgotten that the winding up order was made on a petition filed by a creditor.
The official liquidator has not filed any application seeking dispensing with
the requirement of section 454 of the Act. Rather, he is prosecuting the
accused for their default. No ground exists to dispense with the filing of the
statements of affairs.
The statement of affairs
filed during the pendency of these proceedings by accused Narang obviously does
not meet the requirements of law as it does not contain the particulars as
required and as above mentioned. The default therefore continues.
The case of the accused
Mokam Singh appears to be different. It has come on record that as per Form No.
32 filed with the Registrar Companies, he was shown as an additional director.
His appointment as an additional director was to continue till the date of the
next annual general meeting of the company. Nothing has been brought on record
to show that in the annual general meeting of the company, he was appointed as
a director. It, therefore, cannot be said that he was a director of the company
on the date of the passing of the winding up order. He has, therefore, to be
acquitted.
As far as accused Narang is
concerned, he was aware of the winding up order and of his duty to file the
statement of affairs within the prescribed period. This he failed to do.
Notices were sent by the official liquidator requiring him to file the
statement of affairs. This again was not done by him. Statutory books and other
books of the company were not handed over to the official liquidator, and in
fact I would say he was prevented from taking these into possession as these
were not found at the registered office of the company for which default the
directors could also be liable under the Act. It is correct that in the present
case, it is not enough for the complainant to prove merely the prohibited act
and then must the defendant bring himself within the statutory defence (sic).
The prosecution must bring home to the accused either by direct or
circumstantial evidence showing liability of a guilty mind based in the form of
actual knowledge or connivance because of the use of the words "without
reasonable excuse" in section 454(5) of the Act. To my mind, in the
present case, the prosecution has clearly proved what the accused had to do and
that he deliberately refrained from complying with the provisions of section
454 containing obligations to be performed by him as a director in spite of
notices from the official liquidator on a pretext which, as noted above, cannot
bear scrutiny. The suggestion that the accused was merely a figurehead not
taking any active part in the control of the company is, in my opinion, not
worth any serious consideration. He was a director throughout the relevant
period and was responsible, along with other directors, for the management of
the company. He was not there merely for a chromatic effect. There is nothing
on the record to show whether A.P. Sehgal was the managing director of the
company. Further, in the absence of any other evidence to corroborate the
version of accused Narang, I am not prepared to accept his statement that he
was unconnected or unconcerned with the affairs of the company. He has no
defence. As noted above, the provisions of section 209 which relate to keeping
of proper books of account of the company at its registered office are quite
explicit. Non-compliance with these provisions would make every director of the
company liable to penal action (sub-section (6)(d) of section 209). Accused
Narang cannot escape his liability by contending that the books of account were
not made available to him by the official liquidator, the complainant.
The prosecution has brought
home the charge to the accused. Narang has to be held guilty of an offence
punishable under section 454(5) of the Act, and I convict him accordingly.
Accused Mokam Singh is acquitted.
The question that now
remains is as to what punishment is to be awarded to accused Narang. Before I
pass any order in that respect, I would grant the accused Narang an opportunity
of being heard on the question of sentence.
I have heard arguments on
the question of sentence.
An offence under section 454(5)
of the Act is a serious offence and a deterrent punishment has been provided.
The offence for not filing the statement of affairs under section 454(1) of the
Act is a continuing one and terminates only on the filing of the statement of
affairs. The offence is punishable not only with imprisonment for a term
extending to two years but is also punishable with fine extending to Rs. 100
for every day during which the default continues. I do not, therefore, think
that in such a case the provisions of section 360 of the Code of Criminal
Procedure, 1973 should be invoked which provide for release on probation of
good conduct or after admonition, as was contended before me. As to why
sub-section (5) of section 454 of the Act was substituted in the Act as it now
stands can be best found from the recommendations of the Companies Act
Amendment Committee. The relevant portion of the recommendations of the
Committee is as under ;—
"It has been the complaint of official
liquidators that the statement of affairs is not filed in spite of repeated
reminders and warnings, and if filed at all, is filed only after considerable
delay. The penal provision is hardly ever enforced apparently because a
complaint has to be made by the official liquidator to the criminal court, and
this involves delay. Much of the delay in winding up is caused by the statement
of affairs of the company not being filed in time to enable the Official
Liquidator to take the necessary action. It would facilitate his work and speed
up the winding-up of companies, if the power to punish the officers of the
company who default in filing the statement of affairs, is vested in the
winding-up court instead of in the ordinary criminal courts. The winding-up
court, which in most cases will be the High Court, will be in a better position
to judge the degree and nature of the default of the officers concerned and
mete out appropriate punishment where necessary. The fear that the winding-up
court would take immediate cognisance of any delay and deal adequately with
those in default would by itself do much to ensure prompt filing of the
statement of affairs. Section 454 of the Act should, therefore, be amended,
vesting the power of punishment under the section in the winding-up court
(Report: para. 166)."
(At p. 942, Guide to the Companies Act
by A.
Ramaiya, 10th Edn. 1984)
As noted in the judgment
above, the books of account and other statutory records of the company were not
handed over to the official liquidator. The directors contravened the provision
of law regarding tiling of the statement of affairs which is an important
document to enable the official liquidator to start the process of winding up
of the company. It now appears to me that the official liquidator is extremely
handicapped in the present case and perhaps he has no choice except to seek an
order under section 481 of the Act for dissolution of the company without
knowing who the debtors are and who the creditors are and what functions the
company performed. That appears to be the unfortunate result. It was again
asserted that no creditor had come forward even after the petition for the
winding up order was advertised. It is not the case of the accused that there
were no creditors, and if that be so, the argument now advanced does not help
the accused at all. I have already mentioned that the company was in fact
ordered to be wound up on a creditor's petition. The official liquidator has
not invited any claims so far ; and it will not be possible to send individual
notices to the creditors as provided and I do not know what he is going to do
in the circumstances of the present case. The gravity of the offence cannot be
minimised. That the offence under section 454(5) of the Act is a continuing one
cannot now be disputed in view of the decision of the Supreme Court in Maya
Rani Punj v. Commissioner of Income-tax [1986] 157 ITR 330. By this decision,
an earlier decision of the Supreme Court in Commissioner oj Wealth-tax v.
Suresh Seth [1981] 129 ITR 328 was overruled. A question, however, arose as to
whether sentence of fine which is for each day during which the default
continues is to be limited up to the date of filing of the complaint or up to
the date of conviction. The first impression was that perhaps it would be up to
the date of conviction in the present case inasmuch as the court did take
notice of the fact that during the pendency of this complaint, the statement of
affairs was not tiled and that which was filed was altogether not in accordance
with the provisions of section 454(1) of the Act and could not be termed as a
statement of affairs in the eye of law. However, in my opinion, a sentence of
fine cannot be imposed for the period after filing of the complaint.
Sub-section (5A) of section 454 of the Act is as follows :
"The court by which the winding up order
is made or the provisional liquidator is appointed, may take cognizance of an
offence under sub-section (5) upon receiving a complaint of facts constituting
such an offence and trying the offence itself in accordance with the procedure
laid down in the Code of Criminal Procedure, 1898, for the trial of summons
cases by magistrates".
If reference is made to the
Code of Criminal Procedure, 1973 (after repeal of the earlier Code of 1898),
'complaint' has been defined to mean any allegation made orally or in writing
to a Magistrate, with a view to his taking action under the Code, that some
person, whether known or unknown, has committed an offence (section 2(d)). The
court takes cognizance of the offence under section 190 of the Code upon receiving
a complaint of facts constituting the offence. Process is issued to the accused
under section 204 of the Code and when he appears, the substance of the
accusation is to be stated to him (section 251). The provisions contained in
Chapter XX of the Code relating to trial of summons cases are to be applicable
inasmuch as the punishment with imprisonment is for a term up to two years Then
after the trial, the court is to record its finding, convicting or acquitting
the accused. Thus, it will be seen that the accused is to meet the case as set
out in the complaint and the substance of the accusation is stated to him and
he is asked to plead guilty or not to the same. This substance of accusation is
given in the complaint only up to the date of filing of the complaint.
Considering, however, the
facts and circumstances of the present case, I am of the opinion that the ends
of justice will be met by imposing a fine on the accused and he need not be
sent to prison. I would, therefore, sentence the accused Kuldip Raj Narang to
pay a fine of Rs. 50 per day for every day during which the default continued.
The fine at the rate of Rs. 50 per day will be payable from November 11, 1978,
21 days after the date of the winding up order which is October 20, 1978, till
December 19, 1980, when the complaint was filed. The amount of fine comes to
Rs. 38,500. In default of payment of fine, the accused will undergo rigorous
imprisonment for a period of two months. The fine, when realised, will be
payable to the official liquidator, the complainant.
[1964] 34 COMP. CAS. 5 (ALL.)
HIGH COURT OF ALLAHABAD
v.
Tika Ram
Uniyal
BROOME,
J.
CRL.
MISC. CONT. CASE NO. 36 OF 1962
OCTOBER
12, 1962
JUDGMENT
Notice has been issued to the opposite party, Tika Ram Uniyal, to show cause why he should not be punished for contempt of court in disobeying the order passed by the District Judge of Kumaun on July 9, 1960, directing him as the managing director of the Garhwal Farmers and Industrial Traders Co. Ltd. to furnish returns to the Registrar of Companies within a certain period.
From the affidavit filed on behalf of the Registrar of Companies it appears that notice was sent to Tika Ram Uniyal on October 22, 1954, inviting his attention to the provisions of sections 32(3) and 134(1) of the Indian Companies Act, 1913, and requiring him to submit the annual summary of capital and other documents in respect of the calendar year 1953. The required documents were not filed, and the Registrar accordingly made an application under section 249A on December 30, 1954. Notice was issued thereon to all the five directors of the company and it was found that all were agreed the Tika Ram Uniyal was the managing director. Time was granted to him to furnish the necessary returns, but he failed to do so. On May 21, 1959, he appeared in court and put forward the excuse that a certain Kundam Singh Rawat had been managing the farms of the company at certain places in Bijnor District and had not submitted any accounts; but when the aforesaid Kundam Singh Rawat was summoned to the court of the District Judge he refuted these allegations and denied that he had ever been in charge of any farm. At this stage, Tika Ram Uniyal absented himself from the court ; and therefore on July 9, 1960, the District Judge passed final orders requiring him to furnish return to the Registrar within two months, threatening him with proceedings for contempt of court if he failed to do so. Subsequently, further time was granted to him, but still he failed to comply with the order ; and eventually the District Judge was obliged to refer the matter to this court on April 21, 1962, for necessary action.
The opposite party has twice been granted time for the purpose of filing a reply to the affidavit of the Registrar of Companies but has failed to file any such reply. The allegations contained in the Registrar's affidavit thus stand uncontroverted and may be taken as proved. A suggestion has been made before me today by learned counsel for the opposite party that the required returns have since been furnished to the Register, but there is nothing whatsoever on the record to show that there is any substance in this assertion. In any case the opposite party is clearly guilty of contempt of court for failing to comply with the orders of the District Judge within the time allowed by the District Judge.
I accordingly impose a fine of Rs. 200 on Tika Ram Uniyal and direct that if he fails to pay the fine within two months from today, he shall be detained in prison for one month. He shall also be liable for the costs of the Registrar of Companies assessed at Rs. 100.
[1988] 63 COMP. CAS. 882 (CAL)
HIGH COURT OF CALCUTTA
v.
Assistant Registrar of Companies
MONORANJAN MALLICK, J.
CRIMINAL
REVISION NO. 714 OF 1986.
JANUARY
14, 1987
Amit Bhattacharya for the
Petitioner.
Anjan K. Mukherjee for the
Registrar of Companies.
Purnima Chowdhury for the
Union of India.
S. Mazumdar for the State.
The present petitioners have
moved this court in revision being aggrieved by the order dated January 4,
1986, by which the learned Metropolitan Magistrate rejected the prayer of the
present petitioners for exemption from examination under section 313 of the
Code of Criminal Procedure and issuing a warrant of arrest.
The petitioners who are
accused in Case No. C/1832 of 1980 under section 162(1) of the Companies Act,
1956, pending in the court of the Metropolitan Magistrate, 17th Court,
Calcutta, after the close of the evidence for the prosecution, filed the
application in terms of the proviso to subsection (1) of section 313 of the
Code of Criminal Procedure praying for dispensing with the examination under
section 313(1) of the Code on the ground that during the whole trial, the petitioners
were exempted from their personal appearance under section 205 of the Code. The
learned Magistrate rejected their prayer and issued warrant of arrest against
them.
Being aggrieved, the
present petitioners have filed this revision application contending, inter
alia, that the learned Magistrate having allowed the present petitioners'
prayer to be represented by their advocate under section 205 of the Code of
Criminal Procedure should have dispensed with their examination under section
313, Criminal Procedure Code, after the close of the prosecution evidence when
the present petitioners themselves prayed for dispensing with their
examination.
In support, a decision of
this court in Ramacast Ltd. v. Registrar of Companies [1986] 3 Crimes has been
cited where a single judge of this court has held that where in a summons case,
the court has dispensed with the personal attendance of the accused, it may
also dispense with his examination under section 313(b) of the Criminal
Procedure Code if there is no incriminating evidence against the accused.
The present petitioners are
being prosecuted under section 162 of the Companies Act, 1956. The case
referred to above is also a case under section 162 of the said Act. The learned
single judge in the said decision has held that though the learned Magistrate
in the circumstances of the case, had permitted the personal exemption of the
accused under section 205 of the Code, he failed to exercise his jurisdiction
in accordance with law by not granting them the exemption from being examined
under section 313 of the Code of Criminal Procedure.
In this particular case, I
do not find any reason whatsoever as to why the learned Magistrate rejected the
application. He did not assign any reason. He did not indicate that there was
any incriminating evidence against the petitioners which needed examination
under section 313, Criminal Procedure Code. I also do not find that on behalf
of the opposite party any objection was raised against the said prayer. In
these circumstances, regard being had that the case is one under section 162 of
the Companies Act and in view of the fact that the petitioners were exempted
from personal appearance under section 204 of the Code, the learned Magistrate
did not exercise his jurisdiction properly by rejecting the said application
without assigning any reason whatsoever.
I therefore allow the
revision petition and direct that the learned Magistrate shall allow the
petitioners' application for exemption and thereafter dispose of the case as
quickly as possible.
Learned advocate for the
petitioners has raised other legal points against the prosecution. The present
petitioners are directed to urge those points before the learned Magistrate at
the time of argument.
The revision petition is
thus allowed.
[1978] 48 COMP. CAS. 768
(ORI)
HIGH COURT OF ORISSA
v.
Utkal Distributors Private Ltd.
R.N. MISRA AND P.K. MOHANTI JJ.
CRIMINAL APPEAL NO. 195
OF 1974.
DECEMBER 10, 1976
R.K.
Mohapatra for the Appellant.
K.C. Mohanty and R.Ch. Mohanty for the Respondents.
R.N. Misra
J.—This is an appeal under
section 374 of the Code of Criminal Procedure, 1973, directed against the
judgment of acquittal passed by a learned Magistrate acquitting the respondents
of an offence punishable under section 162(1) of the Companies Act, 1956
(hereinafter referred to as "the Act").
Complaint was
laid by the Registrar of Companies on the allegation that the Utkal
Distributors Private Ltd. was incorporated as a company under the Indian
Companies Act of 1913, on April 28, 1948, and is an existing company as defined
under section 3(ii) of the Act. Under section 159 of the Act, the company and
its directors had the statutory obligation to file with the Registrar an annual
return in the prescribed form made up to the date of the annual general
meeting. The annual general meeting of the year 1971 was to be held on or
before the 30th of September, 1971, and the return had to be filed before the
Registrar on or before November 29, 1971, as provided under section 159(1) of
the Act. The Registrar served notice on the officers of the company asking for
compliance, but there has been default and such default has continued from 30th
of November, 1971, till the date of complaint, i.e., 30th May, 1972. The
default thus continued up to the date of complaint covering a total period of
182 days.
The defence
plea was that the company became defunct from 1968; the employees of the
company left service; records of the company were seized by the C.B.I, and in
spite of attempts, no meeting of the board of directors or the annual general
meeting could be held.
Prosecution examined one witness and two witnesses
were examined on behalf of the defence. The learned Magistrate recorded an
order of acquittal by holding:
"According to section 159 of the Companies Act
the returns are to be prepared and filed with the Registrar within sixty days
from the date on which each of the annual general meetings referred to in
section 166 is held. Therefore, the filing of the annual returns is dependent
upon the holding of the annual general meeting. If there will be no annual
general meeting then it is not possible for the directors and the company to
prepare and file the returns with the Registrar. Not holding of the annual
general meeting is an offence punishable under section 168 of the Act. The
prosecution has failed to say if there was any such annual general meeting.
Under the circumstances the accused persons cannot be held guilty under section
162(1) for not filing the annual returns with the Registrar of Companies".
The judgment of acquittal passed by the learned
Magistrate upon this reasoning is assailed in appeal.
When this appeal came up for hearing before our
learned brother, Panda J., he directed the appeal to be heard by a Division
Bench with the following observation:
"That in the relevant year, i.e., 1971, there
was no annual general meeting as contemplated under section 166 of the Act is
not in dispute. The short point for consideration was if in consequence of not
holding the annual general meeting a company is unable to place before it the
annual return whether such a company would be liable under section 162(1) of
the Act or not. In this case, the plea of the respondents was that as the
accounts had been seized by the C.B.I, in 1967, the managing director had
resigned since 1967, and the directors were noticed to attend the annual
general meeting in 1967, but they did not turn up, the annual return could not
be prepared and produced and thereafter submitted to the Registrar within 60
days as required under section 159(1) of the Act. The learned lower court held
that the filing of the annual return is dependent upon the holding of the
annual general meeting. Therefore, if there is no annual general meeting it is
not possible for the directors and the company to prepare and file the return
either before the annual general meeting or send the same to the Registrar
subsequently. He further held that not holding of the annual general meeting is
a different offence punishable under section 168 of the Act.
The learned lower court seems to have missed the
point. Under section 159(2) of the Act it is provided thus:
'The said return shall be in the Form set out in Part
II of Schedule V or as near thereto as circumstances admit and where the return
is filed even though the annual general meeting has not been held on or before
the latest day by which it should have been held in accordance with the
provisions of this Act, the company shall file with the return a statement
specifying the reasons for not holding the annual general meeting' So in this
case non-submission of the return within 60 days as required under section
159(1) is an independent offence which makes the respondents liable under
section 162(1) of the Act.
The point that obsesses me is the quantum of
punishment. In an earlier case against these accused persons for the year 1969
they have been found guilty and the operative portion of the order runs thus:
'The respondents 1, 2 and 4 failed to submit the
annual return with the Registrar by that date and, therefore, they were in
default from November 30, 1969, up to the date of decision of trail court,
i.e., September 5, 1973.
The result, therefore, is that the appeal is allowed
and the order of acquittal passed against the respondents is set aside.
Respondents 1, 2 and 4 are convicted under section 162 of the Act and each of
them is sentenced to pay a fine of Re. 050 for every day during the period from
November 30, 1969, to September 5, 1973.........'
The company is to hold the annual general meeting
every year. If in the said annual general meeting the annual return has not
been filed for that year, that cannot be filed after the year lapses. On the
expiry of any calendar year, the possibility of having the annual general
meeting for that year vanishes and thereafter the liability to have the general
meeting of the subsequent year arises within the stipulated time. In the case
of this company for an earlier period reported in [1975] 41 CLT 1356; [1978] 48
Comp Cas 106, 110 (Orissa) (Registrar
of Companies v. Utkal Distributors Pvt. Ltd.) Justice Mohanti has passed
the order quoted above. Therein the liability to pay the fine has been from
November 30, 1969, to September 5, 1973. Evidently November 29, 1969, was the
last date by which the annual return of that year, i.e., 1969, should have been
filed before the Registrar. So he has fixed the liability from November 30,
1969. The second date, i.e., September 5, 1973, is the date when the trial
court acquitted the accused persons. The question that arises is whether beyond
one year this fine could be imposed. In my opinion, the default continues at
best ,for 15 months as per the provisions of section 166 of the Act which lays
down that every company shall in each year hold in addition to any other
meetings a general meeting as its annual general meeting and shall specify the
meeting as such in the notices calling it; and not more than fifteen months
shall elapse between the date of one annual general meeting of a company and
that of the next. There is no rationale why the default should continue, as in
the reported case, till September 5, 1973, when the S.D.M. delivered the
judgment".
The learned single judge has recorded a positive
finding that the judgment of acquittal is wrong and unconnected with the
holding of the annual general meeting, the company and its officers had the
liability to file the return within the appointed time before the Registrar. In
fact, holding of an annual general meeting is not a condition precedent to
filing of the return before the Registrar. As counsel appearing for the
respondents does not dispute the analysis presented by our learned brother,
Panda J., we must hold that the judgment of acquittal is bad and whether an
annual general meeting was held or not, the respondents must be found to have
committed an offence punishable under section 162 of the Act, We would
accordingly reverse the judgment of acquittal.
Next comes the question regarding the recurring fine.
For convenience, we propose to extract the relevant portions of sections 159
and 162 of the Act before we proceed to examine the question:
"159. (1)Every company
having a share capital shall, within sixty days from the day on which each of
the annual general meetings referred to in section 166 is held, prepare and
file with the Registrar a return containing the particulars specified in Part I
of Schedule V, as they stood on that day, regarding—...
(2)The said return shall be in
the Form set out in Part II of Schedule V for as near thereto as circumstances
admit and where the return is filed even
though the annual general meeting has not been held on or before the latest day
by which it should have been held in accordance with the provisions of this
Act, the company shall file with the return a statement specifying the reasons
for not holding the annual general meeting: .........
162. (1) If a company fails to comply with any of the
provisions contained in section 159, 160 or 161, the company, and every officer
of the company who is in default, shall be punishable with fine which may
extend to fifty rupees for every day during which the default
continues......"
Section 166 of the Act makes provision for holding of
the annual general meeting and such meeting has to be so held that more than
fifteen months shall not elapse between the day of one annual general meeting
and the other. The Registrar has power to extend the time up to three months
for any special reason. Section 162 of the Act making provision for the offence
in question provides for the punishment of fine which may extend to rupees
fifty for every day during which the default continues. The default in the
instant case arises out of the failure to comply with the provisions contained
in section 159 of the Act. As already indicated, the filing of the return is
not conditional upon holding of the annual general meeting and compliance is possible even without such
meeting being held provided along with a return a statement specifying the
reason for not holding the annual general meeting is also filed. The learned
single judge while coming to hold that the offence had been committed rightly
relied upon section 159(2) of the Act, but while coming to deal with the
question of punishment referred to, in our view without justification, the
holding of the annual general meeting. It is true that the annual general
meeting of a particular year can be held within an upper limit of eighteen
months as provided in section 166 of the Act and there would be no scope to hold
such a meeting after the lapse of such period and yet treat such meeting as the
annual general meeting of that particular year. In our opinion, on the facts of
the present case and in view of the provisions in section 159(2) of the Act,
for a consideration of the duration of default, it was not necessary to refer
to section 166 of the Act. Independent of holding of the annual general
meeting, there was default and it continued until the return was filed. There
was no explanation from the accused persons as to why the return was not filed
when the law permitted such return to be filed even without the holding of the
annual general meeting.
It is a
well-known legislative policy to provide for imposition of recurring fine where
it is intended that the statutory provision should be followed and the breach
should not be permitted to continue. The default in this case is, therefore,
unconnected with the holding of the annual general meeting and as long as the
default continued the delinquents were liable to be subjected to the recurring
punishment.
The
distinction between the punishment provided under section 162(1) and section
168 of the Act may now be brought out. Under section 162, there is no
punishment for the main offence while under section 168, the punishment
provided is a fine which may extend to the tune of Rs. 5,000 and in case of
continuing default, there is provision for a recurring fine for every day
during which the default continues. For the offence under section 162 of the
Act, therefore, the appropriate punishment has to be only a daily fine for
every day during which the default continues. The first default was on November
30,1971, and had admittedly continued up to the date of complaint as mentioned
in paragraph 6 of the prosecution report. P.W. 1 who is an assistant employed
in the office of the Registrar of Companies deposed to the effect that the
default was not made good till the filing of the complaint and there is no
evidence that the default continued beyond the date of filing of the complaint.
On the facts of the case, it must, therefore, be held that the default
continued for 182 days beginning from November 30, 1971, up to 30th of May,
1972, and on conviction for the offence under section 162(1) of the Act, each
of the respondents is liable to a sentence of fine for the aforesaid period.
Keeping the facts of the case in view, we think, imposition of a daily fine of
rupee one for these 182 days of default for each of the respondents would meet
the ends of justice. Accordingly, we reverse the judgment of acquittal, convict
each of the respondents under section 162(1) of the Companies Act and direct
that each of them shall pay a daily fine of rupee one for these 182 days of
default as aforesaid, or in default respondents Nos. 2 and 3 shall suffer
simple imprisonment for fifteen days each. Out of the fine, if recovered, a sum
of rupees two hundred be paid to the Registrar of Companies under section 626
of the Act for meeting the costs of the proceedings.
Mohanti J.—I
agree.
[2002]
39 SCL 310 (AP)
HIGH
COURT OF ANDhRA PRADESH
v.
Ch. Mohan Rao
C.Y. Somayajulu, J.
Criminal Petition No. 718 of 2000
February 12, 2002
Section 163
of the Companies Act, 1956 - Registers and returns - Place of keeping, and inspection
of - Whether since names of shareholders of company have to be entered in
‘register of members’ as laid down in sections 150 and 151, contention that
list of registered shareholders of company is not one of registers to be
maintained under section 163(1), could not be accepted - Held, yes - Whether,
therefore, under section 163(1) a shareholder is entitled to a copy of list of
registered shareholders - Held, yes
Facts
The first respondent filed a petition under section 163(5) alleging that he was a shareholder of the first petitioner company and his request for a copy of the list of registered shareholders of the first petitioner from 30-4-1995 to 1996, was not complied with. The company contended that since the list of the registered shareholders of the first petitioner-company was not a register open to inspection under section 163(1), proceedings under section 163(5) were not sustainable.
Held
As per section 41(3), every shareholder is a member of the company. As per section 150, every company has to keep a ‘register of members’ containing the name, address, occupation of each member and, in the case of a company having share capital, the shares held by each member, etc. As per section 151, if a company has more than fifty members, it shall, unless the ‘register of members’ is in such a form as in itself to constitute an index, keep an index of the names of the members of the company. Therefore, it is clear that the names of the shareholders, whose names are registered in records of the company, would and should be available, in its ‘register of members’.
It is clear from section 163(1) and (3) that all members and debenture- holders of a company can, without paying any fee, and any other person on payment of fees prescribed, inspect the registers, etc., mentioned in sub-section (1) of section 163, and they can by paying the fees prescribed, require copies of those registers, etc., to be furnished to them. Section 163(4) mandates furnishing copies on such request within ten days (exclusive of non-working days) of receipt of that request.
Since the names of the shareholders of the company have to be entered in the ‘register of members’ as laid down in sections 150 and 151, the contention of the petitioner that the list of registered shareholders of the first petitioner-company was not one of the registers to be maintained under section 163(1), could not be accepted. Therefore, there were no grounds to quash the complaints and the instant petition was to be dismissed.
Case Referred to
N. Satyaprasad Rao v. V.L.N. Sastry [1988] 64 Comp. Cas. 492 (AP).
B. Nalinkumar for the Petitioner. Raghunandan for the Respondent.
Judgment
C.Y. Somayajulu, J.—This petition is filed to quash the proceedings in S.T.C. No. 30 of 1999 on the file of the Court of the Special Judge for Economic Offences, Hyderabad.
2. The first respondent filed the above S.T.C. under section 163(5) of the Companies Act, 1956 (‘the Act’), alleging that he is a shareholder, holding 46,600 shares in the first petitioner-company and as his request for a copy of the list of registered shareholders of the first petitioner as on 30-4-1995 to 1996, was not complied with, he made a request through registered notice on 30-1-1999, enclosing a demand draft for Rs. 200 to cover the expenses to be incurred for providing xerox copies of the documents required and postal charges, undertaking to pay additional charges, if any required, and that that notice was returned unserved, raising a presumption that the petitioners are deliberately avoiding to furnish the required information, and, hence, the petitioners have committed an offence under section 163(5).
3. The contention of the learned counsel for the petitioners is that since the list of the registered shareholders of the first petitioner-company is not a register open to inspections under section 163(1), proceedings under section 163(5) are not sustainable. The contention of the learned counsel for the first respondent is that ‘register of members’ mentioned in section 163(1) is but a list of registered shareholders, and so the first respondent is entitled to make a request for a copy thereof by paying the necessary fees as contemplated by section 163(2) and (3).
4. As per section 41(3) of the Act every shareholder is a member of the company. In fact this court in N. Stayaprasad Rao v. V.L.N. Sastry [1988] 64 Comp. Cas. 492 (A.P.) held that the shareholders in whose favour shares are issued could exercise rights as members of the company, notwithstanding the omission of their names from the register. As per section 150 every company has to keep a ‘register of members’ containing the name, address, occupation of each member, in the case of a company having share capital, the shares held by each member etc. As per section 151 if a company has more than fifty members, it shall, unless the register of members is in such a form as in itself to constitute an index, keep an index of the names of the members of the company. Therefore, it is clear that the names of the shareholders, whose names are registered in records of the company, would and should be available, in its ‘register of members’.
Section 163(1) of the Act reads as follows:
“163. Place of keeping, and inspection of, registers and returns.—(1) The register of members commencing from the date of the registration of the company, the index of members, the register and index of debenture- holders, and copies of all annual returns prepared under sections 159 and 160, together with the copies of certificates and documents required to be annexed thereto under sections 160 and 161, shall be kept at the registered office of the company :
Provided that such registers, indexes, returns and copies of certificates and documents or any or more of them may, instead of being kept at the registered office of the company, be kept at any other place within the city, town or village in which the registered office is situate, if—
(i) such other place has been approved for this purpose by a special resolution passed by the company in general meeting, and.....,
(ii) the Registrar has been given in advance a copy of the proposed special resolution.”
Sub-section (3) of section 163 reads as follows:
“Any such member, debenture-holder or other person may—
(a) make extracts from any register, index, or copy referred to in sub-section (1) without fee or additional fee, as the case may be; or
(b) require a copy of any such register, index or copy or of any part thereof, on payment of such sum as may be prescribed for every one hundred words or fractional part thereof required to be copied.”
5. It is clear from section 163(1) and (3) that all members and debenture- holders of a company can, without paying any fee, and any other person on payment of fees prescribed, inspect the registers, etc., mentioned in sub-section (1) of section 163, and they can by paying the fees prescribed, require copies of those registers, etc., to be furnished to them. Section 163(4) mandates furnishing copies on such request within ten days (exclusive of non-working days) of receipt of that request.
6. Since the names of the shareholders of the company have to be entered in the ‘register of members’ as laid down in sections 150 and 151 referred to above, the contention of the petitioner that the list of registered shareholders of the first petitioner-company from 30-4-1995, to 1996 is not one of the registers to be maintained under section 163(1), cannot be accepted.
Therefore, I find no grounds to quash the complaint. Hence, the petition is dismissed.
[1996] 85 COMP. CAS. 1 (BOM)
v.
Mahendra G. Wadhwani
R.G.
VAIDYANATHA J.
COMPANY APPEAL NO. 4-F OF 1993
SEPTEMBER
1, 1995
M.S. Usgaonkar and Smt. N. Navelkar for the Appellant.
R.G.
Vaidyanatha J.—This
is an appeal against the order dated March 10, 1993, in Company Petition No.
2/163(6)/CLB/WR/92 on the file of the Company Law Board, Western Region Bench,
Bombay. The respondent has remained absent in spite of service of notice, I
have heard learned counsel for the appellant.
The
respondent sent an application dated August 9, 1991, to the appellant-company
seeking an extract from the register of the company's members. "The
appellant-company sent a reply stating that a sum of Rs. 6,000 should be sent
in advance for preparing the copies. The respondent sent a reply asserting that
the claim of the appellant was excessive but sent an advance of Rs. 500 only
and requested the appellant to furnish the copies. Since the appellant-company
did not supply the copies and demanded Rs. 6,000, the respondent filed an
application before the Company Law Board under section 163(6) of the Companies
Act, 1956, for a direction to the appellant-company to furnish the extracts of
the list of members. After hearing both the sides the Company Law Board passed
the impugned order directing the appellant-company to quantify the amount
payable by the respondent within 15 days and then the respondent was directed
to send the amount by demand draft within 15 days and, thereafter, the
appellant-company should furnish the copies within ten days. Being aggrieved by
that order the appellant-company has come up with this appeal.
It
may also be mentioned that earlier the company filed a writ petition in this
court challenging the impugned order being Writ Petition No. 276 of 1993. Later
it was allowed to be withdrawn since the appellant has a statutory right to
come by way of statutory appeal to this court. The present appeal is filed
under section 10F of the Companies Act.
Learned
counsel for the appellant has questioned the correctness and legality of the
impugned order. It was argued that the supply of copies involves voluminous
work and the appellant-company has demanded Rs. 6,000 only as advance and the
Company Law Board erred in interfering with that.
No
doubt the company is under a statutory obligation to supply copies whenever
asked for by anybody subject, of course, to demanding and collecting the
necessary charges for preparing the copies. In the present case, the appellant-company
demanded Rs. 6,000 as advance but the respondent sent only Rs. 500 as advance.
The appellant-company is also aggrieved by the time frame given in the impugned
order under which the company has been asked to supply copies within ten days.
It was pointed out that if one typist is placed exclusively in charge of
preparing the copies demanded by the respondent, it would take about 80 days.
There are about 4,000 members in the company. For each member there is one
sheet in the register. The learned company advocate has explained that one
typist may prepare 50 to 60 sheets per day and to make all the copies of 4,000
members it will take about 80 days but the impugned order gives only ten days
to the company to give the copies. Then a grievance was made about the impugned
order not giving a discretion to the company for supplying copies by another
mode. In my view, both the grievances of the appellant-company are justified.
The
member of the Company Law Board who has passed the impugned order has not taken
into consideration the practical difficulties with which the appellant-company
is faced. The respondent is an utter stranger to the company. It is riot known
for what reason he wants the extracts of the register of members. The company
cannot be expected to spare one typist exclusively for taking the copies. The
company work should net be allowed to suffer merely because a stranger wants
copies and that too without disclosing the reason for the same. Today learned
counsel for the appellant has made available the particulars of preparing
copies as suggested by this court on the last hearing date. It is seen that
there are about 3,800 members in the appellant-company. Each member will have
one folio sheet. Therefore, the company will have to prepare 3,800 copies of
folios in order to meet the demand of the respondent. The approximate cost, as
per law, the company can charge is Re. 1 for every 100 words. This will work
out to about Rs. 2,280 for preparing copies of folios of 3,800 members.
If
xerox copies are taken, it will be convenient since it will save lot of time
and in which case the cost will come to Rs. 3,800. I, therefore, feel that the
impugned order should be modified and the respondent should be directed to pay
charges of Rs. 2,280 and wait for six months to get the necessary copies or he
can pay Rs. 3,800 and take the copies within two weeks.
It
is also seen in one of the grounds in the memo of appeal that the vires and
validity of section 163(3) and (4) of the Companies Act is challenged on the ground
of being unjust and unreasonable. In my view, for the disposal of this appeal,
it may not be necessary to go into the same. That question is left open.
In
the result the appeal is allowed partly. The impugned order is modified. The
appellant-company shall give typed copies of the extracts of the register of
members within a period of six months after the respondent sends cash of Rs.
2,280 in pursuance of this order. In case the respondent wants the copies
earlier, it is open to him to send cash of Rs. 3,800 to the appellant-company
and in which case the appellant-company shall supply xerox copies of the lists
of members within a period of two weeks from the date of receipt of the cash.
The respondent shall make the above payments only by way of demand draft on any
scheduled bank. In the circumstances of the case, there will be no order as to
costs in this appeal.
[1996] 87 COMP. CAS. 689 (CAL.)
Maknam
Investments Ltd., In re
Baboo Lall Jain, J.
February 13, 1995
Company Petition No. 379 of 1994 connected
with Company Application No. 242 of 1994.
S.B.
Mukherjee, S.N. Mukherjee, Ranjan Bachwat, D. Basak and Aniket Agarwal, for the
petitioners.
Ashok Das
Adhikary, Dipak Kumar Pal, for the Respondent.
B. Debnath,
for the Union of India.
Baboo Lall
Jain J. —This is an
application made under sections 391(2) and 394 of the Companies Act, 1956, for
section of the scheme of amalgamation being annexure "A" to the
petition. The scheme envisages amalgamation of Maknam Investments Ltd.
(hereinafter shortly referred to as "Maknam") and Namtok Investments
Ltd. (hereinafter shortly referred to as "Namtok") being the two
transferor companies with India Foils Ltd. (hereinafter referred to as
"IFL") being the transferee-company.
The case of
the petitioner is, inter alia, to the effect that Maknam has an issued,
subscribed and paid-up capital of Rs. 15 crores. Namtok has a paid-up capital
of Rs. 14,50,00,000. The transferee-company, i.e., IFL, has a paid-up capital
of Rs. 6,66,88,980 divided into 66,68,898 equity shares of Rs. 10 each fully
paid up.
Pursuant to
an order dated September 19, 1994, made by this court at the petition of the
said transferee and transferor companies, meetings were held under the
different chairmen appointed by this court. The said meetings were held on
October 26, 1994. At the meeting of the shareholders of Maknam 99.98 per cent.
of the shareholders attended the meeting and they all voted in favour of the
scheme and no one voted against the G scheme. At the meeting of equity
shareholders of Namtok, 99.90 per cent. of the shareholders attended the
meeting and they all voted in favour of the scheme. At the meetings of the
preference shareholders of Maknam and Namtok, the preference shareholders who
attended the meeting, voted in favour of the scheme. At the meeting of India
Foils Ltd. out of holders of 66,68,898 shares, holders only of 33,16,051 shares
attended the meeting. Out of-the shareholders attending and voting at the said
meeting, holders of 33,10,950 shares voted in favour of the scheme, and holders
of 723 shares voted against the scheme. The percentage of the persons who voted
against the scheme, so far as IFL is
concerned, works out to .02 per cent. and of those who voted in favour of the
scheme comes to 99.98 per cent. The other shareholders, holding 4,378 shares,
who were present in the meeting did not cast their votes. The instant
application was made for final sanction of the scheme. None of the holders of
the 723 shares, who voted
against the scheme, have appeared before this court to oppose this application.
So far as the Union of India is concerned, it was served with a notice of this
application and it has expressed through its advocate that the Union of India
has no objection to the sanction of the scheme.
Notice of
this application was published in the newspapers and Tamal Kumar Majumdar, a
shareholder of India Foil»Ltd., holding 13 fully paid equity shares of Rs. 10
each, has appeared and is opposing the sanction of the scheme.
The said Tamal
Kumar Majumdar received the notice in respect of the meeting of the
shareholders on October 28, 1994. The envelope in which the said notice was
sent has been produced before me and it appears that the notice was posted on
September 30, 1994. It also appears that due to some postal error, the notice
erroneously went to Noapara on October 10, 1994, and the stamp of that post
office is affixed on the said envelope. Thereafter, the envelope has been
stamped with the stamp of Haridebpur which is dated October 28, 1994. According
to the said objector, he received the notice on October 28, 1994, i.e., two
days after the meeting was held. Such notices are issued by the chairman
appointed by this court and the same are despatched by or under the supervision
of the chairman by certificate of posting. Section 172(3) of the Companies Act
provides that the accidental omission to give notice to or the non-receipt of
notice by that member to whom it should be given shall not invalidate the
proceeding at the meeting. I am satisfied that the late delivery of the notice
to Sri Tamal Kumar Majumdar on October 28, 1994, was due to postal delays
and/or omissions on the part of the postal authorities and this cannot be
treated so as to invalidate the meeting. Even if Mr. Majumdar could have
attended the meeting, his presence could not affect the result of the meeting
even if he voted against the meeting.
The next
grievance of the objector, Mr. Majumdar, is that he has not been supplied a
list of members. It appears that the objector had written a letter to the
chairman, Mr. B.M. Khaitan, in which he, inter alia, prayed for supply of an
updated list of members upon the usual terms. Section 163 of the Companies Act
provides that the company shall keep the register of members open during
business hours subject to such reasonable restriction as the company may impose
to the inspection of any member, A without fee. There is no allegation that any
such inspection was sought to be taken. Under section 163(2)(b), a member may
require a copy of such register on payment of such sum as may be prescribed for
every 100 words or fractional part thereof required to be copied. This
provision, in my opinion, envisages that the member on payment of such sum
obtain b copies of the register of members. This envisages a prior payment to
the company of the prescribed sum, and it is only upon such payment that a copy
is to be supplied as provided under section 163(4). A mere request to the
chairman by letter is, in my opinion, insufficient. I am not satisfied that the
objector complied with the requirements of section 163(3)(b) of c the Companies
Act. Furthermore, the petitioner did not even make any attempt to take any
inspection of the register of members which he could do under the said section
163 of the Companies Act. It was up to the objector to take appropriate steps
for obtaining the list of members or for inspection thereof, if he was of the
view that it could have in any manner helped the objector in his case before
this court.
A point has
also been taken that out of the eleven directors, only four directors were
present at the meeting and that two of them did not exercise their voting right
and one director voted in favour of the scheme for 800 equity shares whereas
his total holding was 2,207 equity shares. The court is concerned with the
total voting of the shareholders and the pattern of its voting. There is
nothing to show that there is any dispute as between the directors of IFL, as
is being sought to be alleged. It is said that one of the directors, Mr.
Amitava Roy, has left the company and joined another company. The said Amitava
Roy might have been an employee director of the IFL. In any event, the leaving
of the said Amitava Roy is in no manner relevant so far as the sanctioning of
the scheme is concerned.
The next
point that has been urged in the affidavit-in-opposition is that ten
groups/associated companies hold about 48.32 per cent. of the paid-up capital
of India Foils Ltd. The names of the said groups/associated companies are not
given in the affidavit-in-opposition affirmed by Mr. Majumdar. The scheme is a
scheme as between members of the company on the one hand and the company on the
other hand, and I do not see as to how a shareholder of a company can be
deprived of his voting rights at a meeting of the members. The shareholders of
the company stand on the same footing and they have to consider the scheme in
their capacity as members and to give their votes in the meeting of the
shareholders. The benefit or loss, if any, has to*go to the concerned
shareholders.
The objector
has also relied on certain resolutions which were passed at the annual general
meeting of the company held on August 23, 1994. The minutes of the meeting have
been placed before me. The resolutions passed thereat do not provide as to the
date within which the right shares are to be issued. The said resolutions also
provide for various requirements to be complied with before any rights issues
are to be made. For example, premium in respect of rights issues has to be fixed
by the board prior to the issues in consultation with SEBI or such other
authorities as may be prescribed. The rights shares have to be issued on such
date as may be fixed by the directors. Such shares have to be issued in
consultation with the Calcutta Stock Exchange with reference to equity shares.
By another special resolution of the same date, the board of directors was
authorised to issue and allot such number of equity shares as may be required
to be issued and allotted whether to the member of the company or not of an
aggregate amount not exceeding Rs. 150 crores. In short, it cannot be said that
there has been any violation of the special resolutions passed at the annual
general meeting held on August 23, 1994, since the date of issue of the rights
shares has been left to the discretion of the board of directors.
It was also
submitted on behalf of the objector that the word "private" has not
been removed from the certificate of registration and/or respective documents
in spite of the fact that both the transferor companies have become public
limited companies. The certificate of registration was produced before this
court and it appears that the name "private" has in fact been deleted
from the certificate by the Registrar of Companies, West Bengal, in respect of
both the transferor companies pursuant to a letter written in that respect.
Unfortunately, the copies supplied to the objector did not show the said
deletion in the copy. However, I do not think that there is any substance in
this objection since the name "private" has already been deleted in
accordance with law in the case of both the transferor companies.
Objection has
also been taken with regard to the increase in the share capital of the
transferor companies. If there has been increase in the share capital of the
transferor companies, I do not think as to how the same can be a subject-matter
of objection by the objector in so far as the amalgamation of the companies is
concerned.
It was also
submitted that the objects of the transferor and transferee companies are not
the same. The transferor companies are investment companies and it appears that
they have made large investments. So far as the transferee company is concerned, the said transferee company
also engages in investment and the investment of the transferee company as on
March 31, 1994, has been shown in the audited balance-sheet at Rs. 6,17,72,295.
The investments of Maknam as on March 31, 1994, are shown at Rs. 9,65.69.144
and those of Namtok as on March 31, 1994, are shown in the balance-sheet at Rs.
9,38,17,440. It shows that the transferee-company is also carrying on the
business of investments as is being done by the transferor companies and that
there is similarity in object so far as the business of investment is concerned.
It is not necessary that all the objects should be identical in cases of
amalgamation of companies.
The next
objection that has been taken is that the income of the transferor companies is
very meagre or even there are losses. So far as the transferee, IFL. is
concerned, it has vast reserves and it has been earning substantial profits.
The transferor companies have undoubtedly large investments which can be
utilised in the case of need for diversion in other useful purposes if the
companies are ultimately amalgamated. It is a matter for the shareholders to
consider commercially whether such merger is beneficial or not. The court is
really not concerned with the commercial decision of the shareholders until and
unless the court feels that the proposed merger is manifestly unfair or is
being proposed unfairly and/or to defraud the other shareholders. Whether the
merged companies will be ultimately benefited or will be able to economise in
the matter of expenses is a matter for the shareholders to consider. If three
companies are amalgamated, certainly, there will be some economies in the
matter of maintaining accounts, filing of returns and various other matters.
However, the court is really not concerned with the exact details of the matter
and if the shareholders approved the scheme by the requisite majority, then the
court only looks into the scheme as to find out that it is not manifestly
unfair and/or is not intended to defraud or do injustice to the other
shareholders. I do not find that there is any material before me to hold that
the proposed scheme of amalgamation is manifestly unfair or is intended to
defraud any shareholders or to do injustice to other shareholders.
It was also
submitted that the exchange ratio of shares has not been fixed properly. The
exchange ratio has been fixed by a reputed firm of chartered accountants,
namely, Price Waterhouse, and I do not think that it can be said that the same
is unfair or unreasonable, simply because the objector says so. It was also
submitted that the said Price Waterhouse did not fix the valuation on proper
basis as required under the guidelines issued by the Central Government. The guidelines relied on on behalf of
the objector mention that the same are purely administrative instructions for
internal official use and are, therefore, not to be quoted, cited or published
as the official guidelines of the Government. In my opinion, the court is not
going into the matter of fixing the exchange ratio in great detail or to sit in appeal from the decision
of the chartered accountant. If a chartered accountant of repute has given the
exchange ratio as per valuations made by him, and if the same is accepted by
the requisite majority of shareholders, the court will only see whether there
is any manifest unreasonableness or manifest fraud involved in the matter. Mr.
S.B. Mukherjee, learned counsel appearing on behalf of the companies, relied on
a judgment reported in Hindustan General Electric Corporation Limited, In re
[1959] 29 Comp Cas 46; AIR 1959 Cal 679. Some of the observations made in the
said judgment are set out hereunder (at page 48):
"The
function and duties of the court in the matter of sanctioning of schemes are
well-known. Any scheme which is fair and reasonable and made in good faith will
be sanctioned, if it could reasonably be supposed by sensible people to be for
the benefit of each class of the members or creditors concerned [Alabama. New
Orleans, Texas and Pacific function Railway Co., In re [1891] 1 Ch 213, 259,
243 and English, Scottish and Australian Chartered Bank, In re [1893] 3 Ch 385.
It is also the duty of the court to see that the resolutions were passed by the
statutory majority section 391(2) of the Indian Companies Act, 1956J [see
Dorman Long and Co., In re [1934] 1 Ch 635; [1955] 5 Comp Cas 30J. In the case
before me, Mr. Mitra, who opposed tin's scheme on behalf of the Hindustan
Commercial Bank Ltd., which is the holder of 2,000, 5 per cent. preference
shares of Rs. 100 each of the company, has contended that the scheme was not
passed by the requisite majority. It is argued with reference to the report of
the chairman of the meeting held on December 11, 1957, that holders of
preference shares of the value of Rs. 6,42,700 were present at the meeting but
only holders of the preference shares of the value of Rs. 4,42,700 voted in
favour of the resolution whereas to constitute the requisite majority, the
holders of the preference shares of the value of Rs. 4,82,000 should have voted
and so the resolution was not validly passed. Now, there is some controversy
raised in the affidavit of Mr. Pai, the representative of the Hindustan
Commercial Bank, as to what attitude he took up at the meeting held on December
11, 1957. Mr. Pai's suggestion is that he voted against the scheme for reduction
resolution which was passed at the meeting of February 14, 1957, when this
resolution was placed before the meeting
of December 11, 1957. It is, however, clear from the report of the chairman
that those resolutions which were passed on February 14, 1957, were not put to
vote at all in the meeting of December 11, 1957. It was only the modified
scheme which was put to vote but Mr. Pai expressed his intention to remain
neutral in respect of this matter. He did not vote either in favour of or
against the modified scheme. In other words, he did not take part in the voting
at all. All the other preference shareholders present voted in favour of the
resolution.
Section
391(2) of the (Indian) Companies Act is as follows:
'If a
majority in number representing three-fourths in value of the creditors, or
class of creditors, or members, or class of members, as the case may be.
present and voting either in person or, where proxies are allowed, by proxy, at
the meeting, agree to any compromise or arrangement, the compromise or
arrangement shall, if sanctioned by the court, be binding on all the creditors,
all the creditors of the class, all the members, or all the members of the
class, as the case may be, and also on the company, or, in the case of a
company which is being wound up, on the liquidator and the contributories of
the company.'
It will be
seen from the above provision that additional words 'and voting' between the
words 'present' and 'either in person' have been introduced in sub-section (2)
of section 591 which were absent from section 153(2) of the Act of 1913. There
can be no doubt that these words 'and voting' have been introduced with a
purpose and it appears to me that the intention of the framers of this section
was that the majority of the three-fourths value must be of persons who were
present and who took part in the voting'. Mere presence would not be enough.
This being the proper construction of sub-section (2) of section 391, it
appears that all the preference shareholders present besides Mr. Pai voted in
favour of the resolution. In other words, there was a unanimous passing of the
resolution. Therefore, there is no doubt that the requisite majority
contemplated in section 391(2) agreed to the arrangement now presented before
the court for sanction. Reference may be made to Buckley's Companies Acts,
latest edition, page 408, where Buckley points out that the words 'and voting'
had brought about an alteration in the corresponding English section. Mr. Mitra
relied on the case of Betuial Bank Ltd. v. Suresh Chakravarthy [1951] 21 Comp
Cas 315; AIR 1952 Cal 133; 55 CWN 206, in support of this argument, but that
was a case under section 153 of the Indian Companies Act of 1913 and so is not
of assistance to Mr. Mitra."
He-also
relied on the judgment reported in Hindusthan Commercial Bank Limited v.
Hindusthan General Electrical Corporation [1960] 30 Comp Cas 367; AIR 1960 Cal
637, which was in appeal from the aforesaid earlier judgment. The appeal court
affirmed the said judgment of the trial court.
The petitioner
also relied on the judgment reported in Sussex Brick Co. Ltd., In re [1960] 30
Comp Cas 536; [1961] 1 Ch 289; [1960] 1 All ER 772. In the said case, it was
held as follows (at page 538 of 30 Comp Cas):
"That
being the undoubted law, I think that the present scheme and the present offer
are undoubtedly open to criticism, and that a clever businessman, a man
well-versed in company law and matters which influence dealings on the stock
exchange, could find a good many loopholes in it. That amounts to this: the
scheme is open to criticism; but does that go far enough? That is the
difficulty in the present case. It has not been suggested on behalf of the
applicant that there has been any bad faith or any intentional misleading of
the applicant, but although the scheme is open to a good deal of criticism,
which might be enlarged on at great length in one or more circulars, what
exactly the effect on the mind of the shareholders would have been I do not
pause to inquire. That the scheme is open to criticism I have no doubt, but can
it be said therefore, to be unfair? I think it rather difficult to predicate
unfairness in any case in which there has been perfect good faith on the side
of the person who is alleged to have been unfair. I think that the applicant is
faced with the very difficult task of discharging an onus which is undoubtedly
the heavy one of showing that he, being the only man in the regiment out of
step, is the only man whose views ought to prevail. That is the difficulty he
is faced with in the present case.
I agree that
certain criticisms set out in the applicant's affidavit show that a good case
could be made out for the formulation of a better scheme, of a fairer scheme,
of one which would have been more attractive to the shareholders if they could
have understood the implications of the criticism. I have no doubt at all that
a better scheme might have been evolved, but is that enough? Is it necessary to
establish the validity of such an offer as put forward in the present case? Is
there any point in the scheme on which a better view might have-prevailed, and
rather more generous treatment might have been offered to persons whose shares
are sought to be expropriated? A better and fairer offer might have been made,
possibly, but I do not think that because a scheme is not 100 per cent.
fair or right, there is the kind of unfairness with which Maugham J. was
dealing in the case Hoare and Co. In re [1933] 150 LT 374 to which I have
referred. The mere finding of items, or details, in the scheme which are open
to valid criticism, is not unfairness consistent with the spirit of that
judgment.
A scheme must be obviously unfair, patently unfair,
unfair to the meanest intelligence. It cannot be said that no scheme can be
effective to bind a dissenting shareholder unless it complies to the extent of
100 per cent. with the highest possible standards of fairness, equity and
reason. After all, a man may have an offer made to him and, although he would
prefer something better, would be quite prepared to accept it because it was
good enough in all the circumstances. It may be that the grounds for
criticising the present scheme are not grounds of such a nature as to render
the whole thing unfair in the sense in which Maugham J. used the words in the
case which I have cited.
A good deal of light is thrown in the consideration
of this section in Press Caps Ltd. In re [1949] 19 Comp Cas 327; [1949] Ch 434
(CA), where the test laid down by Maugham J. in Hoare and Co., In re [1955] 150
LT 374, 575, that where the statutory majority has accepted the offer, the onus
must rest on the applicant to satisfy the court that the price E offered is
unfair, was approved. . . . .
There is no suggestion that there has been anything
like intentional cheating or deception on the part of those promulgating this
scheme and, particularly, on the part of the authors of the circular.
Without putting my own view as to how this scheme
could have been improved and made a little more favourable and a little more
fair, perhaps, to the ordinary shareholders, I do not think that unfairness in
the sense in which it has been used in the reported cases has been established.
It must be affirmatively established that notwithstanding the view G of the
majority, the scheme is unfair, and that is a different thing from saying that
ii must be established that the scheme is not a very fair or not a fair one: a
scheme has to be shown affirmatively, patently, obviously and convincingly to
be unfair."
Learned counsel on behalf of the respondent objector
relied on the judgment in Alembic. Chemical Works Co. Limited, In re [1988] 64
Comp Cas 186 (Guj). The objections taken in the said case may be summarised as
follows (headnote):
"(a) that the explanatory statement sent along
with the notice of the meeting did not give enough details to enable the
shareholders to properly comprehend the ramifications of the scheme;
(b) that the shareholders of Neomer were to get
dividend for a period for which they were not members of Alembic and during
which Neomer had not made profits inasmuch as the scheme had to be deemed to
have effect from an earlier date, from 1983;
(c) that the value of the shares of Neomer
arrived at by the chartered accountants for the purpose of amalgamation had no
nexus to reality."
The findings of the court in the
said case may be summarised as follows:
"(i) That the scheme ought to be sanctioned
because the statutory provisions were complied with ; the majority was acting
bona fide; the class of creditors and shareholders were fairly represented and that
the scheme was sanctioned by an overwhelming majority; they had voted as men of
business in favour of the scheme and their votes were not obtained by
perpetrating any fraud upon them. The scheme was scrutinised from various
angles by the authority constituted under the Monopolies and Restrictive Trade
Practices Act as well as the income-tax authorities. Moreover, an industry in a
backward area generating employment was required to be resuscitated and
rejuvenated rather than annihilated and obliterated because the only
alternative outcome of not granting sanction to the scheme would be that Neomer
would have to be wound up. So far as it was practical, the court would always
be in favour of reviving an industry rather than closing it down.
(ii) That the break-up value of the shares of
Neomer arrived at by the chartered accountants was not one which could be
termed as grossly exaggerated. The only method which could be available for
arriving at a break-up value under such circumstances would be the quotation of
the Neomer share on the stock market. Where a large majority of shareholders
had approved of a valuation, the burden would be upon the objector to prove
that the said break-up value was either inadequate or that it was overrated.
While arriving at a valuation of a particular share even of a consistently
losing concern, neither the stock market quotation nor the intangible, assets
could be overlooked and the court would usually accept a valuation accepted by
the majority as fair and reasonable, unless the contrary was proved, and merely
because a different method of valuation could have been adopted would be no
reason for the court to dub the valuation as unfair.
(iii) That the shareholders of Neomer were not being
made A members with retrospective effect but were to be made members from a
particular date, namely, the effective date, and once the scheme was
sanctioned, the scheme of amalgamation would relate back to the effective date,
and hence they would be entitled to all the benefits of being members of
Alembic from the effective date just as they would be subjected to the b
disadvantages, if any, of being members of the transferee-company from the said
effective date. The provisions of section 205 of the Companies Act, 1956,
therefore, could not be said to have been violated, by making a provision for
payment of dividend from the effective date.
(iv) That the prospect of reviving the unit and
making it financially viable could not be totally disregarded. Moreover, the
court also could not be oblivious to the fact that an industry started in a
backward area and generating employment in such a backward area did not require
to be obliterated if it could be resuscitated with assistance from the magna
corporation like the transferee-company. It would be trite to say that when two
alternative courses were presented to the court, and while following one, an
established industry would be wiped out and by following the other it could be
revived, the court would lean in favour of the second alternative.
(v) That as a result of the amalgamation, a
sizable amount of almost three crores of rupees by way of tax benefit would
also result to Alembic.
While
sanctioning a scheme of amalgamation, a duty is cast upon the court to find out
whether the statutory requirements have been complied with. But even if the
statutory requirements have been complied with, the sanction of the court would
not automatically follow. A duty is cast upon the court to find out whether the
proposed scheme is for the benefit of the company as a whole. The court is not
supposed to set its seal upon a decision of the majority and while the court is
not supposed to scrutinise the scheme with a fine tooth comb to find out flaws
and then q to view them through a magnifying glass, the court must be satisfied
before the sanction is accorded that the majority vote was honestly obtained,
that the majority acted honestly, that no financial or arithmetical jugglery
was perpetrated either upon the creditors or upon the shareholders to cajole
them or coax them into voting in favour of the scheme. However, the scheme is
not to be scrtunised by the court with the eye of an expert or the exactness of
an accountant, but if the scheme is, broadly speaking, calculated to benefit
the company as a whole, it would be entitled to the sanction of the
court."
The
petitioner relied upon the judgment of the Supreme Court in Hindustan Lever
Employees' Union v. Hindustan Lever Limited [1995] 83 Comp Cas 30. In the said
case, one of the attacks on the sanction of the scheme was that there were
statutory violation, procedural irregularities of provisions of the Act and
under valuation of shares. The Supreme Court held that there was no violation of section 391(1)(a) of the Act and
the claim that the disclosures in the explanatory statements were not as
required was without basis, as it was not established that the statement did
not disclose the correct financial position of Tomco, nor was there anything to
show that the material was not disclosed. The court held that the petitioner
failed to establish any fraud or prejudice. On the valuation of shares for the
exchange ratio, the court found that a well-reputed valuer of a renowned firm
of chartered accountants and a director of Tomco determined the rate by
combining three well-known methods, namely, the net worth, the market value
method and the earning method. The figure so arrived at could not be shown to
be vitiated by fraud and mala fide and the mere fact that the determination
done by a slightly different method might have resulted in different conclusion
would not justify interference unless it was found to be unfair. In the instant
case also, it was sought to be suggested that the explanatory statement did not
disclose the full facts. The said explanatory statement was settled by an
officer of this court and I do not think that the same can be challenged by
simply saying that the same did not disclose the full facts. So far as the
requirements of the statute are concerned, the same have been complied with. As
in the case before the Supreme Court, here also overwhelming members of the
company have supported the claim and have not complained about the lack of
notice and/or the insufficiency of notice or lack of understanding of the same,
and it will not be right to hold that the explanatory statement was not proper
or was lacking in any material particulars.
In the said
case Hindustan Lever Employees' Union v. Hindustan G Lever Limited [1995] 83
Comp Cas 30 (SC) at page 39, the Supreme Court, inter alia, held as follows:
"Section
394 casts an obligation on the court to be satisfied that the scheme of
amalgamation or merger was not contrary to public interest. The basic principle
of such satisfaction is none other than the broad and general principles
inherent in any compromise or settlement entered into between parties that it
should not be unfair or contrary to public policy or unconscionable. In
amalgamation of companies, the courts have evolved the principle of 'prudent
business management test' or that the scheme should not be a device to evade law. But when the court is
concerned with a scheme of merger with a subsidiary of a foreign company then
the test is not only whether the scheme shall result in maximising the profits
of the shareholders or whether the interest of employees was protected, but it
has to ensure that merger shall not result in impeding promotion of industry or
obstruct growth of the national economy. Liberalised economic policy is to
achieve this goal. The merger, therefore, should not be contrary to this
objective. Indeed, the power of the court is to be satisfied only whether the
provisions of the Act have 'been complied with or that the class or classes
were fully represented and the arrangement was such as a man of business would
reasonably approve between two private companies-may be correct and may
normally be adhered to, but when the merger is with a subsidiary of a foreign
company, then the economic interests of the country may have to be given
precedence. The jurisdiction of the court in this regard is comprehensive.
Here, each of
the challenges claimed to be violative of public interest has to be examined in
the prevailing atmosphere which opted for liberalisation of the Government
policies to promote economic growth of the country. What is remarkable is that
the Legislature itself has amended Foreign Exchange Regulation Act, 1973, by
Act 29 of 1993 ('FERA' for short), the Monopolies and Restrictive Trade
Practices Act, 1969, and the Companies Act, 1956, by Act 58 of 1991.
The scheme of
amalgamation does not run counter to any legislative provision or policy of the
Government. Even assuming that the assets are being transferred for a very
meagre sum, but that by itself would not render the agreement bad or against
public policy. Once the FERA was amended and assets of the Indian company could
be transferred to the foreign company, then the amalgamation cannot be withheld
when the shareholders themselves did not raise any objection nor was it raised
by financial institutions or statutory bodies. The challenge, therefore,
founded on transfer of assets at a lower price cannot be upheld as violative of
public interest."
The court further held (at pages 55 and 57 of 83 Comp Cas):
"It was
contended by Mr. Dholakia that a foreign company was being given a large
interest in the assets of Tomco at a gross undervalue. We are unable to uphold
this argument. The shareholder has no interest in the assets of the company
while the company is in existence. It is only at the stage of liquidation of
the company that the shareholders become interested in the assets of the company. The share of any member in a
company is movable property and transferable in the manner provided by the
articles of the company. This is provided by section 82 of the Companies Act.
The definition of 'goods' in the Sale of Goods Act, 1930, specifically includes
stocks and shares. A share represents a bundle of rights which includes, inter alia, the rights
(i) to elect directors; (ii) to vote on resolutions at meetings of the company;
(iii) to enjoy the profits of the company, if and when dividend is declared and
distributed; and (iv) to share in the surplus, if any, on liquidation. In the
case of Bacha F. Guzdar v. CIT [1955] 25 Comp Cas 1; AIR 1955 SC 74, the position
of a shareholder was explained . . .
A similar
question came up for consideration before a Division Bench of the Gujarat High
Court in the case of Jitendra R. Sukhadia v. Alembic Chemical Works Co. Ltd.
[1984] 64 Comp Cas 206. That was also a case of amalgamation. In that case, it
was held that the exchange ratio of the shares of the two companies, which were
being amalgamated, had to be stated along with the notice of the meeting. How
this exchange ratio was worked out. however, was not required to be stated in
the statement contemplated under section 393(1)(a)."
At one stage,
the company had offered to the objector to make arrangements for purchase of
the objector's shares at a price Rs. 5 higher than those prevailing on or
before the time when the scheme was initially proposed. However, the objector
declined to accept such offer.
I do not
think that the objector has made out any case for rejecting the sanctioning of
the scheme There will, therefore, be an order in terms of prayers (a) to (j) of
the petition of the petitioners dated November 10, 1994. There will be no order
as to costs, save and except that the petitioners will pay the costs of the
Central Government, assessed at 150 G. Ms.
All parties
concerned to act on the signed copy of the operative part of this judgment and
order on the usual undertaking.