Section 220
THREE
COPIES OF BALANCE SHEET TO BE FILED WITH REGISTRAR
[1988] 63 COMP. CAS. 460 (ORI)
HIGH COURT OF ORISSA
v.
Orissa
Paper Products Ltd.
S.C. MOHAPATRA, J.
CRIMINAL APPEAL NO. 13 OF 1981
N.C. Pati, A.K. Nanda
and B.N. Misra for the Respondent.
S.C. Mohapatra, J.—This is an appeal against the order of acquittal of the
respondents in respect of the prosecution for punishment under section 220(3)
of the Companies Act, 1956 (hereinafter referred to as "the Act").
M/s. Orissa Paper Products
Ltd. (accused No. 1) is a company incorporated on May 30, 1969, under the Act.
For the year ending on June 30, 1977, the balance-sheet of the company and its
profit and loss account were not filed with the Registrar of Companies, Orissa, as required under section 220(3) of the Act.
Therefore, the Registrar issued notice No. PS/D/523/2170(5), dated September
13, 1978, by registered post separately to the company and its four directors,
namely, (i) Himansu Sekhar Misra (accused No. 2),
(ii) Bhimasen Misra
(accused No. 3), (iii) Balakrushna Sarangi (accused No. 4) and (iv) Mehboob
Khan. The notice having no effect, the Registrar of Companies filed a complaint
on July 6, 1979, in the court of the Sub-Divisional Judicial Magistrate, Sadar,
The plea of the respondents would have been forceful
before December 24, 1977, when section 220 of the Act was amended by Act 46 of
1977 in view of the decision in Slate
of A.P. v. Andhra Provincial Potteries Ltd. [1973] 43 Comp Cas 514 (SC), where it was laid down that until the annual
general meeting is held, there is no question of filing of the balance-sheet
and the profit and loss account for a period and, as such, no offence is
committed under section 220(3) of the Act. This was also the view of this court
in a Division Bench decision in Vulcan Industries (P.) Ltd. v. Registrar of
Companies [1972] 42 Comp Cas
326 (Orissa). These decisions and the other decisions
in the line would, however, be of no avail after the amendment of section 220
by Act 46 of 1977. After the amendment, the balance-sheet and the profit and
loss account are to be filed within thirty days from the last date when such
documents should have been laid in the annual general meeting if the same had
been held. Section 220, as amended, reads as follows :
"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; ......
(3) If default is made in complying with the
requirements of subsections (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." (emphasis
supplied)
The balance-sheet of this company and its profit and
loss account for the year ending on June 30, 1977, were required to be laid
before the annual general meeting within six months as provided in section 210,
i.e., within December 31, 1977. Under section 220, as amended, these documents
were to be filed with the Registrar within thirty days, i.e., by January 30,
1978, even if no annual general meeting was held. Thus, non-filing of the
balance-sheet and the profit and loss account for the year ending on June 30, 1977,
even after January 30, 1978, is a default. On the plain language of section
220(3), respondent No. 1, M/s. Orissa Paper Products
Ltd., the company, is liable for the default.
Respondent No. 2, Bhimsen Misra, and respondent No. 3, Himansu
Sekhar Misra, were the
directors of the company. A director is an officer of the company within the
meaning of the inclusive definition of "officer" in section 2(30) of
the Act. Under section 220(3), every officer of the company who is in default
is also liable for the default.
Mr. Misra, learned counsel
for the respondents, however, relied upon a Division Bench decision in Nandlal More v. Ramchandiram Mirchandani [1968] 38 Comp Cas 39
(Bom), to submit that only employees are officers and
not directors. In the aforesaid decision, the consideration was whether a
partner of a managing agency firm of a company would be an officer. In that
context, it was held that an officer must be in the relation of an employee or
servant of the company. The correctness of the observation in this decision is
not required to be examined since the context in which the observation was made
is completely different.
Mr. Misra next relied upon
a decision of the Karnataka High Court in S. Gururajarao
v. State of Karnataka [1979] 49 Comp Cas 468 (Kar), in which the question whether a director of a company
is an employee for being liable to be taxed under the Karnataka Tax on
Professions, Trades, Callings and Employments Act, 1976, was being considered.
These two decisions, not being directly on the issue,
have no persuasive value in this case.
In order that a director is made liable for
punishment under section 220(3), the default in omitting to file the
balance-sheet and the profit and loss account is to be wilful.
This has been clearly laid down in the Division Bench decision of this court in
Vulcan Industries P. Ltd. v. Registrar of Companies [1972] 42 Comp Cas 326, where it has been held while considering the penal
provisions under sections 166, 168, 210 and 220 that the defaulters are
punishable, only if their acts or omissions are wilful.
The decision of the Kerala High Court in V.M. Thomas
v. Registrar of Companies [1980] 50 Comp Cas
247 (Ker), which has been rendered relying on section
5 of the Act, is also to the same effect. Section 5 reads as follows:
"5.
Meaning of 'officer who is in default'.—For the purposes 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."
The decision of the Calcutta High Court in Ajit Kumar Sarkar v. Assistant
Registrar of Companies [1979] 49 Comp Cas 909 is also
to the same effect wherein the phrase "every officer in default" in
section 162 of the Act was given importance to hold that it is incumbent on the
prosecution to fix the liability with the particular officers in default.
Whether an act or omission is wilful
is an inference from proved conduct. In spite of receipt of the notice dated
September 13, 1978, by registered post, respondents Nos. 2 and 3 did not take
any action to file the balance-sheet and the profit and loss account. No
explanation has been offered for such inaction even after they were reminded by
the Registrar. In the absence of any lawful excuse, the omission is wilful.
A letter dated October 10, 1977 (exhibit A),
addressed by respondent No. 2, Bhimsen Misra, describing him as chairman of the company to the
Project Officer, Balangir and District Industries Officer,
Balangir, is purported to be the letter of his
resignation as director. In this letter, it is has been indicated that
respondent No. 3, Himansu Sekhar
Misra, has also sent a similar letter of resignation
that day to the addressee. No doubt, resignation of a director does not require
acceptance. A letter to a third party like the Project Officer or the District
Industries Officer would not be a valid letter of resignation. Thus, the
liability of respondents Nos. 2 and 3 cannot be got rid of by issue of such a
letter. Accordingly, whatever might have been the position till September 13,
1978, the omission to file the balance-sheet and the profit and loss account of
the company after receipt of the notice (exhibit 1) becomes wilful
and they are liable for the default under section 220(3) of the Act.
To justify the acquittal, it is urged by Mr. Misra that the cognizance of an offence under section
220(3) of the Act is barred by limitation as the default was committed on
January 31, 1978, and the complaint was filed on July 6, 1979, much beyond six
months as provided under section 468(2)(a), Criminal
Procedure Code. The complaint had been filed treating the default under section
220(3) as a continuing offence cognizance of which is protected under section
472, Criminal Procedure Code.
It has been observed by the Supreme Court in a
decision in Bhagirath Kanoria
v. State of
"The expression 'continuing offence' is not
defined in the Code but, that is because expressions which do not have a fixed
connotation or a static import are difficult to define"
It has been further observed in paragraph 19 of the
aforesaid decision (at page 1692):
"The question whether a particular offence is a
continuing offence must necessarily depend upon the language of the statute
which creates that offence, the nature of the offence and, above all, the
purpose which is intended to be achieved by constituting the particular act as
an offence "
In an earlier decision of the Supreme Court in State
of
"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 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 as 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 a decision
in State at the instance of the Inspector of Employees' Provident Fund v. Prajatantra Prachar Samiti [1981] 51 CLT 79, 85 while considering the
question, this court held :
"......If the Legislature intended to make it a
continuing offence, then some other phraseology would have been used in the
section or recurring penally for the continuing default would have been
levied. " (emphasis
supplied).
Thus, the nature of penalty as envisaged in the
language of the statute is to be taken into consideration to determine whether
the act or omission which is punishable is a continuing offence.
Relying upon the observation in State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908,
the Calcutta High Court in a decision in United Savings and Finance Co. P. Ltd. v. Deputy Chief Officer, Reserve Bank of India
[1980] 50 Comp Cas 518 (Cal) held an offence
under section 58B(2) of the Reserve Bank of India Act,
1934, providing for fine for each day to be a continuing offence.
Under section 220(3), the defaulter is liable to the
like punishment as is provided under section 162 of the Act. Section 162
provides for fine which may extend to fifty rupees for every day during which
the default continues. In view of the nature of penalty provided for, there can
be no doubt that the offence under section 220(3) is a continuing offence.
Even where the act or omission is a continuing
offence, attracting the punishment of fine only, the offence committed within
six months before the date of cognizance would be within the period of
limitation as provided under section 468(2)(a),
Criminal Procedure Code. Cognizance in this case having been taken on July 6,
1979, the offence committed by the respondents from January 6, 1979, is only
within the period of limitation for which punishment can be imposed.
Punishment for omission to discharge a duty which
is an offence is provided in a statute not only to compel a person to perform
his duty but also as a warning to others similarly situated that in case of
their neglect or omission, they would be liable to similar punishment. It is to
be remembered that "offence" is a wrong to society and the wrongdoers
must not be permitted to pollute the rule of law prevailing in our republic.
Directorship of a company is not thrust upon a person. It is accepted by
choice. When an individual has chosen to be a director, he knows the duties he
is to perform. In case he tolerates the wrongs done by others with whom he is
associated and does not discard such wrongdoers, he invites the liability. It
is no excuse to say that the wrongdoers are not within his control. Similarly,
persons entrusted with the duty to deal with wrongs should be alert and should
not look into those wrongs casually. Our society is bound like a chain.
Weakness of one link in the chain makes the entire society weak and the rule of
law is given a goodbye in gradual process. This brings in victimisation,
favouritism and misplaced sympathy in accepting lame
excuses which are all evils for a good society to prevail. Keeping these
principles and the object to be achieved, punishment is to be imposed on the
accused.
The directors of a company are the trustees of the
shareholders. The object of filing the balance-sheet and the profit and loss
account periodically before the Registrar is to provide facilities to the
shareholders or creditors to inspect the same and to obtain copies thereof for
safeguarding their own interest by getting knowledge of the affairs of the
company. Parliament had to amend section 220 to achieve this object so that the
defaulters do not escape because the annual general meeting was not held. There
is no limitation of period after which a defaulter is absolved from his liability.
In the background of this object, it is also to be kept in view that the
Registrar acted in this case very casually. It took him one and half years to
file the complaint and without any explanation for the delay which speaks much
in respect of that office. The amended law was also now in the field. The
affairs of the company were in bad shape as is revealed from exhibit A.
Imposition of the maximum daily fine for six months in the circumstances would
not be justified. It is also to be taken note of that
six years after the complaint was filed, the respondents are being punished.
Accordingly, while convicting the respondents under section 220(3) of the Act,
each of them is directed to pay a fine of Rs. 50 (fifty) in default to undergo
simple imprisonment for one week.
In the the result, the
appeal is allowed and the order of the trial court is set aside.
[1990] 68 Comp. Cas. 625 (
High Court OF
(Cr. M. (M) Nos. 1473 To 1478 of
1986)
v.
State
D.P. Wadhwa J.
CR. M. (M) NOS. 1473 TO 1478 OF 1986 AND 576 AND 577 OF 1987
M.S. Gandhi for the petitioner in Cr. M. (M.) Nos. 1473-78 of 1986.
C.L. Behl for the petitioner in Cr. M. (M.) Nos. 576 and 577 of 1987.
S.K. Misra with S.K. Dubey,
Rajiv Nanda and Mrs. Usha Kumar for the Respondent.
D.P. Wadhwa J.—the only question that arises in this
petition and other petitions which are being disposed of by this order is
whether the offences under section 159, read with section 162 and section 220
again read with section 162, of the Companies Act, 1956 (for short, "the
Act"), are continuing offences within the meaning of section 472 of the
Code of Criminal Procedure, 1973 (for short, "the Code"), so as to
remove the bar of limitation to take cognizance of the offences as provided by
section 468 of the Code. Under sub-section (1) of section 468 of the Code, a
court cannot take cognizance of an offence after the expiry of the period of
limitation as provided under sub-section (2) of that section. In the case where
the offence is punishable with fine only, the period of limitation prescribed
is six months. Section 472 of the Code provides, however, that in the case of a
continuing offence, a fresh period of limitation shall begin to run at every
moment of the time during which the offence continues. Section 159 of the Act
provides for filing of annual returns by the company and fixes the time by
which the annual return is to be filed with the Registrar of Companies. The
return is to be in the form prescribed and is to contain various particulars as
mentioned in the section. Sub-section (1) of section 220 of the Act provides
for filing of the balance-sheet and the profit and loss account with the
Registrar of Companies. These documents are to be filed within 30 days from the
date on which the balance-sheet and the profit and loss account were laid at
the annual general meeting of the company. Where, however, the annual general
meeting of a company for any year has not been held, then also copies of the
balance-sheet and profit and loss account duly signed as provided are to be
filed with the Registrar of Companies within thirty days from the latest day on
or before which the annual general meeting should have been held. This latter
requirement was added by the Companies (Amendment) Act, 1977. Under sub-section
(3) of section 220 of the Act, so far as is relevant in the present case, if a
default is made in complying with the requirements of subsection (1) of section
220, the company and every officer of the company who is in default shall be
liable to punishment as provided by section 162 which is the same as for
default in complying with the provisions of section 159 as well. Section 162 of
the Act may now be set out as under:
"162(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 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".
Admittedly,
in the present cases, the complaints were filed after a period of six months
when time for filing of annual return, balance-sheet and profit and loss
account had expired. If it is held that the offences under sections 159 and 220
of the Act are not continuing offences, the complaints would be barred by
limitation. The learned Additional Chief Metropolitan Magistrate held the
offences under sections 159 and 220 of the Act as continuing offences. The plea
of the petitioners to the contrary was also negatived
by the Additional Sessions Judge who heard some of the revisions against the
orders of the Additional Chief Metropolitan Magistrate.
It was
contended by Mr. C. L. Behl, learned counsel for the
petitioners, that an offence under section 162 of the Act for contravening the
provisions of sections 159 and 220 of the Act could not be said to be a
continuing offence. He said there were certain sections in the Act which
provided for punishment in the case of continuing offences. In this connection,
Mr. Behl referred to sections 168, 234 and 598 of the
Act. Section 168 levies penalty for default in holding a meeting of the company
in accordance with section 166 or in complying with any directions of the
Central Government under sub-section (1) of section 167 of the Act and the
company and every officer of the company who is in default is punishable with
fine which may extend to Rs. 5,000 and in the case of a continuing default,
with a further fine which may extend to two hundred and fifty rupees for every
day after the first during which such default continues. (Underlined portion
inserted by Companies (Amendment) Act, 1960). Sub-section (4) of section
234 of the Act provides for punishment in case of default in complying with the
provisions of sub-sections (2), (3) or (3A) of the section and the company and
the officers concerned shall be punishable with fine which may extend to Rs.
500 and in the case of a continuing default, with an additional fine which may
extend to Rs. 50 for every day after the first during which the default
continues, and the court at the same time is also empowered on the application
of the Registrar to give certain directions to the company. Under section 598
of the Act, if a foreign company fails to comply with the provisions of Part XI
of the Act, then the company and every officer or agent of the company in
default is liable to be punished with fine which may extend to Rs. 1,000 and in
the case of a continuing default, with an additional fine which may extend to
Rs. 100 for every day during which the default continues. Thus, according to
Mr. Behl, the use of the words, "continuing
default" and "continuing offence" made all the difference which
words were not used in section 162. Mr. Behl also
submitted with reference to section 614A of the Act that the offence under
section 162 could not be a continuing offence. Under this section, a court,
when trying an offence for a default in compliance with the provisions of the
Act, could direct any officer or other employee of the company to file with the
Registrar of Companies statements as required by sections 159 and 220 of the
Act. Mr. Behl also said that there were other
provisions in the Act under which a company could be required to comply with
the provisions of sections 159 and 220 of the Act and in this connection he
referred to sections 614 and 615 of the Act. Mr. Behl
also said that whenever the Legislature wanted the offence to be continuous, it
always provided for higher punishment for the subsequent offence. According to
Mr. Behl, therefore, the words continuous offence and
subsequent offence were synonymous and there was always a severe punishment for
a subsequent offence. In support of his submissions, Mr. Behl
relied upon a Bench decision of the Calcutta High Court in National Cotton
Mills v. Assistant Registrar of Companies [ 1984] 56 Comp Cas
222.
Mr. M. S. Gandhi who also appeared for some of the petitioners,
supported Mr. Behl in his submissions and submitted
that infliction of fine on day-to-day basis did not make the offence
continuous.
Mr. S. K. Misra, learned counsel for the respondents, referred to the
objects of filing of statements mentioned in sections 159 and 220 of the Act
with the Registrar of Companies. He also referred to section 610 of the Act
which provides for inspection of any document of a company kept by the
Registrar of Companies by any person. A company is the creation of statute. It
acts through its general body of shareholders and the board of directors. A
person dealing with the company may have to find out its registered office, its
members, debenture-holders, shares, its indebtedness, its directors, etc., past
and present. Shareholders and creditors of the company and even third persons
may like to find out as to the affairs of the company and its financial
condition. They can know all these particulars only after inspection of the
documents required to be filed under sections 159 and 220 of the Act. There was
earlier a view, particularly with reference to section 220 of the Act, that if
no annual general meeting had been held, there could be no question of the
balance-sheet and the profit and loss account having been laid before a company
at its annual general meeting and there could thus be no further question of
filing these documents with the Registrar. Section 220 was subsequently amended
and the following para from the objects and reasons
for the amendment is appropriate:
"Persons
in charge of the management of some of the companies sometimes omit to convene
the annual general meeting of the company and by such omission keep the
shareholders as well as the creditors of the company in the dark about the
affairs of the company and its financial condition. Further, by such omission,
they also evade the necessity of filing the balance-sheet and the profit and
loss account with the Registrar of Companies. When a document is filed with the
Registrar of Companies, it is open to any shareholder or creditor to inspect
such document and to obtain a copy thereof. In the circumstances, it is
absolutely essential that even where the annual general meeting of the company
has not been held, the balance-sheet and profit and loss account should be
filed with the Registrar of Companies to enable the shareholders and other
persons to find out, from inspection of the said documents, the affairs of the
company and its financial condition".
It will be
seen that a certain purpose is sought to be achieved by requiring the company
to file various statements mentioned in sections 159 and 220 of the Act. The
purpose is quite apparently to have important particulars of a company made
available for inspection by the creditors, shareholders of the company and by
the public having dealings or intending to have dealings with the company.
The Supreme
Court had occasion to deal with the question as to whether a particular offence
is a continuing offence. This question was considered in State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908,
Bhagirath Kanoria v. State
of M. P., AIR 1984 SC 1688, and Maya Rani Punj v. CIT [1986] 157 ITR 330 (SC), this latter decision
overruling an earlier decision in CWT v. Suresh Seth [1981] 129 ITR 328 (SC).
Before I discuss these judgments, I may note that in Ajit
Kumar Sarkar v. Assistant Registrar of Companies
[1979] 49 Comp Cas 909, a single judge of the
Calcutta High Court held that failure to file annual return under section 159
of the Act was a continuing offence under section 162 of the Act. This decision
was, however, overruled in National Cotton Mills [1984] 56 Comp Cas 222 (
Section 276
of the Income-tax Act, 1961, was deleted by the Taxation Laws (Amendment) Act,
1975, and section 276B introduced providing for stringent punishment. Earlier
section 276 provided for punishment in case of failure to deliver returns of
income or to deduct and pay tax as required. So far as it is relevant for the
present case, this section provided that if a person failed without reasonable
cause or excuse to deduct and pay tax as required, "he shall be punishable
with fine which may extend to ten rupees for every day during which the default
continues". This provision as would be seen is similar to sections 159 and
220 read with section 162 of the Act. The provisions of section 276 of the
Income-tax Act, 1961, were the subject-matter of decision by this court in D.
C. Goel v. B. L. Verma
[1974] 93 ITR 63. The following para from the
judgment would be quite apt (at page 86):
"As
soon as an omission to deposit the tax deducted at the source out of the salary
of a particular employee occurred on account of the default in complying with
the requirements of section 200 of the Act read with rule 30, the offence took
place. The duration of the omission could be terminated only by making the
deposit. Wherever the omission was subsisting, after the 1st of April, 1968, it
became an offence under section 276B of the Act. This view finds support from
the terms employed at the end of section 276B of the Act which is clear that
the period as from the date on which such tax was deductible to the date on
which such tax was actually paid, was to be the basis for calculating the fine
which was to be imperatively imposed. The offence was, therefore, to continue
till the actual payment of the particular deduction to the credit of the
Central Government. If the default was still there, when section 276B became
applicable, it became punishable thereunder".
In Bhagirath Kanoria's case, AIR
1984 SC 1688, the Supreme Court was considering the provisions of section
14(2A) of the Employees' Provident Funds and Miscellaneous Provisions Act,
1952. The question which arose was as to whether failure to pay the employer's
contribution to the provident fund was a continuing offence.' In that case,
complaints for nonpayment of the employer's contribution to the provident fund
were filed under section 14(2A) of that Act which provided for punishment with
imprisonment extending to 3 months or with fine which might extend to Rs. 1,000
or with both. The Supreme Court distinguished its earlier decision in Deokaran Nenshi's case, AIR 1973
SC 908, and held that the decision in that case to the effect that failure to
furnish returns before the due date was not a continuing offence must be
confined to cases of failure to furnish returns and it could not be extended to
"cases like those before us in which, the contravention is not of a
procedural or formal nature and goes against the very grain of the statute
under consideration". In Deokaran Nenshi's case, AIR 1973 SC 908, the respondents were owners
of a stone quarry and were required to forward certain annual returns in
respect of the preceding year, on or before January 21 in each year, and
failure to forward the return as required was punishable with fine under
section 66 of the Mines Act, 1952. The respondents failed to furnish the
returns by the due date and they were prosecuted for an offence under section
66 of the Mines Act, 1952. Section 79 of that Act provided
that no court could take cognizance of an offence under that Act unless the
complaint was filed within six months of the date of the offence. There
was an Explanation to this section which provided that if the offence in
question was a continuing offence, the period of limitation would be computed
with reference to every point of the time during which the said offence
continued. The Supreme Court held that the infringement which occurred on
January 21 of the relevant year was complete when the owner failed to furnish
annual returns on that date and since the regulation did not lay down that the
owner would be guilty of an offence if he continued to work the mine without
furnishing the returns, the offence was non-continuing and, therefore, the
complaint was time-barred. The Supreme Court in Bhagirath
Kanoria's case, AIR 1984 SC 1688, observed that the
question whether a particular offence was a continuing offence must necessarily
depend upon, (1) the language of the statute which created that offence, (2)
the nature of the offence, and above all, (3) the purpose which was intended to
be achieved by constituting the particular act as an offence. Applying these principles,
there could be no doubt that offences for contravening
the provisions of sections 159 and 220 of the Act are continuing offences. As
observed by the Supreme Court, the concept of continuing offence does not wipe
out the original guilt. It keeps the contravention alive day by day.
The decision
in Maya Rani Punj's case [ 1986] 157 ITR 330 (SC) was rendered on the interpretation
of section 271(1)(a) of the Income-tax Act, 1961. One of the questions before
the Supreme Court was as to whether the default of non-filing of the return
within the time stipulated by law was not a continuing offence. A somewhat
similar provision under the Wealth-tax Act was the subject-matter of decision
by the Supreme Court in Suresh Seth's case [1981] 129 ITR 328, where the court
took the view that the provision of imposition of penalty with reference to
every month during which the default continued indicated the legislative
intention that a multiplier had to be adopted for determining the quantum of
penalty and did not have the effect of making the default a continuing one.
This view was not accepted by the Supreme Court in Maya Rani
Punj's case [1986] 157 ITR 330. As would be seen that
the view taken by the Calcutta High Court in National Cotton Mills' case [1986]
56 Comp Cas 222 was the same as in Suresh Seth's case
[1981] 129 ITR 328 (SC). In Maya Rani Punj's case [1986] 157 ITR 330, the Supreme Court further
observed as under (at page 341):
"The
imposition of penalty not confined to the first default but with reference to
the continued default is obviously on the footing that non-compliance with the
obligation of making a return is an infraction as long as the default
continued. Without sanction of law, no penalty is imposable with reference to
the defaulting conduct. The position that penalty is imposable not only for the
first default but as long as the default continues and such penalty is to be
calculated at a prescribed rate on monthly basis is indicative of the
Legislative intention in unmistakable terms that as long as the assessee does not comply with the requirements of law, he
continues to be guilty of the infraction and exposes himself to the penalty
provided by law".
It further
observed that there were several statutory provisions where such default was
stipulated to be visited with daily penalty. In that connection, the Supreme
Court referred to various decisions of the High Courts in eluding that of the
Calcutta High Court in Ajit Kumar Sarkar's
case [1979] 49 Comp Cas 909 which, as noted above,
was overruled subsequently in National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal).
Thus, in my
view, the submissions of Mr. Behl and Mr. Gandhi are
of no avail. Reference to sections 168, 234, 598, 614A or even sections 614 and
615 of the Act is of no help while interpreting the provisions of sections 159
and 220 read with section 162 of the Act.
In Suresh
Seth's case [1981] 129 ITR 328, the Supreme Court observed as under (at page
335):
"A
liability in law ordinarily arises out of an act of commission or an act of
omission. When a person does an act which law prohibits him from doing it and
attaches a penalty for doing it, he is stated to have committed an act of
commission which amounts to a wrong in the eye of law. Similarly, when a person
omits to do an act which is required by law to be performed by him and attaches
a penalty for such omission, he is said to have committed an act of omission
which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure
to perform an act required by law to be done becomes a completed act of
commission or of omission, as the case may be, as soon as the wrongful act is
committed in the former case and when the time prescribed by law to perform an
act expires in the latter case and the liability arising therefrom
gets fastened as soon as the act of commission or of omission is
completed".
These
observations were approved in Maya Rani Punj's case [1986] 157 ITR 330 (SC). In Maya Rani Punj's case [1986] 157 ITR
330, the Supreme Court held that if a duty continued from day to day, the
non-performance of that duty from day to day was a continuing wrong. The
legislative scheme under section 162 read with sections 159 and 220 of the Act
in making provision for a fine coterminous with the default provided for a
situation of continuing offence. Section 14(2A) of the Employees' Provident
Funds and Miscellaneous Provisions Act, 1952, did not prescribe for payment of
fine for every day or every month for which the default in paying the
employer's contribution to the fund continued. Yet the Supreme Court in Bhagirath Kanoria's case, AIR
1984 SC 1688, held that the offence of which the
appellants were charged, namely, non-payment of the employer's contribution to
the provident fund before the due date, was a continuing offence, considering
the object and purpose of that Act.
It is not
necessary to use the words, "repetitive", "subsequent" or
"recurring" while determining the question whether the offence is a
continuing offence. As noted above, the concept of a continuing offence does not
wipe out the original guilt. Rather, it keeps the contravention alive day by
day. This concept of a continuing offence is somewhat akin to a continuing
cause of action as used in the civil law (see section 22 of the Limitation Act,
1963, which says that in the case of a continuing breach of contract or in the
case of a continuing tort, a fresh period of limitation begins to run at every
moment of time during which the breach or the tort, as the case may be,
continues). I have already referred to the objects underlying sections 159 and
220 of the Act which require filing of the annual return, balance-sheet and
profit and loss account of the company with the Registrar of Companies within a
particular period. By these requirements, the company as well
as the officers of the company are compelled to make public the
information relating to their financial positions. The public can have access
to this information on inspection of the records of the Registrar of Companies
on payment of requisite fee.
Considering,
therefore, the objects of the provisions of sections 159 and 220 read with
section 162 of the Act and the language used therein, I am of the opinion that
the offences of which the petitioners are charged, namely, non-filing of the
annual returns and balance-sheet and profit and loss account within the period
prescribed, are continuing offences and therefore the period of limitation
prescribed by section 468 of the Code cannot have any application. The offences
which are alleged against the petitioners will be governed by section 472 of
the Code according to which, a fresh period of limitation shall begin to run at
every moment of the time during which the offence continues.
All these
petitions are, therefore, dismissed.
[1990] 69 COMP. CAS. 442 (
HIGH COURT OF
v.
Assistant Registrar of Companies
A.M. BHATTACHARJEE AND A.K. NANDI JJ.
Criminal Revision Nos. 844 and 845 of 1983
R.N. Chakraborty for the Petitioner.
A.R. Saha for the Respondent.
JUDGMENT
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
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
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.
[2004]
54 scl 424 (
High
Court of
Punyark Credit
& Investment (P.) Ltd.
v.
State of
Mridula
Mishra, J.
Criminal Misc. No. 7219 of 2003
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
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 :
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. [
Therefore, the
application was to be dismissed. [
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.
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,
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,
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 (
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. 117 (KAR)
HIGH COURT OF KARNATAKA
Chandra Spinning and Weaving Mills (P.) Ltd.
v.
Registrar of Companies
K.B. NAVADGI J.
Criminal Revision Petition No. 377 of 1985
S.S. Naganand for S.G. Sundaraswamy
and C.K. Narayana Rao for
the Petitioners.
C. Shivappa for the Respondent.
K.B. Navadgi, J.—This
criminal revision petition is filed under section 397, read with section 401 of
the Code of Criminal Procedure (the "Code" for short), by petitioners
Nos. 1 to 3 against the judgment of convictions and sentences passed by the
Presiding Officer, Special Court for Economic Offences, Bangalore District,
Bangalore, in C. C. No. 79 of 1982.
Chandra Spinning and Weaving Mills P. Ltd., a company
incorporated under the Indian Companies Act, 1913, having its registered office
at 5th Main Road, Chamarajpet, Bangalore-18,
represented by its director, Sri M. Krishnamoorthy
(petitioner No. 1), Shri M. Krishnamoorthy
(petitioner No. 2) and Sri M. Nagaraj (petitioner No.
3), the directors of the said company, were A-1, A-2 and A-4, respectively, in
the trial court. The other person arraigned in the trial court as accused No. 3
was Sri M. Madhusudhan, another director of the said
company.
Chandra Spinning and Weaving Mills P. Ltd., Sarvashree M. Krishnamoorthy, M. Madhusudhan and M. Nagaraj would
be hereinafter referred to as "the company", A-2, A-3 and A-4,
respectively.
I have heard learned counsel for the company, Sri
C.K. Narayana Rao and S.S. Naganand, learned counsel for A-2 and A-4 and Sri C. Shivappa,
learned Senior Standing Counsel for the Central Government, for the Registrar
of Companies in Karnataka,
I have examined the record and proceedings in C.C.
No. 79 of 1982 and have read the authorities cited at the Bar.
The material facts relevant and necessary to dispose
of the revision petition lie in a short compass. Briefly stated, they are as
under:
The company is a private limited company. It was
incorporated in the year 1954 by one Sri D.R. Madhavakrishnaiah.
A-2, A-3 and A-4 are his sons. The shareholders of the company at the time of
its incorporation and, thereafter, were the four sons and four daughters of Sri
D. R. Madhavakrishnaiah. The company consists of the
members of the joint Hindu family as its shareholders.
Sri D.R. Madhavakrishnaiah
passed away in the year 1978.
During the
accounting year of the company 1979-80, i.e, from
July 1, 1979, to June 30,1980, A-2, A-3 and A-4 were
its directors.
Under section
220(1) of the Companies Act, 1956 (1 of 1956), ("the Act" for short),
the company was required to submit three copies of the balance-sheet and the
profit and loss account for the accounting year ended on June 30, 1980, to the
Registrar of Companies in Karnataka within 30 days from the date when the
balance-sheet and the profit and loss account were laid before the annual
general meeting, or in case where the annual general meeting was not held,
within 30 days from the latest date on or before which the annual general
meeting of the company should have been held, i.e, on
December 31,1980.
There is no
dispute and it is admitted by both the sides that the company did not hold its
annual general meeting for the financial year 1979-80 on or before December 31,
1980, and that it was required to file three copies of the balance-sheet and
the profit and loss account before the Registrar of Companies on or before
January 30,1981.
A-2, A-3 and
A-4 were the directors of the company during the relevant accounting year.
There was a legal obligation on the part of A-2 to A-4 to obey or comply with
the direction mandated under section 220(1) of the Act. They knowingly and
willfully authorised or permitted the default to be
committed. A-2 to A-4 were the officers of the company
in default within the meaning of the expression stated in section 5 of the Act.
It is with
these allegations that the respondent set the criminal law in motion against
the company and A-2 to A-4 by the complaint filed on January 25, 1982.
It appears
from the record that this complaint came to be instituted in the Court of the
Metropolitan Magistrate,
The case was
tried by adopting the procedure prescribed for the trial of summons cases.
Accusation was framed against the company and A-2 to A-4 on October 13, 1982.
Both the company and A-2 to A-4 denied the offence alleged against them when
the substance of the accusation was read over and explained to each of them.
The offence alleged was tried and evidence was recorded.
Before
recording of the evidence, the company, represented by A-2, and A-2 and A-4
filed an application under section 633(1) of the Act to relieve them wholly of
their liabilities on the grounds stated therein. The respondent on being
noticed of the application, filed his objections,
opposing the grant of the prayer.
The
respondent, to substantiate the offence alleged, adduced oral as well as
documentary evidence. Gopalakrishna, working in the
office of the respondent and in charge of the files relating to the company,
gave evidence as PW-1. The documentary evidence, admitted for the respondent in
the trial court, consists of the following documents :
Exhibit P-1
is the copy of the incorporation certificate issued in favour of the company by
the Registrar of Joint Stock Companies in
The company,
A-2 and A-4, during their statutory examination, referred to the application
filed by them under section 633(1) of the Act, whereas A-3 stated that he would
file his statement separately.
The company
and A-2 to A-4 in terms admitted during the course of their statutory
examination, the offence alleged against them. A-3 in support of his defence, filed his statement stating that he could not be
held guilty of the offence alleged.
A-3 entered
the witness-box and gave evidence as D. W-1. It was in his evidence that
exhibit P-15 came to be marked. A-2 went to the witness-box and gave evidence
in support of his defence. In all, 13 documents were
admitted in evidence for A-2 and A-4 and were marked as exhibits D-1 to D-13 to
which I would advert in the course of this order if and when necessary.
The learned
Presiding Officer, on consideration of the evidence, held that the offence
alleged against the company and A-2 to A-4 was a continuing offence and that,
therefore, the prosecution was not barred by time. Placing reliance on the
decision of the Supreme Court in State of Bombay v. Bandhan
Ram Bhandani [1961] 31 Comp Cas
1; AIR 1961 SC 186, he held that A-2 to A-4 knowingly and willfully failed to
file the copies of the balance-sheet and the profit and loss account of the
company as on December 31, 1980, on or before January 30, 1981, as required
under section 220(1) of the Act and that they were not entitled to the relief
under section 633 (1) of the Act.
In the view
he took, he convicted the company and A-2 to A-4 for the offence in respect of
which accusation has been framed and sentenced the company and each of A-2, A-3
and A-4 to pay a fine of Rs. 100 and directed the company and A-2 to A-4 to
suffer simple imprisonment for a week in default of payment of fine.
The learned
Presiding Officer, while convicting and sentencing the company and A-2 to A-4
as aforesaid, directed them to file the annual returns within three months from
November 5, 1984. It appears that the learned Presiding Officer while giving
the direction instead of stating the copies of balance-sheet and the profit and
loss account, stated the annual return.
It is this
judgment of conviction and sentence that is assailed in this revision petition.
On the principal
contentions raised, the questions that have arisen for consideration and
determination are these:
(1) Whether the contravention of the
provisions contained in section 220(1)(a) of the Act
is a continuing contravention or not ?
(2) Whether A-2 and A-4 have made out a case
for the grant of relief, relieving them wholly of the liability for the default
alleged against them, under section 633(1) of the Act ?
(3) Whether
the judgment of convictions and sentences is legal, correct and proper ?
Section
220(1)(a) of the Act stated to have been contravened by the company and A-2 to
A-4, in terms admitted by them, reads thus:
"220(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:"
The other
relevant provision, for the present purpose, is section 220(3) of the Act. It
reads thus :
"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
220(3) of the Act provides 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 default in complying with the provisions of section 159, 160
or 161.
Section 159
deals with the annual return to be made by the company having a share capital,
while section 160 refers to the annual return to be made by the company not
having a share capital, whereas section 161 makes further provisions regarding
annual return and certificate to be annexed thereto.
Section
162(1), which is material, is extracted here below :
"162(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".
A reading of
this provision, in the context of the default in complying with the
requirements of section 220(1) of the Act, would show that the company and the
officer of the company who is in default would be punishable with fine which
may extend to fifty rupees for every day during which the default continues.
Thus, the default in complying with the requirements of section 220(1) of the
Act is punishable only with fine.
By the new
provisions in Chapter XXXVI of the Code, limitation has been prescribed for the
first time for launching criminal prosecution in regard to offences not
punishable with imprisonment for a term exceeding three years. Among the
grounds in favour of prescribing the limitation, the following may be stated :
(i) As time passes, the evidence of witnesses becomes
weaker and weaker because of the failure or lapse of memory and it becomes more
and more uncertain with the result that the danger of error becomes greater ;
(ii) For the purpose of peace and repose, it is necessary that a person accused
of an offence should not be kept under continuous apprehension that he may be
prosecuted at any time particularly because with the multifarious laws creating
new offences many persons at some time or the other commit some crime or the
other. People would be having no peace of mind if there is no period of
limitation even for petty offences ; (iii) The deterrent effect of punishment
would be impaired if prosecution is not launched and punishment is not
inflicted before the offence has been wiped off the memory of the persons
concerned ; (iv) The sense of social retribution which is one of the purposes,
perhaps even the main purpose, of criminal law loses its edge after the expiry
of a long period ; (v) The period of limitation would make the organs of
investigation and prosecution to make every endeavour
to ensure the detection and punishment of the crime quickly.
Section 468
of the Code provides that no court shall take cognizance of an offence, after
the expiry of the period of limitation, except as otherwise provided elsewhere
in the Code, a reference to which is unnecessary, of the categories specified
therein.
The question
as to whether the prosecution launched against the company and A-2 to A-4 on
January 25, 1982, which is obviously beyond the prescribed period of limitation
is barred or not would depend upon the decision on the question as to whether
the default alleged is a continuing one or not. If it is held that it is not a
continuing default, then obviously the prosecution initiated on January 25,
1982, beyond the period prescribed would be barred by limitation. In that
event, taking cognizance of the offence would be illegal and the trial
proceeding on the basis of such illegal order would be vitiated. If it is held
otherwise, then section 472 of the Code which provides that in the case of
continuing offence, a fresh period of limitation shall begin to run at every
moment of the time during which the offence continues, would
be attracted.
Before
adverting to the law declared by the Supreme Court on the point, it is apposite
to refer to the statement in the American Jurisprudence, second edition, volume 21, in section 236 on page 424. The statement reads:
"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 prosecution generally commences 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,"
The
expression "continuing offence" is not defined in the code or in the
Act. Expressions which do not have a fixed connotation or a static import are
difficult to define. It is difficult to put the concept of continuing offence
in a strait-jacket.
Explaining
the expression "a continuing cause of action", Lord Lindley in Hole
v. Chard Union [1894] 1 Ch 293 observed (at page 295):
"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's that for which the action
was brought".
In the same
decision, Lord Justice A.L. Smith, who agreed with the view of Lord Lindley,
said (at page 296):
"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".
The statement
of law made by Lord Lindley and Lord Justice A.L. Smith in Hole's case [1894] 1
Ch 293 has received approval by the Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328.
The
distinction between a continuing offence and an offence which is committed once
and for all is clearly brought out in the decision of the High Court of
Judicature at Bombay in State v. A.H. Bhiwandiwalla,
AIR 1955 Bom 161. In that case, the respondent had
been charged with two offences, namely, (a) failure to apply for registration
of his factory and to give notice of occupation; and (b) running the factory
without a licence issued under the Factories Act,
1948. In the context of the plea of limitation raised by the accused, the High
Court of Bombay observed (p. 163) :
"In
civil law, we often refer to a continuing or recurring cause of action.
Similarly, even in criminal law the expression 'continuing offence' is
frequently used. As observed by Beaumont, C.J. in Emperor v. Chhotalal Amarchand, AIR 1937 Bom 1 [FB] the expression 'continuing offence' is not a
very happy expression. It assumes, says the learned Chief Justice (at pages 6
and 7):
'....that you
can have a continuing offence in the sense in which you can have a continuing
tort, or a continuing breach of contract, and I doubt, myself whether the
assumption is well founded, having regard to the provisions of the Criminal
Procedure Code as to the framing of charges and as to the charges which can be
tried at one and the same trial. It is quite clear that you could not charge a
man with committing an offence de die in diem over a
substantial period.'
Even so, this
expression has acquired a well-recognised meaning in
criminal law. If an act committed by an accused person constitutes an offence
and if that act continues from day to day, then from day to day a fresh offence
is committed by the accused so long as the act continues. Normally, and in the
ordinary course, an offence is committed only once. But we may have offences
which can be committed from day to day and it is offences falling in this
latter category that are described as continuing offences".
In Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, AIR 1959 SC
798, His Lordship Justice Gajendragadkar (as he then
was), dealing with the essence of a continuing wrong, observed (at page 807):
"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".
In State of
Bihar v. Deokaran Nenshi,
AIR 1973 SC 908, the respondents who were owners of a stone quarry in greater Bombay,
were required to forward certain annual returns in respect of the preceding
year, on or before January 21, in each year. Failure to forward the returns as
required is punishable under section 66 of the Mines Act, 1952. On the failure
of the respondents to furnish the returns by the due date, a complaint had been
lodged against them in the court. One of the contentions raised by the
respondents was that the complaint was barred by limitation under section 79 of
the Mines Act, 1952, which provides that no court shall take cognizance of the
offence under that Act unless the complaint was filed within six months of the
date of the offence. The Explanation to section 79 provides that if the offence
in question is a continuing offence, the period of limitation shall be computed
with reference to every part of the time during which the said offence
continued. The Supreme Court held that the default which occurred on January 21
of the relevant year, was complete when the owner
failed to furnish the annual returns on that date. Since the regulation did not
lay down that the owner would be guilty of an offence
if he continued to work the mine without furnishing the returns, the offence
was a non-continuing one and, therefore, the complaint was time barred. The Supreme
Court observed (at page 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 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 the case
of CWT v. Suresh Seth [1981] 129 ITR 328 (SC) referred to earlier, the question
was whether failure to file returns as required under section 14(1) of the
Wealth-tax Act, 1957 (27 of 1957), was a continuing offence or not. Their
Lordships observed (at p. 335):
"A
liability in law ordinarily arises out of an act of commission or an act of
omission. When a person does an act which law prohibits him from doing it and
attaches a penalty for doing it, he is stated to have committed an act of
commission which amounts to a wrong in the eye of law. Similarly, when a person
omits to do an act which is required by law to be performed by him and attaches
a penalty for such omission, he is said to have committed an act of omission
which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure
to perform an act required by law to be done becomes a completed act of
commission or of omission, as the case may be, as soon as the wrongful act is
committed in the former case and when the time prescribed by law to perform an
act expires in the latter case and the liability arising therefrom
gets fastened as soon as the act of commission or of omission is completed. The
extent of that liability is ordinarily measured according to the law in force
at the time of such completion. In the case of acts amounting to crimes, the
punishment to be imposed cannot be enhanced at all under our Constitution by
any subsequent legislation by reason of article 20(1) of the Constitution which
declares that no person shall be subjected to a penalty greater than that which
might have been inflicted under the law in force at the time of the commission
of the offence. In other cases, however, even though the liability may be
enhanced it can only be done by a subsequent law (of course subject to the
Constitution) which either by express words or by necessary implication
provides for such enhancement. In the instant case, the contention is that the
wrong or the default in question has been altered into a continuing wrong or
default giving rise to a liability de die in diem, that is, from day to day.
The distinctive nature of a continuing wrong is that the law that is violated
makes the wrongdoer continuously liable for penalty. A wrong or default which
is complete but whose effect may continue to be felt even after its completion
is, however, not a continuing wrong or default. It is reasonable to take the
view that the court should not be eager to hold that an act or omission is a
continuing wrong or default unless there are words in the statute concerned
which make out that such was the intention of the Legislature..".
Their
Lordships proceeding further, explaining the true principle with illustrations,
observed (at page 338):
"The
true principle appears to be that where the wrong complained of is the omission
to perform a positive duty requiring a person to do a certain act the test to
determine whether such a wrong is a continuing one is whether the duty in
question is one which requires him to continue to do that act. Breach of a
covenant to keep the premises in good repair, breach of a continuing guarantee,
obstruction to a right of way, obstruction to the right of a person to the
unobstructed flow of water, refusal by a man to maintain his wife and children
whom he is bound to maintain under law and the carrying on of mining operations
or the running of a factory without complying with the measures intended for
the safety and well-being of workmen may be illustrations of continuing
breaches or wrongs giving rise to civil or criminal liability, as the case may
be, de die in diem".
The Supreme
Court in Bhagirath Kanoria
v. State of M.P., AIR 1984 SC 1688, 1692; [1986] 68 FJR 98, 105 adopting the
reasoning in the three English decisions, the decisions of the Bombay High
Court and the Patna High Court referred to in the decision,
observed:
"The
question whether a particular offence is a continuing offence must necessarily
depend upon the language of the statute which creates that offence, the nature
of the offence and, above all, the purpose which is intended to be achieved by
constituting the particular act as an offence".
This court in
W.M.I. Cranes Ltd. v. G.G. Advani [1984] 1 Kant LC
462, referring to the law laid down by the Supreme Court in the State of Bihar
v. Deokaran Nenshi, AIR
1973 SC 908; and CWT v. Suresh Seth [1981] 129 ITR 328 (SC) held that wrongful
withholding of possession of property by a director of a company after his
termination, does not amount to a continuing offence ; that the director
becomes a licensee and the remedy would not be by way of a criminal complaint,
but by a suit for recovery of possession ; and that filing of a private
complaint by a company against the director after a lapse of six months would
be barred by time.
It was
brought to the notice of the court by learned counsel for the company and A-2
and A-4 that this court in Criminal Revision Petition No. 549 of 1986 (disposed
of on November 7, 1986), has held that the default in complying with section
220(1) of the Act is not a continuing default. It was submitted that this court
in the said criminal revision petition affirmed the view taken by the trial
court. The record and proceedings in the said matter were sent for and perused.
The revision petition had been preferred against the order dated September 7,
1985, made by the Special Court for Economic Offences, Bangalore District,
Bangalore, in C.C. No. 115 of 1985, under sections 397 and 482 of the Code, by
the Registrar of Companies, Karnataka, dismissing the complaint on the ground
that the complaint was barred by time, holding that the default in complying
with section 220(1) of the Act was not a continuing offence. Holding that there
was no error committed by the court below, this court rejected the revision
petition.
I now refer
to the three decisions of the Calcutta High Court referred to by learned
counsel for the company and A-2 and A-4. In Ajit
Kumar Sarkar v. Assistant Registrar of Companies
[1979] 49 Comp Cas 909 ; 83 CHN 108, the question
whether an offence under section 159 punishable under section 162 of the Act is
a continuing offence or not came to be considered. It was held that the
liability to furnish the return under section 159 continues until it is
complied with and each day's failure is visited with penalty.
A Division Bench
of the Calcutta High Court in National Cotton Mills v. Assistant Registrar of
Companies [1984] 56 Comp Cas 222, dissented from the
view taken in Ajit Kumar Sarkar's
case [1979] 49 Comp Cas 909 (Cal) and held that on a
careful review of the legal position it was difficult to agree with that view.
Thus, in substance, the decision of the single judge in Ajit
Kumar Sarkar's case [1979] 49 Comp Cas 909 (Cal) was overruled by the
Division Bench.
In National
Cotton Mills' case [1984] 56 Comp Cas 222 (Cal) on a
complaint filed by the Assistant Registrar of Companies alleging violation of
the provisions of section 159 of the Act, viz., failure to file the return
within sixty days from the date on which the annual general meeting was held,
the Jurisdictional Magistrate prosecuted the petitioner-company and its
officers. In the revision filed by the petitioners in the High Court for
quashing the proceedings against them on the grounds, (i)
that the Magistrate had erred in law in taking cognizance of the cases without
examining the complainant or his witnesses, (ii) that the failure to file the
return did not constitute a continuing offence, and (iii) that since the
offence was not a continuing one, cognizance of such an offence could not be
taken by the Magistrate after the expiry of the period of limitation provided
in section 468 of the Code, it was held that the offence alleged was not a
continuing one and the cognizance taken after the expiry of the period of
limitation provided in section 468 of the Code was not proper and valid.
The reasoning
which persuaded the Division Bench of the Calcutta High Court to take this view
is to be found in the penultimate paragraph of the judgment (at p. 227) :
"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-fulfillment of a continuing
obligation or continuing of business without filing of such returns becomes a
continuing offence. When section 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 section 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 section 162 in that behalf as there are in
sections 234, 598, etc., of the Companies Act, it will not be proper to hold
that the offence under section 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".
The decision
in National Cotton Mills' case [1984] 56 Comp Cas 222
(Cal) was followed by a single judge of the same High Court in Central Manbhum Coal Co. P. Ltd. v. Assistant Registrar of
Companies [1986] 59 Comp Cas 176. In the said case,
the default involved was omission to comply with the provisions contained in
section 220(1) of the Act.
As against
this, a decision of the Kerala High Court was cited
before the court in Sudarsan Chits (India) Ltd. v.
Registrar of Companies, [1986] 59 Comp Cas 261. In
that case, the contravention involved was the same as the one in the instant
case. The learned single judge of the Kerala High
Court, referring to the decision in Ajit Kumar Sarkar's case [1979] 49 Comp Cas
709 (Cal) held that the failure to file the balance-sheet and the profit and
loss account of the company under section 220 of the Act with the Registrar of
Companies is a continuing offence under section 162 of the Act. The learnedjudge held as under (at page 266):
"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 a 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 a 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. Section 629A 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 a 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
as 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".
Mr. Shivappa, learned Senior Standing Counsel for the Central
Government, submitted that the Supreme Court has admitted the special leave
petition for leave to prefer an appeal against the Division Bench decision of
the Calcutta High Court in National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal) and has granted stay. He also submitted that
the special leave petition to prefer an appeal against the decision of the Kerala High Court in Sudarsan
Chits' case [1986] 59 Comp Cas 261 has been rejected
by the Supreme Court. He sought time either to submit certified copies of the
orders passed by the Supreme Court or to make a statement as to whether the
special leave petition to prefer an appeal against the decision of the Kerala High Court was dismissed in limine
without a speaking order. Today he submits that the special leave petition has
been dismissed in limine. In Indian Oil Corporation
Ltd. v. State of Bihar [1987] 167 ITR 897; AIR 1986 SC 1780, it has been held
by the Supreme Court that the dismissal of a special leave petition in limine by a non-speaking order does not justify any
inference that, by necessary implication, the contentions raised in the special
leave petition on the merits of the case have been rejected by the Supreme
Court and that neither on the principle of res judicata nor on any principle of public policy analogous
thereto would the order of the Supreme Court dismissing the special leave
petition operate to bar the trial of identical issues in a separate proceeding
before the High Court merely on the basis of an uncertain assumption that the
issues must have been decided by the Supreme Court at least by implication.
Since the
special leave petition to appeal against the decision of the Kerala High Court has been rejected by the Supreme Court in
limine, I agree with the contention urged on behalf
of the company and A-2 and A-4 that it cannot be said that the Supreme Court
has affirmed the view taken by the Kerala High Court.
We have now
to consider whether the contravention of section 220(1) of the Act is a
continuing contravention attracting section 472 of the Code or not.
The
determination whether a given crime is a continuous offence is a matter of
statutory interpretation. But the judicial consensus is 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 contravention or offence should not be deemed to be a continuous
one unless the explicit language of the substantive criminal statute compels
such a conclusion. The Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328
referred to earlier, has held that the court should not be eager to hold that
an act or omission is a continuing wrong or default unless there are words in
the statute concerned which make out that such was the intention of the
Legislature. To the same effect is the dictum laid down by the Supreme Court in
Bhagirath Kanoria's case,
AIR 1984 SC 1688; [1986] 68 FJR 98 referred to earlier.
The
balance-sheet of the company is a document and not an account in the strict
sense. It is merely a statement of the company's assets and liabilities as at the
end of the financial year. It describes a state of affairs as at a particular
point of time. The profit and loss account presents the figures for a period of
activity (for a particular financial year) designed to show the resulting
profit or loss. The fundamental principle and the philosophy behind the
Companies Act have been that of a disclosure. Publicity is the object.
Disclosure is the principal safeguard on which the Companies Act pins its
faith.
This
disclosure can be secured, as observed in Gower's Principles of Modern Company
Law, fourth edition, by L.C.B. Gower, page 497, in four ways: (a) by official
notification in the Gazette; (b) by provisions for registration at the
companies' registry; (c) by compulsory maintenance of various registers and the
like by the company; and (d) by compulsory disclosure of the financial position
in the company's published accounts and by attempting to ensure their accuracy
through a professional audit.
It is with
the object of securing compliance with this fundamental principle and of
securing obedience to the principal safeguard that section 220(1) has been
enacted.
It is
relevant to note the provisions contained in section 614A of the Act. It reads:
"614A.
(1) Any court trying an offence for a default in compliance with any provision
of this Act which requires a company or its officers to file or register with,
or deliver or send to, the Registrar, any return, account or other document,
may at the time of sentencing, acquitting or discharging the accused, direct by
order, if it thinks fit to do so, any officer or other employee of the company
to file or register with, deliver or send to, the Registrar on payment of the
fee including the additional fee required to be paid under section 611, such
return, account or other document within such time as may be specified in the
order.
(2) Any
officer or other employee of the company who fails to comply with an order of
the court under sub-section (1) shall be punishable with imprisonment for a
term which may extend to six months, or with fine, or with both".
Reference may
also be made in this regard to section 611(2) of the Act.
It is
pursuant to this power that the learned trial court has directed the company
and A-2 to A-4 to file the copies of the balance-sheet and the profit and loss
account within three months from November 5, 1984.
This then is
the provision in the Act which seeks to ensure compliance with the provisions
of the Act contravened, to achieve the fundamental principle and secure
compliance with the principal safeguard.
It was urged
on behalf of the respondent that since section 162(1) of the Act imposes
penalty at the rate of Rs. 50 for every day during which the default continues,
it must be held that the default in complying with the provisions in section
220(1) of the Act is a continuing default.
Having
examined the language of sections 220(1) and 162(1) of the Act, the nature of
the default and the purpose for which section 220(1) of the Act was enacted and
the purpose which the said provision is intended to be achieved, I am unable to
hold that the default alleged against the company and A-2 to A-4, for which
they were tried, is a continuing default attracting section 472 of the Code.
The reasons
are these: A continuing cause of action in civil law 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. Similarly, 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 injury or
wrong. If the wrongful act or omission causes an injury which is complete,
there is no continuing wrong even though the damage resulting from the wrong
may continue.
It cannot be
said that the failure to submit the copies of the balance-sheet and the profit
and loss account as provided in section 220(1) of the Act would amount to
repetition of the omission even after the omission stands committed on the due
date to submit copies. It is difficult to hold that this omission continues
after the last date fixed for the submission of the copies. The wrong resulting
due to omission (the Legislature has made effective provision) is minimised by the power to issue necessary and proper
directions.
Section
220(1) of the Act by itself does not impose any liability the contraventions of which is susceptible of continuance. The
default would be complete with a failure to furnish the copies of the
balance-sheet and profit and loss account in the manner and within the time
stated therein. Such an offence is committed once and for all as and when a
person/s commit/s the default A careful reading of
section 220(1) of the Act would show that it neither envisages nor contemplates
that the obligation to submit copies continues from day to day until the copies
are actually submitted. No provision in the Act was brought to my notice which
would prohibit a company from continuing its business without filing the
copies. If such a provision were to exist in the Act, then one could have
advanced an argument that such a provision would indicate that filing of copies
is a continuous obligation.
The Supreme
Court in CWT v. Suresh Seth [1981] 129 ITR
328 referred to earlier, has laid down that a wrong or default 'Which is
complete, but whose effect may continue to be felt even after its completion
is, however, not a continuing wrong or default. Of course, the penalty
prescribed under section 162 of the Act is the penalty of fine which may extend
to fifty rupees for every day during which the default continues. If a section
prescribes merely the measure of a penalty, as held by the Calcutta High Court
in National Cotton Mills' case [1984] 56 Comp Cas 222
(Cal), it appears that this prescription is made with the object of enforcing
strict compliance with the requirement of section 220(1) of the Act under the
threat of enhanced penalty and getting relief from such penalty on enhancing
scale by early submission of copies even after the default.
However, that
does not make or render the initial default a continuing one. It is impossible
to hold that the default is repeated from day to day after the initial default.
There is no
express provision in section 162, the penal provision, as we find in sections
234(4)(a) and 598 of the Act. In the absence of such a
provision, it would be changing the language of section 162 to infer that the
offence punishable under it is a continuing offence.
Having
carefully examined the language of section 220(1) which creates an obligation
and the purpose which is intended to be achieved by constituting the omission
or default as an offence, I hold that the default of section 220(1) is not a
continuing offence. I respectfully agree with the reasons given by the Calcutta
High Court in National Cotton Mills' case [1984] 56 Comp Cas 222.
The principal
reason of the Kerala High Court in taking the view
that the offence under section 220(3) of the Act is a continuing offence is the
punishment provided in section 162. It is reasoned that the punishment provided
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 and that this provision makes
it clear that the default or offence is not something which takes place once
and for all but is one which continues. I have adverted earlier to the penalty
provided under section 162 and have held that the measure of penalty appears to
be made with the object of enforcing strict compliance with the provisions
contained in section 220(1) of the Act under the threat of enhanced penalty.
That is the reasoning of the Division Bench of the Calcutta High Court also in
National Cotton Mills' case [1984] 56 Comp Cas 222.
For the
reasons aforesaid, I hold that the contravention of section 220(1) made
punishable under section 220(3) of the Act is not a continuing contravention.
In view of this conclusion of mine on question No. 1, I do not feel it
necessary to pronounce in this matter whether A-2 and A-4 have made out, a case
for the grant of relief, relieving them wholly of the liability for the default
alleged against them, under section 633(1) of the Act. The complaint filed on
January 25, 1982, was barred by time. There was a limitation on the learned
Presiding Officer from taking cognizance of the default alleged against the
company and A-2 to A-4. The cognizance of the default taken by him in view of
the bar of limitation under section 468 of the Code was bad. The consequent
trial on the basis of such illegal and invalid act stands vitiated.
I,
therefore, allow the criminal revision petition and set aside the order of
convictions and sentences passed against the company and A-2 to A-4. The
company and A-2 to A-4 are acquitted of the default alleged against them in
respect of which they have been held guilty and convicted.
[1988] 64 COMP. CAS. 113 (P&H)
HIGH COURT OF PUNJAB AND HARYANA
Shivalik Ice Factory and Cold Storage Pvt. Ltd.
v.
Registrar of Companies
PRITPAL SINGH, J.
CRIMINAL
MISC. NO. 7861 OF 1986
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
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 (
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.
[1988] 63
COMP. CAS. 271 (ORI)
HIGH COURT OF ORISSA
v.
Registrar of Companies
B.K. BEHERA, J.
CRIMINAL
REVISION NO. 165 OF 1983.
A. Pasayat, Bidhayak Patnaik, R.B. Mohapaira and G.H. Mulia for the
Petitioner.
A. Misra for the
Respondent.
Behera, J.—The
petitioner assails the order of conviction recorded against him under section
220(3) of the Companies Act, 1956 (hereinafter to be referred to as "the
Act"), sentencing him to pay a fine of Re. 0 25 paise
for each day of default and in default of payment thereof, to suffer simple
imprisonment for fifteen days for non-compliance with the provision made in
section 159 of the Act, in that the annual general meeting of the company of
which the petitioner was said to be one of the directors should have been held
on or before June 30, 1980, and the annual return was required to be submitted
by August 29, 1980, but the petitioner had failed to comply with the said
requirement. The case of the petitioner was that he was not one of the
directors of the company and he had nothing to do with the filing of the
return. The trial court has accepted the case of the prosecution and convicted
the petitioner as indicated above.
As has been submitted by the learned counsel for the
petitioner and the learned standing counsel for the Central Government, the
only material against the petitioner placed by the prosecution in order to show
that he was a director was a return submitted by the managing director of the
company in Form No. 32. This cannot be construed to be an admission on the part
of the petitioner that he was one of the directors. There is no evidence that
the complainant had made any verification with reference to any other record as
to whether the petitioner was one of the directors of the company. Thus, there
was absence of proof to indicate that the petitioner was one of the directors
of the company.
Relying on the principle laid down by the Calcutta
High Court in Ajit Kumar Sarkar v.
Assistant Registrar of Companies [1979] 49 Comp Cas 909,
Mr. Pasayat has contended for the petitioner that
there was no specific averment in the complaint that the present petitioner was
the officer in default and, therefore, the prosecution is not competent. As has
been submitted at the Bar, there is no such averment in the petition of
complaint and there is no evidence to that effect. The petitioner cannot
legally be held to be liable for the alleged default.
For the aforesaid reasons, the revision is allowed
and the impugned order of conviction and sentence passed against the petitioner
is set aside.
[1988]
63 Comp. Cas. 747 (Mad)
High
Court OF
Assistant Registrar
of Companies
v.
Sudarsan Liners Ltd.
Maheswaran,
J.
CRIMINAL
APPEAL NO. 827 OF 1984.
R. Shammigham
for the Appellant.
P.M. Bhaskaran for the Respondent.
Maheswaran,
J.—This appeal is filed by the Assistant Registrar
of Companies against the judgment of the learned Additional Chief Metropolitan
Magistrate (Economic Offences) No. II,
A reading of section 220(3) of the Companies Act
shows that if default is made in complying with the requirements of sections
220(1) and 220(2), the company and every officer of the company who is in
default shall be liable to like punishment as is provided in section 162. Even
though the learned trial Magistrate found that there was default in complying
with the provisions of section 220(1) and section 220(2) of the Companies Act,
the same was not wilful and was beyond the control of
the company. If the non-filing of the balance-sheet was beyond the control of
the company, it is not quite clear as to how the directors of the company could
file the balance-sheet. Whatever reasons apply to the acquittal of accused No.
1, should also apply to accused Nos. 2 to 4, the
directors who have been found guilty of violation of section 220(1) and (2) of
the Companies Act. But the directors and the managing director are not before
the court. The convictions and the sentences imposed on them have become final
so far as they are concerned. But, it should be noted here that sections
220(1), (2) and (3) do not provide for exempting any one from punishment, the
company or its directors, even if sufficient reasons are given for their
non-filing of the balance-sheet and profit and loss account in time. As pointed
out by learned counsel for the appellant, mere default in complying with the
requirements of section 220(1) and (2) is sufficient to make the company and the
officers of the company liable to punishment. While so, the order of the
learned trial Magistrate acquitting the company, accused No. 1, for the reasons
stated by him is not correct and has to be set aside. Accordingly, the order
acquitting accused No. 1, company, is set aside and the matter is remitted to
the trial court for a de novo trial only in so far as accused No. 1 is
concerned and the judgment in other respects is confirmed. The appeal is
allowed to the extent indicated above and is dismissed in other respects.
[1988] 63 COMP. CAS. 805 (
HIGH COURT OF
v.
Assistant Registrar of Companies
MONORANJAN MALLICK, J.
CRIMINAL REVISION NO. 823 OF 1986.
Amit Bhattacharjee, Amal Ch. Majumdar, P.K. Bera and S.M. Masud for
the Petitioner.
Anjan K. Mukherjee and Mrs. Purnima Das Chaudhuri
for the Respondent.
Monoranjan Mallick, J.—This revision
petition is directed against the conviction and sentence passed by the learned
Magistrate against the present petitioners under section 220(3) of the
Companies Act, 1956. The facts are briefly as follows :
Opposite party, the Assistant Registrar of Companies,
filed a petition of complaint under section 220(3) read with section 162(1) of
the Companies Act, 1956, alleging that M/s. Ramacast
Ltd. and the directors who are petitioners Nos. 2 to 4 herein of the company,
were under a statutory obligation to file three copies of balance-sheet and
profit and loss account placed in the annual general meeting within 30 days,
that the annual general meeting of the company should have been held on or
before June 30, 1981, and the balance-sheet, etc., were required to be produced
in the office of the complainant on or before July 29, 1981, but that the
petitioners-accused did not file the balance-sheet and profit and loss account
even as on December 31, 1981, in spite of show-cause notice. That is how they
have contravened the provisions of section 220(1) of the Act and are liable to
be prosecuted and punished under that section read with section 162(1) of the
Act.
The learned Magistrate, on considering the evidence
produced by the complainant as well as by the present petitioners, came to the
finding that the prosecution has been able to prove the charges against the
accused petitioners, that the accused persons are responsible for the default
regarding non-submission of the balance-sheet and profit and loss account and
are liable to be punished under section 220(3) of the Companies Act. So he
convicted all the petitioners under that section and sentenced petitioner No. 1
to a fine of Rs. 200 only and the other petitioners to a fine of Rs. 200 each
in default to simple imprisonment for 5 days each. He also directed 10% of the
fine, if realised, to be awarded to the prosecution
as costs.
Being aggrieved, this revision petition has been
filed.
It is contended, firstly, that the learned Assistant
Registrar of Companies has no competence to file a petition of complaint and
the complaint filed by him is illegal and the conviction and sentence are,
therefore, liable to be set aside. The second contention is that the learned
Magistrate considered the documentry evidence proved
by P.W. 1, but that P.W. 1 did not have the competence to prove documents and
that the contents of the documents cannot be read in evidence. The third
contention is that there is no evidence that petitioners Nos. 2, 3 and 4 are in
default and under section 5 of the Companies Act, 1956, they can only be
prosecuted if they are officers in default and, consequently, the conviction
and sentence against petitioners Nos. 2 to 4 are liable to be quashed.
The revision petition is contested by the opposite
party. On behalf of the opposite party, it is contended that the decision of
this court in Ajit Kumar Sarkar v.
Assistant Registrar of Companies [1979] 49 Comp [Cas 909
(Cal); 83 CWN 108 where it has been held that the Assistant Registrar of
Companies has the competence to file the petition of complaint as against the
accused persons for offence punishable under section 220(3) of the Act answers
the first point. It is also submitted that P.W. 1 has clearly proved the
documentary evidence and so reliance can be placed on such evidence. It is
further contended that in view of the judgment in Madan
Gopal Dey v. State, AIR
1968 Cal 79 ; [1969] 39 Comp Cas
119, the directors have an obligation to follow the provisions of the Companies
Act, 1956, and, therefore, when they failed to perform their statutory duties,
they bring themselves within the mischief of the penal provisions of law and in
the circumstances, the conviction of the directors was quite proper and is not
liable to be set aside.
As regards the first contention raised by the learned
advocate for the petitioners, I am of the view that the judgment of this court
in Ajit Kumar
Sarkar v. Assistant Registrar of Companies [1979] 49
Comp Cas 909 ; 83 CWN 108 answers the point.
There, the learned single judge has held that an Assistant Registrar of
Companies is competent to file any petition of complaint for contravention of
any provisions of the Companies Act, I have carefully perused this decision and
I fully rely on the said decision as it appears to lay down the correct
principle. I find no reason to differ from the observation made by the learned
judge in coming to the conclusion that the Assistant Registrar of Companies is
competent to make a complaint against the limited company and the directors
thereof under the provisions of the Companies Act, 1956. Therefore, the
contention of the learned advocate for the petitioners in this regard is not
tenable.
As regards the question of admissibility of the
documentary evidence being proved by P.W. 1, I am of the view that it is true
that P.W. 1 is an assistant in the Office of the Registrar of Companies and has
no personal knowledge about the case nor about the
notices sent. He has proved the signature of the complainant in the petition of
complaint and some acknowledgment receipts showing that notices were sent to
the accused petitioners which were duly received by all others except one and
his notice had been returned unserved by the postal
authorities. The documentary evidence which have been tendered in this case are formal in nature. Mr. Mukherjee,
learned advocate for the Assistant Registrar of Companies, submits that the
Registrar of Companies does not have any obligation to issue notice on the
company and its directors asking them to submit balance-sheet, etc., but by way
of abundant caution, the notices have been issued and he is not placing any
importance on such notices and he is of the view that on the basis of the other
evidence before the learned Magistrate, the finding of the learned Magistrate
that the petitioners are guilty of offence under section 220(3) of the
Companies Act can be supported.
In view of the above submissions, I am not going to
take into consideration the evidence regarding the service of notices, because
P.W. 1 did not have any personal knowledge. The petition of complaint was also
a formal document to be tendered in evidence. I am to see whether the
prosecution has been able to bring home the charge against the petitioners on
the basis of other evidence produced.
So far as petitioner No. 1 is concerned, there can be
no doubt that the company has the obligation to hold the annual general meeting
and to submit the balance-sheet and profit and loss account to the Registrar of
Companies within the specified period. It is not the case of the present
petitioners that the balance-sheet and the profit and loss account were
submitted within the above specified period. Therefore, so far as the company
is concerned, the evidence adduced by P.W. 1 that no balance-sheet and profit
and loss account were submitted within the specified time is sufficient to
convict the company. So the conviction of and sentence on the company cannot be
set aside.
Learned advocate for the petitioners vehemently urges
that even if the company can be convicted under section 220(2) of the Act, its
directors cannot be convicted as there was no evidence that they were in
default. My attention has been drawn to the provisions of section 5 of the
Companies Act in which it is stated 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."
Mr. Bhattacharjee, learned
advocate for the petitioners, has drawn my attention to the evidence of P.W. 1
and has submitted that P.W. 1 has not stated in his evidence that petitioners
Nos. 2 to 4 were knowingly guilty of the default and permitted to continue such
default. This fact has not been proved by evidence and in the absence of such
evidence by P.W. 1, the only witness for the prosecution,
it is fit and proper that the conviction as against petitioners Nos. 2 to 4
cannot be upheld.
Mr. Mukherjee, learned
advocate for the complainant opposite party, submits that necessary averments
to the. above effect were made in the petition of
complaint and if the evidence along with the petition of complaint is also
admitted as an exhibit in the case, then there cannot be any doubt that there
is evidence that petitioners Nos. 2 to 4 were also in default. Mr. Mukherjee, learned advocate has also referred me to the
decision of Madmn Gopal Dey v. State, AIR 1968 Cal 79 ; [1969] 39 Comp Cas 119 to argue that the directors can be prosecuted
because of their statutory obligation to file the balance-sheet and the profit
and loss account in accordance with the provisions of the Companies Act. There
the learned Judge held as follows (at pp. 82 and 83 of AIR and at p. 125 of
Comp Cas):
"When the directors fail to perform their
statutory duty, they bring themselves within the mischief of the penal
provisions of the law. In order that a conviction, under the sections involved
in the present cases, of 'an officer of the company' may be sustained, the only
thing to prove is that that particular officer knowingly and wilfully authorised or permitted
these defaults. The offence is complete if the officer of the company knew of
the defaults and permitted the same."
So, from the above observation of the learned judge,
there can be no doubt that there must be evidence to show that the particular
officer knowingly or wilfully permitted the default
or authorised the default. But the question remains
whether there is such evidence in this case or not. P. W. 1 has not made any
such averments in this evidence. Mr. Mukherjee,
learned advocate for the complainant, submits that such averment was made in
the petition of complaint and if this averment in the petition of complaint be
read as evidence, then there is evidence to direct
prosecution.
I am unable to accept the above submissions of Mr. Mukherjee. The petition of complaint though tendered in
evidence cannot be held to be substantive evidence. The prosecution case has to
be proved by evidence at the trial and the petition of complaint cannot be a
substitute for legal evidence to be produced to prove the case. I am of the
view that petitioners Nos. 2 to 4 cannot be held guilty of default when the
decision of the learned single judge referred to above makes it clear that
there must be clear evidence before the directors can be convicted. In the circumstances,
I am unable to sustain the conviction passed against petitioners Nos. 2 to 4 in
this case.
In the result, the conviction and sentence against
petitioner No. 1 stands but against petitioners Nos. 2 to 4 is set aside. The
revision petition is thus allowed in part. Fine, if realised,
from petitioners Nos. 2 to 4 may be refunded.
[1932] 2 COMP. CAS. 387 (MAD.)
v.
Emperor
PAKENHAM WALSH, J.
K.S. Jayarama Ayyar for S. Nagaraja Ayyar and T. Pattabhirama Ayyar for the Petitioner.
T.S. Anantaraman for the Crown.
Pakenham
Walsh, J.—There were five accused in this case of whom
accused 1 to 4 were the directors of a certain company called National Live
Stock Registration Bank, Ltd.,
Taking the first charge under Sec. 134(4), Sec. 134(1) says:
"After the balance sheet has been laid before the company at the general meeting a copy thereof signed by the manager or secretary of the company shall be filed with the registrar at the same time as the copy of the annual list of members and summary prepared in accordance with the requirements of Sec. 32."
The first balance sheet Ex. Y prepared for the year ending 31st July, 1928, was passed at a general meeting of the company held on 26th December, 1929, and filed with the Registrar on 16th January, 1930. The next annual balance sheet of the company representing the state of the bank on 31st July, 1929 has not as yet been filed. On 9th January, 1930, the Registrar sent a reminder (Ex. Z) to the bank to expedite the balance-sheet. The managing director of the Bank replied by Ex. Z (1) dated 18th January, 1930, acknowledging receipt of Ex. Z and promising to send the balance sheet. A further reminder Ex. O was sent on 29th May, 1930, to which Ex. P dated 5th June, 1930 is the Bank's reply promising to send the balance sheet. A still further reminder Ex. Q dated 14th July, 1930 and another Ex. S on 19th August, 1930, were sent. The contention of the accused is that as the last general meeting was held on 26th December, 1929, there was time to convene the next general meeting till 26th December, 1930, and therefore the call for the balance-sheet by the Registrar was premature. It is in the evidence of the Registrar's clerk himself that the last general meeting was held on 26th December, 1929, and the next general meeting should be held within 15 months and that for the purpose of the general meeting there was time till 31st December, 1930. The learned Presidency Magistrate got over this plea by saying that under Sec. 131(1) of the Act the Bank should have its balance-sheet prepared at intervals of not more than fifteen months and' the latest date up to which the balance sheet should have been prepared is therefore up to the period ending 31st October, 1929, and that under Art. 151 of the articles of association such a balance sheet should have been put before the general meeting within not more than four months, and hence there should have been a general meeting not later than 28th February 1930. Apart from the fact that the articles of association have no statutory force, this is not what Art. 151 says. It runs:—
"At every ordinary general meeting the Directors shall lay before the Company a profit and loss account, and a balance sheet, containing a summary of the property and assets and liability of the company made up to a date not more than four months before the meeting, from the time when the last preceding account and balance sheet were made up."
The clear meaning of this Article, I think, is that the shareholders of the company are entitled to have a balance sheet made up to within four months before the meeting ; but there is nothing to indicate the converse, namely, that a meeting must be called within four months from the date when balance sheets under the rules are made up. The case quoted by the lower Court, Debendra Nath Das Gupta v. Registrar of Joint Stock Companies in which it was held that the director of a company cannot plead, in answer to a charge under Sec. 134 his own omission to call the annual general meeting of the company required by Sec. 76 and to place before it such balance sheet, has no application to the present case. In that case there was an omission to call the annual general meeting. Here the whole defence is that the annual general meeting was not due to be held, and therefore had not been held at the time when the Registrar called for the balance-sheet. The charge being one under Sec. 134(1) the charge of non-filing of the balance-sheet before the Registrar receives a complete reply if the accused can show that the balance sheet was not due to be filed before the Registrar. It is altogether immaterial whether they had or had not prepared the balance sheet.
It was attempted to be argued for the respondent that the accused had committed an offence under Sec. 131(4) and that that section must be read along with Sec. 134. That is to my mind a quite untenable argument. The accused might have had quite a good defence against a charge under this head, and in fact, it is suggested that the books had all been taken away, and therefore they could not make up the accounts. However that may be, the charge is not under Sec. 131(4) but under Sec. 134(4); and to my mind it is clear that they have met this charge effectually and there can be no conviction for this offence.
The second offence was one under Sec. 32(4). That section requires a company to make every year a list of all persons who on the day of the first or only ordinary general meeting in the year are members of the company, or have ceased to be members of the company, together with the summary required by Sec. 32(2). The Bank filed Ex. J., dated nth February, 1930—list of members and summary. The Court found that the figures in columns 2 and 3 of items 2 and 3 did not agree with the total of the returns of allotments already filed in respect of three matters:
"(1) In column 2 the number of preferential shares allotted in cash is noted as 25,847½ whereas the correct figure according to the return of allotments is 26,126½.
(2) Again
in column 3, the number of ordinary shares allotted for cash is noted as 7,294,
whereas it ought to be 7,310 and
(3) The transfer of shares for the year and the
number of shares forfeited had not been noted."
Now, it may be observed in the first place that the Court evidently proceeded on the supposition that the previous returns were correct. The previous returns have not been marked as exhibits. There is no evidence that the previous returns were correct. Also there is no evidence that the difference in figures is not merely an arithmetical error in counting. Evidently, from the steps which the Registrar took he did not regard the matter as one of deliberate misrepresentation. The whole charge obviously fails in any case unless there is evidence that the previous return is correct because, otherwise one must arrive at the conclusion that if there is any mistake in one year it cannot be corrected in the next. As I have said, the original return has not been marked as an exhibit and there is no proof that it is correct. The case quoted by the lower Court, In re Briton Medical and General Life Association, has no application. What was held in that case was that the forwarding to the Registrar of a list of members and summary which upon the face of them purport to satisfy the requirements of the Act is not a sufficient compliance with that section unless such list and summary are in accordance with the facts and the Court can go into this. Finally, it is clear that an officer of a company cannot be convicted under this section unless it is found that he knowingly and wilfully authorised or permitted the default, Vide: Sundar Das v. The Crown. For all that appears here as regards the first two charges as I have said, they are purely arithmetical mistakes in addition.
As regards the question of reporting the transfer of the shares in the year, there was a resolution on 17th December, 1929, of the directors forfeiting certain shares, and this no doubt does not appear in Ex. J. The contention of the accused is that that resolution was cancelled at a general meeting held, on 29th December, 1929, whereas Ex. J was not submitted till 11th February 1930. The learned Presidency Magistrate says that according to Art. 41 of the Articles of Association of the company, shares may be forfeited by a resolution of the directors. But there is nothing in the Articles to show that the general power of the shareholders at a public meeting to cancel a decision of the directors is not possessed by this company or that the cancellation on 29th December, 1929, was ultra vires. Therefore the failure to note the forfeiture of the shares in Ex. J, which forfeiture had by that time been cancelled, is not a default. This second charge must therefore also fail and the accused must be acquitted of it.
The third offence was under Sec. 87(2). Sec. 87(1) requires that every company shall keep at its registered office a register containing the names and addresses and the occupations of its directors and file with the Registrar a copy thereof and from time to time file with the Registrar notice of any change among its directors or managers. On 29th May, 1930, the 3rd accused sent in his resignation of his directorship of the Bank. But at a meeting of the directors held on 29th October, 1930, that resignation was withdrawn and the resignation of the 4th accused was accepted. The lower Court has dropped the resignation of the 4th accused and only deals with the resignation of the 3rd accused. In Form 26 it is stated that the notice of change should be given within 30 days from the date of occurrence. The resignation of the 3rd accused no doubt took effect from the date of the resignation letter. Vide: Glossop v. Glossop quoted by the lower Court. But it has been held in Kumud Chandra Nandi v. Emperor that the provision in foot-note of Form No. 26, Appendix A of the Act, requiring a notice of the change among directors to be given within 30 days from the date of occurrence is not mandatory and that no offence is committed by a company by not filing such notice. If there had not been this decision on this point, it might certainly be argued with a good deal of force that as Sec. 87(1) contains only such a vague expression as 'from time to time the particular period prescribed in the form was meant to supplement it and was mandatory. However, I see no reason for not following this decision and there is none other on the point. It seems, to me in the light of this decision that the time mentioned in Sec. 87(1) should be made more specific.
I find that the conviction on none of the three offences can stand. It is not therefore necessary to deal at great length with the two other objections raised. One is that the complaint was not properly instituted, the complaint being only signed by the Registrar's clerk, and there is nothing to show that the Registrar authorised it. In this connection Sidheswar Ghose v. Emperor and Emperor v. Lala Shib Das were quoted for the petitioners. The first case seems to be distinctly against them, for though it was said that the Court should be chary of admitting such complaints, it was held that the complaint was competent. The second case is in the petitioners' favour. I do not think it is necessary to express an opinion on this point.
The other point is that there has been misjoinder of parties. That I think is clear. The 3rd accused was obviously not chargeable under the third charge, but he was tried jointly with the other accused on all the charges. It has been held in Upendranath Bishwas v. Emperor that Sec. 233, Criminal Procedure Code, applies to summons cases, and as regards misjoinder of charges vitiating trial, may be mentioned the well known Privy Council case in Subrahmania Ayyar v. King Emperor. I would therefore hold that in any case the misjoinder of parties had vitiated the trial.
In the light of the above it is hardly necessary to deal with Cr. R.C. No. 648 put in by the 4th accused and the Bank, 5th accused, represented by its liquidator, T.A. Doss. With regard to this I may say that this liquidator has failed to prove his status. In the Fort St. George Gazette dated 31st January, 1931, three liquidators were appointed and he says that two of those resigned and the third appointed petitioner in his place. But he failed to show me any authority for one liquidator appointing another in his place. I consider therefore that he has no locus standi. As the grounds taken by the 4th accused are the same as those taken by the other accused, this petition must also be allowed.
In the result the convictions are set aside and the accused acquitted. The fines will be refunded.
v.
Emperor
COSTELLO, J.
APPEAL NO. 372 OF 1933
Bireswar Chatterjee,
for the Appellant.
Harideb Chatterjee, for the Crown.
Costello, J.—This appeal is, in my opinion, not properly constituted. It is somewhat difficult to understand how it came to be admitted in its present form. The memorandum of appeal reads thus. In the matter of Ajit Kumar Chatterjee, Managing Director, Eastern National Insurance Co., Ltd., appellant against The King-Emperor; and in the matter of convictions and sentence under sections 32(4) and 134 (4), Companies Act (VII of 1913); and in the matter of an appeal under section 411, Criminal Procedure Code. The convictions referred to were not of Ajit Kumar Chatterjee but of the Eastern National Insurance Co., Ltd. It is therefore obvious that the company should have been the appellant acting through a properly authorized agent. It is to be observed that in paragraph 6 of the memorandum of appeal it is stated: Being aggrieved by the said orders of the learned Chief Presidency Magistrate, your petitioner begs humbly to prefer this appeal in this Hon'ble Court, the petitioner as I have stated being Ajit Kumar Chatterjee. However, putting on one side this defect in the proceedings, one has to see whether there is any substance in this appeal. The Eastern National Insurance Company was convicted under section 32(4) and section 134(4) of the Indian Companies Act, 1913, and under section 134(4) was sentenced to pay a fine of Rs. 500. No separate sentence had been passed under section 32(4) of the Act. It is clearly admitted and could not have been denied that this company has failed to comply with any of the requirements of the Companies Act in regard to the preparation and filing of the list of the members of the company and a balance-sheet.
The complainant in the matter was the
Registrar of Joint Stock Companies,
Mr. Bireswar Chatterjee, who has appeared on behalf of the company in this appeal sought to argue that the conviction was wrong in law because the company concerned was carrying on life insurance business and so is subject to the provisions of the Life Insurance Companies Act (VI of 1912). He referred to section 287 of the Companies Act of 1913 in the course of his argument. It seems to me that there is no substance whatever in this contention. The Life Insurance Companies Act was passed in 1912 and the Companies Act was passed in the year 1913. This particular company is registered under the Companies Act of 1913 and therefore is subject to all the provisions of the Act of 1913; and as it carries on life insurance business it is in addition, subject to the further provisions contained in the Act of 1912. All the provisions of the Act, with which we are concerned are, of course, designed for the protection of the investing public and of persons who take out policies in companies dealings with life insurance business. It is therefore necessary in the public interest that the provisions of these Act should be strictly complied with. Any company registered under the Companies Act, 1913, takes upon itself all the obligations imposed by that Act, and there is no escape from those obligations. It is to be observed that the provisions of sections 32, 131 and 134 are mandatory as regards the company, the words of the section being the company shall make a list of its members, shall cause accounts to be balanced and a balance sheet to be prepared and shall file a copy of that balance sheet. There are no qualifications to those provisions. Therefore, any company which makes default in compliance with them ipso facto renders itself liable to the penalties imposed by those sections. The position of course is different as regards the officers of the company. I have already pointed out that so far as they are concerned before a conviction can rightly be obtained, it is necessary for the complainant to show that the default on the part of the officers was authorised or permitted knowingly and wilfully. The observations I have just made dispose of the second point taken by Mr. Bireswar Chatterjee.
On behalf of the company there has been a reiteration of the defence set up before the Chief Presidency Magistrate by Ajit Kumar Chatterjee, the present Managing Director who was representing the company. The plea was that the accounts had been called for by various Criminal Courts and therefore the company was unable to comply with the requirements of the Act. I desire once more to emphasise that no such excuse is or can be of the slightest avail. The company must comply with the very salutary provisions of the Companies Act or become liable to the penalties provided. It follows from what I have said that the conviction of the company by the learned Chief Presidency Magistrate was right. This appeal must be dismissed. With regard to the application made by Ajit Kumar Chatterjee in connexion with this appeal, the matter can be disposed of by my expressing the opinion, that the right procedure is that the fine imposed upon the company should be realized by the methods laid down in section 386, Criminal Procedure Code.
[1986] 59 COMP. CAS. 822 (
HIGH COURT OF
v.
Assistant Registrar of Companies
MANOJ KUMAR MUKHERJEE AND SANKAR
BHATTACHARYA, JJ.
CRIMINAL
REVISION NO. 1759 OF 1984
D.K. Butt, P.S. Bose and S.K. Rakshit for the Petitioners.
B.R. Ghosal
and S. James for the Registrar.
Kamal Bhattacharyya for the State.
Manoj Kumar Mukherjee, J.—An Assistant Registrar of Companies,
To appreciate the contention raised by Mr. Dutt in support of this application, it will be necessary
to detail the facts, which are not in dispute. The annual general meeting of
the company for the year ending April 14, 1982, was held on October 12, 1982,
and the annual general meeting for the year in question was initially held on
October 12, 1983. Since the auditor's report and audited accounts had not been
received till then, the meeting was adjourned; and in the adjourned meeting
held on January 7, 1984, the balance-sheet and profit and loss account of the
company were laid and adopted. Thereafter, the balance-sheet and profit and
loss account were sent to the Registrar of Companies on January 13, 1984.
Mr. Dutt contended that the
annual general meeting for the year ending April 14, 1983, was held within the
calendar year of 1983 and since the adjourned annual general meeting, in which
the balance-sheet and profit and loss account were laid, was the continuance of
its earlier meeting and was held within 15 months from the date of the annual
general meeting of the earlier year, it was held strictly in accordance with
the provisions of section 166 of the Act ; and consequently there could not be
a valid prosecution for violation of section 220(1) of the Act.
Mr. Ghosal, appearing for
the complainant, relied upon the provision of section 220(1) of the Act and
contended that irrespective of the fact whether the balance-sheet and profit
and loss account were laid in the annual general meeting of the company or not,
they should have been filed with the Registrar of Companies 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 ; and since in the instant case the
annual general meeting was held on October 12, 1983, the balance-sheet and
profit and loss account were required to be filed in the office of the
Registrar of Companies on or before November 11, 1983. According to Mr. Ghosal, as it was not filed within the stipulated time, the
petitioners were liable for prosecution under section 220(3) of the Act.
In the case of M.D. Mundra
v. Assistant Registrar of Companies [1979] 83 CWN 279; [1980] 50 Comp Cas 346 (Cal), it has been held by this court that the
adjourned annual general meeting was nothing but a continuance of its earlier
meeting. Again in the case of Sudhir Kumar Seal v.
Assistant Registrar of Companies [1979] 49 Comp Cas
462, it has been held, relying upon a Circular bearing No. 35/9/72-CL. III,
dated February 2, 1974, issued by the Company Law Board, Ministry of Law,
Justice and Company Affairs, that in a case where the annual accounts were not
ready for laying at the annual general meeting of the company, it would be open
to the directors to get the annual general meeting adjourned to a subsequent
date by an appropriate resolution and the account and balance-sheet could be
laid at the adjourned annual general meeting. Another Division Bench of this
court held in the case of Bejoy Kumar Karnani v. Assistant Registrar of Companies [1984] 2 CHN 314 ; [1985] 58 Comp Cas 293, that
notwithstanding such adjournments by appropriate resolutions, the annual
general meeting must be completed within the statutory period of 15 months,
from the date of the annual general meeting for the previous year unless, of
course, the period was extended by the Registrar under section 166(1) of the
Act.
Judged in the light of the above three decisions, we
find that the annual general meeting was initially held within the stipulated
time and the adjourned meeting was held within 15 months as envisaged under
section 166(1) of the Act. It must be said, therefore, that the annual general
meeting for the year in question was held by the latest day on or before which
that meeting should have been held in accordance with the provisions of the
Act. Since in that meeting the balance-sheet and profit and loss account of the
company were laid and since they were sent to the Registrar of Companies within
7 days thereof, there was no violation of the provision of section 220(1) of
the Act. It must, therefore, be held that the instant prosecution is not
maintainable.
We, therefore, allow this application and quash the
proceeding.
Sankar Bhattacharyya J.—I
agree.
[1986] 59
COMP. CAS. 670 (MAD.)
HIGH COURT OF
Assistant Registrar of Companies
v.
Southern
Machinery Works Ltd.
BHASKARAN, J.
CRIMINAL
REVISION CASES NOS. 362 TO 398 OF 1982.
(CRIMINAL
REVISION PETITIONS NOS. 359 TO 395 OF 1982).
R. Shanmugam for the Petitioner.
K. Ramaswamy for the
Respondents.
Bhaskaran, J.—This
batch of revision petitions arises out of a common order passed by the learned
Third Metropolitan Magistrate, Madras, upholding the preliminary objections
with regard to the maintainability of the complaints and dismissing the
complaints filed by the Assistant Registrar of Companies against several
companies and the directors of those companies under section 162 of the
Companies Act, 1956, hereinafter referred to as "the Act", for
failure to file the annual return and certificate under section 161 of the Act
and failure to file the balance-sheets, etc., as provided under section 220 of
the Act.
A preliminary objection has been taken in all the
petitions under revision on behalf of the companies and the directors that the
prosecution cannot be launched against all the directors for failure to comply
with any provision of the Act but should be filed only against the company and
those directors who are in default as defined under the Act, and since the
complainant has mechanically stated that "the companies and the directors
are under statutory obligation to file the statutory returns and since they
failed to file the returns, all of them are liable", the complaints are
not maintainable and the prosecution cannot be launched. The learned trial
Magistrate upheld the objection and dismissed all the complaints as such. Hence, these revisions by the Assistant Registrar of Companies.
Section 159 of the Act deals with
submission of annual return by the company having a share capital.
Sub-section (1) of this section 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 particulars specified in Part I of Schedule V to the Act. Under
section 220 of the Act, three copies of the balance-sheet and profit and loss
account have to be filed with the Registrar of Companies within thirty days
from the date on which the balance-sheet and the profit and loss account were
so laid. Under section 220(3), for violation of the above said requirements,
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 of the Act. Under sub-tion (1) of section 162, 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. Under
sub-section (2) of section 162, it is stated that 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 term "officer" is defined under
section 2(30) as including any director, managing agent, secretaries and
treasurers, manager or secretary, or any person in accordance with whose
directions or instructions the board of directors or any one or more of the
directors is or are accustomed to act. Thus, the term "officer"
includes any director of the company besides others. The term "officer who
is in default" has been defined in section 5 as any officer of the company
who is knowingly guilty of the default, non-compliance, failure, refusal or
contravention mentioned in the provisions of the Act or who knowingly and wilfully authorises or permits
such default, non-compliance, failure, refusal or contravention.
A reading of the various provisions of the Act
mentioned above would make it clear that for failure to comply with the
relevant provisions of the Act, besides the company, any officer of the
company, who includes a director, who is knowingly guilty of the default, is
liable to be punished under section 162 of the Act.
In Ajit Kumar Sarkar v. Assistant
Registrar of Companies [1979] 49 Comp Cas 909, it has been observed by the Calcutta High
Court at page 920 as follows:
"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 ' 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
sections 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."
In the above case, the complaint did not contain a
specific plea as to the officers who are in default apart from the company. The
Calcutta High Court held that the complaint was bad. Further, the company in
that case was not an accused and, therefore, the court held that the company
was a necessary party and that the prosecution should be conducted only in the
presence of the company as accused and that only if the company was convicted,
the other officers in default can be convicted. On both the above said grounds,
the court quashed the prosecution. In the instant case, since in none of the
complaints the complainant has fixed the liability on any director as officer
in default but has simply stated that all the directors of the company are
liable for non-compliance of the requirements under the Act, the trial
Magistrate, following the above decision of the Calcutta High Court, held that
the complaints are not maintainable and, acccordingly,
dismissed all the complaints.
Learned counsel for the petitioner in these revisions
would submit that the liability of the company for non-compliance is absolute,
that in all these cases the companies are carried on by the board of directors
and, as such, for non-compliance of the provisions of the Act, all the
directors are liable and whether a particular director can escape liability on
the basis that he is not an officer in default has to be gone into only after
recording evidence and the complaints cannot be rejected in limine.
He would further submit that an officer in default means an officer knowingly
in default and in these cases all the directors must be deemed to be officers
in default since notices have been served on all the directors before the
prosecution was launched and none of the directors had given any reply and only
after giving reasonable time after the issue of notice, the prosecution has
been launched and, therefore, prima facie it must be taken that all the
directors are officers in default knowingly. He would rely upon Arcot Citizen Bank Ltd., In re [1957] 27 Comp Cas 550 (Mad) and Madan Gopal Dey v. State [1968] 72 CWN 312 ; [1969] 39 Comp Cas 119 (
Learned counsel for the revision petitioner also
submitted that the decisions relied on by the learned trial Magistrate are
distinguishable on the facts of the present case, since in that case, the
directors alone were sought to be prosecuted without impleading
the company, whereas in the instant cases, the companies are also proceeded
against and since the liability of each company is absolute, the complaints
cannot be thrown out. Further, according to him, in the Calcutta case, Ajit Kumar Sarkar v.
Assistant Registrar of Companies [1979] 49 Comp Cas
909 (Cal) it has not been established that any notice issued by the
Registrar of Companies has been served on the directors giving them opportunity
to comply with the requirements of the Act, whereas in the cases on hand,
notices in fact have been issued and served on the directors, but they have not
even replied to those notices and the prosecutions have been launched only
after giving them sufficient opportunity.
Learned counsel for the respondents, on the other
hand, submitted that if all the directors are made liable, then there is no
need to include the term "officer in default" alone should be liable,
in the Act and that is why the Calcutta High Court has pointed out that if all
the directors are liable for every default, then the expression "every
officer who is in default" becomes redundant and meaningless.
In the decision in Arcot
Citizen Bank, In re [1957] 27 Comp Cas
550 (Mad), for failure of laying of balance-sheet before the meeting, the
company and its directors were sought to be prosecuted. Against the conviction,
the directors filed a revision to this court contending that they cannot be
held to have knowingly and wilfully defaulted. This
court dismissed the revision and while considering the scope of the word
"knowingly and wilfully", it has quoted
with approval the following passage of the Calcutta High Court in Bhagirath Chandra Das v. Emperor
[1947] 17 Comp Cas 93 (p. 555 of 27 Comp Cas):
"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."
In the decision in Bhagirath
Chandra Das v. Emperor [1947] 17 Comp Cas 93 (Cal), which relates to prosecution under section
32(5), Shyam Sundar Jalan v. State [1977] 47 Comp Cas
61 (Cal) and section 134 of the old Act corresponding to section 162(1)—Ajit Kumar Sarkar v. Assistant
Registrar of Companies [1979] 49 Comp Cas 909
(Cal)—and section 220 Madan Gopal
Dey v. State [1968] 72 CWN 312; [1969] 39 Comp Cas 119 (Cal)—of the present Act, it has been observed as
follows (headnote of 17 Comp Cas
93):
"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 the 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. If directors, who are responsible for the
management of the 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."
In Madan Gopal Dey's case [1968] 72 CWN
312; [1969] 39 Comp Cas 119 (Cal), after quoting the
decisions in Bhagirath Chandra Das
v. Emperor [1947] 17 Comp Cas 93 (Cal) and Arcot Citizen Bank, In re [1957] 27 Comp Cas 550 (Mad) of respectively the Calcutta High Court and
this (Madras) High Court with approval, the Calcutta High Court has held as
follows (p. 125 of 39 Comp Cas):
"The relevant provisions of the Companies Act
have been enacted to protect the shareholders and, in some cases, to protect
the general public and they impose definite duties on the directors. When the
directors fail to perform their statutory duty, they bring themselves within
the mischief of the penal provisions of the law. In order that a conviction
under the sections involved in the present cases of ' an officer of the company
' may be sustained, the only thing to prove is that that particular officer
knowingly and wilfully authorised
or permitted these defaults. The offence is complete if the officer of the
company knew of the defaults and permitted the same."
Learned counsel for the petitioner also relied on the
decision in Shyam Sundar Jalan v. State [1977] 47 Comp Cas
61 (Cal) in support of his contention that whether a particular director is an
officer in default or not is a matter of evidence and the complaint cannot be
thrown out at the threshold. In that case, prosecution was launched under the
Income-tax Act against the directors of a company for failure to deduct
income-tax on the salary of the employees, for failure to submit the returns in
time, and for other violations of the provisions of the Income-tax Act. It was
contended, that under the Income-tax Act, the principal officer designated is
responsible for compliance of the requirements under the various provisions of
the Income-tax Act and, therefore, all the directors cannot be prosecuted. It
was held that it was a matter of evidence whether the director named in the
complaint could be treated as principal officer of the company.
Learned counsel for the revision petitioner submitted
that prima facie, the companies in question are run through their board of
directors, that the board of directors appoint officers like secretary, manager
and managing director to administer the affairs of the company and, as such,
every director of the company is responsible for compliance of the requirements
as provided under the Act, but in order to visit them with penal provisions of
the Act whether that officer is an officer in default is a matter of evidence.
According to him, notices have, in fact, been served on all the directors and
there was no reply before action could be taken and, therefore, it has to be
held that all the directors are officers in default and it is always open to
any of the directors to prove by letting in evidence that he was not an officer
in default; in other words, he did not commit any default knowingly.
In Ajit Kumar's case [1979]
49 Comp Cas 909 (Cal), the Calcutta High Court has
observed that if all the directors are liable for every default, then the
expression "every officer who is in default" becomes redundant and
meaningless. But, in my view, a harmonious construction would be that in some
cases all the directors of the company may be held liable or treated as
officers in default or some of the directors alone may be treated as officers
in default for non-compliance of any of the provisions of the Act depending
upon the constitution of the company. That is why if the Registrar of Companies
had issued notice to all the directors calling upon them to perform the
statutory obligations and if any reply was sent by any of the directors
repudiating the liability and that some other officer was liable for the
alleged default, the Registrar of Companies can take into consideration the
averments in the reply and decide whether that director could be proceeded with
or not. So, whether a particular director could be proceeded against or not in
a complaint filed against the company is a matter of evidence and in the
absence of a reply to the notice, the Registrar of Companies can proceed against
all the directors since all the directors must be deemed to be knowingly guilty
of default since they were put on notice of the default. This presumption is,
of course, rebuttable on evidence.
In this connection, the decision in V.M. Thomas v.
Registrar of Companies [1980] 50 Comp Cas
247 (Ker) relied on by the learned counsel for the
respondents herein requires mention. In that case, prosecution was launched
against the company, its managing director and another director. The company
and its managing director pleaded guilty, but the other director disputed his
liability. The other director was also found guilty and convicted. He preferred
a revision to the High Court. The Kerala High Court
in that case found that a notice was sent to the director by the Registrar of
Companies but it was returned unserved. Taking that
fact into consideration, the Kerala High Court held
that it cannot be said that in spite of the petitioner before it having been
cautioned in time, the default took place and, therefore, he had knowingly and wilfully authorised or permitted
the default or non-compliance. From this observation, conversely it follows, that if notice is served and if no reply is
received, it must be held that that officer has knowingly committed default. In
the instant case, admittedly the company is the first accused and notices have
been served on all the directors who are made the accused, but no reply has
been given by any of them. In those circumstances, the complaint filed by the
Assistant Registrar of Companies against the company and all its directors
treating them prima facie as officers in default is valid.
So far as the company is concerned, its liability is
absolute, once the default is proved and no question of "knowingly
committing default" arises in the case of the company. Therefore, it is
open to any of the directors to prove by letting in evidence that he is not an
officer in default. In these circumstances, I find that on the averments made
in the complaints filed after issuance of notice to all the directors, the
complaints cannot be said to be not maintainable.
The result is, these revision petitions are allowed,
the order of the trial Magistrate is set aside and the miscellaneous petitions
raising preliminary objections to the complaints before the trial Magistrate
are dismissed. The trial Magistrate will take all the complaints on file and
dispose of them according to law.
[1986] 59 COMP. CAS. 176
(
HIGH COURT OF
Central Manbhum Coal Co. (P.) Ltd.
v.
Assistant Registrar of Companies
UMESH CHANDRA BANERJEE, J.
MATTER NO. 1025 OF 1983.
Pranab Pal for the Petitioners.
P.K. Bose for the Respondents.
Umesh
Chandra Banerjee, J.—This writ petition
arises out of a complaint lodged by the Assistant Registrar of Companies,
In that view
of the statement, the right to prosecute accrued on July 30, 1980. Admittedly,
this complaint was filed before the Chief Metropolitan Magistrate on September
16, 1982.
Section 468
of the Criminal Procedure Code 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. Pranab Pal, appearing for the petitioner,
that the learned Magistrate cannot in view of the bar of limitation take
cognizance of the matter. Mr. Pal in support of his contention cited a decision
of this court in National Cotton Mills v. Assistant Registrar of Companies,
West Bengal [1984] 56 Comp Cas 222 ; 87 Cal WN 1038 ;
[1984] Tax LR 2043, wherein all relevant decisions have been noted and the
proceedings were quashed on the ground of being time-barred.
Mr. P. K.
Bose, appearing on behalf of the respondents, however, submitted that the
offence under section 220(3) read with section 162(2) of the Companies Act is a
continuing offence and, as such, question of limitation would not arise on the
facts of this case. I am, however, unable to accept the contention of Mr. Bose.
The language of section 162(1) makes it clear that it is not a continuing
offence. In the view taken by the Division Bench of this court, it is apparent, the complaint is ex facie barred by limitation.
In that view
of the matter, this application succeeds. The rule is, therefore, made
absolute.
There will be
no order as to costs.
Since no
affidavit has been filed, the allegations in the petition are not admitted by
Mr. Bose.
[1992] 75
COMP. CAS. 243 (MAD.)
HIGH COURT OF
A. Gnanadurai
v.
Registrar of Companies
PRATAP SINGH J.
Criminal Miscellaneous Petitions Nos. 2978 and
2981 of 1989
A K. Mylsamy for the Petitioner.
K. Ilias Ali for the Respondent.
Pratap Singh,
J.—The second accused in
C.C. No. 999 of 1988 and C.C. No. 1000 of 1988 on the file of the Additional
Chief Metropolitan Magistrate (E.O.I), Egmore,
Madras, has filed these two petitions under section 482, Criminal Procedure
Code, praying to call for the records relating to the aforesaid C.C. No. 999 of
1988 and C.C. No. 1000 of 1988 and quash the same.
In C.C. No.
999 of 1988, the respondent has filed the complaint against Ramamurthy Metal
Decorating Industries Ltd., the petitioner herein, Subash
Chandra Bose and Ramamurthy arraying them as accused Nos. 1 to 4 under section
220 of the Companies Act, 1956. The allegations in it are briefly as follows:
The first
accused was incorporated as a company under the Companies Act, 1956. It is
represented by accused Nos. 2 to 4 who are directors of the company, according
to the particulars filed in the office of the complainant. According to section
220 of the Companies Act, 1956, the company and its directors are under a
statutory obligation to file with the Registrar of Companies, three copies of
the balance-sheet and profit and loss account in the prescribed form, duly
placed in 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
balance-sheet and profit and loss account of the company, as on December 31,
1985, were required to be placed in the annual general meeting by a day not
later than June 30, 1986, viz., within six months of the close of the financial
year and three copies of the balance-sheet were required to be filed in the
office of the complainant not later than July 30, 1986, viz., within 30 days of
holding 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 accused
company has not filed the copies of the balance-sheet and profit and loss
account with the complainant. The complainant issued a show-cause notice to accused Nos. 1 to 4 on
July 19, 1988. In spite of issue of show-cause notice, the accused have wilfully and knowingly allowed these defaults to continue
and hence are liable for prosecution for default within the meaning of section
5 of the Companies Act, 1956. The default commenced on July 31, 1986, and is a
continuing offence within the meaning of section 472, Criminal Procedure Code. Hence the complaint.
The
respondent has filed the complaint in C.C. No. 1000 of 1988 on the file of the
Additional Chief Judicial Magistrate (E.O.I.) Egmore,
Mr. A.K. Mylsamy, learned counsel appearing for the petitioner,
would contend that the petitioner was not a director of the company during the
period for which the balance-sheet and profit and loss account of the company
were to be filed before the respondent. It is his contention that the company
had three directors, and one-third of the board of directors are to retire each
year by virtue of the provisions of the Companies Act and the petitioner had retired
from directorship during the relevant period and hence he is not liable. In
this regard, he relies upon Company Petition No. 156 of 1988 in the High Court
of Judicature at
In view of
the above, both the petitions are dismissed.
[1992] 74 COMP. CAS. 809 (
HIGH COURT OF
v.
Criminal Revisions Nos. 375 and 376 of 1985
Soumen Ghosh and Ajoy Roy for the petitioner.
A.R. Saha, B.R. Ghosal
and Dipak Mukherjee for the
respondent.
JUDGMENT
Jyotirindra
Nath Hore J.—These two matters
have been heard together and this judgment will govern both.
Criminal
Revision No. 375 of 1985 arises out of an application under section 482 of the
Criminal Procedure Code for quashing the impugned proceeding being C/2894 of
1983 under section 220(3) of the Companies Act, 1956, pending before the
learned Metropolitan Magistrate,
The
petitioner is a director of Clyde Fan Company Private Limited. Shri S.K. Bhattacherjee, the
Assistant Registrar of Companies, West Bengal, filed a complaint before the
learned Chief Metropolitan Magistrate at Calcutta, alleging, inter alia, that the annual general meeting of the company should
have been held in accordance with the provisions of the Companies Act, 1956, on
or before June 30, 1983, and the balance-sheet and profit and loss account of
the company for the year ending on December 31, 1982, were required to be filed
under section 220(1) Of the Companies Act in the office of the complainant on
or before July 30, 1983. But, in spite of show-cause notices/default notices
issued by the complainant, the said balance-sheet and profit and loss account
as on December 31, 1982, have not yet been filed. Accused No. 1 is the company
and accused Nos. 2 to 4 are officers of the company who were/are in default and
were/are knowingly guilty of the said default in filing the said balance-sheet
and profit and loss account. Accused Nos. 1 to 4 are, therefore, liable for
punishment under section 220(3) of the Companies Act, 1956. The petitioner has
been made accused No. 2 in the said case.
On a perusal
of the complaint, cognizance was taken as summons against the petitioners and
others under section 220(3) of the Companies Act, 1956, was issued.
Criminal
Revision Case No. 376 of 1985 arises out of a similar complaint under section
220(3) of the Companies Act for non-submission, of the balance-sheet and profit
and loss account for another period.
Mr. Ghosh, learned advocate for the petitioner, has challenged
the impugned proceedings against the petitioner on two grounds. Firstly, it has
been contended that there is no material in the petition of complaint to show
that the petitioner was in overall control of the day-to-day business of the
company and was in charge of preparing the balance-sheet and profit and loss
account and holding the annual general meeting and in the absence of such
averments in the petition of the complaint, the initiation of proceedings and
taking of cognizance are bad, illegal, improper and without jurisdiction. It
has been contended that there is no material in the petition of complaint to
show that the petitioner is an officer of the company as contemplated under
section 220(3) of the Companies Act, and is also in default; and, in the
absence of such material, the learned Magistrate has no competence, authority
and/or jurisdiction to take cognizance of the case and initiate the proceeding.
Secondly, it has been contended that the petitioner could not prepare the
balance-sheet and profit and loss account and hold the annual general meeting
of the company for consideration of the accounts due to circumstances
absolutely beyond the control of the petitioner. It has been alleged that
though the petitioner was a director of the company and the petitioner and the
other members of his family were the majority shareholders, the petitioner did
not get accounts and stock verification statement after transfer of the shares
and did not get possession of the factory building and machinery as the workers
and the staff had started an agitation in respect of their salaries, bonus and
other demands. The petitioner did not get possession of the books of account
and other documents of the company and as a result, the petitioner could not
prepare any accounts and also the balance-sheet and the profit and loss account
and could not comply with the provisions of the Companies Act in the absence of
books of account and the documents or the relevant particulars.
Mr. Ghosal, learned advocate for opposite party No. 2, the
Assistant Registrar of Companies, contended, on the other hand, that there are
sufficient averments in the complaint which make out a prima facie case under
section 220(3) of the Companies Act against the petitioner. It has further been
contended that the allegations about the circumstances for which the petitioner
is alleged to have been unable to prepare the balance-sheet and profit and loss
account and submit the same before the authorities are in the nature of defence which is to be proved by the petitioner by adducing
evidence as the alleged circumstances are not admitted. The same cannot be
taken into consideration at this stage.
Under the
provisions of section 220(1) of the Companies Act, 1956, three copies of the
balance-sheet and profit and loss account duly placed in the annual general
meeting are to be filed with the Registrar of Companies within 30 days of the
general meeting and, in case no annual general meeting was held, within 30 days
from the last date on which the annual general meeting should have been held in
accordance with the provisions of the Act. Sub-section (3) of section 220
provides that, if default is made in complying with the requirement of
sub-section (1) or (2), the company and every officer of the company who is in
default are liable to the like punishment as provided by section 162 for a
default in complying with the provisions of sections 159, 160 or 161. It is
clear, therefore, that the company would be always liable for non-compliance
with the requirements of section 220(1). Apart from the company, every officer
of the company who is in default is also liable. The expression "officer
who is in default" has been defined in section 5 as 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 a default, non-compliance, failure, refusal or contravention. In paragraph
6 of the petition of complaint, there is an allegation that accused No. 2 who
is the petitioner before me and other accused persons are officers of the
company who were in default and who were knowingly guilty of the said default,
viz., non-compliance and failure to file the said balance-sheet and profit and
loss account. At this stage, the question for consideration is whether the
allegations in the petition of complaint, if taken on their face value, make
out a prima facie case against the petitioner under section 220(3) of the Companies
Act. There is a specific allegation that the petitioner was knowingly guilty of
the said default, viz., non-compliance and failure to file the balance-sheet
and profit and loss account for the disputed period. The petitioner is a
director of the company. Any director of the company who is knowingly guilty of
the default or who knowingly authorises or permits
such a default would be an "officer who is in default" under section
5 read with section 2(30). In view of the allegations made in paragraph 6 of
the plaint, it cannot be said that no prima facie case has been made out
against the petitioner. The details as to how the petitioner was knowingly
guilty of the default or knowingly authorised or
permitted such a default are matters of evidence.
Mr. Ghosh, relying upon a single Bench decision of this court
in the case of Ajit Kumar Sarkar
v. Assistant Registrar of Companies [1979] 49 Comp Cas
909 (Cal), has contended that, in the absence of any averment in the petition
of complaint as to which of the directors was specifically in default and in
what respects in complying with the provisions of the Companies Act, 1956, the
cognizance taken in the instant case was bad in law. That case is
distinguishable in two respects. Firstly, there was no allegation in that case
that the accused persons were knowingly guilty of the default or knowingly authorised or permitted such a default. The only
allegations were that the accused persons were officers and the directors of
the company and they were under a statutory obligation to file with the
complainant an annual return. Secondly, in the instant case there was a
show-cause notice/default notice issued by the complainant against the
petitioner and other directors but no reply was given. In the case of Assistant
Registrar of Companies v. Southern Machinery Works Ltd. [1986] 59 Comp Cas 670, the Madras High Court has held that if the
Registrar of Companies had issued notice to all the directors calling upon them
to perform the statutory obligations, and if any reply was sent by any of the
directors repudiating the liability and alleging that some other officer was
liable for the alleged default, the Registrar of Companies can take into
consideration the averments in the reply to decide whether that director could
be proceeded against or not. So whether a particular director could be
proceeded against or not in a complaint filed against the company is a matter
of evidence and, in the absence of a reply to the notice, the Registrar of
Companies can proceed against all the directors since all the directors must be
deemed to be knowingly guilty of the default since they were put on facts of
the default. This presumption is rebuttable on
evidence. Mr. Ghosh does not dispute this proposition
of law but contends that the notice of default was served on the company and
not on the petitioner. But from the records produced by opposite party No. 2,
it appears that there was an order for sending the notice of default to all the
directors including the present petitioner and an affidavit has been filed on
behalf of opposite party No. 2 that, during shifting of office to another
place, records like dispatch register, etc., were found missing. The averment
in the affidavit that the notice was sent to all directors has not been
challenged by the petitioner in any affidavit-in-opposition though sufficient
time and opportunity were given. I am, therefore, prima facie satisfied that
notice of default was served on the petitioner who did not reply to it. The
first contention raised by Mr. Ghosh cannot,
therefore, be accepted.
With regard
to the second point urged by Mr. Ghosh, the
petitioner's case is that though the petitioner was a director of the company
and the petitioner and other members of his family are the majority
shareholders, the petitioner did not get the accounts and stock verification
statement after transfer of the shares as adjustment against the loan advanced
by the petitioner in favour of the Clyde Fan Company Private Limited and did
not get possession of the factory building and machinery as the staff started
agitation for their salaries, bonus and other dues. In spite of repeated
reminders the persons who were directors prior to the transfer of the shares in
favour of the petitioner and his family did not hand over the books of account
and the balance-sheet as on December 31, 1973, and also on the date of transfer
of shares. It is alleged that the default was due to circumstances beyond the
control of the petitioner. Whether this is a valid defence
or not can be decided only at the time of trial after consideration of the
evidence adduced by the petitioner. The facts are disputed. It cannot,
therefore, be held at this stage that the complaint is not maintainable on this
score.
In the
result, both the rules are discharged and the revisional
applications are dismissed. Interim order of stay is vacated. Send down the
lower court records at once.
[2000] 24 SCL 483 (Guj.)
HIGH COURT OF
v.
State of
A.L.
Dave, J.
Criminal
Miscellaneous Application
No.
2526 of 1999
Section 220, read with section 5, of the
Companies Act, 1956 - Accounts -Default in filing copies of balance sheet etc.
- Whether where a director ceased to be director of company prior to date of default
and on date of default his relationship with company was not in existence, he
would not fall within definition of ‘officer in default’ under section 5 and
therefore, complaint against such person under section 220(3) would not be
maintainable - Held, yes
The
petitioner happened to be a director of the company which failed to file three
copies of the balance sheet and profit and loss account by 30-10-1997 as
required under section 220. The Registrar of Companies lodged complaint against
the company and its directors including the petitioner. The petitioner
challenged the said complaint contending that he had resigned from the
directorship of the company by his letter dated 23-9-1996 and the said
resignation came to be accepted by the Board of Directors and the company had
submitted Form No. 33 indicating that the petitioner ceased to be director with
effect from 17-10-1996 and therefore, on the date of alleged commission of
offence, he was not director of the company and could not be held responsible
for the alleged default.
It was apparent from the facts that the
petitioner ceased to be professional director of the company on 17-10-1996.
Admittedly, according to the complaint, the accounts were to be submitted
latest by 30-10-1997. On that day, the petitioner was not connected with the
company in any manner. To put it differently, the petitioner’s relationship
with the company had snapped on 17-10-1996 and on the date of the alleged
commission of the offence, he had no relation whatsoever with the company.
A bare perusal of the section 220,
particularly sub-section (3), indicates that, in cae
of default in complying with provisions of sub-section (1) or (2), the company
and every officers of the company who is in default would be liable. As such,
liability would arise in the instant case only on 30-10-1997, the day on which
the petitioner had no relationship with the company. He would not fall within
the definition of officer who is in default as defined under section 5 and,
therefore, the complaint against the petitioner was not maintainable at all.
Form No. 32, filed by the company with the
Registrar of companies, indicated that the change was effected on 17-10-1996
and intimated on 21-7-1997 which was in any case prior to the date of default
and cause of action therefor. The complaint,
therefore, could not have been filed against the petitioner.
Thus, on the date on which the offence was
said to have been committed, i.e., on 30-10-1997, the petitioner’s relationship
with the company was not in existence. The petitioner could not be held
responsible even otherwise as he did not fall within the definition of officer
in default as given in section 5. No offence against the petitioner could be
said to be constituted and, as a necessary consequence, the petition must
succeed and complaint qua the petitioner must be quashed.
1. Heard Mr. Pahwa for the petitioner, Mr. S.P. Dave, the learned
Additional Public Prosecutor for the respondent No. 1 State and Ms. Davawala for the respondent No. 2.
2. Rule Mr.
S.P. Dave Waives Service of Rule on behalf of respondent No. 1 and Ms. Davawala waives service on behalf
of the respondent No. 2.
3. The
petitioner happened to be a Director of one Aashi
Leasing & Finance Ltd. The said company failed to file three copies of the
balance sheet and profit and loss account of the company by 30-10-1997, as
required under section 220 of the Companies Act, 1956 (‘the Act’) and,
therefore, the Registrar of Companies for Gujarat, Dadra
and Nagarhaveli lodged complaint against the company
and three directors of which present petitioner was shown as accused No. 3,
under section 220(3).
4. The
petitioner has challenged the said complaint on the ground that it is not
maintainable against him. According to the petitioner, at one stage, he was
director or the company, but he resigned from the directorship by his letter
dated 23-9-1996 with effect from 23-9-1996. The said resignation came to be
accepted by the Board of Directors and, accordingly, the company had submitted
Form No. 32 indicating that the petitioner ceased to be director with effect
from 17-10-1996 as the same was accepted by the Board of Directors and,
therefore, on the date of the alleged commission of the offence, the petitioner
was not director and he cannot be held responsible therefor.
The petitioner has in support of his version, produced a copy of the
resignation at Annexure 6 and that of Form No. 32 at Annexure-C.
5. Mr. Pahva, the learned Advocate appearing for the petitioner
submitted that the offence is under section 220(3) and, if that section is
considered, it holds responsible the company and every officer of the company,
who is in default, liable to be punished. Mr. Pahva
submitted that the petitioner was neither director nor officer of the company on
30-10-1997 and, therefore, he cannot be held responsible for non-filing of the
statement of accounts, balance sheet, etc. he has further drawn attention of
this Court to section 5 of the Companies Act which defines ‘officer who is in
default.’ Mr. Pahva submitted that the petitioner
does not fall under any of the categories stated in the said definition. Under
the circumstances, criminal liability cannot be fastened on the petitioner and
the complaint lodged against him may be quashed.
6. Ms. Davawala appearing for the Registrar of Companies respondent
No. 2 submitted that the company’s head quarters is at
Ahmedabad. Out of the three accused persons, accused
No. 2 and 4 stay at Mumbai and it is only the petitioner who is staying at Ahmedabad. He is a Chartered Accountant and, therefore, an
inference can be drawn that he must be looking after the affairs of the company
at Ahmedabad level, more so in relation to accounts
matters and, therefore, he cannot escape from this liability.
Mr. S.P. Dave, the learned Additional Public
Prosecutor submitted that there is no substance in the petition and may be
dismissed.
8. In reply
to the argument advanced by Ms. Davawala Dave that
Form No. 32 was sent on 21-7-1997, Mr. Pahva has
drawn attention to section 303. If section 303 is perused, it casts duty on the
company to intimate the change within 30 days of the effect of the change.
Sub-section (3) of the said section provides that in the event of default in
complying with the above provision, the company and every officer of the
company who is in default shall be punishable with a fine which may extend to
fifty rupees for every day during which the default continues. Mr. Pahva, therefore, submitted that the resignation was
accepted on 17-10-1996 and, therefore, it was the duty of the company to send
Form No. 32 within one month thereof and, if there is any default on the part
of the company, the petitioner cannot be held responsible even according to
provisions of sub-section (3) of section 303.
9. Having regard to the contentions raised, the
following dates become important :—
(1) 23-9-1996—Petitioner tendered resignation as a professional
director from the company with effect from 23-9-1996.
(2) 17-10-1996—Resignation was accepted and
the change was effected.
(3)
30-10-1997—The
last date for filing of copies of balance sheet, profit and loss account, etc.
(4) 21-7-1997—The company sent Form No.
32 to intimate the change following resignation of the petitioner.
It is apparent from the above data that the
petitioner ceased to be professional director of the company on 17-10-1996.
Admittedly, according to the complaint, the accounts were to be submitted
latest by 30-10-1997. On that day, the petitioner was not connected with the
company in any manner. To put it differently, the petitioner’s relationship
with the company has shapped on 17-10-1996 and on the
date of the alleged commission of the offence, he had no relation whatsoever
with the company.
10. Section 220 runs as under :
“220. Three copies of balance sheet, etc., to
be filed with registrar—(1) After the balance sheet and 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 balance sheet and the profit and loss account,
signed by the managing director, managing agent, secretaries and treasures,
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 public company by virtue
of Section 43A, if the Central Government directs that it is not in the public
interest that any persons 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 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, a statement of that fact and of the
reasons therefor 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-section (1) and (2) the Company, 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.”
A bare perusal of the above section,
particularly sub-section (3) indicates that, in default in complying with
provisions of sub-section (1) or (2), the company and every officers of the
company who is in default would be liable. As such, liability would arise in
the instant case only on 30-10-1997, the day on which the petitioner had no
relationship with the company. He would not fall within the definition of
officer who is in default as defined under section 5 and, therefore, the
complaint against the petitioner is not maintainable at all.
11. Annexure-C,
if perused, indicates that the change was effected on 17-10-1996 and intimated
on 21-7-1997, which is in any case is prior to the date or default and cause of
action therefore, the complaint, therefore, could not have been filed against
the petitioner.
12. The outcome
of the above discussion is that, on the date on which the offence is said to
have been committed, i.e., on 30-10-1997, or not submitting copies of the balance
sheet, profit and loss account, etc. by then, the petitioner’s relationship
with the company was not in existence. The petitioner cannot be held
responsible even otherwise as he does not fall within the definition of
officer in default as given in section 5 and sub-section (3) of section 220
holds the company and every officer in default responsible for such lapse and,
therefore, the petition deserves to be allowed. No offence against the
petitioner can be said to be constituted and as a necessary consequence, the
petition must succeed and complaint qua the petitioner must be quashed.
13. The petition
is, therefore, allowed. The complaint being criminal case No. 322 of 1998,
lodged before the learned Additional Chief Metropolitan Magistrate, Ahmedabad, is hereby quashed so far as it relates to the
petitioner only. It is clarified that the entire complaint is not quashed. This
Court expresses no opinion on merits of the complaint and that it may be taken
to its logical conclusion in accordance with law. Rule is made absolute
accordingly.
Petition allowed.