Section 621
OFFENCES
AGAINST ACT, COGNIZANCE OF
v.
Mrs. H.K. Sandhu J.
March 31, 1994
Rajiv Kataria and K.S. Ruppal for the Petitioner.
P.C. Wadhawa for the Respondent.
Mrs.
Harmohinder Kaur Sandhu J.—Shri
S.C. Bhatia, director, Indana Spices and Food Industries Ltd., 72, Janpath, New
Delhi, has filed this petition under section 482 of the Criminal Procedure
Code, for quashing complaint annexure "P-7”, summoning order annexure
"P-8" and the proceedings arising therefrom pending in the court of
Shri T.R. Bansal, Judicial Magistrate, 1st Class, Chandigarh. The brief facts
of the case relevant for the disposal of this petition are that P.C. Wadhawa,
respondent, filed a complaint under section 73 of the Companies Act, 1956,
against the petitioner alleging that Indana Spices and Food Industries Limited
floated debentures in August, 1991. He applied for 40 debentures the company and issued cheque for a sum of Rs. 3,000
bearing No. 569179, dated August 9, 1991, on Haryana State Co-operative Apex
Bank Limited, Sector 28-D, Chandigarh, for the purchase of the debentures. The
application form and cheque were deposited with the Canara Bank. Debentures
were, however, not allotted to him within the stipulated period. On
non-allotment of debentures, the company was required to refund the amount of
Rs. 3,000 within eight days of the expiry of a period of 10 weeks from the date
of closure of the issue, but the company illegally withheld and used the amount
of Rs. 3,000 for its own gain. The amount was refunded by Shri S.C. Bhatia,
vide cheque which was received on April 10, 1992, but was presented to the bank
on April 14, April 11 and 13 being holidays. The amount was illegally retained
by the company for a period of five and a half months after the lapse of the
statutory period of 10 weeks plus eight days and no interest was paid for this
period in spite of various letters written to the company. The director of the
company violated the provisions of sub-section (2A) of section 73 of the
Companies Act, 1956, and was liable for action under sub-section (2B) of that
section.
After hearing
counsel for the complainant and going through the record, the Chief Judicial
Magistrate, Chandigarh, summoned the present petitioner to stand trial for an
offence under section 73 of the Companies Act.
The petitioner
alleged that the complaint, annexture "P-7", was in abuse of the
process of law having been filed with a malicious intention to tarnish the
image of the company in the eyes of the general public and the respondent had
no locus standi to file the same. The complaint could not have been filed
against the petitioner as section 73 of the Companies Act stipulated that
criminal liability shall be that of the company and every director of the
company who was an officer in default. No act of negligence or mens rea
regarding commission of an offence by the petitioner was disclosed.
No return was
filed by the respondent.
I have heard
Mr. Rajiv Kataria, learned counsel for the petitioner, and Mr. P.C. Wadhawa,
respondent and have perused the record.
It was argued
on behalf of the petitioner that the complaint annexure "P-7" was
liable to be quashed as the allegations made therein did not disclose the
commission of any offence by the petitioner nor did the complainant have any
locus standi to file the complaint. The petitioner against whom the complaint
had been filed could not be punished under section 73 of the Companies Act, as
the complaint was not maintainable against him. He referred to section 621 of
the Act, which runs as under:
"(1) No court shall take cognizance of any offence
against this Act (other than an offence with respect to which proceedings are
instituted under section 545), which is alleged to have been committed by any
company or any officer thereof, except on the complaint in writing of the
Registrar, or of a shareholder of the company, or of a person authorised by the
Central Government, in that behalf:
Provided that
nothing in this sub-section shall apply to a prosecution by a company of any of
its officers.
(1A)
Notwithstanding anything contained in the Criminal Procedure Code, 1898 (5 of
1898), where the complainant under sub-section (1) is the Registrar or a person
authorised by the Central Government, the personal attendance of the
complainant before the court trying the offence shall not be necessary unless
the court for reasons to be recorded in writing requires his personal
attendance at the trial.
(2) Sub-section (1) shall not apply to any
action taken by the liquidator of a company in respect of any offence alleged
to have been committed in respect of any of the matters included in Part VII
(sections 425 to 560) or any other provisions of this Act relating to the
winding up of companies.
(3) A liquidator of a company shall not be
deemed to be an officer of the company, within the meaning of sub-section
(1)."
It was urged
that according to the provisions of the above section, the court could not take
cognizance of any offence under section 73 of the Act, unless the complaint was
filed in writing by the Registrar or by a shareholder of the company or by a
person authorised by the Central Government in that behalf. The respondent was
neither a shareholder nor was he authorised by the Central Government to file
the complaint. Even if debentures had been allotted to him still he could not
become a shareholder of the company unless he held shares.
The contention
of learned counsel for the petitioner is quite tenable. Under the Act,
protection is given to companies from frivolous and malicious prosecution
hatched by any person who has no locus standi to file a complaint. In case any
person is aggrieved of any act of the company and he is not a shareholder of
the company, then the only remedy open to him is to approach the Registrar of
Companies, who shall file the complaint in a court of law, if any offence was
committed by the company. The only exception to section 621 of the Act is when
the prosecution for the offence happens to be under section 545 of the Act,
then the person filing the complaint need not be a shareholder or a person duly
authorised by the Central Government but this provision is not applicable to
the present case as that is available during the course of winding up of a
company.
The respondent
contended that whereas all other acts which provide for criminal prosecution
referred to the offences "under the Act", section 621 provided for
offence against the Act. So section 621 was not attracted and he was competent
to file a complaint for an offence punishable under section 73 of the Act. This
submission of the respondent is, however, not valid. The only grouse of the complainant
was that the company had failed to refund his money within the time period
stipulated under section 73, and, therefore, the company had committed an
offence by acting against the mandatory provisions of section 73(2A) punishable
under section 73(2B). The words "against the Act" or "under the
Act" connote the same meaning and the respondent failed to distinguish the
two by showing as to what were the offences "against the Act" and
which were "under the Act". In the light of the express bar under section
621 of the Act, the respondent had no locus standi to file the complaint.
Section 73(2B)
stipulated that the company and every officer of the company who was an
"officer in default" shall be punished. An officer in default has
been defined in section 5 of the Act, which is as under:
"5. Meaning of 'officer who
is in default'.-For the purpose of any provision in this Act which enacts that
an officer of the company who is in default shall be liable to any punishment
or penalty, whether by way of imprisonment, fine or otherwise, the expression
'officer who is in default' means all the following officers of the company,
namely:—
(a) the
managing director or managing directors;
(b) the
whole-time director or whole-time directors;
(c) the
manager;
(d) the
secretary;
(e) any person in accordance with whose
directions or instructions, the board of directors of the company is accustomed
to act;
(f) any
person charged by the board with the responsibility of complying with that
provision:
Provided that the person so
charged has given his consent in this behalf to the board;
(g) where any company does not have any of the
officers specified in clauses (a) to (c) any director or directors who may be
specified by the board in this behalf or where no director is so specified, all
the directors:
Provided that where the board
exercises any powers under clause (f) or clause (g),it shall, within thirty
days of the exercise of such powers, file with the Registrar a return in the
prescribed form.”
The petitioner
does not fall under any of the categories mentioned in the above section. He is
neither a managing director nor a whole-time director nor manager nor
secretary. In order to prosecute the petitioner it was necessary for the
respondent to mentioned in the complaint whether the petitioner was a managing
director or a whole-time director as it is only those tow type of director who
could be termed as officer in default. A person who is simply a director cannot
be prosecuted under section 73 of the Act. In the instant case, neither the
respondent had a locus standi to file the complaint nor the petitioner was
liable for the commission of any offence and the complaint is liable to the
quashed on these grounds.
As a result, I allow this petition and quash the complaint, annexure “P-7”, summoning order, annexure “P-8”, and all subsequent proceedings arising therefrom pending in the court of the Judicial Magistrate, Ist Class, Chandigarh.
[2001] 106 COMP.
CAS. 685 (MAD.)
v.
Registrar
of Companies
M
KARPAGAVINAYAGAM, J.
Criminal
O.P. Nos.22987 and 22988 of 1998
And
Crl. M.P. Nos. 11216 and 11217 of 1998
JANUARY 18, 2001
JUDGMENT
N. KARPAGAVINAYAGAM, J. - V. Karthikeyan and T. L. Pragasam, who are arrayed as A2 and A5 respectively in the private complaint filed by the Registrar of Companies for the offence under section 207 of the Companies Act, 1956, have filed these two petitions under section 482 of the Criminal Procedure Code seeking for quashing of the said proceedings in E.O.C.C. No. 177 of 1998.
Whether the offence under section 207 of the Companies Act has been taken cognizance of validly by the trial court before the expiry of the period of limitation ?
This is the main question posed before this court in these petitions.
According to learned counsel for the petitioners, though M/s. Iggi Resorts International Ltd., the subject company, declared a dividend of 25 per cent. at its annual general meeting held on September 25, 1996, it did not pay the dividend amount on or before November 5, 1996, i.e., within 42 days from the date of declaration of the dividend and the said non-payment would amount to an offence under section 207 of the Companies Act and is liable to be punished with imprisonment for seven days with fine and as such, the complaint ought to have been filed and taken cognizance of within one year under section 468(2)(b) of the Criminal Procedure Code and in this case, the complaint was filed only on June 15, 1998, after nearly two years and as such, the cognizance is not valid.
On the other hand, it is the contention of learned counsel appearing for the respondent that the Registrar of Companies came to know of the above-said default only on March 24, 1998, when the Regional Directorate, Department of Company Affairs gave instructions to launch prosecution and as such, from that date the complaint has been filed within one year i.e., on June 15, 1998, even before the expiry of the period of limitation. He would further contend that even assuming that the Registrar has got knowledge of receipt of the complaint from the shareholder on June 30, 1997, even then the complaint was within time, since it was filed on June 15, 1998, within one year from the date of receipt of the said complaint and therefore, the present prosecution has been filed within the period of limitation.
Let us now refer to the penal section of the Act. Section 207 of the Companies Act provides thus :
"207. Where a dividend has been declared by a company but it has not been paid, or the warrant in respect thereof has not been posted, within forty-two days from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine".
Under this section, the offence would be complete after the expiry of forty-two days, if the dividend declared by a company has not been paid to the shareholder and the said offence is punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine.
Counsel on either side would concede that limitation for initiation of proceedings for offences under the Act has not been prescribed under the Act itself, and hence the general law, under the Code of Criminal Procedure will stand attracted. Since the offence alleged is punishable with imprisonment and fine, it is evident that under section 468 of the Criminal Procedure Code the period of limitation for initiation of the impugned prosecution will be one year.
Section 468 of the Criminal Procedure Code reads as follows :
"468. Bar to taking cognizance after lapse of the period of limitation. - (1) Except as otherwise provided elsewhere in this Code, no court shall take cognizance of an offence of the category specified in sub-section (2), after the expiry of the period of limitation.
(2) The period of limitation shall be -
(a) six months, if the offence is punishable with fine only;
(b) one year, if the offence is punishable with imprisonment for a term not exceeding one year. ...".
The reading of this section would make it clear that there is a bar to taking cognizance after the lapse of the period of limitation.
However section 469 of the Code prescribes the commencement of the period of limitation. Section 469 reads as follows :
"469. Commencement of the period of limitation. - (1) The period of limitation, in relation to an offender, shall commence, -
(a) on the date of the offence; or
(b) where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, on the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier; or. ...".
This section would reveal that the period of limitation shall commence either on the date of the offence or on the date known to the person aggrieved by the offence or to any police officer whichever is earlier.
We are now concerned with the commencement of the period of limitation in the instant case.
The present complaint has been filed not on the basis of the date on which offence was committed, but on the basis of the date on which offence came to be known by the person aggrieved.
Let us now refer to section 621 of the Companies Act. Section 621 reads thus :
"621. (1) No court shall take cognizance of any offence against this Act (other than an offence with respect to which proceedings are instituted under section 545), which is alleged to have been committed by any company or any officer thereof, except on the complaint in writing of the Registrar, or of a shareholder of the company, or of a person authorised by the Central Government in that behalf. ...".
The reading of this section would clearly show that the complaint could be lodged either by a shareholder or the Registrar of Companies or by a person authorised by the Central Government. In the instant case, the complaint has been filed by the Registrar of Companies.
Under section 469 of the Criminal Procedure Code the period of limitation would commence only on the date when the offence comes to the knowledge of the person aggrieved by the offence or to any police officer whichever is earlier. In this case, no police officer is involved. On the other hand, the shareholder on being aggrieved of the non-payment of the dividend complained to the Registrar of Companies.
Section 621 of the Companies Act would make it clear that the complaint could be filed either by shareholder or by Registrar of Companies. Even though the shareholder knew about the offence, he did not choose to file complaint. Therefore, it is not necessary to go into the question as to whether there is any bar for the court to take cognizance on his complaint and as to when the shareholder came to know of the offence for finding out the time on which the period of limitation commenced.
There is no doubt, as held by the Division Bench of this court in Abdul Rahim v. State Represented by the Chit Registrar [1978] LW (Crl.) 195 and Registrar of Companies v. Rajshree Sugar and Chemicals Ltd. [2000] 101 Comp Cas 271; [2000] SCC (Crl.) 1019, that the Registrar of Chits also is a "person aggrieved" within the meaning of section 469(1)(b) of the Code and as such, he is competent to initiate prosecution by invoking the benefit under section 469(1)(b) of the Criminal Procedure Code.
Therefore, the wording "whichever is earlier" would not mean the date of knowledge as between the shareholder and the Registrar of Companies. It is a comparison only between the aggrieved person and the police officer with reference to the dates of knowledge in order to find out which date is earlier and that meaning cannot be conveyed to be the date of knowledge between the shareholder and the Registrar of Companies.
In this case, it has to be taken that the date of knowledge of the offence by the Registrar of Companies who filed the complaint, is the date of commencement of the period of limitation.
Under those circumstances, we have to find out what is the date of knowledge of the Registrar of Companies in regard to the offence and what is the date of cognizance of the offence taken by the trial court.
According to the complainant, the Registrar of Companies, as mentioned in the complaint, he was instructed to launch prosecution by the Regional Directorate on May 24, 1998, and as such, the period of limitation would commence only on that date and the complaint was presented on June 15, 1996, and therefore, the cognizance had been taken during the period of limitation i.e., within one year.
However, it is admitted by learned counsel for the respondent-Registrar of Companies through the memo that the Registrar of Companies received a complaint from the shareholder B. C. L. Narayana on June 30, 1997. It is also mentioned in the complaint that B. C. L. Narayana sent a complaint regarding the non-payment of the dividend to the office of the Registrar of Companies on June 25, 1997. Thus, it is clear that the complaint sent by the shareholder B. C. L. Narayana dated June 25, 1997, was received by the complainant, Registrar of Companies on June 30, 1997.
On this basis, learned counsel for the respondent would contend that even assuming that the Registrar has got knowledge of the offence on June 30, 1997, on receipt of the complaint from the shareholder, since the complaint was filed on June 15, 1998, the prosecution is valid, as the same has been filed within one year from the date of receipt of the first complaint.
In view of the said submission and in view of the averment made in the complaint, there is no difficulty in holding that the "person aggrieved" as referred to in section 469(1)(b) of the Criminal Procedure Code, namely, the Registrar of Companies, the complainant came to know of the offence on June 30, 1997.
The next question would arise as to the date of cognizance.
According to counsel for the respondent, the complaint was filed on June 15, 1998. This court called for the records. It is seen from the first page of the complaint that the complaint was presented on June 15, 1998, and the seal was affixed on that date. But unfortunately, on noticing some irregularities in the complaint, it was returned for compliance on June 16, 1998, by the trial court to the complainant. After compliance, the complaint was resubmitted on September 8, 1998. Ultimately, the matter came up before the trial court on September 10, 1998.
A detailed order has been passed on September 10, 1998, by the court stating that the complainant was instructed to launch prosecution by the Regional Directorate, Department of Company Affairs, on March 24, 1998, and, therefore, the complaint is within the period of limitation and as such, the cognizance of offence was taken on September 10, 1998.
This shows that the trial court on the misconception that the complainant came to know of the offence only on March 24, 1998, passed an order taking cognizance on September 10, 1998, as if it is filed within the period of limitation, namely one year from the date of knowledge, namely March 24, 1998.
As indicated earlier, the date of knowledge of the person aggrieved, the Registrar of Companies, is not March 24, 1998, but June 30, 1997, if it is so, the cognizance is to be taken within one year from the said date i.e., on or before June 30, 1998. Though the complaint was presented on June 15, 1998, the said date cannot be construed to be the date of cognizance.
It is settled law that the cognizance is taken by the trial court only when it applies its mind to the allegation in the complaint and issues process. In this case, the cognizance was taken on September 10, 1998, as seen in the order passed by the trial court by which the case was taken on file and summons was issued to all the accused directing them to appear before the court on October 14, 1998.
Section 468 of the Criminal Procedure Code would provide the caption "bar to taking cognizance after lapse of the period of limitation". Under this section, the court shall not take cognizance of an offence after the expiry of the period of limitation. In the instant case, the period of limitation is one year from the date of knowledge of the person aggrieved. Admittedly, in this case, cognizance was taken only after the expiry of the period of limitation.
It is true that the period of limitation can be extended in certain cases as provided in section 473 of the Criminal Procedure Code. But, the condition for invoking section 473 is that the court must be satisfied that the delay has been properly explained or that it is necessary so to do in the interests of justice.
In the present case, section 473 of the Criminal Procedure Code has not been invoked. There is no application filed by the prosecution requesting for the extension of the period of limitation either by explaining the delay or to impress upon the court that it is necessary that cognizance should be taken in the interests of justice.
As noted above, cognizance was straightaway taken by the trial court on September 10, 1998, under the misconception that the Registrar of Companies came to know of the offence only on March 24, 1998. As noted earlier, there cannot be any dispute that the Registrar of Companies come to know of the offence on June 30, 1997, on receipt of the complaint of the shareholder B. C. L. Narayana, dated June 25, 1997. Thus, it is clear that the trial court which is not competent to take cognizance under section 468 of the Criminal Procedure Code has wrongly taken cognizance on September 10, 1998.
Under those circumstances, the entire proceedings in pursuance of the wrong cognizance taken in E.O.C.C. No. 177 of 1998 on the file of the Additional Chief Metropolitan Magistrate, E. O. I. Egmore, are liable to be quashed not only as against the petitioners but also as against all the other accused, though they are not the petitioners herein.
With the above observation, the petitions are allowed. Consequently, Crl. M.P. Nos. 11216 and 11217 of 1998 are closed.
Rajasthan High
Court
Indian
Petro Chemicals Corpn. Ltd.
v.
P.P.
Naolekar, J.
June 1,
2000
Section 10, read with sections 113 and 116, of
the Companies Act, 1956 - Courts - Jurisdiction of -
Petitioner-Government-company with registered office in Gujarat, failed to
issue share certificates within prescribed time limit to respondent No. 2, a
shareholder situated in Rajasthan - Court below at Jaipur took cognizance of
offence under sections 113(2) and 116 on complaint made at Jaipur - Whether
since complaint for offence under section 113(2) can be filed only where
registered office of company is situated and not where complainant resides court
at Jaipur had no jurisdiction to entertain complaint and take cognizance of
offence under section 113(2) - Held, yes
Section 621 of the Companies Act, 1956 -
Offences - To be cognizable only on complaint by Registrar, shareholder or
Government - Whether complaint under sections 113 and 116 against a Government
company can be taken cognizance of only if it is filed by a person authorised
by Central Government in that behalf except in proceedings instituted under
section 545 - Held, yes - Whether on facts stated under heading ‘Issue of
certificates - Limitation of time for’ since complainant was not authorised by
Central Government and complaint was not filed in proceedings instituted under
section 545, Court was prohibited from taking cognizance of offences under
sections 113(2) and 116 on account of clear cut provisions of section 621 -
Held, yes
The petitioner was a Government company
incorporated under the Companies Act. Its registered office was in Gujarat.
According to the respondent No. 2, she was allotted 100 equity shares but the
share certificates were never delivered nor she was informed about the
remaining call money. She, therefore, filed complaints in the court of Judicial
Magistrate, Jaipur for non-compliance of provisions of the Act and an offence
under sections 113 and 116. The Court issued process against the petitioner
after conducting an enquiry. As the court rejected the objections raised, the
petitioner-company filed the instant miscellaneous petitions claiming relief of
setting aside the order of the Court below and quashing of criminal proceedings
pending in the Court.
A reading of section 113 as a whole clearly
indicates that the person who has not been delivered share certificates after
allotment as provided under section 113(1), can make a complaint before the
magistrate and the magistrate can impose a penalty as provided under
sub-section (2) of section 113, whereas remedy provided under sub-section (3)
is independent and separate remedy wherein the person after giving the
statutory notice can approach the Board for non-compliance of the provisions of
sub-section (1) and the Board has an authority to issue directions to the
company to deliver, within such time as may be mentioned in the order, the
allotted or transferred shares. The amendment brought about in sub-section (3)
by the Companies (Amendment) Act, 1988 with effect from 31-5-1991 deleting
‘court’ and substituting it by the ‘Company Law Board’ does not make any
difference. Previously power under sub-section (3) was vested with the court;
with the amendment that has been given to the Board.
The petitioner was not right in his submission
that the complaint for non-compliance of section 113(1) would lie only before
the Board. Sub-section (2) of section 113 provides for penalty for non-delivery
of share certificates to allottee whereas sub-section (3) of section 113
provides for delivery of share certificates. Under sub-section (2) the court
is authorised to impose penalty whereas sub-section (3) gives authority to Board
to issue direction to deliver share certificate. If the complainant wants to
proceed against a company under sub-section (2) of section 113 the complaint
will have to be filed in the court of Registrar having jurisdiction whereas if
he wants to resort to the summary remedy for delivery, he can approach the
Board under sub-section (3) of section 113.
Admittedly, the petitioner-company’s
registered office was situated at Gujarat. The complaint of the respondent No.
2 was in respect of non-delivery of share certificates within the prescribed
time after allotment whereby the alleged offence under section 113(2) was
committed by the petitioner-company. The question raised is now finally settled
by the Apex Court in a judgment in H.V. Jairam v. Industrial Credit &
Investment Corpn. of India Ltd. [2000] 36 CLA 1, wherein it has been held that
under the provisions of section 53 two modes are prescribed for serving the
documents : one to serve personally and other by post and, therefore, where the
documents are sent to the purchaser of the share by post, the cause of action
would arise only where head office is situated and the complaint for offence
under section 113(2) of non-delivery of the share certificates within the
prescribed time can be filed only where the registered office of the company is
situated and not where the complainant resides. Normally, the share
certificates, debentures or debenture stock shall be sent by post to the
persons who are resident of outside stations and, thus, it shall be presumed
that the company shall send the share certificates by post unless, of course,
the shareholders are the residents of the same place where the company’s
registered office is situated. Admittedly, the plaintiffs were not the resident
of place where the company’s registered office was situated and, therefore, it
shall be deemed that the company was responsible to send the share
certificates, debentures or debenture stock by post. The court below had no
jurisdiction to entertain complaint and take cognizance of an offence under
section 113(2).
The process was issued and cognizance was
taken by the Court under sections 113 and 116 on a complaint made by the
respondent No. 2, the shareholder. Section 617 defines ‘Government company’
which is a company in which not less than 51 per cent of the paid-up share
capital is held by the Central Government or by any State Government or the
Governments, or partly by Central Government and partly by one or more State
Governments and includes a company which is subsidiary of a Government company.
The petitioner-company had paid-up share capital by the Central Government of
more than 51 per cent and, thus, the company was a Government company. Section
621 prohibits the court to take cognizance of the offence against the Act other
than an offence with respect to which proceedings are instituted under section
545, which is alleged to have been committed by any company or any officer
thereof except on a complaint in writing of the Registrar, or of a shareholder
of the company or in case of Government company, by a person authorised by
Central Government in that behalf. In regard to the other companies the
complaint can be made in writing either by the Registrar or by a shareholder of
the company or by a person authorised by the Central Government in that behalf.
But so far as the complaint is against the Government company it has to be made
by person authorised by the Central Government in that behalf; that is the
mandate of sub-section (1) of section 621. The offences falling within section
541 are the offences in relation to company, coming to light in the course of
winding-up having been committed by any officer or member and a special
procedure is especially provided by that section. It appears from the
comprehensive nature of the provision of section 545 that the offence mentioned
therein has a relevance which has been brought to light during the winding-up
proceedings only.
In the instant case the complaint made, by the
respondent, who claimed herself to be the shareholder, was against the
Government company, not in relation to the offence which was brought to light
during winding-up proceedings and, therefore, the court was prohibited from
taking cognizance of the offence under sections 113(2) and 116, on account of
the clear cut provision of section 621, whereby the court has been restrained
from taking cognizance of a complaint made by shareholder against the
Government company. The complaint filed was not maintainable.
The Court below had committed an error in
taking cognizance of an offence under sections 113(2) and 116 on a complaint
made at Jaipur. The order dated 17-10-1998 of the Special Court of Judicial
Magistrate (Economic Offences) Rajasthan, Jaipur, was set aside. The complaints
made and the proceedings taken in criminal cases by the court below were
quashed.
H.V. Jairam v. Industrial Credit &
Investment Corpn. of India Ltd. [2000] 36 CLA 1 (SC).
Munindar Singh for the Petitioner. Rizwan Ali for the
Respondent.
1. As
a common question of law and facts is involved in these cases they are decided
by this common judgment. (The facts in the matter of Smt. Kanta Devi are taken
into consideration for deciding the appeals.)
2. Petitioner
No. 1—Indian Petro Chemicals Corporation Ltd. (‘the petitioner-company’) is a
company incorporated under the Companies Act, 1956 (‘the Act’). It has its
registered office at P.O. Petro Chemicals, Distt. Vadodara-391346 (Gujarat).
Petitioner No. 2 K.G. Ramnathan is the chairman and managing director of the
petitioner-company. The petitioner-company has invited applications for
allotment of public issue of equity shares of rupees ten each for cash at a
premium of rupees one hundred fifty per share. At the relevant time when the
public issue was made the Government of India held 80 per cent of the equity
share capital of the company and it was declared by the company that subsequent
to the proposed issue the holding of the Government of India will be 70.87 per
cent of the enhanced equity. In pursuance of the invitation, the respondent No.
2 Smt. Kanta Devi Agrawal applied for allotment of equity shares. As per the
respondent No. 2 although hundred shares were allotted to her, she was not
delivered the share certificates. She was neither informed regarding share
certificates nor was informed about remaining call money nor was sent share
offer forms for right shares. Complaints were filed in the Special Court of
Judicial Magistrate (Economic Offences) Rajasthan, Jaipur (‘the court below’)
for non-compliance of the provisions of the Act and thereby committing an offence
under sections 113 and 116 of the Act. The learned court below conducted an
enquiry in the matter and vide its order dated 12-7-1995 issued process against
the petitioners along with some other persons after taking cognizance for an
offence under sections 113 and 116. The petitioners entered appearance in
pursuance of the summons issued by the court below and submitted preliminary
objections as to the maintainability of the complaints in the Jaipur court and
of the jurisdiction of the court of taking cognizance and issuance of process
on the complaint made by the respondent No. 2.
3. The
objections raised by the petitioner-company was rejected, hence, these
miscellaneous petitions were filed under section 482 of the Criminal Procedure
Code, 1973 claiming relief of setting aside the order of the court below passed
on 17-10-1998 and quashing of criminal proceedings pending in his Court.
4. It
is submitted by the counsel for the petitioner that the complaint under section
113 could be filed before the Company Law Board (‘the Board’) only as provided
under sub-section (3) of section 113, that the petitioner-company’s registered
office having situated at Vadodara (Gujarat), the court below has no
jurisdiction to entertain the complaint made under sections 113 and 116, that
the court below has committed an error in taking cognizance on a complaint of
the respondent No. 2 who claimed herself to be a shareholder for an offence
under sections 113 and 116 against the petitioner-company which is a Government
company. I shall deal with the submissions made by the counsel for the parties
one by one.
5. Section
113(1) (so far it is relevant for this case) provides for every company unless
prohibited by any provision of law or by order of any court, tribunal or any
other authority, to deliver within three months, after the allotment of shares,
debentures, debenture stock, and within two months after the application for
registration of the transfer of any such shares, debentures or debenture stock
in accordance with the procedure laid down in section 53, the certificate of
shares, debentures and certificate of debenture stocks allotted or transferred
to the allottee. Therefore, the petitioner-company under sub-section (1) is required
to deliver the share certificate allotted or transferred by it within three
months and within two months deliver, transferred debentures or debenture
stock. The proviso which has been added with effect from 15-7-1988 authorises
the Board to extend the period provided for delivery of allotted or transferred
shares. Sub-section (2) is a penal provision and if the company makes default
to comply with sub-section (1) of section 113, the company or every officer of
the company who is in default is punishable with fine which may extend to
rupees five hundred for every day during which the default continues. The
penalty for default under the section is fine which may extend to rupees five
hundred for every day during which the default continues. The default in
complying with the requirement of section is an offence and triable by the
magistrate. Although the Board has been given power to extend the period of
delivery of certificate, the punishment on default, if any, would be in the
domain of the courts only. Sub-section (3) lays down a summary remedy of applying
to the Board for an order directing the company and any officer thereof to
issue certificate in respect of which default of section 113(1) has been
committed. The person entitled to the certificate may approach the Board for an
order directing the issue of certificate. He is required to serve a notice on
the company as provided under sub-section (3) and only in the event of the
company failing to comply with the notice within ten days he can move the Board
under sub-section (3) of section 113. Reading of section 113 as a whole clearly
indicates that the person who has not been delivered share certificates after
allotment as provided under section 113(1) can make a complaint before the
magistrate and the magistrate can impose a penalty as provided under
sub-section (2) of section 113. Whereas remedy provided under sub-section (3)
is independent and separate remedy wherein the person after giving the
statutory notice can approach the Board for non-compliance of the provisions of
sub-section (1) and the Board had an authority to issue directions to company
to deliver, within such time as may be mentioned in the order, the allotted or
transferred shares. The amendment brought about in sub-section (3) by the
Companies (Amendment) Act, 1988 with effect from 31-5-1991 deleting ‘court’ and
substituting it by the Board does not make any difference. Previously power
under sub-section (3) was vested with the court, with the amendment that has
been given to the Board.
6. The
counsel for the petitioner is not right in his submission that the complaint
for non-compliance of section 113(1) would lie only before the Board.
Sub-section (2) of section 113 provides for penalty for non-delivery of share
certificates to allottee whereas sub-section (3) of section 113 provides for
delivery of share certificates. Under sub-section (2) court is authorised to
impose penalty whereas sub-section (3) gives authority to Board to issue
direction to deliver share certificate. If the complainant wants to proceed
against a company under sub-section (2) of section 113 the complaint will have
to be filed in the court of magistrate having jurisdiction whereas if he wants
to resort to the summary remedy for delivery, he can approach the Board under
sub-section (3) of section 113.
7. Admittedly
the petitioner-company’s registered office is situated at Vadodara (Gujarat).
The complaint of the respondent No. 2 is in respect of non-delivery of share
certificates within the prescribed time after allotment whereby the alleged
offence under section 113(2) is committed by the petitioner-company. The
question raised is now finally settled by the Apex Court in a judgment in H.V.
Jairam v. Industrial Credit & Investment Corpn. of India Ltd. [2000] 36 CLA
1 wherein it has been held that under the provisions of section 53 of the Act
two modes are
prescribed for serving the documents; one to serve personally and other by post
and, therefore, as the documents were sent to the purchaser of the share by
post, the cause of action would arise only where head office is situated and
the complaint for offence under section 113(2) of non-delivery of the share
certificates within the prescribed time can be filed only where the registered
office of the company is situated and not where the complainant resides.
Normally, the share certificates, debentures or debenture stock shall be sent
by post to the persons who are resident of outside stations and, thus, it shall
be presumed that the company shall send the share certificates by post unless,
of course, the shareholders are the residents of the same place where the
company’s registered office is situated. Admittedly, the plaintiffs are not the
resident of place where the company’s registered office is situated and,
therefore, it shall be deemed that the company is responsible to send the share
certificates, debentures or debenture stock by post. The court below has no
jurisdiction to entertain complaint and take cognizance of an offence under
section 113(2).
8. The
process is issued and cognizance is taken by the court under sections 113 and
116 on a complaint made by the respondent No. 2, the shareholder. Section 617
defines ‘Government company’ which is a company in which not less than 51 per
cent of the paid-up share capital is held by the Central Government or by any
State Government or Governments, or partly by Central Government and partly by
one or more State Governments and includes a company which is subsidiary of a
Government company. The petitioner-company has paid-up share capital by the
Central Government more than 51 per cent and, thus the company is a Government
company. Section 621 prohibits the court to take cognizance of the offence against
the Act other than an offence with respect to which proceedings are instituted
under section 545, which is alleged to have been committed by any company or
any officer thereof except on a complaint in writing of the Registrar, or of a
shareholder of the company or a person authorised by Central Government in that
behalf. In case of Government company by a person authorised by Central
Government in that behalf. In regard to the other companies the complaint can
be made in writing either by the Registrar or by a shareholder of the company
or by a person authorised by the Central Government in that behalf. But so far
the complaint is against the Government company it has to be made by person
authorised by the Central Government in that behalf, that is the mandate of
sub-section (1) of section 621. The offences falling within section 541 are
the offences in relation to company, coming into light in the courts of
winding-up having been committed by any officer or member and the special
procedure is especially provided by that section. It appears from the
comprehensive nature of the provision of section 545 that the offence mentioned
therein has a relevance which has been brought to the light during the
winding-up proceedings only.
9. In
the present case, the complaint made, by the respondent, who claimed herself to
be the shareholder, is against the Government company, not in relation to the
offence which is brought to light during winding-up proceedings and, therefore,
the court is prohibited from taking cognizance of the offence under sections
113(2) and 116, on account of the clear cut provision of section 621, whereby
the court has been restrained from taking cognizance on a complaint made by
shareholder against the Government company. The complaint filed was not
maintainable.
10. The
court below has committed an error in taking cognizance of an offence under
sections 113(2) and 116 on a complaint made at Jaipur. The order dated
17-10-1998 of the Special Court of Judicial Magistrate (Economic Offences) Rajasthan,
Jaipur is set aside. The complaints made and the proceedings taken in criminal
cases by the court below are hereby quashed.
[2001]
33 scl 262 (ap)
v.
State of A.P.
R.
Ramanujam, J.
Section 621, read with section 628, of the
Companies Act, 1956 and section 482 of the Code of Criminal Procedure, 1973 -
Offences and prosecution - Offences to be cognizable only on complaint by
Registrar, shareholder, etc. - Second respondent filed a complaint against
petitioners who were directors of a registered company, for offence alleged to
have been committed under section 628 - Complaint was taken cognizance of by
the Special Judge for economic offences - Complainant was not a shareholder of
the company - His father was a shareholder and after father’s death he had
applied for transfer of shares in his name and this application for transfer
of shares was pending - Whether since complainant was not a shareholder of the
company, in view of clear prohibition contained in section 621 no cognizance
of complaint should have been taken and criminal proceedings were, therefore,
liable to be quashed - Held, yes
The petitioners were managing director and
directors of a chit fund company registered under the Companies Act. The second
respondent initiated criminal proceedings against the petitioners for the
offence alleged to have been committed under section 628. The complaint was
that the petitioners had filed a false statement in Form No. 32 before the
Registrar of Companies showing the second respondent as one of the directors of
the company, even though he was not. The Special Judge for Economic Offences
took cognizance of the complaint and issued process to the accused. The
petitioners thereupon filed instant criminal petition under section 482 of the
Code of Criminal Procedure for quashing the proceedings contending that since
the complainant - second respondent was not a shareholder of the company, the
complain could not be taken cognizance of, keeping in view the mandatory
provisions of section 621. The second respondent contended that his father was
a shareholder of the company and, after his death, he had applied for transfer
of the shares in his name and, hence, the complaint was maintainable.
On Petition :
A plain reading of provisions of section 621
clearly shows that prosecution for the offences under the Act (except offences
under section 545) cannot be initiated by any person other than a Registrar, or
a shareholder of the company or a person authorised by the Central Government.
The petitioner was neither a Registrar nor a
person authorised by the Central Government. Undisputedly, the complainant was
not a shareholder of the company as yet. His application for transfer of shares
held by his late father was still pending and the shares were not yet
transferred in his name in accordance with the procedure laid down in Schedule
I to Table-A to the Companies Act, in particular, Regulations 25 to 28. Till such
time, he could not be a shareholder of the company. Therefore, the complaint
filed by the complainant should not have been taken cognizance by the Special
Judge in view of the clear prohibition contained in section 621.
The criminal petition, therefore, was to be
allowed and the criminal proceedings pending on the file of the Special Judge
for Economic Offences were to be quashed.
L. Venkateshwar Rao for the Petitioner. P. Shivkumar for
the Respondent.
1. This
criminal petition is filed under section 482 of the Code of Criminal Procedure,
1973 to quash the proceedings in Calendar Case No. 34 of 2000 on the file of
the Special Judge for Economic Offences, City Criminal Courts, Hyderabad.
2. Petitioners
1 to 3 herein are A.1 to A.3 respectively in the aforesaid Calendar Case. The
1st petitioner herein is the Managing Director, 2nd and 3rd petitioners are
the Directors of Karni Chit Funds (P.) Ltd. which is a company registered under
the Companies Act, 1956 (‘the Act’).
3. The
complaint, on which the criminal proceedings were initiated were filed by one
Shri Mukka Harish Babu, 2nd respondent herein, for the offence alleged to have
been committed by the petitioners under section 628 of the Act.
The case of the complainant, as is evident
from the complaint, is that the accused have filed a false statement in Form
No. 32 before the Registrar of Companies showing the complainant as one of the
Directors of the said company, even though he is not.
4. The
learned Special Judge, after examining the complainant, took cognizance of the
complaint and issued process to the accused. Thereupon, they filed the present
petition for quashing the said proceedings.
5. The
main ground urged by Shri L. Venkateswara Rao, the learned counsel for the petitioners-Accused
is that the complainant is not a shareholder of the company and, therefore, the
learned Special Judge ought not to have taken cognizance of the complaint in
view of the mandatory provision contained in section 621 of the Act.
6. Shri
P. Shiv Kumar, the learned counsel for the 2nd respondent-complainant,
however, submits that the father of the complainant was a shareholder of the
company. After his death, the complainant became entitled to the said shares
and he also filed an application for transfer of the same in his name.
Therefore, he can maintain the complaint.
7. I find merit in the
contention advanced on behalf of the accused. Section 621 reads thus :
“Offences against Act to be cognisable only on
complaint by Registrar, shareholder or Government.—(1) No Court shall take
cognizance of any offence against this Act (other than an offence with respect
to which proceedings are instituted under section 545), which is alleged to
have been committed by any company or any officer thereof, except on the
complaint in writing of the Registrar, or of a shareholder of the company, or
of a person authorised by the Central Government in that behalf.”
A plain reading of the aforesaid provision clearly shows that prosecution for the offences under the Act (except offences under section 545) cannot be initiated by any person other than a Registrar, or a shareholder of the company or a person authorised by the Central Government. The petitioner is neither a Registrar nor a person authorised by the Central Government. Undisputedly, the complainant is not a shareholder of the company as yet. His application for transfer of shares held by his late father is still pending and the shares are not yet transferred in his name in accordance with the procedure laid down in Schedule I to Table A to the Act, in particular, regulations 25 to 28. Till such time, he cannot be a shareholder of the company. Therefore, the complaint filed by the complainant should not have been taken cognizance by the Special Judge in view of the clear prohibition contained in section 621.
8. The criminal petition, therefore, succeeds and it is accordingly allowed. Consequently, the criminal proceedings in Calendar Case No. 34 of 2000, pending on the file of the Special Judge for Economic Offences, City Criminal Courts, Hyderabad, are quashed.