Registrar of Companies Vs. Rajshree Sugar & Chemicals Ltd. & Ors.
EmailAppeal: Criminal Appeal No. 483 of 2000
(Arising out of SLP (Crl.) No. 3445 of 1999)
(From the Judgment and Order dated 17.3.98 of the Madras High Court in Crl.R.No. 125 of 1995)
(Arising out of SLP (Crl.) No. 3445 of 1999)
(From the Judgment and Order dated 17.3.98 of the Madras High Court in Crl.R.No. 125 of 1995)
Petitioner: Registrar of Companies
Respondent: Rajshree Sugar & Chemicals Ltd. & Ors.
Apeal: Criminal Appeal No. 483 of 2000
(Arising out of SLP (Crl.) No. 3445 of 1999)
(From the Judgment and Order dated 17.3.98 of the Madras High Court in Crl.R.No. 125 of 1995)
(Arising out of SLP (Crl.) No. 3445 of 1999)
(From the Judgment and Order dated 17.3.98 of the Madras High Court in Crl.R.No. 125 of 1995)
Judges: K.T. THOMAS, D.P. MOHAPATRA & RUMA PAL, JJ.
Date of Judgment: Nov 05, 2000
Appearances:
Mr. C.V. Subba Rao, Mr. B. Krishna Prasad, Advocates for the Appellant.
Mr. K.V. Viswanathan, Mr. Kunwar Ajit M. Singh and Mr. K.V. Venkataraman, Advocates for the Respondents.
Head Note:
COMPANY LAWS
Companies Act, 1956
Sections 113 and 621 – Code of Criminal Procedure , 1973 – Sections 397, 401, 468, 469 and 472 – Offences by companies – Cognizance of – Bar to cognizance after lapse of limitation – When period of limitation commences – Delay on the part of company in effecting transfer of shares and return of transferred share certificates – First batch of transfer application received by company on 11.12.1990 approved on 29.3.1991 and share certificates dis-patched on 6.4.1991 – Similarly second batch received on 26.12.1990 approved on 3.4.1991 and dispatched back to sharehold-er on 20.7.1992- Registrar of companies coming to know of the of-fence on 20.7.1992 during inspection of documents filed and on that basis filing criminal complaint on 20.8.1992 – Magistrate dismissing the complaint as being barred by limitation – High Court upholding dismissal – Validity. Held since the Registrar came to know of the offence only on 20.7.1992 the period of limi-tation of six months would commence from that date and hence complaint filed by ROC on 20.8.1992 not barred by limitation.
Companies Act, 1956
Sections 113 and 621 – Code of Criminal Procedure , 1973 – Sections 397, 401, 468, 469 and 472 – Offences by companies – Cognizance of – Bar to cognizance after lapse of limitation – When period of limitation commences – Delay on the part of company in effecting transfer of shares and return of transferred share certificates – First batch of transfer application received by company on 11.12.1990 approved on 29.3.1991 and share certificates dis-patched on 6.4.1991 – Similarly second batch received on 26.12.1990 approved on 3.4.1991 and dispatched back to sharehold-er on 20.7.1992- Registrar of companies coming to know of the of-fence on 20.7.1992 during inspection of documents filed and on that basis filing criminal complaint on 20.8.1992 – Magistrate dismissing the complaint as being barred by limitation – High Court upholding dismissal – Validity. Held since the Registrar came to know of the offence only on 20.7.1992 the period of limi-tation of six months would commence from that date and hence complaint filed by ROC on 20.8.1992 not barred by limitation.
Held:
According to the appellant, the Magistrate overlooked the provisions of Section 469(1)(b) of the Code which provides for the computation of the period of limitation from the first day on which the offence comes to the knowledge of “the person aggrieved by the offence or to the police officer”. The High Court rejected the submission holding that the appellant was neither the person aggrieved nor a police officer and that the prosecution under Section 113 could be launched only on the application of an affected shareholder. According to the High Court, this was clear from clause (3) of Section 113.
(Para 11)
It is not in disp-ute that the appellant came to know of the offences on 20th July 1992. The commencement of the period of limitation of six months for initiating the prosecution would have to be calculated from that date. The complaint was filed on 20th August 1992 well within the period specified under Section 468(2) of the Code.
(Para 19)
Cases Reffered:
1. State of U.P. v. Bahadur Singh and Others, (AIR 1983 SC 845)
2. Bhagwati Prasad v. Assis-tant Registrar of Companies ((1983) 53 Company Cases 56);
3. Sushil Kumar and Others v. Registrar of Companies ((1983) 53 Comp. Cases P. 54)
4. Sulochana v. State of Registrar of Chits (Investigation and Prosecution), Madras 1978 Crl.L.J. 116
5. Abdul Rahim v. State represented by the Chit Registrar Nagapattinam 1978 (1) L.W. Crl. 195.
6. Vasantlal Chandulal Majmudar v. Navinchandra Manilal & Anr. Guj. LR Vol. XXII 436
7. Nestle India Limited and Others v. State and Another (1994 (4) Comp. L.J. 446 (Del))
JUDGEMENT:
RUMA PAL, J.
1. Leave granted.
2. This appeal has been preferred from the decision of the High Court of Madras dated 17th March, 1998. The appeal was filed on 26th July, 1999 after a delay of 406 days. The application for condonation of delay filed by the appellant shows that the De-partment of Legal Affairs took up the matter only on 16th Decem-ber, 1998. No explanation whatsoever has been given for the appellants’s inaction during this period of nine months. The observation of this Court in State of U.P. v. Bahadur Singh and Others, (AIR 1983 SC 845) regarding the latitude to be shown to the Government in deciding questions of delay, does not give a licence to the Officers of the Government to shirk their respon-sibility to act with reasonable expedition. However, since the matter has been permitted to be argued on merits, it would not be appropriate to dismiss the appeal on the ground of delay, but our disapproval of the conduct of the appellant in this regard will be reflected in the costs which we intend to award against the appellant in favour of the respondents, irrespective of our decision on merits.
3. The issue to be decided in this appeal relates to an offence allegedly committed by the respondents under Section 113 of the Companies Act, 1956 (referred to as the ‘Act’). The complaint was filed by the appellant against the respondents on 28th August, 1992 alleging that the respondents had, in violation of Section 113 of the Act, defaulted in transfer of shares within the time specified in that Section. The Chief Judicial Magistrate, Coimba-tore by his order dated 30th March, 1993 dismissed the complaint on the ground that it was barred by limitation under Section 468 of the Code of Criminal Procedure (for short ‘the Code’).
4. The appellant filed a petition under Sections 397 and 401 Cr.P.C. before the High Court of Madras praying for revision of the order dated 30th March, 1993. The High Court by the impugned judgment not only upheld the order of the trial court but also held that the appellant was incompetent to file a complaint in respect of an offence under Section 113 of the Act.
5. Section 1131 Sub-section (1) of the Act requires a company to deliver the share certificates to the allottee or transferee within three months after the allotment and within two months after the application for registration of transfer of the shares. The period is extendable in certain circumstances on an applica-tion by the company to the Company Law Board subject to a maximum period of nine months.
6. Sub-section (2) of Section 113 provides that if default is made in compliance with Sub-section 1 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. In addition to this criminal liabil-ity for punishment, under Section 113 (3) a person entitled to have the shares delivered to him, may apply to the Company Law Board for a directive on the company to deliver the certificates or the debentures to the complainant. The Company Law Board is authorised to pass an order directing the company and any officer of the company “to make good the default” within such time as may be specified and also provide for the costs of and incidental to the application to be paid to the complainant by the company or any officer of the company who may be responsible for the de-fault.
7. In this case, the complaint filed by the appellant was under Section 113(2). It was alleged in the complaint that the company was sent share transfer certificates along with applications for transfer in two batches; – on 23.11.1990 and 18.12.1990. The first batch of applications for transfer was received by the company on 11.12.1990, approved on 29.3.1991 and dispatched on 6.4.1991. The second batch of applications was received on 26.12.1990 approved by the company on 3.4.1991 and dispatched on 16.4.1991. Apparently, Section 113 (1) was not complied with. This came to the knowledge of the appellant only on 20.7.1992 when the appellant inspected the books of account of the company under Section 209A (1)(i) of the Act. The complaint was filed by the appellant on 20th August 1992 before the Chief Judicial Magistrate, Coimbatore.
8. As already noted the Chief Judicial Magistrate dismissed the complaint relying on Section 468 of the Code, which provides:
“468. Bar to taking cognizance after lapse of the period of limi-tation :- (1) Except as otherwise provided elsewhere in this Court, no Court shall take cognizance of an offence of the cate-gory 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”;
9. The date on which period of limitation is to commence has been provided for in Section 469 of the Code in the following manner:
“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, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier.”
10. It is unnecessary to decide whether the offence under Section 113 of the Act is a continuing one under Section 472 of the Code on the facts of this case. Even if the offence were a continuing one, the offence, if any, continued upto the date when the deliv-eries were in fact effected under Section 113 viz. on 6.4.91 and 16.4.91. As the offence of delayed delivery is punishable with a fine, the time to initiate proceedings under Section 468 of the Code would expire at the latest in October, 1991. The appellant, in fact, filed the complaint almost a year later.
11. According to the appellant, the Magistrate overlooked the provisions of Section 469(1)(b) of the Code which provides for the computation of the period of limitation from the first day on which the offence comes to the knowledge of “the person aggrieved by the offence or to the police officer”. The High Court rejected the submission holding that the appellant was neither the person aggrieved nor a police officer and that the prosecution under Section 113 could be launched only on the application of an affected shareholder. According to the High Court, this was clear from clause (3) of Section 113.
12. It is contended by learned counsel appearing for the respond-ents that the view of the High Court has also been taken by a learned Single Judge of the Gujarat High Court in Vasantlal Chandulal Majmudar v. Navinchandra Manilal & Anr. Guj. LR Vol. XXII 436; by a learned Single Judge of the Delhi High Court in Nestle India Limited and Others v. State and Another (1994 (4) Comp. L.J. 446 (Del)) as well as by a learned Single Judge of the Madras High Court in Sulochana v. State of Registrar of Chits (Investigation and Prosecution), Madras 1978 Crl.L.J. 116.
13. A contrary view has been expressed by two Division Bench judgments of the Calcutta High Court in Bhagwati Prasad v. Assis-tant Registrar of Companies ((1983) 53 Company Cases 56); Sushil Kumar and Others v. Registrar of Companies ((1983) 53 Comp. Cases P. 54) with reference to Section 113 of the Act.
14. As far as the decision of the Gujarat High Court is con-cerned, it dealt with the provisions of the Gujarat Co-operative Societies Act, 1967, the provisions of which are not before us. As far as the decision of the High Court of Madras is concerned, the decision of the learned Single Judge in Sulochana v. Regis-trar (supra) has been expressly over-ruled by the Division Bench of the Madras High Court in Abdul Rahim v. State represented by the Chit Registrar Nagapattinam 1978 (1) L.W. Crl. 195. The Division Bench has held that the Registrar of Chits was a ‘person aggrieved’ within the meaning of Section 469 (1)(b) of the Code and was competent to initiate prosecution for an offence under the Tamilnadu Chit Funds Act, 1961. Sulochana’s case was also distinguished in the two Calcutta High Court’s decisions noted earlier.
15. The only decision cited by the respondents which is on Section 113 of the Act is the decision in Nestle India Limited (supra). Neither the learned Judge in his decision in Nestle India nor the High Court in the judgment under appeal considered the provisions of Section 621 (1) of the Companies Act, which provides:
“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.”
16. Under this Section therefore, the appellant is competent to file a written complaint in respect of offences under, inter-alia, Section 113 of the Act.
17. The phrase ‘person aggrieved’ has not been defined in the Code. However, as far as offences under the Companies Act are concerned, the words must be understood and construed in the context of Section 621 of the Act. If the words ‘person ag-grieved’ are read to mean only ‘ the person affected’ by the failure of the Company to transfer the shares or allot the shares, then the only ‘person aggrieved’ would be the transferee or the allottee, as the case may be. Under Section 621 of the Act, no Court can take cognizance of an offence against Companies Act except on the complaint of a share-holder, the Registrar or the person duly authorised by the Central Government. Where the transferee or allottee is not an existing share-holder of the Company, if the words ‘person aggrieved’ is read in such a limit-ed manner, it would mean that Section 469(1)(b) of the Code would be entirely inapplicable to offences under Section 113 of the Act. There is, in any event, no justification to interpret the words ‘person aggrieved’ as used in Section 469 (1)(b) restric-tively particularly when, as in this case, the statute creating the offence provides for the initiation of the prosecution only on the complaint of particular persons. Having regard to the clear language of Section 621 of the Act, we have no manner of doubt that the appellant would be a ‘person aggrieved’ within the meaning of Section 469 (1)(b) of the Code in respect of offence (except those under Section 545) against the Companies Act.
18. Apart from overlooking the provisions of Section 621 of the Act, the High Court erred in construing the provisions of Sec-tion 113(2) with reference to Section 113(3). The latter deals with the civil liability of the Company and its officers for a breach of Section 113(1) at the instance of the transferee of the shares. Section 113 (2) deals with the criminal liability aris-ing out of a violation of Section 113 (1). The objects of the two Sub-sections are disparate. Section 113 (3) is primarily compen-satory in nature whereas Section 113 (2) is punitive. An applica-tion under Section 113 (3) can only be made by the transferee. And as already seen, a transferee who is not an existing share-holder of the Company cannot file a complaint under Section 113 (2) at all.
19. For the reason stated, we are of the view that the appellant as a person aggrieved would be entitled to the benefit of the provisions of Section 469 (1)(b) of the Code. It is not in disp-ute that the appellant came to know of the offences on 20th July 1992. The commencement of the period of limitation of six months for initiating the prosecution would have to be calculated from that date. The complaint was filed on 20th August 1992 well within the period specified under Section 468(2) of the Code.
20. In the circumstances, the decision of the High Court as well as the Chief Judicial Magistrate, Coimbatore are set aside and the matter is remanded back to the Chief Judicial Magistrate, Coimbatore for being decided on merits.
21. Because of the inordinate delay by the appellant in prefer-ring this appeal, the appellant shall pay the costs of the appeal to the respondents.
1. Leave granted.
2. This appeal has been preferred from the decision of the High Court of Madras dated 17th March, 1998. The appeal was filed on 26th July, 1999 after a delay of 406 days. The application for condonation of delay filed by the appellant shows that the De-partment of Legal Affairs took up the matter only on 16th Decem-ber, 1998. No explanation whatsoever has been given for the appellants’s inaction during this period of nine months. The observation of this Court in State of U.P. v. Bahadur Singh and Others, (AIR 1983 SC 845) regarding the latitude to be shown to the Government in deciding questions of delay, does not give a licence to the Officers of the Government to shirk their respon-sibility to act with reasonable expedition. However, since the matter has been permitted to be argued on merits, it would not be appropriate to dismiss the appeal on the ground of delay, but our disapproval of the conduct of the appellant in this regard will be reflected in the costs which we intend to award against the appellant in favour of the respondents, irrespective of our decision on merits.
3. The issue to be decided in this appeal relates to an offence allegedly committed by the respondents under Section 113 of the Companies Act, 1956 (referred to as the ‘Act’). The complaint was filed by the appellant against the respondents on 28th August, 1992 alleging that the respondents had, in violation of Section 113 of the Act, defaulted in transfer of shares within the time specified in that Section. The Chief Judicial Magistrate, Coimba-tore by his order dated 30th March, 1993 dismissed the complaint on the ground that it was barred by limitation under Section 468 of the Code of Criminal Procedure (for short ‘the Code’).
4. The appellant filed a petition under Sections 397 and 401 Cr.P.C. before the High Court of Madras praying for revision of the order dated 30th March, 1993. The High Court by the impugned judgment not only upheld the order of the trial court but also held that the appellant was incompetent to file a complaint in respect of an offence under Section 113 of the Act.
5. Section 1131 Sub-section (1) of the Act requires a company to deliver the share certificates to the allottee or transferee within three months after the allotment and within two months after the application for registration of transfer of the shares. The period is extendable in certain circumstances on an applica-tion by the company to the Company Law Board subject to a maximum period of nine months.
6. Sub-section (2) of Section 113 provides that if default is made in compliance with Sub-section 1 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. In addition to this criminal liabil-ity for punishment, under Section 113 (3) a person entitled to have the shares delivered to him, may apply to the Company Law Board for a directive on the company to deliver the certificates or the debentures to the complainant. The Company Law Board is authorised to pass an order directing the company and any officer of the company “to make good the default” within such time as may be specified and also provide for the costs of and incidental to the application to be paid to the complainant by the company or any officer of the company who may be responsible for the de-fault.
7. In this case, the complaint filed by the appellant was under Section 113(2). It was alleged in the complaint that the company was sent share transfer certificates along with applications for transfer in two batches; – on 23.11.1990 and 18.12.1990. The first batch of applications for transfer was received by the company on 11.12.1990, approved on 29.3.1991 and dispatched on 6.4.1991. The second batch of applications was received on 26.12.1990 approved by the company on 3.4.1991 and dispatched on 16.4.1991. Apparently, Section 113 (1) was not complied with. This came to the knowledge of the appellant only on 20.7.1992 when the appellant inspected the books of account of the company under Section 209A (1)(i) of the Act. The complaint was filed by the appellant on 20th August 1992 before the Chief Judicial Magistrate, Coimbatore.
8. As already noted the Chief Judicial Magistrate dismissed the complaint relying on Section 468 of the Code, which provides:
“468. Bar to taking cognizance after lapse of the period of limi-tation :- (1) Except as otherwise provided elsewhere in this Court, no Court shall take cognizance of an offence of the cate-gory 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”;
9. The date on which period of limitation is to commence has been provided for in Section 469 of the Code in the following manner:
“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, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier.”
10. It is unnecessary to decide whether the offence under Section 113 of the Act is a continuing one under Section 472 of the Code on the facts of this case. Even if the offence were a continuing one, the offence, if any, continued upto the date when the deliv-eries were in fact effected under Section 113 viz. on 6.4.91 and 16.4.91. As the offence of delayed delivery is punishable with a fine, the time to initiate proceedings under Section 468 of the Code would expire at the latest in October, 1991. The appellant, in fact, filed the complaint almost a year later.
11. According to the appellant, the Magistrate overlooked the provisions of Section 469(1)(b) of the Code which provides for the computation of the period of limitation from the first day on which the offence comes to the knowledge of “the person aggrieved by the offence or to the police officer”. The High Court rejected the submission holding that the appellant was neither the person aggrieved nor a police officer and that the prosecution under Section 113 could be launched only on the application of an affected shareholder. According to the High Court, this was clear from clause (3) of Section 113.
12. It is contended by learned counsel appearing for the respond-ents that the view of the High Court has also been taken by a learned Single Judge of the Gujarat High Court in Vasantlal Chandulal Majmudar v. Navinchandra Manilal & Anr. Guj. LR Vol. XXII 436; by a learned Single Judge of the Delhi High Court in Nestle India Limited and Others v. State and Another (1994 (4) Comp. L.J. 446 (Del)) as well as by a learned Single Judge of the Madras High Court in Sulochana v. State of Registrar of Chits (Investigation and Prosecution), Madras 1978 Crl.L.J. 116.
13. A contrary view has been expressed by two Division Bench judgments of the Calcutta High Court in Bhagwati Prasad v. Assis-tant Registrar of Companies ((1983) 53 Company Cases 56); Sushil Kumar and Others v. Registrar of Companies ((1983) 53 Comp. Cases P. 54) with reference to Section 113 of the Act.
14. As far as the decision of the Gujarat High Court is con-cerned, it dealt with the provisions of the Gujarat Co-operative Societies Act, 1967, the provisions of which are not before us. As far as the decision of the High Court of Madras is concerned, the decision of the learned Single Judge in Sulochana v. Regis-trar (supra) has been expressly over-ruled by the Division Bench of the Madras High Court in Abdul Rahim v. State represented by the Chit Registrar Nagapattinam 1978 (1) L.W. Crl. 195. The Division Bench has held that the Registrar of Chits was a ‘person aggrieved’ within the meaning of Section 469 (1)(b) of the Code and was competent to initiate prosecution for an offence under the Tamilnadu Chit Funds Act, 1961. Sulochana’s case was also distinguished in the two Calcutta High Court’s decisions noted earlier.
15. The only decision cited by the respondents which is on Section 113 of the Act is the decision in Nestle India Limited (supra). Neither the learned Judge in his decision in Nestle India nor the High Court in the judgment under appeal considered the provisions of Section 621 (1) of the Companies Act, which provides:
“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.”
16. Under this Section therefore, the appellant is competent to file a written complaint in respect of offences under, inter-alia, Section 113 of the Act.
17. The phrase ‘person aggrieved’ has not been defined in the Code. However, as far as offences under the Companies Act are concerned, the words must be understood and construed in the context of Section 621 of the Act. If the words ‘person ag-grieved’ are read to mean only ‘ the person affected’ by the failure of the Company to transfer the shares or allot the shares, then the only ‘person aggrieved’ would be the transferee or the allottee, as the case may be. Under Section 621 of the Act, no Court can take cognizance of an offence against Companies Act except on the complaint of a share-holder, the Registrar or the person duly authorised by the Central Government. Where the transferee or allottee is not an existing share-holder of the Company, if the words ‘person aggrieved’ is read in such a limit-ed manner, it would mean that Section 469(1)(b) of the Code would be entirely inapplicable to offences under Section 113 of the Act. There is, in any event, no justification to interpret the words ‘person aggrieved’ as used in Section 469 (1)(b) restric-tively particularly when, as in this case, the statute creating the offence provides for the initiation of the prosecution only on the complaint of particular persons. Having regard to the clear language of Section 621 of the Act, we have no manner of doubt that the appellant would be a ‘person aggrieved’ within the meaning of Section 469 (1)(b) of the Code in respect of offence (except those under Section 545) against the Companies Act.
18. Apart from overlooking the provisions of Section 621 of the Act, the High Court erred in construing the provisions of Sec-tion 113(2) with reference to Section 113(3). The latter deals with the civil liability of the Company and its officers for a breach of Section 113(1) at the instance of the transferee of the shares. Section 113 (2) deals with the criminal liability aris-ing out of a violation of Section 113 (1). The objects of the two Sub-sections are disparate. Section 113 (3) is primarily compen-satory in nature whereas Section 113 (2) is punitive. An applica-tion under Section 113 (3) can only be made by the transferee. And as already seen, a transferee who is not an existing share-holder of the Company cannot file a complaint under Section 113 (2) at all.
19. For the reason stated, we are of the view that the appellant as a person aggrieved would be entitled to the benefit of the provisions of Section 469 (1)(b) of the Code. It is not in disp-ute that the appellant came to know of the offences on 20th July 1992. The commencement of the period of limitation of six months for initiating the prosecution would have to be calculated from that date. The complaint was filed on 20th August 1992 well within the period specified under Section 468(2) of the Code.
20. In the circumstances, the decision of the High Court as well as the Chief Judicial Magistrate, Coimbatore are set aside and the matter is remanded back to the Chief Judicial Magistrate, Coimbatore for being decided on merits.
21. Because of the inordinate delay by the appellant in prefer-ring this appeal, the appellant shall pay the costs of the appeal to the respondents.
