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The State of Bombay Vs. Bandhan Ram Bhandani and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany;Criminal
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1961SC186; (1961)63BOMLR423; [1961]31CompCas1(SC); 1961CriLJ319; [1961]1SCR801
ActsIndian Companies Act, 1913 - Sections 32, 32(5), 36, 131 and 134; Indian Companies (Amendment) Act, 1936
AppellantThe State of Bombay
RespondentBandhan Ram Bhandani and ors.
Cases ReferredPark v. Lawton
Books referredBuckley's Company Law (13th Ed.)
Excerpt:
.....against them - respondent contended that there was no default in complying with requirements until general meeting was held - no reason to hold that a person charged with failure to file list and summary as required by section 32 where meeting had not been held could only be prosecuted under section 76 of act and not under section 32 of act - by imposing daily fine during continuance of default indicated that default was committed till meeting had been held - section 131 of act requires director of company once at least in every calender year to lay before company in general meeting a balance sheet and profit and loss account of company - it was no defence to charge for breach of section 131 that meeting was not called - held, case remanded back to learned presidency magistrate and be..........was that they were knowingly and wilfully parties to the failure to lay before the company in general meeting the balance sheet and profit and loss account as at march 31, 1953 and thereby became punishable under section 133(3) of the act for a default in complying with the requirements of section 131. there was a separate trial in respect of each offence. 2. the learned magistrate found that no general meeting of the company had been held in the year concerned. following imperator v. pioneer clay and industrial works ltd. i.l.r. [1948] bom. 86 he acquitted the respondents, being of the view, that no offence under either section could be committed till the general meeting had been held. the learned magistrate did not go into the merits of the cases on the facts. appeals by the.....
Judgment:

Sarkar, J.

1. The respondents were Directors of Hirjee Mills Ltd. They were prosecuted before the Chief Presidency Magistrate, Bombay, for two offences under the Companies Act, 1913, as amended by Act XXII of 1936. The first offence was that they knowingly and wilfully authorised the failure to file the summary of share capital for the year 1953 and thereby became punishable under sub-section (5) of section 32 of the Act, for a default in carrying out the requirements of that section. The second offence was that they were knowingly and wilfully parties to the failure to lay before the company in general meeting the balance sheet and profit and loss account as at March 31, 1953 and thereby became punishable under section 133(3) of the Act for a default in complying with the requirements of section 131. There was a separate trial in respect of each offence.

2. The learned Magistrate found that no general meeting of the company had been held in the year concerned. Following Imperator v. Pioneer Clay and Industrial Works Ltd. I.L.R. [1948] Bom. 86 he acquitted the respondents, being of the view, that no offence under either section could be committed till the general meeting had been held. The learned Magistrate did not go into the merits of the cases on the facts. Appeals by the appellant to the High Court at Bombay from the orders of the learned magistrate were summarily dismissed. It has preferred the present appeals from the decisions of the High Court at Bombay with special leave granted by this court. The appeals have been heard together and are both disposed of by this judgment.

3. It appears that respondent No. 7, N. K. Firodia, was discharged by the learned Magistrate because it was conceded at the trial that he was not a director of the company at any material time. He has been made a respondent to the present appeals clearly through some misapprehension. The appellant, the State of Bombay, does not and cannot proceed against him. The name of the respondent Firodia should therefore be struck out from the records of this appeal. Respondent No. 5, Fateh Chand Jhunjhunwala, died while this appeal was pending in this Court. The appeal is therefore concerned with the remaining five respondents only.

4. Sub-section (1) of section 32 requires a company once at least in every year to make a list of its shareholders as on the date of the first or only ordinary general meeting in the year. Sub-section (2) requires that the list shall contain a summary specifying various particulars mentioned in it. Sub-section (3) states that the list and summary shall be completed within twenty-one days after the day of the first or only ordinary general meeting in the year and the company shall forthwith file a copy with the Registrar together with a certificate from a director or the manager or the secretary of the company that the list and summary state the facts as they stood on the day aforesaid. Sub-section (5) contains the penal provision, that 'If a company makes default in complying with the requirements of this section, it shall be liable to a fine not exceeding fifty rupees for every day during which the default continues, and every officer of the company who knowingly and wilfully authorises or permits the default shall be liable to the like penalty.'

5. It is said on behalf of the respondents that there is no default in complying with the requirements of the section until a general meeting is held. That, it is said, follows from the language of the section, for it requires certain things as at the date of the meeting to be stated in the list and summary and also requires these to be filed within a certain time of the meeting. So, it is said, that, the section requires certain things to be done only after the meeting has been held and no question of performing those things arises till the meeting has been held.

6. A contrary view has been taken in England on the corresponding provisions of the English Companies Acts of 1862 and 1908 : See Gibson v. Barton (1875) L.R. 10 Q.B. 329 Edmonds v. Foster (1875) 45 Law J. Rep. M.C. 41 and Park v. Lawton [1911] 1 K.B. 588 It was said in these cases that a person charged with an offence could not rely on his own default as an answer to the charge, and so, if the person charged was responsible for not calling the general meeting, he cannot be heard to say in defence to the charge that the general meeting had not been called. It was also said that the company and its officers were bound to perform the condition precedent, if they could do that, in order that they might perform their duty. This seems to us to be the correct view to take. If the person charged with the failure to carry out the requirements of the section could have called the meeting, he cannot defeat the provisions of the section simply by not calling the meeting wilfully.

7. It is true that under section 76 of the Act a general meeting of a company has to be held once at least in every calendar year and if a default is made, the company and every director or the manager of the company who is knowingly and wilfully a party to the default shall be liable to a fine not exceeding five hundred rupees. That however is, in our opinion, no reason for saying that a person charged with a failure to file the list and summary as required by section 32 where a meeting had not been held, could only be prosecuted under section 76 and not under section 32. Section 76 imposes an obligation to hold a meeting and attaches a penalty to a failure to perform that obligation. In the case of section 32 it is necessary that the meeting should be held in order that the requirements of that section may be carried out. It is no less necessary to call a meeting for performing the obligations imposed by section 32, because under section 76 there is an obligation to call a meeting the breach of which entails an independent penalty. The two sections deal with different matters and section 76 does not interfere with the operation of s. 32. The effect of s. 32 must be derived from its terms : the terms cannot have different effects depending on whether there is a provision like s. 76 in another part of the Act or not. Without a provision like section 76 a delinquent office of the company may make section 32 infructuous, and therefore, as already stated, it must be held that liability under section 32 would be incurred where the officer has wrongly assisted in the meeting not being held. The result cannot be different because of the presence of a provision like section 76.

8. Nor do we think that sub-section 5 of section 32 by imposing a daily fine during the continuance of the default indicates that the default is not committed till the meeting has been held. In order that the default may continue it has, no doubt, first to occur. In our view, it occurs after the expiry of 21 days from the day when the meeting should have been held within the year.

9. The respondents referred to the case of Queen v. Newton (1879) 48 L J. R. M.C. 77 where it having been proved that the general meeting was not held, the persons charged with the default were acquitted. That case, however, is clearly distinguishable, 'because the decision proceeded on the ground that, the summons having alleged in terms that the default was made after the general meeting had been held, it became essential to prove when the meeting was held as a matter of fact, and in the absence of proof the court held that the summons was rightly dismissed.' In this case Cockburn C.J., expressed some doubts about the correctness of the decision in Edmonds v. Foster (1875) 45 L J. R. M.C. 41 In Park v. Lawton [1911] 1 K.B. 588 however, Lord Alverstone said that he was unable to share these doubts, and with this view we agree. We may add that such doubts have not been shared by anyone up to now.

10. Another case to which we were referred on behalf of the respondents was Dorte v. South African Super-Aeration Ltd. (1904) 20 T.L.R. 425 There a company was convicted for a failure to file the list and summary in a case where the general meeting had not been held and fined ld and ld per day up to a certain day. Subsequently, a further summons against it was taken out in respect of the same default for further penalties from that day to another later day. It was held that the word 'default' implied a willful and continued neglect to do an act required and that the company could not be liable to a continuing daily fine for an omission which it was impossible to remedy. The report does not set out the arguments nor the judgment and it is not clear on what grounds the decision was given. It appears, however, that Lord Alverstone was one of the judges who decided that case. In Park v. Lawton [1911] 1 K.B. 588 Lord Alverstone himself observed with regard to Dorte's case that there, 'there was no question of the defendant being also in default as to the general meeting, and that decision, therefore, in no way conflicts with the earlier authorities.' We do not think, therefore, that Dorte's case assists the respondents at all. It is authority only for the proposition that a continuing daily fine will not be exacted where, owing to no meeting having been held, it is impossible to remedy the default : see Buckley's Company Law (13th Ed.), p. 311.

11. Turning now to section 131, we find that it requires the directors of a company, once at least in every calendar year, to lay before the company in general meeting a balance sheet and profit and loss account of the company. Sub-section (3) of section 133 makes the company and every officer of it who is knowingly and wilfully a party to the default in carrying out the provisions of section 131, punishable with fine which may extend to five hundred rupees. As in the case of section 32 and for the same reasons, here also it is no defence to the charge for breach of section 131 to say that a meeting was not called.

12. As regards Imperator v. Pioneer Clay and Industrial Works Ltd. I.L.R. [1948] Bom. 86 on which the courts below held that the respondents must be acquitted, we find that it turned on section 134 of the Companies Act, 1913. The language of that section is to a certain extent different from the language used in sections 32 and 131. The section 134(1) says, 'After the balance sheet, and profit and loss account .... have been laid before the company at the general meeting, three copies thereof ..... shall be filed with the Registrar.' Sub-section (4) of this section provides a penalty for breach of section 134, in terms similar to those contained in sub-section (5) of section 32. If the language of section 134(1) makes any difference as to the principle to be applied in ascertaining whether a breach of it has occurred or not - as to which we say nothing in this case - then that case can be of no assistance to the respondents. If, however, no such difference can be made, then we think that it was not correctly decided. We observe that Chagla C.J., who delivered the judgment of the court in that case, did not question the correctness of the decision in Park v. Lawton [1911] 1 K.B. 588 which he was asked to follow. All that he said with regard to that case was that the scheme and terms of the section on which it turned were different from section 134 of the Companies Act, 1913. That may or may not be so. There is, however, no difference between section 26 of the English Companies Act, 1908, on which Park's case turned, and which apparently through some mistake Chagla, C.J., cited as section 36, and section 32 of the Indian Companies Act of 1913, except that the English section required the summary to include a statement in the form of a balance sheet containing certain particulars mentioned, whereas our section does not require that. Section 131 of our Act contains some provision about the laying of the balance sheet before the general meeting. This provision was inserted in the Act by the amending Act of 1936. The fact, that one of the requirements of the English section 26 is not present in s. 32 of our Act cannot create any material difference between s. 32 of our Act and s. 26 of the English Act. If the principle that a person charged with an offence cannot rely on his own default as an answer to the discharge is correct, as we think it is, and which we do not find Chagla, C.J., saying it is not, then that principle would clearly apply when a person is charged with a breach of section 32 of our Act.

13. We think therefore that the appeal should be allowed. The case will now go back to the learned Presidency Magistrate and be tried on the merits according to the law as laid down in this judgment.

14. Appeals allowed. Case remanded.


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