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Sukhbir Saran Bhatnagar and ors. Vs. Registrar of Companies - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberC.P. No. 52 of 1971
Judge
Reported in[1972]42CompCas408(Delhi)
ActsCompanies Act, 1956 - Sections 159 to 161, 210, 220(3), 560 and 633(2)
AppellantSukhbir Saran Bhatnagar and ors.
RespondentRegistrar of Companies
Appellant Advocate Satish Chandra, Adv
Respondent Advocate A.B. Saharya, Adv.
DispositionPetition dismissed
Cases ReferredState v. Moggavi Ltd.
Excerpt:
.....registrar having stated in exhibit r-12 that action under section 560 could not be considered on account of the pendency of prosecutions, and it is not being stated that such action under section 560 has since been taken, it is not possible to grant the relief claimed by the petitioners, namely, that they should be relieved of the liability from filing the returns under the companies act in respect of the years 1969 and 1970. it would be a different matter for the registrar himself to take action, even suo moto if he is satisfied, that a company is defunct and strike off the name (of the company) from the register. though no such relief could be granted to the petitioner, still i would like to express the hope that the registrar would himself take steps under section 560 at least after..........towards the said subscription.2. it is further alleged that tbe third petitioner had informed the registrar of companies by her letter dated april 7, 1969, that she had resigned from the directorship of the company in the year 1961 but due intimation of the same had not been communicated by the company to the registrar (respondent). it is further stated that petitioners nos. 1 and 2 felt discouraged on account of the resignation of the third petitioner and on that account the idea of running the business of the company was dropped.3. on april 7, 1969, the third petitioner wrote to the registrar (copy of which is annexure ' b ' to the petition) that two years earlier she had resigned and was left with the impression that her resignation had been forwarded to him for necessary action. she.....
Judgment:

S. Rangrajan, J.

1. Voss India (P.) Ltd. was incorporated on 5th May, 1966 ; the three petitioners were the promoters-directors. The authorised capital of the company was Rs. 50,000 divided into 500 equity shares of Rs. 100 each. The petitioners had subscribed 100, 50 and 50 shares each respectively in the memorandum. It is stated that they merely signified their willingness to subscribe shares as mentioned in the memorandum of association at the time of incorporation but that they did not actually pay any sum towards the said subscription.

2. It is further alleged that tbe third petitioner had informed the Registrar of Companies by her letter dated April 7, 1969, that she had resigned from the directorship of the company in the year 1961 but due intimation of the same had not been communicated by the company to the Registrar (Respondent). It is further stated that petitioners Nos. 1 and 2 felt discouraged on account of the resignation of the third petitioner and on that account the idea of running the business of the company was dropped.

3. On April 7, 1969, the third petitioner wrote to the Registrar (copy of which is annexure ' B ' to the petition) that two years earlier she had resigned and was left with the impression that her resignation had been forwarded to him for necessary action. She requested that she may be relieved of the consequence of any default. It is stated that there was a reply (which is not on record) to the above said letter, on May 28, 1969. On June 5, 1969, the third petitioner wrote to the Registrar (exhibit R-1) informing the Registrar that the company did not start functioning, that due to certain unavoidable circumstances the requirements under the Act for submitting the accounts, etc., could not be completed well in time and so a default notice had been served. She again referred to her being under the impression that her resignation had been accepted and requested for an opportunity to explain the matter personally to the Registrar.

4. Four prosecutions for alleged violation of Sections 160, 161 and 220 of the Companies Act for the years 1966-67 and 1967-68 were laid. It is seen, however, from the copies of the judgment that in the prosecutions launched under Section 220 read with Section 162 of the Companies Act, the petitioners had pleaded guilty and sentenced to payment of fines. The judgments also contained the following directions :

' The relevant documents if not already filed will be filed by the accused directors within a period of 2 months from the date of the commencement of these orders, failing which they shall be liable for action under Section 614(2) of the Act.'

5. The said orders were made on August 21, 1969.

6. Subsequently, on June 2, 1970, the Registrar issued a notice under Section 614(2) and directed them to file the balance-sheet for 1966-67 and 1967-68 as well as the annual return up to November 24, 1967, and December 31, 1968, within two months from August 21, 1969. The third petitioner also joined in writing to the Registrar on May 12, 1970, and July 2, 1970, informing him that the statement of accounts as prepared by the auditors will be ready within a few days and would be submitted as soon as possible, within 15 days. The Assistant Registrar replied by letter dated September 21, 1971 (exhibit R-9), that the letter under reply, dated July 2, 1970, was received in the office on July 8, 1970, and that there was no provision under which the Registrar could grant extension for filing documents.

7. On July 27, 1970 (the date has been wrongly given in paragraph 7 of the petition as July 7, 1970), the advocate for Voss India (P.) Ltd., requested that the name of the company may be removed from the register of companies under Section 560 of the Companies Act. An affidavit of the third petitioner (R-11) was also sent to the Registrar stating that the company had never worked after its incorporation, that it had no intention to work and no shareholders had been taken by the company which had no assets and no liabilities. On October 23, 1970, the Assistant Registrar informed the advocate for the company that since some prosecution cases were pending against the directors no action could be taken under Section 560.

8. The following issues were framed on August 23, 1971 :

' (i) Whether the petitioners should not be relieved of their liabilities from filing the return under the Companies Act in respect of the years 1969 and 1970 in spite of the Registrar of Companies having been informed that the company has never functioned and never did any business ?

(ii) Whether the pending prosecutions are not liable to be quashed ?'

9. It was stated by Shri A.B. Saharia, learned counsel for the Registrar that he was not letting any evidence except to tender exhibits R-1 to R-13. Shri Satish Chandra, learned counsel for the petitioners, also did not insist to examine any one.

Issue No. 1 :

10. The contention of Shri Satish Chandra that it was the duty of the Registrar to strike off from the registers a defunct company does not receive any support from the language of Section 560, the material portion of which reads as follows :

'560(1). Where the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, he shall send to the company by post a letter inquiring whether the company is carrying on business or in operation. '

' 560(5). At the expiry of the time mentioned in the notice referred to in Sub-section (3) or (4), the Registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register, and shall publish notice thereof in the Official Gazette ; and on the publication in the Official Gazette of this notice, the company shall stand dissolved :

Provided that--

(a) the liability, if any, of every director, the managing agent, secretaries and treasurers, manager or other officer who was exercising any power of management, and of every member of the company, shall continue and may be enforced as if the company had not been dissolved ; and

(b) nothing in this sub-section shall affect the power of the court to wind up a company the name of which has been struck off the register.'

11. A plain reading of the above provision shows that the Registrar has the power, as opposed to a duty, of striking off a defunct company. It is also worth recalling that even as late as July 2, 1970, the third petitioner had requested (under exhibit R-8) the Registrar to grant time for filing the statement of accounts as prepared by the auditors. Until the company is wound up or until such time as the company is struck off by the Registrar under Section 560, the company is under a duty to submit the returns prescribed by the Companies Act.

12. It was, however, stated in paragraph 9 of the reply filed on behalf of the Registrar as follows :

'That since the company has filed an affidavit on July 30, 1970, mentioned in paragraph 10 of the petition, the deponent do not oppose the application as far as the granting of relief under Section 633(2) in respect of default in the years 1969 and 1970 is concerned.'

13. In spite of this reply issue No. 1 was raised obviously because the above statement in paragraph 9 does not represent the correct position in law. It was seen that the liability to file the statutory returns would continue, in law, until the company is wound up or it is struck off the register. The Registrar having stated in exhibit R-12 that action under Section 560 could not be considered on account of the pendency of prosecutions, and it is not being stated that such action under Section 560 has since been taken, it is not possible to grant the relief claimed by the petitioners, namely, that they should be relieved of the liability from filing the returns under the Companies Act in respect of the years 1969 and 1970. It would be a different matter for the Registrar himself to take action, even suo moto if he is satisfied, that a company is defunct and strike off the name (of the company) from the Register. Though no such relief could be granted to the petitioner, still I would like to express the hope that the Registrar would himself take steps under Section 560 at least after the pending prosecutions are over, as he himself indicated in exhibit R-2.

Issue No. 2 :

14. P. Jaganmohan Reddy C. J. (as his Lordship then was), speaking for the Full Bench in Andhra Provincial Potteries v. Registrar of Companies, [1969] 39 Com. Cas. 1000 ; A.I.R. 1970 A.P, 70. held that an annual general meeting and laying before it of a balance-sheet and profit and loss account is essential for a prosecution under Section 220(3) but that the holding of such meeting was not necessary for prosecution for default committed under Sections 159 to 166 and 210. The case law as well as the relevant statutory provisions were discussed at length. His Lordship explained that the relevant provisions unmistakably indicated that the holding of the annual general meeting and the laying before it of the balance-sheet and the profit and loss account is sine qua non for filing of copies thereof before the Registrar and, consequently, if no general body meeting is held, the persons concerned cannot be said to have committed a default in complying with those provisions. But his Lordship also pointed out that the default in not holding any general meeting and preparing statement of returns and filing them before the Registrar, or in not laying the balance-sheet and the profit and loss account before that meeting as required by Sections 159 to 161 and 210 cannot be pleaded in defense of a prosecution Under these sections. The earlier, but contrary view of the same High Court in Public Prosecutor v. H.R. Basawa Raj, : AIR1963AP389 was held to be no longer good law in view of the decision of the Supreme Court on the analogous provision of the old Companies Act (vide State of Bombay v. Bandham Ram Bhandani, : 1961CriLJ319 ). I respectfully concur with the observations and the view taken by the Full Bench decision of the Andhra Pradesh High Court.

15. The fact that the company itself did not function could not be a ground by itself for the Registrar not to enforce compliance with the submissions of returns and documents as prescribed by the Act. I am in respectful agreement with the following observations of T. P. Mukerjee J. in Madan Gopal Dey v. State, : AIR1968Cal79 :

' So far as the present cases are concerned, it would appear that, since its incorporation, nothing was done either by the company or by its two directors to comply with the provisions of the Indian Companies Act. It is the petitioner's case that the company did not function and so it was impossible either to call a general meeting of the company or to prepare a balance-sheet and the profit and loss account or to submit the annual return. If the company did not function, the Act provides for winding up proceedings. It is not for the Registrar of Joint Stock Companies to know whether a company is functioning or not. All that he is concerned with is compliance with the provisions of the Act which are meant for protecting the interests of the shareholders. So long as the company is not wound up, nothing stood in the way of the company and its directors holding a meeting or in preparing blank balance-sheet and profit and loss account and in submitting the annual returns. The fact that the company did not function is, in my view, no excuse, though it might extenuate the offence to some extent.'

16. To say anything else, it seems to me, would be to detract from the duties which have been squarely laid on the Registrar in the matter of enforcing the submission of returns, etc., in order to safeguard the interests of shareholders.

17. The Companies Act also specifically excludes means read as a constituent element of the offence. According to Section 162 of the Companies Act, a fine extending to Rs. 50 for every day during which the default continues has been prescribed in respect of a company which ' fails to comply with any of the provisions contained in Section 159, 160 or 161 '. Gopal Khaitan v. State, : AIR1969Cal132 pointed out other offences under the Companies Act, where different considerations apply and where means read has not been excluded. Where there is ' failure ' to comply with the statutory provisions concerned and where mere failure is made punishable, it is a clear indication that means read is ruled out.

18. There is yet another reason for not granting the relief of quashing the criminal prosecutions. These are applications under the Companies Act which have to be dealt with by the judge in charge of company work. In this situation this court will not have jurisdiction to grant relief under Sub-section (2) of Section 633 of the Act, if proceedings have been instituted in a criminal court (sic) in Section 633(1). Support is to be had for this view from the observations of Shri S.N. Andley J. (vide In re Auto Link Financiers Pvt. Ltd., [1971] 41 Com. Cas. 63 (Delhi) The unreported decision of D.K. Mahajan J. in C. L. Sabhartval v. Registrar of Companies, Delhi, Criminal Miscellaneous No. 455-C of 1962, decided on October 19, 1962 does not help the petitioners because that was a petition under Section 561A of the Code of Criminal Procedure for quashing the proceedings taken by the Registrar under Sections 159 and 220 of the Companies Acts of 1936 and 1959. It was observed, however, in that context that the proper course for the Registrar was to act under Section 560. Nor can any observation made by the Division Bench of the Punjab High Court in the State v. Moggavi Ltd., Criminal Appeal No. 5 of 1957, decided on April 23, 1958 be of any assistance to the petitioners for the same reason. In that case the Registrar was informed about the company having become defunct and it was, thereforee, pointed out that the launching of prosecution was inadvisable.

19. While I cannot thus interfere, for the reasons mentioned, in order to quash the prosecutions that are now pending, I may still observe that the violation in this case of the statutory provisions has not injured any one. There are only three shareholders who themselves did not contribute anything by way of subscription for shares and the company dit not actually transact any business. The violation, for which the prosecutions have been launched are purely technical. This is, however, an aspect for the learned Magistrate to consider.

20. As I have already observed, as soon as the prosecutions are over, the Registrar may also consider taking action under Section 560 of the Companies Act. In any case the remedy will lie in the hands of the petitioners themselves who can also wind up the company voluntarily.

21. The petition is accordingly dismissed but, in the circumstances, without costs.


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