I.N. Modi, J.
1. These are four revisions between the same parties and involve the determination of identical questions of law, I, therefore, propose to dispose of them by a single judgment.
2. The material facts leading up to these revisions may be shortly stated as follows. Petitioner No. 1 Messrs. Saraswati Printers Ltd., Jaipur, was a firm which having a share capital was incorporated as a public limited company on the 21st January, 1944, under the Companies Act of the former Jaipur State. Petitioner No. 2 was the managing director of that company while petitioners Nos. 3 to 6, among others, were its directors at all relevant times.
The last Annual General Meeting of the company was held on the 24th December, 1952. Thereafter no such meeting was held until the 11th January, 1957. The petitioners were, therefore prosecuted at the instance of the Registrar of Companies, Rajasthan, for not having held a general meeting under Section 76 of the Indian Companies Act, No. VII of 1913 hereinafter referred to as the Act and for not submitting the annual list of its members and the various other particulars under Section 32(3) of the Act and for not laying before the Company in general meeting a balance-sheet and a profit and loss account under Section 131(1) and for not sending three copies of such balance-sheet and profit and loss account to the Registrar under Section 134 of the said Act with respect to the years 1953 to 1956. It is also alleged that notices were issued from time to time to the Company and its officers asking them for compliance with respect to the provisions afore-mentioned but without any effect.
3. The defence of the petitioners was that it was found some time towards the end of 1952 that the Company was working at a loss and so it was resolved that with a view to meet the claims of the various creditors of the Company, the Board of Directors be authorised to sell or otherwise dispose of all the fixed or liquid assets of the Company in one or more lots on such terms or conditions as the Board should think fit and the directors were further authorised to take all the necessary steps to achieve this end.
It was also pleaded that the directors in their meeting dated the 24th December, 1952, had decided to transfer the total assets of the Company to Messrs. Indermal Chandmal, a firm of the managing director Chandmal against the entire debts due from the Company, and that the petitioner Chandmal had taken upon himself the entire responsibility with respect to the affairs of the Company from December 1952 onwards. The petitioners, other than Chandmal, therefore, contended that they were not responsible for calling the General Meetings or doing the various other acts with respect to which they had been prosecuted.
So far as the petitioner Chandmal is concerned, he admitted that he was the managing director of the Company front 1958 to 1956 but his defence was that as he had to go to Indore on account of unavoidable business commitments he could not call the General Meeting or carry out the various other functions which he was required to do under the Act but has defaults were not made wilfully, and, therefore, he prayed for condonation under Section 281 of the Act.
4. The trial court found the Company and the other petitioners guilty under Sections 32, 76, 131(1) and 134 of the Act and sentenced them to pay a fine of Rs. 50/- on each count for each of the four years in question. The petitioners thereafter went in appeal to the learned Sessions Judge Jaipur City who upheld their convictions but halved their fines. The petitioners have now come up in revision to this Court.
5. The main contention of the petitioners before this Court was that once the petitioners were convicted under Section 76 of the Act, they should not have been further convicted under the various other sections under which they were prosecuted as a matter of law, inasmuch as the other defaults all flowed from the fact that no General Meeting for the respective years had at all been held, and, therefore, the other defaults were a natural and inevitable consequence of the primary default under Section 76 and did not constitute any independent default on the part of th]e petitioners.
Developing the point it was argued that where an annual general meeting was not held for a particular year, then it was impossible to lay the balance-sheet or the profit and loss account of the Company before the said meeting or to send a copy thereof to the Registrar or even to send a list of the members and the other particulars required under Section 32 of the Act. Putting the same argument from another angle, it was contended that if a general meeting had been held for a particular year and then the various requirements had not been fulfilled as laid down in Section 32 or 131 or 134 of the Act, then a prosecution for these other defaults could well have been successfully launched, but not where the annual general meeting itself had not been held, and therefore, it was physically impossible to comply with the various requirements of the other sections with which we are concerned. Learned counsel for the petitioners placed strong reliance on In re Narasimha Rao AIR 1937 Mad 341; Surendra Nath V. Emperor AIR 1942 Cal 225 and Emperor v. Pioneer Clay and Industrial Works Ltd. AIR T948 Bom 357.
6. In AIR 1937 Mad 341 certain directors of the company were prosecuted for not sending a copy of the balance-sheet after laying it before the general meeting of the company, both under Section 131 and Section 134 with respect to a number of years. It was held by a learned single Judge of the Madras High Court that a conviction under Sections 131 and 134 both with respect to the same persons for the same years was not possible because Section 134 contemplates the sending of a copy of the balance-sheet only after it had been placed before the general meeting of the company and where the balance-sheet had not at all been so placed, the offence under Section 134 could not possibly have been committed. In this view of the matter, the convictions under Section 134 were quashed.
7. In AIR 1942 Cal 225 the facts were these. The managing director of a company was convicted under Section 76 of the Act and thereafter he was prosecuted under Section 32 and was convicted by the trial court. In revision it was held by a learned single Judge of the Calcutta High Court that the second prosecution was 'rather pointless after the first.' The learned Judge proceeded to observe that it would have been another matter if the defence of the petitioner had been that the general meeting was held and then it was found that he had committed a default under Section 32.
The attention of the learned Judge was invited to the decision of the Court of Appeal in Park v. Lawton, 1911-1 K. B. 588 which dealt with the interpretation of a similar provision under the English Act; but the latter ruling was distinguished by saying that all it held was that a person could not put forward the impossibility as a defence if the impossibility had been due to his own default. With all respect, it seems to me rather difficult to hold that the decision in the English case was not applicable because the same petitioner was first prosecuted under Section 76 and then under Section 32, and obviously, therefore, it could hardly be said of him that the impossibility of carrying out the requirements of Section 32 had not proceeded from his own default under Section 76.
8. It is important to point out here that there was an earlier Bench decision of the Calcutta High Court in Debendra Nath Das Gupta v. Registrar, Joint Stock Companies AIR 1917 Cal 1 which does not seem to have been brought to the notice of the learned single Judge. The petitioner in this case was a director of a joint stock company and was convicted under Section 134 of the Act in respect of a default made about filing with the Registrar the balance-sheet for a certain year.
The defence of the petitioner in revision was that there was no general meeting in that year, and, therefore, no balance-sheet was laid before the company at any such general meeting, and as these preliminaries had not been fulfilled, it was impossible for him or his company to comply with the provisions of Section 134, and that if at all be should have been convicted under Section 76 or Section 131 but not under Section 134.
This contention was repelled, it having been held that the petitioner as one of he directors was himself responsible for ensuring that all necessary preliminaries should have been observed, and that on the principle of the decision of the Court of Appeal in 1911-1 KB 588 it was not open to the petitioner to plead his prior default with respect to the calling of the prescribed general meeting.
9. This brings me to the decision of the Bombay High Court in AIR 1948 Bom 357. The default in this case arose under Section 134 of the Act in the matter of filing with the Registrar of Companies three copies of the balance-sheet and the profit and loss account of the Company for a certain year. It was common ground that no general meeting of the company was called at which the balance-sheet and the profit and loss account of the company for the year 1944 could have been laid.
It was held that the acquittal of the accused under Section 134(4) was correct. The ratio of this decision was that no conviction under Section 134(4) is possible until the stage of Sections 76 and 131 has been gone through, With reference to the decision of the Court of Appeal in Park's case, 1911-1 KB 588 it was held that that decision was based on Section 26 of the English Act which in its scheme and terms was entirely different from the section with which we are concerned.
The learned Judges in this case refused to follow the decision of the Calcutta High Court in AIR 1917 Cal 1 and pointed out that the learned [fudges in the Calcutta case had not taken due note of the language of Section 134 as we have it in India. It was further pointed out that what the accused person relies on in a case like this is not on his earlier default but on the factor that the stage at which his prosecution could have been made had not arrived.
In other words, the real defence was that they could have sent copies of the balance-sheet and the profit and loss account only after a general meeting had been called and the balance-sheet and the profit and loss account had been placed before that meeting. In this view of the matter the acquittal of the accused under Section 134 was maintained.
10. As I understand the case, however, I may state at once that it is no authority for the broad proposition 'for which learned counsel contends, namely, that once the accused has been prosecuted under Section 76 of the Act, his further prosecution under S.32 or Section 131 of the Act cannot be maintained. In fact Chagla Ag. C.J. as he then was, clearly laid down that in that case the directors were in default both in not calling a general meeting and also in not laying the balance-sheet and the profit and loss account before such a meeting and that in not canying out either of these requirements and obligations they rendered themselves liable to the penalties provided by the Act, and it was open to Government to prosecute them under either of these two sections,
What seems to have prevailed with the learned Acting Chief Justice in that case was the peculiar language of Section 134 which, to my mind, is rather unhappy. The wording of the section is that 'after the balance-sheet and profit and loss account (or the income and expenditure account as the case may Be) have been laid before the company at the general meeting', three copies thereof signed by the manager or secretary of the company shall be filed with theregistrar at the same time as the copy of the annual list of members and summary prepared in accordance with the requirements of Section 32.
In other words, certain copies of the balance-sheet and the profit and loss account have to be tiled with the Registrar only after the balance-sheet and the profit and loss account or the income and expenditure account, as the case may be, have been laid before the company at the general meeting. Where, however such balance-sheet and account have not been placed before a general meeting of the company, it would appear, on the authority of this case, that an offence under Section 134 would mm. be committed,
I propose to examine the Bombay view as to the correct interpretation to be put on Section 134 a, little more closely hereafter, But even on this view of Section 134, which is indeed plausible, I have no hesitation in saying that the further contention that a prosecution under Section 32 or under Section 131 is not possible in law on account of a prosecution nonfat Section 76 would be going very far indeed and for such a proposition the case of AIR 1948 Bom 357 is no authority.
The reason is that the language of all the other sections with which we are concerned, namely, 32, 76 and 131 is entirely different from that of Section 134, and the considerations which may possibly seem to apply to Section 134(1) do not and cannot apply to fine other sections. Thus Section 32 provides that every com pany having a share capital shall within a certain period from its incorporation and thereafter once of least in every year make a list of all persons, who on the day of the first or only ordinary general meeting in the year are members of the company, and off all persons who have ceased to be members since the date of the last return or the date of the incorporation of the company, as the case may be
This list, it is further provided, must state-certain particulars mentioned in Sub-section (2) of the section. Sub-section (3) then provides that Sae company shall send a copy of the above list and summary signed by the director or the manager together with the certificate of its correctness to the registrar. Sub-section (5) then provides that if a company makes a 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 authorizes or permits the default shall be liable to the like penalty.
It clearly seems to me that the requirement of this section is essentially a requirement which is independent of either Section 76 or Section 131- There is no question that so far as Section 76 is concerned, if lays down a basic requirement namely that a general meeting of every company shall be held within a certain period from the date of its incorporation and thereafter once at least in every calendar year and not more than fifteen months after the holding of the last preceding general meeting, and a default in this respect is punishable under Sub-section (and the section.
11. Then comes Section 131 This section, Broadly speaking, provides for laying of a balance-sheet and profit and loss account or an income and expenditure account duly audited by the auditors of the company with their report at a general meeting Which must be called by the directors with reference to certain points of. time stated in Sub-section (1) of Section 131. Sub-section (3) of Section 133 inter alia then provides that if any default is made in laying before the company or in issuing a balance-sheet and profit and loss account or income and expenditure account as required by Section 131, the company and every officer of the company who is knowingly and wilfully a party to the default shall be punishable with fine which may extend to five hundred rupees. In my opinion, this provision, on its plain language, provides for a distinct default. Thus, where the directors are in default in not calling a general meeting or in not laying the balance--sheet or pro-fit and loss account before such a meeting or in not sending the list of members together with a summary under Section 32, I am of opinion that they render themselves liable to the penalties provided by the Act for each and every one of these defaults provided of course that so far as the directors or other officers are concerned, their default is wilful and not inadvertent as distinguished from the default of the company itself which has been made liable independently of any such requirement and its (liability is, therefore, absolute.
12. It seems to me that to a default in any of the respects last-mentioned, the principle of the decision of the Court of Appeal in Park's case, 1911-. 1 KB 588 fully applies without any doubt whatsoever. The facts in this case were that the respondents who were all directors of the company were charged with an offence under Section 26 of the Companies (Consolidation) Act, 1908 for having knowingly and wilfully permitted default to be made by the company, in forwarding to the Registrar of Companies a copy of its list of members with a summary of its capital and shares etc.
It was common ground that no general meeting of the company had been held during the year in question. It was, therefore contended that it was impossible for them to comply with the requirements of Section 26. Now Section 26 of the Act of 1908 provided that once at least in every year a list was to be made of all persons who 'on the fourteenth day after the first or only ordinary general meeting in the year are members of the company', and further the list must contain a summary of some important particulars and Sub-section (5) of Section 26 imposes a penalty if default is made in compliance with the requirements of the section. Lord Alverstone C.J. relying on Gibson v. Barton (1875) 10 QB 329 and Edmonds v. Foster (1875) 45 LJMC 41 repelled the contention raised by the directors and held that
a person charged with an offence under Section 26 is not entitled by way of defence to plead the impossilbility of complying with Section 26 by reason of no general meeting having been held, at any rate if the person charged was also a party to the default In holding the meeting; in other words, a person charged with an offence cannot rely on his own default as an answer to the charge.
It was further observed that
If it were the case that everything required to be inserted in the list was dependent on the fact of the general meeting having been held. It might perhaps have been contended with some force that it is impossible to calculate a continuing penalty from a day which has never come into existence but when one sees that Section 26 requires a number of important matters to be included in the list of members which are entirely independent of the holding of a general meeting, this very much weakens the contention that no list need be compiled if,' owing to the failure to hold a general meeting, it is impossible to say what day is the fourteenth day thereafter.
Therefore it was held that it was no defence to the charge under Section 26 for the directors that no general meeting had been held, the directors themselves having been parties to the default in holding the general meeting.
13. In this view of the matter, I have no hesitation in coming to the conclusion that the conviction of the petitioners under Sections 32 and 131 read with Section 133 cannot be said to be wrong on the reasoning that their default under Sections 32 or 131 read with Section 133 proceeded from an earlier default under Section 76 of the Act and for which they stand prosecuted and punished.
14. The further question which requires to be considered in this connection is whether the default of petitioners Nos. 2 to 6 under these sections was intentional and wilful. It may be pointed out in this connection that under the Act a company has been made liable for certain defaults committed by it without any additional requirement but an officer of the company has been made liable only where he knowingly and wilfully authorises or permits the default. The result, therefore, is and must be that a company would be always liable where any such requirements are not fulfilled without more, but the officers or the directors of the company would be liable only if they knowingly and wilfully authorise or permit such defaults.
15. Now there is ample authority for the proposition that in order that the default should be wilfully and knowingly committed, it need not necessarily be suggestive of dishonesty or fraud on the part of those concerned. It is important to remember in this connection for the reasons already pointed out that the party in default cannot be allowed to plead the impossibility of complying with the various provisions of the Act for which he is being prosecuted on the ground that some thing which was required to be done earlier was not done when such impossibility is due to his own previous default.
Be it noted that the language of the relevant provisions is wide enough. A default to be punish-able may not have been authorised and yet it may be wilfully permitted, and if that is so, it would be punishable. The law presumes and rightly that those who have accepted the office of directors of a' company know the duties attaching to their office. Thus a positive duty has been laid on the directors to call an annual general meeting under Section 76 and to see that the requisite list and summary of particulars are prepared and sent to the Registrar under Section 32 and that a balance-sheet and a profit and loss account (or an income and expenditure account, as the case may be) duly audited are laid before the company in general meeting, broadly speaking, once in every calendar year under Section 131 of the Act.
The directors, therefore, cannot be allowed to escape the performance of these duties by the mere plea that they had no real control over the affairs of the company and therefore they did not wilfully permit the default. It is their duty not to be mere passive spectators of what is going on but to see and make the necessary attempt that the statutory requirements are carried out and where this has not been done, the courts can and would legitimately infer that the defaults though not expressly authorised were still wilfully permitted. See Ballav Das v. Mohan Lal Sadhu 39 Cal WN 1152 and Bhagirath v. Emperor AIR 1948 Cal 42.
Now, so far as the instant cases are concerned, there is evidence on the record to show that the Registrar of the Companies, Rajasthan, had sent notices to the petitioners to comply with the various requirements with respect to which they have been subsequently prosecuted (Exs, P-3, P-4, P-5 and P-6) but without any effect whatever. That being so, the conclusion is inescapable that the defaults on the part of the petitioners were committed knowingly and wilfully and not inadvertently. This disposes of the second question raised by learned counsel for the petitioners.
16. The next point that remains to decide is whether the conviction of the petitioners under Section 134(1) is correct. I have already referred to the authorities on which learned counsel for the petitioners relies and the leading authority which supports him on this aspect of the case is AIR 1948 Bom 357. As against this, the learned Deputy Government Advocate relies on AIR 1917 Cal 1 which takes the contrary view.
The question for decision, therefore, is which is the better of the two views. As already stated, the language of Section 134 appears to me to be rather unhappy and it is that which has perhaps given rise to divergence between the Calcutta and the Bombay view. Since the decision in AIR 1948 Bom 357 was given, the matter came up for consideration before a learned single Judge of the Madras High Court in In re Appayya AIR 1952 Mad 800.
In this case, the Assistant Registrar of Joint Stock Companies prosecuted the directors of a certain Motor Transport Company for their failure to place the balance-sheet before a general meeting of the Company under Section 131(1) read with Section 133(3) of the Act. The defence was that as no general meeting had been held, the question of placing the balance-sheet before a general meeting could mot possibly arise, and therefore, no offence had been committed at all.
The directors were convicted by the trial court and their conviction was maintained in the High Court. Referring to AIR 1948 Bom 357, the learned Judge disagreed with the view taken in that case. This decision proceeded on the footing that the directors were relying on their own default in not having called the general meeting and this they could nor be allowed to do as held in 191.11 KB 588 and AIR 1917 Cal 1 already referred to above.
17. But before I deal with this aspect of the case, I wish to point out that the case before the learned Judge in AIR 1952 Mad 800 was a case under Section 131(1) read with Section 133(3), and not under Section 134, and the considerations which might possibly arise on the language of Section 134 do not, in my opinion, really arise with respect to a prosecution under Section 131(1), read with Section 133(3) or under Sections 32 or 76 because the language and tenor of these sections are entirely different from the language of Section 134(1) as already discussed above.
Be that as it may, the question directly arises here whether a director who has failed to comply with the requirements of Section 134, can be allowed to plead that the balance-sheet and the profit and loss account or the income and expenditure account had not been laid before the company at the general meeting, and, therefore, he could not send the requisite copies to the Registrar and therefore he has not committed any offence under Section 134(1) even though the directors who were sought to be prosecuted under Section 134(1) are the very persons who were responsible for not calling the general meeting and not placing the balance-sheet and the profit and loss account before the general meeting of the company.
On a careful and anxious consideration of the pros and cons of the two views, I think, on the whole, with respect, that though the Bombay view is plausible, it is not sound and is perhaps needlessly narrow. As I look at the matter untrammelled by authority one way or the other, the substantial requirement of Section 134(1) appears to me to be the sending of a certain number of copies of the balance-sheet and the profit and loss account or the income and expenditure account as the case may be to the Registrar and it is there that the true emphasis of the section lies and not On the introductory part of the section, namely, 'after the balance-sheet and profit and loss account (or the income and expenditure account as the case may be) has been laid before the company at a general meeting' as seems to have been supposed. I say so because if the liability of the directors or officers of the company in the matter of sending such copies to the Registrar could be successfully met and answered merely on the pretext that the balance-sheet and the profit and loss account were not laid in general meeting before the company, it should be only one step further from this to say that as no annual general meeting Was held, it was scarcely material whether the balance-sheet and the profit and loss account were prepared or not, or, again that for that reason a list of the members along with a summary under} Section 32 need not or could not have been prepared' and sent to the Registrar.
A reasoning like this, in my considered opinion, would very largely render nugatory the various obligatory provisions of the Act by which several important duties are imposed on the directors in public interest at various stages in the management of the company, It may be that these stages are different, and the default at one stage may be due to a default at a prior stage but, nevertheless, in the eye of law, those are independent defaults for which the directors concerned are accountable at every respective stage, and it cannot be a satisfactory answer for them to say that they are not responsible for them because there was a default at an earlier stage; the more so where the persons who are at fault at both stages are one and the same.
It does seem to me that the courts should not place an interpretation upon a section which would a premium on a double default, or, putting it slightly differently, permit the evasion of or escape from one default simply because this default was the inevitable consequence of another default, and where both these defaults are punishable in the eye of few and where those responsible for the second default are also responsible for the first. I am dis to bold the view that the proper course is to furnish the persons guilty of both the defaults and not for one only. I hold accordingly.
In this view of the matter, the conclusion I to is that the conviction of the petitioners under Section 134(1) is not untenable in law and does not call for any interference. Further, as to who the default under this section also was knowingly and wilfully committed by the accused petitioners, my observations under this head made in the foregoing part of this judgment with respect to their default under other sections fully apply as to the present count and I consider it unnecessary to them.
19. The last question raised by learned counsel far the petitioners is that even if this Court concurs in the conclusion of the courts below that the accused petitioners are guilty of the various offences discussed above, they should be given the benefit of 281 of the Act. The short answer to this sub-on is that before Section 281 can be properly in-it must be shown that the person or persons seeking relief had 'acted honestly and reason- In other words the conduct of the accused must satisfy the two-fold requirement of lack of dis-jjfawiesty as well as lack of unreasonableness, and honesty by itself would not be enough. Assuming that the petitioners in this case were not dishonest, I find it difficult to hold that their behaviour satisfies the lest of reasonableness. One of them was a director and the rest were directors. They a certain position of trust and responsibility with respect to the affairs of the company. The statute had placed certain obligations upon and their breach there of for no satisfactory cannot be lightly disregarded for obvious ressons. I have already held above that their perfect to comply with the duties under which they ware bound to act according to the statute continued -sewer a number of years and was wilful inasmuch as they failed to do the various acts which it was their duty to do in spite of warning or notice by the Register. The lapses, therefore, were not the result of any accident, unforeseen or unforeseeable, but were, if I may say so, born of sheer recklessness. This in my judgment disentitles them to the benefit of Soc. 281. I hold accordingly.
20. The results is that these revisions fail and are hereby dismissed.