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The Public Prosecutor, Government of Pondicherry Vs. Abdul Aziz Khan and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany;Criminal
CourtChennai High Court
Decided On
Case NumberSpecial Appeal (Criminal) No. 296 of 1967
Judge
Reported inAIR1970Mad311; 1970CriLJ1107
ActsGeneral Clauses Act, 1897 - Sections 6; Companies Act, 1956 - Sections 633(1), 648 and 658
AppellantThe Public Prosecutor, Government of Pondicherry
RespondentAbdul Aziz Khan and anr.
Appellant AdvocatePublic Prosecutor
Respondent AdvocateVedanatam Srinivasan, Adv.
DispositionAppeal dismissed
Cases ReferredIn Raja Karayanlal v. M. P. Mis
Excerpt:
.....the contrary intention is clearly expressed by specifically including only the proceedings which had resulted in prosecution. applying this principle in this additional saving provision under section 648, the contrary intention clearly appears in respect of the savings of any legal liability not resulting in prosecution. 15. in respect of the second point, the learned magistrate was clearly in error. to deal with a person under this provision, the absence of criminal intention is irrelevant but what is relevant is whether he acted honestly namely, in good faith and whether he had any justifiable reason to escape from the liability......(application of laws) order, 1954, certain acts mentioned in the schedule therein came into force in pondicherry. the indian companies act (act vii of 1913) by virtue of the said regulation came into force on 1-11-1954.9. act vii of 1913 was repealed and re-enacted by the parliament by act i of 1956 (the indian companies act, 1956). the de jure transfer of pondicherry territory took effect on 16-8-1962 which is known as the 'appointed day'. act 49 of 1962 came into effect on 5-12-1962 and on 28-12-1962, the fourteenth amendment to the constitution became effective, and the territory of pondicherry was classified as a union territory, included as the 9th item in part ii of the first schedule. by virtue of regulation no. 7 of 1963 (the pondicherry (laws) regulation, 1963).....
Judgment:

Krishnaswamy Reddy, J.

1. This appeal has been filed by the Public Prosecutor. Government of Pondicherry, against the order of acquittal by the First Class Magistrate No. 2, Pondicherry. of the two respondents in C. C. No. 397 of 1966. on the private complaint filed by the Registrar of Companies. Pondicherry. against them under Sections 208-D (2). 208-E (3) and 244(3) of the Indian Companies Act, 1913. (hereinafter called 'the Act'). The second respondent is since dead.

2. The Prosecution case is briefly this: Amara Pictures Private Limited was incorporated on or about 26-10-1949 as a private company under the Indian Companies Act, 1913. It had its registered office at No. 61. St.. Therese Street, Pondicherry. By a special resolution passed by the members of the Company on 15-5-1963, the Company was required to be wound up voluntarily and the two respondents were appointed as liquidators of the Company. The respondents had notified their appointment as the liquidators on 20-6-1963. By a letter dated 7-11-1963 the respondents on behalf of the Company informed the Registrar of Companies that they have held the final meeting of winding up in accordance with S. 208-E of the Indian Companies Act, 1913 on 30-10-1963 and that they have prepared all returns already and requested for a few days time to file the returns with the complainant. In spite of several letters and reminders sent by the Registrar of Companies, Pondicherry the respondents did not send returns; nor did they care to reply or take steps to comply with the requirements of the provisions of the Indian Companies Act. The two respondents have failed and neglected to file returns for the period from 15-5-196.3 to 14-3-1964 and 15-3-196i4 to 14-3-1965. Thereupon, a final notice was issued to the respondents on 19-4-1966 explaining therein the implications and stating that unless they comply with the requirements, they would be prosecuted. They were also given 15 days' time for filing the returns. The second respondent by his letter dated 6-5-1966 explained the reasons for the delay and requested for a fortnight's tune for filing returns. As they had failed to submit the returns, they were again reminded of the expiry of the time of 14 days granted to them. The respondents have not taken further steps. Hence the complaint was filed under Sections 208-D (2), 208-E(3) and 244(3) of the Act.

3. Section 208-D(1) of the Act provides that in the event of the winding up continuing for more than one year, the liquidator shall summon a general meeting of the Company at the end of the first year from the commencement of the winding up and of each succeeding year, as soon thereafter as may be convenient within ninety days of the close of the year, and shall lay before the meeting an account of the preceding year and a statement in the prescribed form containing the prescribed particulars with respect to the position of the liquidation. Section 208-D (2) provides for a penalty of not exceeding Rs. 100/- if the Liquidator fails to comply with the section. It is the case of the prosecution that the pendency of winding up has exceeded more than a year and the company has not called for a general meeting as required by Section 208-D of the Act and in spite of the letter by the Registrar dated 20-1-1966 and a reminder issued thereafter the Liquidators have not taken action. Under Section 208-E (3), the Liquidator, within one week after the meeting shall send to the Registrar a copy of the account, and shall make a return to him of the holding of the meeting and of its date, and if the copy is not sent or the return is not made as required, he shall be liable to a fine not exceeding fifty rupees for every day during which the default continues. Under Section 244(11 of the Act, if the winding up is not completed within one year from the date of its commencement, the liquidator shall submit a statement in the prescribed form and containing the prescribed particulars with respect to the proceedings in and the position of the liquidation, to the Registrar Of Companies every year during the tenure of such liquidator.

4. Sri Krishnamurthy, the Registrar of Companies and Sri Sethuraman Upper Division Clerk in the office of the Registrar of Companies were examined as prosecution witnesses to support the facts spoken to in the complaint.

5. When the respondents were questioned, the first respondent stated that he was in the hospital and as he was not doing well, he could not submit returns In time. The second respondent stated that he could not submit returns as the account books were with the first respondent and as he was unwell

6. The learned first Class Magistrate acquitted the respondents on two grounds namely (1) that the Companies Act of 1913 was not in force on the date of the alleged contraventions as the Companies Act, 1956 had come into force by then and that, therefore, the prosecution under the Act of 1913 was unsustainable; and (2) that even assuming that the prosecution was sustainable, the respondents have to be relieved from their liability as they had no criminal intention in having contravened the provisions of the Act, by virtue of Section 633 of the Companies Act 1956.

7. The learned Public Prosecutor contended that both the reasons given by the learned Magistrate for acquitting the respondents are incorrect and submitted that the prosecution under the provisions of the Companies Act, 1913 was saved by the repealing Act of 1956 and that, therefore, the prosecution was sustain-able and he further submitted that Section 633 of the Companies Act, 1956 gives relief to those persons who acted honestly and reasonably while they may be liable In respect of negligence, default, breach of duty, misfeasance or breach of trust. To appreciate the submissions made by the learned Public Prosecutor. It is necessary to note the following facts:

8. Pondicherry was a French territory till October, 1954. By virtue of the merger agreement dated 21-10-1954, there was a de facto transfer of Pondicherry territory to the Indian Union on 1-11-1954 which was followed up by the Treaty of Cession dated 28-5-1956. Before October, 1954, the Code of French Laws, civil and criminal, based upon the Continental System of Jurisprudence prevailed in the Courts of Pondicherry. On 1-11-1954 which is the date of de facto merger, by the promulgation of the French Establishments (Application of Laws) Order, 1954, certain Acts mentioned in the schedule therein came into force in Pondicherry. The Indian Companies Act (Act VII of 1913) by virtue of the said Regulation came into force on 1-11-1954.

9. Act VII of 1913 was repealed and re-enacted by the Parliament by Act I of 1956 (The Indian Companies Act, 1956). The de jure transfer of Pondicherry territory took effect on 16-8-1962 which is known as the 'appointed day'. Act 49 Of 1962 came into effect on 5-12-1962 and on 28-12-1962, the Fourteenth Amendment to the Constitution became effective, and the territory of Pondicherry was Classified as a Union Territory, included as the 9th item in Part II of the First Schedule. By virtue of Regulation No. 7 of 1963 (The Pondicherry (Laws) Regulation, 1963) promulgated by the President of the Republic in exercise of the powers conferred under Article 240 of the Constitution, the Acts mentioned in the Schedule to the Regulation including the Indian Companies Act, 1956 came into force in Pondicherry Territory on 1-10-1963. Before Act I of 1956 came into force in the Pondicherry territory, the Company was wound up voluntarily on 15-5-1963 and the respondents were appointed liquidators on 20-6-1963. After the Act came into force in Pondicherry, the final meeting was held as required under Section 208-E (1) on 30-10-1963. As the winding up and the appointment of the respondents as Liquidators were before Act I of 1956 came into force in Pondicherry territory the prosecution was launched under the provisions of Act VII of 1913.

10. The question, therefore, that arises now is whether, after Act 1 of 1956 came into force in Pondicherry on 1-10-C1963, the prosecution against the respondents is saved?

11. We have, therefore, to note the relevant provisions of repeal and savings In Act I of 1956 (hereinafter called 'the Act'). Under Section 644 of the Act, enactments mentioned in Schedule XII were repealed. Section 645 saves orders, rules, etc., in force at commencement of Act, Section 646 saves the operation of Section 138 of Act VII of 1913 as respects inspectors and the continuation of an inspection begun by inspectors, appointed before the commencement of the Act. Section 646 saves pending proceedings for winding up. Section 648 which is the relevant section in respect of our discussion is as follows:

'Saving of prosecutions Instituted by liquidator or Court under Section 237 of Act VII of 1913:-- Nothing in this Act shall affect any prosecution instituted or ordered by the Court to be instituted under Section 237 of the Indian Companies Act, 1913 (VII of 1913); and the Court shall have the same power of directing how any costs, charges, and expenses properly incurred in any such prosecution are to be defrayed as it would have had, if this Act had not been passed.'

Sections 650 to 657 also deal with savings which may not be necessary to consider in detail. The next relevant section with which we are concerned is Section 658 which reads thus:

'Section 6 of the General Clauses Act, 1897 (X of 1897) to apply in addition to Sections 645 to 657 of Act:-- The mention of particular matters in Sections 645 to 657 or in any other provision of this Act shall not prejudice the general application of Section 6 of the General Clauses Act. 1897 (X of 1897), with respect to the effect of repeals'.

12. The learned Public Prosecutor, Pondicherry, relies upon Section 658 and submits that if the Prosecution In respect of things that occurred before Act I of 1956 came into force was not saved by virtue of Section 648 of the Act, it would be saved by Section 658 of the Act by which the provisions of the General Clauses Act could be applied in addition to the savings provided in the Act in Sections. 645 to 657. It is clear that Section 648 of the Act saves only those prosecutions instituted by liquidator or ordered by the Court to be instituted under Section 237 of the Indian Companies Act, 1913, before the commencement of Act I of 1956 and pending at its commencement and that such prosecutions alone could continue after the commencement of the Act. But this section will not apply to prosecution not Instituted or not ordered by the Court before the commencement of the Act. It is not the case of the prosecution that in the present case, the prosecution was instituted by the liquidator before the commencement of Act I of 1956. The prosecution was instituted in respect of offences under Act VII of 1913 on 6-8-1966, long after Act I of 1956 came into1 force in the Pondicherry territory and, therefore, the present prosecution is not saved by Section 648 of the Act. If Section 6| of the General Clauses Act is applied, by virtue of Clause (e) of the same section, the repeal of any Act shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed and by virtue of Clause (e) of the same section, any legal proceeding or remedy in respect of any such right, liability etc., are saved unless a different intention appears. We have to consider, in view of the specific savings in respect of prosecution provided under Section 648 of the Act whether Section 6 of the General Clauses Act can be invoked in respect of the present prosecution. It is a well-established principle that in applying the principle in respect of Section 6 of the General Clauses Act and the saving sections of any special enactment, line of enquiry should be not whether the new Act expressly keeps alive the old rights and liabilities but whether it manifests an intention to destroy them. It has to be ascertained whether there is any contrary intention in respect of savings in the new legislation. As already noted. Section 648 of the Act specifically saved the prosecutions instituted by the liquidator or ordered by the Court. This gives the indication that the Parliament had specifically considered as to what should be saved and excluded the saving of the prosecution of any liability incurred before the commencement of the Act, The contrary intention is clearly expressed by specifically including only the proceedings which had resulted in prosecution. The pending prosecutions alone are saved and not the liability incurred leading to a prosecution and such liability is destroyed. The general principle under Section 6 of the General Clauses Act 'unless a different intention appears' can also be considered in view of the specific savings made in respect of the things mentioned therein in Sections 645 to 657 of the Act

13. In Brihan Maharashtra Sugar Syndicate v. J. R, Kulkarni. : [1960]3SCR85 , the Supreme Court held in that case that Section 153-C of the Companies Act. 1913 and the continuance of proceedings in respect thereof are saved by the application of Section 8 of the General Clauses Act provided under Section 658 of Act I of 1956 in that Section 647 of the Companies Act of 1956 does not indicate any intention that the rights created by Section 153 (c) of the Act of 1913 shall be destroyed. It is made clear in this decision that Section 6 of the General Clauses Act will apply unless a different intention could be gathered from the new enactment,

14. In Raja Karayanlal v. M. P. Mis-try. : [1961]1SCR417 , the Supreme Court again in considering the scope of Sections 645 to 647 of Act I of 1956 and the effect of the provisions of Section 6 of the General Clauses Act as provided under Section 658 of the Act, in dealing with the savings in respect of Section 138 of Act 7 of 1913 as provided in the saving Section 645 of Act 1 of 1956 observed that Sections 645 to 648 are the saving sections, and ordinarily in the absence of any indication to the contrary these sayins sections should be read as independent of, and in addition to, and not as providing exceptions to, one another. On this view, Section 648 should be construed as an additional saving provision. Applying this principle in this additional saving provision under Section 648, the contrary intention clearly appears in respect of the savings of any legal liability not resulting in prosecution. I am, therefore, of the view that neither Section 648 nor the application of Section 6 of the General Clauses Act as provided in Section 658 of the Act saves the present prosecution. In the result. I find that the prosecution is unsustainable.

15. In respect of the second point, the learned Magistrate was clearly in error. Section 633 of the Act confers power on the Court to grant relief in certain cases and Section 633(1) reads thus:

'If in any proceeding for negligence, default, breach of duty, misfeasance or broach of trust against an officer of A company, it appears to the Court hearing the case that he is or mav be liable In respect of the negligence, default, breach of duly, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit'

Under this provision. It Is not the criminal Intention which is required for consideration. Obviously, negligence and default mentioned in Section 633(1) will not Involve criminal intention on the part of the person who is proceeded against for negligence or default. This section gives a discretion to the Court to relieve the person proceeded against for those acts mentioned therein, provided the Court finds that that person has acted honestly and reasonably and also the other circumstances of the case including the circumstances leading to the appointment of such person and in doing so, it could relieve him either wholly or partly from his liability on such terms as it may think fit. To deal with a person under this provision, the absence of criminal intention is irrelevant But what is relevant is whether he acted honestly namely, in good faith and whether he had any justifiable reason to escape from the liability. This section cannot be equated with a discharge or acquittal provided under the Criminal Procedure Code. This section will apply to all legal proceedings civil or criminal or otherwise instituted under this Act.

16. In the result, the appeal is dismissed.


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