1. This is an application by the accused in C.C. No. 19 of 1941, on the file of the Sub-Divisional Magistrate of Musiri to quash the proceedings against them.
2. The offence with which they have been charged is under Section 4 (5) of the Indian Companies Act, with being members of an association formed in contravention of Section 4 (2), which requires that no company of more than 20 persons shall be formed unless it is registered. It is admitted that the company was formed in 1922-1923, at a time when Sub-sections (1) and (2) to Section 4 had been enacted, but not Sub-sections (3) to (5), which were enacted only in 1936. Mr. V. T. Rangaswami Aiyangar for the petitioners has raised three contentious. The first is that the Sub-Divisional Magistrate was wrong in holding that he could not drop proceedings when once he had initiated them. The second is that Section 4 (5), which was enacted in 1936, has no retrospective effect and cannot affect the petitioners who formed their association in 1922 or 1923. The third is that the complainant in this case has no locus standi to file a complaint and that the Sub-Divisional Magistrate was therefore wrong in taking cognizance of this case on such a complaint.
3. I have not been able to find any legal objection to the proceedings being dropped by the Sub-Divisional Magistrate if he ' finds that he ought not to have taken cognizance of this offence.
4. The second question is whether the accused are legally punishable for having formed themselves into an illegal body in 1922-23, when the punitive section did not exist. Section 4 (2) of the Companies Act says that:
No company, association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association, or partnership ... unless it is registered as a company under this Act...
It cannot be denied that the original members of this association, whether we call it a company or partnership, did an illegal act in forming themselves in to this association; and they continued to be members of an illegal body throughout the whole of the period from 1923 to 1936, when Sub-sections (3), (4) and (5) were enacted. They had contravened the provisions of the Act, but they could not be punished for doing so. Sub-section (5) says:
Any person who is a member of a company, association, or partnership, formed in contravention of this section, shall be punishable with fine not exceeding Es. 1,000:
The members of this association cannot therefore be punished under this sub-section for having formed themselves into a company, association, or partnership in contravention of Section 4 (2); but they can be punished for continuing to be members of it. Mr. V. T. Rangaswami Aiyangar's argument that Section 4 (5) has no retrospective effect would have some force if the forming of a company in contravention of Section 4 (2), had been made punishable, for the petitioners had formed the company before it became a crime to do so. There was however nothing to prevent them from resigning from the association as soon as Section 4' (5) was enacted. If they had done so, they could not have been punished for having been members prior to the amendment. Mr. V.T. Rangaswami Aiyangar contends that Section 4 (5) does not relate to Section 4 (2) at all; but Sections 4 (1) and 4 (2) are the only sub-sections to which the wording of Section 4 (5) could be applied. I therefore cannot agree that on the facts of the complaint no offence has been made out.
5. The remaining question is with regard to the locus standi of the complainant. It is argued that the proper person to institute a complaint is the Registrar of Companies. As there are no provisions to the contrary in the Companies Act, the taking cognizance of an offence under this Act must be governed, as in the case of an offence under the Penal Code, by Section 190, Criminal Procedure Code; and one of the methods of taking cognizance of an offence is by receiving a complaint of the facts which constitute such an offence. There is no restriction in the terms of Section 190 with regard to the person who may lay a complaint. I respectfully agree with In re Ganesh Narayan Sathe I.L.R. (1889) 13 Bom. 600 that the wording of Section 190 leaves no room for doubt on this matter. The Companies Act deals with the question of initiating proceedings only in Section 137, et seq. Section 137 gives power to the Registrar to call for documents from a company and, if he finds on a perusal of them that there is any contravention of the Act, he may report the matter to the Local Government. Under Section 138, Inspectors can be appointed for certain purposes under the Act, and Section 141 makes provision for the reporting to the Local Government of any irregularities discovered by the Inspectors. Then, under Section 141-A, if the Local Government is of opinion upon the report of the Inspector that an offence has been committed, they shall refer the matter to the Advocate-General or the Public Prosecutor, who are empowered under this section to take such steps for the prosecution of the offenders as may be necessary. These sections refer to offences by registered companies and to offences discovered by a particular procedure. They impose no restriction on the manner in which offences may be taken cognisance of. In Surendranath Sarhar v. Kalipada Das I.L.R. (1940) Cal. 575 it was held that a private person can complain where an offence punishable under the Companies Act has been committed. My attention has however been drawn to two Notifications of Government--No. 538, dated 6th June, 1916 and G.O. Mis. No, 3070, dated 23rd August, 1932--published in the Fort St. George Gazette, which permit the Registrar or the Assistant Registrar to institute prosecutions under the Act for defaults on the part of companies or persons in furnishing returns, documents or notices or for any other non-compliance with the provisions of the Act. These Notifications merely permit the Registrar to do what before was not a part of his duty, viz., to lay complaints. It does not purport to restrict a Magistrate in the exercise of his powers under Section 190, Criminal Procedure Code.
6. Mr. V.T. Rangaswami Aiyangar argues that even though there may be no legal bar to a Magistrate's taking cognizance of an offence on a private complaint it is not expedient that any 'Tom, Dick and Harry'--to use Mr. V. T. Rangaswami Aiyangar's words--should be permitted to harass members of companies out of motives of private spite or enmity. That argument might be applied just as well, however, to offences under the Penal Code or any other enactment.
7. I therefore find no reason to quash the proceedings before the Sub-Divisional Magistrate and I accordingly dismiss this petition.