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Madan Gopal Dey and anr. Vs. State and anr. - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtKolkata High Court
Decided On
Case NumberCriminal Revn. Case Nos. 637 to 643 of 1964
Judge
Reported inAIR1968Cal79,[1969]39CompCas119(Cal),1968CriLJ142,72CWN312
ActsCode of Criminal Procedure (CrPC) , 1898 - Sections 235 and 239; ;Companies Act, 1956 - Sections 2(30), 5, 162(1), 168, 210(5) and 220(3)
AppellantMadan Gopal Dey and anr.
RespondentState and anr.
Appellant AdvocateRathindranath Das and ;Nirendra Krishna Mitra, Advs.
Respondent AdvocateNikhil Chandra Talukdar, Adv. for Opposite Party No. 2 and ;Sarathi Mohan Sanyal, Adv.
Cases ReferredBhagirath Chandra Das v. Emperor
Excerpt:
- .....of the requirement of section 220(1) thereof which requires the company and every officer of the company in default to file the balance sheet and the profit and loss account of the company with the registrar, while the charge under section 210(5) relates to the failure of the directors to place before the annual general meeting of the company the balance sheet and the profit and loss account for the specified period as required in section 210(1) of the act.4. the default in the matter of submission of the annual return, in holding the annual general meeting and in placing the balance sheet and profit and loss account at the meeting and in filing the same with registrar were all admitted by the petitioners. the learned advocate appearing on behalf of the petitioners took objection to.....
Judgment:

T.P. Mukherji, J.

1. The seven complaints out of which these seven Revision Cases arise were registered as seven cases in the court of the Chief Presidency Magistrate of Calcutta, but were tried together and were governed by the same judgment. Here in this court also the seven cases were heard together as the same questions of law are involved in all of them. Madan Gopal Dey and his wife Sm. Anjali Dey are the two petitioners in Criminal Revision Cases Nos. 637 to 640 while T. Dey and Co. (P) Ltd. is the petitioner in Criminal Revision Cases Nos. 641, 642 and 643 of 1964.

2. The petitioners in both sets of cases obtained the present Rules against their conviction under Sections 162(1), 168, 220(3) and 210(5) of the Indian Companies Act 1956 and the sentence of a fine of Rs. 50 on each count passed on each of them thereunder, Madan Gopal Dey and Sm. Anjali Dey were sentenced to suffer simple imprisonment for 14 days each in default of payment of fine and half of the fine imposed in all these cases was directed to be paid to the Registrar of Joint Stock Companies, if realised, as cost.

3. T. Dey and Co. (Private) Limited was incorporated on December 12, 1960 and Madan Gopal Dey and Sm. Anjali Dey were declared to be its first Directors. The charge under Section 162(1) of the Companies Act relates to the failure of the company as well as f its Directors to prepare and file with the Registrar under Section 159 of the Act the annual return within 42 days of the annual general meeting. The charge under Section 168 of the Act arises out of the failure of the company as well as of its two Directors to hold the first annual general meeting as required by Section 166 of the Act. The charge under Section 220(3) of the Act relates to the violation of the requirement of Section 220(1) thereof which requires the company and every officer of the company in default to file the balance sheet and the profit and loss account of the company with the Registrar, while the charge under Section 210(5) relates to the failure of the Directors to place before the annual general meeting of the company the balance sheet and the profit and loss account for the specified period as required in Section 210(1) of the Act.

4. The default in the matter of submission of the annual return, in holding the annual general meeting and in placing the balance sheet and profit and loss account at the meeting and in filing the same with Registrar were all admitted by the petitioners. The learned Advocate appearing on behalf of the petitioners took objection to the amalgamation of the cases for the purpose of a joint trial and contended that Section 234 and Section 239 of the Criminal Procedure Code would bar both the joinder of the charges in the cases as well as the joinder of different sets of persons for the purpose of a Single trial. The second contention that was raised before me was that although the company in Criminal Revision Cases Nos. 640-643 of 1964 might be liable for the defaults under the relevant sections, there is no basis for the conviction of the two Directors in the absence of a finding that they knowingly or wilfully authorised or permitted the defaults concerned.

5. It appears from the Magistrate's records that when the seven cases came up for trial on the same date the learned Magistrate examined the two Directors on the charges under the four heads in one record and the trial of all the seven cases in respect of these charges thereafter proceeded jointly against the company as well as its Directors. If the joint trial were held under Section 234 Criminal Procedure Code so far as the two Directors are concerned, the same obviously would be bad in law inasmuch as that section permits a person to be charged with and tried at one trial for any number of offences of the same land not exceeding three which might have been committed by him within the space of twelve months from the first to the last of such offences. On behalf of the petitioner I was referred in this connection to the case Satish v. Subrata : AIR1966Cal67 wherein it was held that beyond the ambit of Section 234 Cr. P. C. there is no provision for amalgamation of cases that by strict adherence to the provisions of the Code are required to be tried separately. In that case 3 complaints by 3 different complainants one under Sections 323 and 504 I. P. C. and the other two under Section 323 I. P. C. only for offences committed on different dates were amalgamated and sought to be tried together. This order for amalgamation was set aside and the cases were directed to be tried separately.

6. Mr. Talukdar appearing on behalf of the opposite party in these cases referred to the case Dulal Chandra Bhar v. State of West Bengal, 66 Cal WN 852 : (1963) (1) Cri LJ 521). That case arose out of prosecution of a private limited company and its four Directors under the four sections as in the present cases. In all 25 cases were tried in 14 groups, only one witness was examined and copies of that evidence were put in in the other groups of cases with the consent of the defence lawyers. All the 25 cases in the 14 groups were disposed of by the same judgment. The procedure followed by the learned Magistrate was upheld by Amaresh Roy, J. on the ground that the defect at the trial would be ' non-compliance of Sections 356 and 360 of the Code and such defect in the absence of actual or possible failure of justice would be cured by Sections 535 and 537 and would not affect the legality of the trial.'

7. Quite obviously the charges in these cases could not be joined for the purpose of a single trial under Section 234 of the Code in the present cases. The section itself is the clearest authority on the point. If, however, the offences which are the subject matter of the charges in these seven cases were committed in course of the same transaction, Section 235 of the Code would authorise their joinder forthe purpose of a single trial. The question is whether the offences under Section 162(1), 168, 220(3) and 210(5) could be said to be so connected together as to form the same transaction. The term 'same transaction' has nowhere been defined. The term suggests a continuity of action and purpose and it has been held that the real and substantive test for determining whether several offences are so connected together as to form one transaction depends upon whether they are related together in point of purpose or as cause and effect or as principal and subsidiary acts so as to constitrue one continuous action. If a continuous thread runs through the acts complained of, charges arising out of those acts would be liable to be joined together under this section. Continuity of action, therefore, seems to be a very important test in the matter.

8. The substance of the charges framed against the petitioners in these cases is that they had failed to hold the annual general meeting and that they had failed to place the balance sheet and profit and loss account at the meeting and they had further failed to file with the Registrar the annual return and copies of the balance sheet and profit and loss account within the specified periods following the annual general meeting. A limited company holding public funds is liable to account for those funds to the shareholders and also to the Registrar of Joint Stock Companies to whom the company is also liable to submit an ' annual return embodying certain specified particulars regarding its management and other affairs. The requirements of the law in these regards fall into a pattern and the action that is to be taken to satisfy those requirements carries a sense of continuity in the matter of the administration of the company. The failure to act up to the legal requirements in these regards and the defaults in the matters mean a failure to pursue that continuity of action. A continuity of action when the charge is default or failure to take action is not inconceivable. If the action required to carry a thread of continuity, the failure to take the actions would constitute omissions which connected together will have a continuous thread of common purpose running through them. In my view the defaults and omissions in the present cases constitute a series of acts which are so connected as to form the same transaction and as such whatever offences might have been committed in course of that transaction are liable to be joined together under Section 235 of the Code for the purpose of a single trial. Section 239 of the Code permits the joinder at the same trial of persons accused of the same offence committed in course of the same transaction. The Directors as well as the company were thus liable to be jointly tried and the learned Magistrate cannot be said to have fallen into an error of law in jointly trying the petitioners in these seven cases at the same trial.

9. Coming how to the second contention raised on behalf of the petitioners, as I have already stated, exception was not taken tothe conviction of the company in the cases out of which arise Criminal Revn. Cases 641-643 of 1964. No exception could be and was also taken to the conviction of the two Directors under Section 210(5) of the Companies Act in the case out of which arises Criminal Revision Cases No. 640 of 1964. Section 210(5) makes liable every Director of a company who fails to take all reasonable steps to comply with the provisions of Section 210(1) which requires the placing of the balance sheet and the profit and loss account before the general meeting. This leaves us to consider the legality of the sentence passed in the three cases out of which arise Criminal Revision Cases 637-639 of 1964.

10. The convictions of the Directors in the above three cases were under Section 162(1), 168 and 220(3). So far as the Directors of the Company are concerned, it is only 'every officer of the company who is in default' that becomes liable. The term 'officer' is defined in Section 2(30) of the Act as including any Director and the term 'officer who is in default' is defined in Section 5 of the Companies Act, According to that definition, 'officer who is in default' means any officer of the company who is knowingly guilty of the default or who knowingly and wilfully authorises or permits such default. Any Director of the company who is knowingly guilty of the default or who knowingly or wilfully authorises or permits such default would be an 'officer who is in default' under the above section. There is no dispute that the petitioners in Criminal Revison Cases 637-639 of 1964 were the promoters of the company and were its first Directors.

11. Reference was made on behalf of the petitioners to the case Rajkumar Kusari v. Emperor, 21 Cal W. N. 840 = (AIR 1918 Cal 190) wherein it was held that for the purpose of convicting a person under Section 76 of the Companies Act corresponding to the Section 166 of the present Act, it has to be shown at the first instance that the accused had knowingly been a party to the default in holding the general meeting and where that question was not enquired into at all the case has not been properly tried and the conviction cannot stand. The accused in the case was the Secretary of a company and not a Director and unless it could be proved that he had any duty in the matter of calling the general meeting and there had been default knowingly and wilfully in the performance of that duty necessarily he could not be convicted. A secretary without more has no duty under the Act in that regard.

12. The case Surendra Nath Sarkar v. Emperor : AIR1942Cal225 is another case cited on behalf of the petitioner on this point. That was a case were the Managing Director of a Company was convicted under Section 32 corresponding to Section 162(1) of the present Act for wilful default in submitting the annual return. It was held that before he could be so convicted, it must be found that he was responsible for the default. The Managing Director, as the report of thecase shows, had previously been convicted under Section 76 of the Act for default in respect of the holding of the general meeting. This case no doubt supports the petitioners' contention.

13. The learned Advocate for the petitioners also referred to the case In re Bank of Deccan Ltd., : AIR1960Ker15 . The subject matter of the decision in that case was the scope of Section 633(1) and the powers of the High Court under Section 633(2) of the Companies Act. There relief was granted to the company for its failure to prepare the balance sheet and profit and loss account on the ground that in the circumstances of that case it was not possible for the company to do so, or in other words that there had been no default knowingly and wilfully in the matter.

14. On behalf of the opposite party Mr. Talukdar referred to the case Bhagirath Chandra Das v. Emperor : AIR1948Cal42 . The prosecution in that case was under Section 32(5) and 134(4) which correspond to Section 162(1) and Section 220(3) of the present Act. It was observed by the learned Judge that,

'It is clearly the duty of all Directors tosee that the particular returns, the list and summary under Section 32 and the copies of thebalance sheet and the profit and loss accountare submitted under Section 134. There is nothing on record to show that these Directorsmade any attempt to see that these returns, listand statement were properly submitted or thatthey were prevented in any way from seeingthat the proper list statement and returns weresubmitted if Directors who are responsible for the management of the company andwho presumably know the duties imposed upon them by law, make no attempt to see thatthose duties are carried out, there is justification for holding, in my opinion, that they havewilfully and knowingly permitted the companyto fail to carry out those duties'.

15. In the case In Re. Arcot Citizen Bank Ltd. Arcot : AIR1957Mad675 the Directors of the Bank were prosecuted under Section 32(3) corresponding to Section 162(1) and under Section 131(I) corresponding to Section 210(5) and while considering the question as to how far the petitioners could be liable thereunder, it was held -

'It would be enough if the evidence makes out blameful inadvertence on the part of the offender; that is, first, the accused must be shown under this third group to have had guilty knowledge that the forbidden event is happening. Secondly, that the accused with such Knowledge and being in a position to prevent the event happening does nothing about it'.

This case quoted with approval is a portion of the judgment in the case : AIR1948Cal42 referred to in the previous paragraph.

16. The relevant provisions of the Companies Act have been enacted to protect the shareholders and in some cases to protect the general public and they impose definite duties on the Directors. When the Directors fall to perform their statutory duty they brine themselves within the mischief of the penal provisions of the law. In order that a conviction under the sections involved in the present cases, of 'an officer of the company' may be sustained, the only thing to prove is that that particular officer knowingly and wilfully authorised or permitted these defaults. The offence is complete if the officer of the company knew of the defaults and permitted the same.

17. So tar 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 petitioners' case that the company did not function and so it was impossible either to call a general meeting of the company or to prepare the 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 interest 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. The petitioners in Criminal Revision Cases Nos. 637-640 are the promoters and first Directors of the Company. It was for them to take the necessary actions for failure to take which the prosecutions against them were started. Nobody else comes into the picture regarding these matters. If they were required to take those actions and if they have defaulted to take the same, certainly they are 'officers in default', as defined in the Companies Act. In view of this and in view of what I have stated earlier I am of the view that the petitioners in these seven cases have been rightly convicted. The Rules must accordingly be discharged.

18. It is ordered accordingly.


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