Case Laws Companies Act The State of Bombay Vs Bandhan Ram Bhandani and Others

PETITIONER:
THE STATE OF BOMBAY

Vs.

RESPONDENT:
BANDHAN RAM BHANDANI AND OTHERS.

DATE OF JUDGMENT:
23/09/1960

BENCH:
SARKAR, A.K.
BENCH:
SARKAR, A.K.
IMAM, SYED JAFFER
GUPTA, K.C. DAS

CITATION:
1961 AIR 186 1961 SCR (1) 801
CITATOR INFO :
E 1973 SC2429 (2,7,8)
ACT:
Company–General meeting not called wilfully–Whether it can
be a defence–Indian Companies Act, 1913 (VII Of 1913), as
amended by Companies Act, 1936 (22 of 1936), ss. 5, 32(5)
131 and 133(3).

 

HEADNOTE:
The respondents, directors of a company, were prosecuted
under ss. 32(5) and 133(3) of the Companies Act, 1913, for
breaches Of ss. 32 and :131 of that Act for having knowingly
and wilfully authorised the failure to file the summary of
share capital for the year 1953 and being knowingly and
wilfully parties to the failure to lay before the company in
general meeting the balance sheet and profit and loss
account as at March 31, 1953. The respondents contended
that there was no default in complying with the requirements
of the section as no general meeting had been held in the
year concerned.
Held–A person charged with an offence cannot rely on his
default as an answer to the charge and so, if the
respondents were responsible for not calling the general
meeting, they cannot be heard to say in defence to the
charges brought against them that the general meeting had
not been called.
The company and its officers were bound to perform the
conditions precedent, if they could do that, in order that
they might perform their duty.
802
It is no less necessary to call a meeting for performing the
obligations imposed by s. 32 because S. 76 creates an
obligation to call a meeting and imposes an independent
penalty for breach of that obligation. Liability under s.
32(5) or s. 133(3) would be incurred where the officer has
wrongfully assisted in the meeting not being held though he
might also be liable at the same time to the penalty under
s. 76.
Sub-section (5) Of S. 32 by imposing a daily fine during the
continuance of the default does not indicate that the
default is not committed till a meeting has been held. The
default occurs after the expiry of twenty-one days from the
day when the meeting should have been held.
Imperator v. The Pioneer Clay and Industrial Works Ltd.,
I.L.R. 1948 Bom. 86, Queen v. Newton, (1879) 48 Law J. Rep.
M.C. 77 and Dorte v. South African Super-Aeration Ltd.,
(1904) 20 T.L.R. 425, distinguished.
Gibson v. Bayton, (1875) L.R. 1o Q.B. 329, Edmonds v.
Foster, (1875) 45 Law J. Rep. M.C. 41 and park v. Lawton,
[1911] 1 K.B. 588, approved.
Doyle v. South African Super–Acration Ltd., (1904) 2o
T.L.R. 425, not applicable.

 

JUDGMENT:
CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos. 93 &
94/1958.
Appeals by special leave from the judgment and order dated
April 9, 1956, of the former Bombay High Court in Criminal
Appeals Nos. 419 and 420 of 1956, arising out of the
judgment and order dated October 15, 1955, of the Chief
Presidency Magistrate, Bombay, in Cases Nos. 370/S and 371/S
of 1955.
C. K. Daphtary, Solicitor-General of India, N. S. Bindra and
R. H. Dhebar, for the appellant (in both the appeals).
S. P. Varma, for respondents Nos. 1, 2 and 3 (In both the
appeals).
A. N. Goyal, for respondent No. 4 (In both the appeals).
N. P. Nathwani, S. N. Andley, J. B. Dadachanji, Rameshwar
Nath and P. L. Vohra, for respondents Nos. 5 to 7 (In both
the appeals).
1960. September 23. The Judgment of the Court was
delivered by
803
SARKAR J.-The respondents were Directors of Hirjee Mills
Ltd. They were prosecuted before the Chief Presidency
Magistrate, Bombay, for two offences under the Companies
Act, 1913, as amended by Act XXII of 1936. The first
offence was that they knowingly and wilfully authorised the
failure to file the summary of share capital for the year
1953 and thereby became punishable under sub-s. (5) of s. 32
of the Act, for a default in carrying out the requirements
of that section. The second offence was that they were
knowingly and wilfully parties to the failure to lay before
the Company in general meeting the balance sheet and profit
and loss account as at March 31, 1953 and thereby became
punishable under s. 133(3) of the Act for a default in
complying with the requirements of s. 131. There was a
separate trial in respect of each offence.
The learned Magistrate found that no general meeting of the
company had been held in the year concerned. Following
Imperator v. The Pioneer Clay and Industrial Works Ltd. (1)
he acquitted the respondents, being of the view that no
offence under either section could be committed till the
general meeting had been held. The learned Magistrate did
not go into the merits of the cases on the facts. Appeals
by the appellant to the High Court at Bombay from the orders
of the learned Magistrate were summarily dismissed. It has
preferred the present appeals from the decisions of the High
Court at Bombay with special leave granted by this Court.
The appeals have been heard together and are both disposed
of by this judgment.
It appears that respondent No. 7, N. K. Firodia, was
discharged by the learned Magistrate because it was conceded
at the trial that he was not a director of the Company at
any material time. He has been made a respondent to the
present appeals clearly through some misapprehension. The
appellant, the State of Bombay, does not and cannot proceed
against him. The name of respondent Firodia should there-
fore be struck out from the records of this appeal.
(i) I.L.R. [1948] BOM. 86.
804
Respondent No. 5, Fateh Chand Jhunjhunwala, died while this
appeal was pending in this Court. The appeal is therefore
concerned with the remaining five respondents only.
Sub-section (1) of s. 32 requires a company once at least in
every year to make a list of its shareholders as on the date
of the first or only ordinary general meeting in the year.
Sub-section (2) requires that the list shall contain a
summary specifying various particulars mentioned in it.
Sub-section (3) states that the list and summary shall be
completed within twenty. one days after the day of the first
or only ordinary general meeting in the year and the company
shall forthwith file a copy with the registrar together with
a certificate from a director or the manager or the
secretary of the company that the list and summary state the
facts as they stood on the day aforesaid. Sub-section (5)
contains the penal provision, that ” If a company makes
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 authorises
or permits the default shall be liable to the like penalty”.
It is said on behalf of the respondents that there is no
default in complying with the requirements of the section
until a general meeting is held. That, it is said, follows
from the language of the section, for it requires certain
things as at the date of the meeting to be stated in the
list and summary and also requires these to be filed within
a certain time of the meeting. So, it is said, that, the
section requires certain things to be done only after the
meeting has been held and no question of performing those
things arises till the meeting has been held.
A contrary view has been taken in England on the
corresponding provisions of the English Companies Acts of
1862 and 1908: see Gibson v. Barton(1), Edmonds v. Foster(2)
and Park v. Lawton (3). It was said in these cases that a
person charged with an
(1) (1875) L.R. 1o Q.B. 329.
(2) (1875) 45 Law J. Rep. M.C. 41.
(3) [1911] 1 K.B. 588.
805
offence could not rely on his own default as an answer to
the charge, and so, if the person charged was responsible
for not calling the general meeting, he cannot be heard to
say in defence to the charge that the general meeting had
not been called. It was also said that the company and its
officers were bound, to perform the condition precedent if
they could do that, in order that they might perform their
duty. This seems to us to be the correct view to take. If
the person charged with the failure to carry out the
requirements of the section could have called the meeting,
he cannot defeat the provisions of the section simply by not
calling the meeting wilfully.
It is true that under s. 76 of the Act a general meeting of
a company has to be held once at least in every calendar
year and if a default is made, the company and every
director or the manager of the company who is knowingly and
wilfully a party to the default shall be liable to a fine
not exceeding five hundred rupees. That however is, in our
opinion, no reason for saying that a person charged with a
failure to file the list and summary as required by s. 32
where a meeting had not been held, could only be prosecuted
under s. 76 and not under s. 32. Section 76 imposes an
obligation to hold a meeting and attaches a penalty to a
failure to perform that obligation. In the case of s. 32 it
is necessary that the meeting should be held in order that
the requirements of that section may be carried out. It is
no less necessary to call a meeting for performing the
obligations imposed by s. 32, because under s. 76 there is
an obligation to call a meeting the breach of which entails
an independent penalty. The two sections deal with
different matters and s. 76 does not interfere with the
operation of s. 32. The effect of s. 32 must be derived
from its terms: the terms cannot have different effects
depending on whether there is a provision like s. 76 in
another part of the Act or not. Without a provision like s.
76 a delinquent officer of the company may make s. 32
infructuous, and therefore, as already stated, it must be
held that liability
103
806
under s. 32 would be incurred where the officer has wrongly
assisted in the meeting not being held. The result cannot
be different because of the presence of a provision like s.
76.
Nor do we think that sub-sec. 5 of s. 32 by imposing a daily
fine during the continuance of the default indicates that
the default is not committed till the meeting has been held.
In order that the default may continue it has no doubt first
to occur. In our view, it occurs after the expiry of 21
days from the day when the meeting should have been held
within the year.
The respondents referred to the case of Queen v. Newton (1)
where it having been proved that the general meeting was not
held, the persons charged with the default were acquitted.
That case however is clearly distinguishable, ” because the
decision proceeded on the ground that, the summons having
alleged in terms that the default was made after the general
meeting had been held, it became essential to prove when the
meeting was held as a matter of fact, and in the absence of
proof the court held that the summons was rightly dismissed
“. In this case Cockburn, C. J., expressed some doubts about
the correctness of the decision in Edmonds v. Foster (2).
In Park v. Lawton (3) however, Lord Alverstone said that he
was unable to share those doubts, and with this view, we
agree. We may add that such doubts have not been shared by
anyone upto now.
Another case to which we were referred on behalf of the
respondents was Dorte v. South African Super-Aeration Ltd.
(4). There a company was convicted for a failure to file
the list and summary in a case where the general meeting had
not been held and fined Id and Id per day upto a certain
day. Subsequently a further summons against it was taken
out in respect of the same default for further penalties
from that day to another later day. It was held that the
word ” default ” implied a wilful and continued neglect to
do an act required and that the company could not
(1) (1879) 48 Law J. Rep. M. C. 77.
(2) (1875) 45 Law J. Rep. M. C. 41.
(3) [1911] 1 K.B. 589.
(4) (1004) 2o T.L.R. 425.
807
be liable to a continuing daily fine for an omission which
it was impossible to remedy. The report does not set out
the arguments nor the judgment and it is not clear on what
grounds the decision was given. It appears, however, that
Lord Alverstone was one of the Judges who decided that came.
In Park v. Lawton(1), Lord Alverstone himself observed with
regard to the Dorte’s case that there, ” there was no
question of the defendant being also in default as to the
general meeting, and that decision, therefore, in no way
conflicts with the earlier authorities.” We do not think,
therefore, that Dorte’s case assists the respondents at all.
It is authority only for the proposition that a continuing
daily fine will not be exacted where, owing to no meeting
having been held, it is impossible to remedy the default:
see Buckley’s Company Law (13th Ed.), p. 311.
Turning now to s. 131, we find that it requires the
directors of a company, once at least in every calendar
year, to lay before the company in general meeting a balance
sheet and profit and loss account of the company. Sub-
section (3) of s. 133 makes the company and every officer of
it who is knowingly and wilfully a party to the default in
carrying out the provisions Of s. 131, punishable with fine
which may extend to five hundred rupees. As in the case of
s. 32 and for the same reasons, here also it is no defence
to the charge for breach of s. 131 to say that a meeting was
not called.
As regards Imperator v. Pioneer Clay and Industrial Works
Ltd. (2), OD which the courts below held that the
respondents must be acquitted, we find that it turned on s.
134 of the Companies Act, 1913. The language of that
section is to a certain extent different from the language
used in ss. 32 and 131. Section 134(1) says, ” After the
balance sheet and profit and loss account………………
have been laid before the company at the general meeting,
three copies thereof……… shall be filed with the
Registrar.” Sub-section (4) of this section provides a
penalty for breach of s. 134, in terms similar to those
contained in sub-see. (5) of s. 32. If the language of s.
134(1)
(1) [1911] 1 K.B. 588.
(2) I.L R. [1948] Bom. 86.
808
makes any difference as to the principle to be applied in
ascertaining whether a breach of it has occurred or not-as
to which we say nothing in this case-then that case can be
of no assistance to the respondents. If however no such
difference can be made, then we think that it was not
correctly decided. We observe that Chagla, C. J., who
delivered the judgment of the Court in that case, did not
question the correctness of the decision in Park v. Lawton
(1) which be was asked to follow. All that he said with
regard to that case was that the scheme and terms of the
section on which it turned were different from s. 134 of the
Companies Act, 1913. That may or may not be so. There is
however no difference between s. 26 of the English Companies
Act, 1908, on which Parker’s case turned and which
apparently through some mistake Chagla, C.J., cited s. 36,
and s. 32 of the Indian Companies Act of 1913, except that
the English section required the summary to include a
statement in the form of a balance sheet containing certain
particulars mentioned, whereas our section does Dot require
that. Section 131 of our Act contains some provision about
the laying of the balance sheet before the general meeting.
This provision was inserted in the Act by the amending Act
of 1936. The fact, that one of the requirements of the
English section 26 is not present in s. 32 of our Act cannot
create any material difference between s. 32 of our Act and
s. 26 of the English Act. If the principle that a person
charged with an offence cannot rely on his own default as an
answer to the charge is correct, as we think it is, and
which we do not find Chagla, C. J., saying it is not, then
that principle would clearly apply when a person is charged
with a breach of s. 32 of our Act.
We think therefore that the appeal should be allowed. The
case will now go back to the learned Presidency Magistrate
and be tried on the merits according to the law as laid down
in this judgment.
A.p.peal allowed. Case remanded.
(1) [1911] 1 K.B. 588.
809

 

 

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