Companies Act Case Law H.V. Jayaram Vs Industrial Credit And Investment Corporation Of India Ltd.

PETITIONER:
H.V. JAYARAM

Vs.

RESPONDENT:
INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD.

DATE OF JUDGMENT: 15/12/1999

BENCH:
K.T.Thomas, M.B.Shah

 
JUDGMENT:

 
Shah, J.
Leave granted.
The only question involved in these appeals is whether
the complaint for the offence punishable under Section 113
(2) of the Companies Act, 1956 could be filed only where the
registered office of the company is situated or where the
complainant is residing.

The appellant had lodged criminal cases before the
Special Court for economic offences in Karnataka at
Bangalore on the allegation that the respondent companies
had committed offences punishable under Section 113(2) of
the Companies Act. Criminal Petition Nos.240, 1485, 1548,
1848 and 1849 of 1996 before the High Court of Karnataka at
Bangalore challenged the order passed by the trial court
rejecting applications for the discharge on the ground that
the Magistrate had no territorial jurisdiction to try the
alleged offences. In some cases, companies straightway
approached the High Court questioning the order passed by
the learned Magistrate issuing summons to them after taking
cognizance of the offence. It was pointed out that
admittedly the registered offices of the respondent
companies are not located in the State of Karnataka but are
located either at Bombay or at Gujarat. As against this,
the appellant who is a practising advocate contended that he
was a permanent resident of Bangalore and letters requesting
the company to transfer the shares and to send memorandum,
articles of association, balance sheets etc. were sent from
Bangalore to the registered offices of the companies and,
therefore, cause of action also arose at Bangalore. The
High Court after considering the various decisions relied
upon by the learned counsel for the parties arrived at the
conclusion that under the provision of Section 53 of the
Companies Act two modes are prescribed for serving the
documents, one to serve personally and the other by post.
As the documents were sent to the respondent by post, as
requested by him, the cause of action would arise only where
the head office is situated. The Court, therefore, arrived
at the conclusion that having regard to Section 201 of the
Cr.P.C., the Magistrate is required to return the complaint
for presentation before the proper court with an endorsement
to that effect.

The learned counsel appearing on behalf of the
appellant (complainant) strenuously contended that the order
passed by the High Court is, on the face of it, erroneous
because admittedly the appellant is residing at Bangalore.
Being purchaser of the shares, he was entitled to get the
share certificates at Bangalore and, therefore, cause of
action would arise at Bangalore also. For this purpose, he
relied upon the decision rendered by Rajasthan High Court in
Ranbaxy Laboratories Ltd. v. Smt. Indra Kala {(1997) 24
CLA 203 (Raj.)}.

As against this, learned senior counsel, Mr. Desai
submitted that the order passed by the High Court is in
accordance with the provision of Section 113 read with
Section 53 of the Companies Act. He referred to the
decision rendered by the Patna High Court in Upendra Kumar
Joshi v. Manik Lal Chatterjee and others, {1982 (Vol.52)
Company Cases 177 (Patna)}. He submitted that the
litigation is frivolous and it should be discouraged.

For appreciating the contention raised by the learned
counsel for the parties, we would refer to the relevant
parts of Sections 53 and 113 of the Companies Act, which are
as under:-

53. Service of documents on members of company.(1)
A document may be served by a company on any member thereof
either personally, or by sending it by post to him to his
registered address, if any, within India supplied by him to
the company for the giving of notices to him.

(2) Where a document is sent by post,–

(a) service thereof shall be deemed to be effected by
properly addressing, prepaying and posting a letter
containing the document, provided that where a member has
intimated to the company in advance that documents should be
sent to him under a certificate of posting or by registered
post with or without acknowledgement due and has deposited
with the company a sum sufficient to defray the expenses of
doing so, service of the document shall not be deemed to be
effected unless it is sent in the manner intimated by the
member; and

(Emphasis added) (b)

(3) (4) (5)
113. Limitation of time for issue of
certificates.(1) [Every company, unless prohibited by any
provision of law or of any order of any court, tribunal or
other authority, shall, within three months after the
allotment of any of its shares, debentures or debenture
stock, and within two months after the application for the
registration of the transfer of any such shares, debentures
or debenture stock, deliver, in accordance with the
procedure laid down in section 53, the certificates of all
shares, debentures and certificates of debenture stocks
allotted or transferred;

Provided. .. ]

(2) If default is made in complying with sub-section
(1), the company, and every officer of the company who is in
default, shall be punishable with fine which may extend to
five hundred rupees for every day during which the default
continues.

(3) ..

Section 113 inter alia requires that within three
months after the allotment of any shares and within two
months after the application for the registration of the
transfer of any such shares, every company shall deliver, in
accordance with the procedure laid down in Section 53, the
certificates of all shares allotted or transferred.
Sub-section (2) provides punishment if default is made in
complying with sub-section (1). Reading Sections 113 and 53
together, share certificates are to be delivered in
accordance with the procedure laid down in Section 53. A
document is to be served either personally or by sending it
by post at registered address within India. Sub- section
(2) specifically mentions that where a document is sent by
post, such service thereof shall be deemed to be effected by
properly addressing, prepaying and posting the letter
containing the document. Hence, once there is a statutory
mode of delivering the document by post and deeming
provision of such delivery, the place where such posting is
done is the place of performance of statutory duty and the
same stands discharged as soon as the document is posted.
Hence the cause of action for default of not sending the
share certificates within stipulated time would arise at the
place where the registered office of the company is situated
as from that place the share certificates can be posted and
are usually posted. If the addressee is available at the
same locality where the registered office of the company is
situated, it is reasonable to think that service of
documents may be effected by personally delivering to him.
But if the addressee is residing at a distant place it is
unreasonable to expect the company to depute somebody to
travel upto that distance to personally deliver it to him.
The only usual mode which any company would then adopt is to
send it to him by post. For such default, as contemplated
under Section 113(1), there is no question of any cause of
action arising at the place where complainant was to receive
postal delivery. What is punishable under sub-section (2)
of Section 113 is non- delivery, in accordance with the
provision laid down under Section 53, of the certificates of
shares within prescribed time. So, if the documents are
posted within stipulated time, there would be compliance of
Section 113 and that there would not be any offence.

In H.P. Gupta v. Hiralal {1970(1) SCC 437}, the
Court considered a similar provision of Section 207 of the
Companies Act, which provides for payment of dividend within
42-days of its declaration by a company and its non payment
within stipulated period is punishable. Section inter alia
provides that where dividend is declared by the company but
has not been paid, or warrant in respect of thereof has not
been posted within 42-days from the date of its declaration,
to any shareholder entitled to the payment of dividend, then
it would be an offence punishable under Section 207. In
that case, Court also considered Section 205(5)(b), which is
similar to Section 53, which inter alia provides that any
dividend payable may be paid by cash or a cheque or a
warrant sent by post directed to the registered address of
the shareholder entitled to the payment of the dividend.
The Court held that when the company posts the dividend
warrant at the registered address of the shareholder, the
post office becomes the agent of the shareholder and the
loss of a dividend warrant during the transit thereafter is
at the risk of the shareholder. The Court further held that
the place where the dividend warrant would be posted is the
place where the company has its registered office and the
offence under Section 207 of the Act would also occur at the
place where the failure to discharge that obligation arises,
namely, the failure to post the dividend warrant within
42-days. In the facts of that case, the Court observed
thus: –

.The venue of the offence, therefore, would be Delhi
and not Meerut, and the Court competent to try the offence
would be that Court within whose jurisdiction the offence
takes place, i.e., Delhi. This should be so both in law and
common-sense, for, if held otherwise, the directors of
companies can be prosecuted at hundreds of places on an
allegation by shareholders that they have not received the
warrant. That cannot be the intention of the Legislature
when it enacted Section 207 and made failure to pay or post
a dividend warrant within 42 days from the declaration of
the dividend an offence.
Same would be the position for the offence punishable
under Section 113 of the Act. Cause of action for failure
to deliver the share certificates or documents within
prescribed time would arise where the registered office of
the company is situated.

However, learned counsel for the appellant relied upon
the decision of Rajasthan High Court in Ranbaxy Laboratories
Ltd. v. Smt. Indra Kala {(1997) 24 CLA 203 (Raj.)}. In
the said case, complaint was filed before the Judicial
Magistrate at Jaipur in Rajasthan for the offences
punishable under Section 113 of the Act against the
directors and officers of the company alleging that the
complainant had purchased 200 shares of the Company and had
duly sent such shares to the head office of the company for
registration of the transfer in its books, but despite
repeated requests, reminders and efforts made by her, the
Company did not register the transfer of the shares in her
name. Registered office of the company was at Delhi. The
High Court negatived the contention of the company that
Judicial Magistrate at Jaipur did not have jurisdiction to
deal with the case by holding thus: –

Company collects money from the public at large by
selling its shares and transactions of sale and purchase are
governed by the provisions of the Companies Act.
Registration of the transferred shares is one of the duties
of the company in the course of conducting its business
according to the provisions of law. Therefore, the interest
of the members of the public transacting such business
cannot be allowed to be defeated on the plea that relief to
the aggrieved persons can be granted only at the place where
the office of the company is located.

In our view, it appears that the attention of the
learned Judge was not drawn to the decision rendered by this
Court in H.P. Gupta v. Hiralal {1970(1) SCC 437} and also
to Section 113 of the Act, which inter alia provides that
company shall deliver the documents, such as, certificates
of shares, debentures and certificates of debenture stocks
allotted or transferred in accordance with the procedure
laid down in Section 53. Section 53 prescribes the mode of
delivery inter alia by sending the document by post at
registered address and sub-section (2) is the deeming
provision for delivery of such letter. In Upendra Kumar
Joshi v. Manik Lal Chatterjee and others, {1982 (Vol.52)
Company Cases 177 (Patna)}, the Patna High Court has
followed the decision rendered by this Court in the case of
H.P. Gupta (Supra) and has rightly arrived at the
conclusion that the cause of action would arise at the place
where registered office of the company is situated.

In the result, the aforesaid appeals are dismissed.

 

 

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