Karnataka High Court
H.H. Marthanda Varma And H.H. Bhupendra ... vs Registrar Of Companies on 5 June, 1987
Equivalent citations: [1988]64COMPCAS125(KAR), ILR1987KAR2257
JUDGMENT K.B. Navdgi, J.
1. Criminal Petition No. 650 of 1985 and Criminal Petition No. 651 of 1985 ar petitions filed under section 482 of the Code of Criminal Procedure (``the Code" for short). They are disposed of by this common order.
2. H.H. MARTHANDA Varma, Elayaraja of Travancore, the petitioner in Criminal Petition No. 650 of 1985, is accused No. 3 in C.C. No. 311 of 1982 on the file of the Special Court for Economic Offences, Bangalore District, Bangalore (the trail court), whereas H.H. Bhupendra Narayan Singh Deo, Raja or Korea ``Ramdrug ", the petitioner in Criminal Petition No. 651 of 1985, ids accused No.4 in C.C. No. 311 of 1982. The Registrar of Companies, the respondent in both the criminal petitions, lodged a complaint against M/ss Mysore Tools Ltd., 4th floor, Coffee Board Building,m No. 1, Vidhata Vedhi, Bangalore -1 (the company ) ; T.T. John,the managing director of the company ; the petitioner in Criminal Petition No. 650 of 1985 ; the petition in Criminal Petition No. 651 of 1985 ; Mr. Victor Fernandes ; and Mr. V.S. Mathews, arranging them as A-1, 1-2, A-3, A-4, A-5 and A-6, respectively, in the trial court on March 14, 1980, under the section 58A(3)(c) read with section 58A(5) of the Companies Act, 1956 (1 of 1956) (``the Act ", for short ).
3. The allegations in the complaint are these :
the company was incorporated as a private limited company under the Act on December 29, 1966. It was subsequently converted into a public limited company with effect from August 26, 1968. The company is having its registered office at 4th floor, Coffee Board Building, No. 1, Vindhana Vedhi, BANGALORE -1.
4. The company is engaged in manufacturing micro meters, calipers, vernier calipers, height gauges, depth gauges, all kinds of precision machiness and was governed by the Non-Banking Non-Financial Companies (Reserved Bank) Directions, 1966, in force prior to February 3, 1975, and is governed by the Companies (Acceptance of Deposits) Rules, 1975, framed under section 58A read with section 642 of the Act with effect from February 3, 1975.
4. Accused Noss. 2 to 6 are the directors of the company. They were attending to the affairs of the company on the relevant dates of default s per the particulars filed in the office o the Registrar of Companies. The company is represented by T.T. John, accused No. 2, the managing director.
6. During the course of the scrutiny of the balance-sheet of the company ass on December 31, 1974, which was filed in the office of the Registrar of Companies on September 16, 1975, it was noticed that the company had accepted deposits in contravention of the directions issued by the Reserve Bank of India from time to time. As per the provisions of clues (c) of sub-section (3) of section 58A of the Act, any deposits received by the company in contravention of any directions made under Chapter III-B of the Reserve Bank of India Act, 1934 (2 of 1934), before the commencement of the companies (Amendment ) Act, 1974, should be repaid in full on or before the 1st day of April, 1975, and such repayment shall be without prejudice to any action taken under the Reserve Bank of India Act for such contravention.
7. Under para 3(2) of the Reserve Bank of India Notification No. DMBC 2/ED (S)-66, dated October 29, 1966, as amended up to August 30, 1973, with effect from January 1, 1973, the maximum amount a non- banking non-financial company could accept by way of deposit from public was 25 % of the paid-up capital and free reserves of thee company. Under the Explanation of rule 4(3) of the said notification, while arriving at the 25% limit, deduction has to be made for accumulated balance of loss disclosed in the company's balance-sheet.
8. From the balance-sheet as on December 31, 1974, filed by the company (anexure ``A"), the following position has emerged :
31-12-1973 31-12-1974 Rs. Rs. Paid-up-capital 23,52,200 23,52,200 Free reserves Nil Nil ------------ ----------- Total (+) 23,52,200 23,52,200 Less: accumulated balance of loss (-) 33,21,828 36,38,855 -------------- ----------- Net worth . (-) 7,69,629 12,86,655
9. The accumulated balance of loss as on December 31, 1974, exceeds the paid-up capital by Rs. 12,86,655. In view of the aforesaid unsatisfactory financial position of the company, the company has n basis to accept any fixed deposits or renew them either. But the company has accepted deposits ass seen from the balance-sheet as on December 31, 1974, amounting to Rs. 7,81, 176. This act of the company is in clear contravention of para. 3(2) (ii) of the Non- Financial Companies (Reserve Bank ) Directions, 1966, in force, prior to February 3,1975, attracting the provisions of section 58A(3)(c) of there Act punishable under section 58A(5) of the Act. This position of deposits has been supported by the company in its letter No. MY. PSB. 8. 3545, dated March, 29, 1976, (copy enclosed as anexure ``B"). The complaint has received a number of complaints from the deposit -holders of the company regarding non-repayment of the deposits on maturity in spite of repeated requested (copies of the complaints are at anexure ``C" to ``I"). The complaint has, therefore, reasonable cause to believe that the company has failed or omitted to make repayment of the deposits received by it in contravention of the directions made under chapter III-B of the Reserve Bank of India, Act, 1934, on before April 1, 1975. The company has, therefore, committed an offence punishable under section 58A(a) of the Act.
10. A-2 TO A-6 were the directors of the company on the relevant dates of default. It was the responsibility of the directors to take all steps to refund in full on or before April 1,1975, the whole of the deposits accepted by the company in contravention of the directions of the Reserve Bank of India. The accused persons have failed to make good the default in spite of the notice and a reminder from the office of the complainant and as such have knowingly and wilfully contravened the provisions of section 58A(3)(c) of the Act and have rendered themselves liable for punishment under section 58A(5)(b) of the Act.
11. These are the allegations made in the complaint against the company, A-1 and its directors, A-2 TO A-6.
12. It appears the complaint was filed first before the Chief Metropolitan Magistrate, Banglore City, and it was transferred to the trial court consequent on its establishment. It also appears that accused No. 2 remained absent and that hiss presence could not be secured in spite of the insurance of non-bailable warrant. It also appears trial court, on the request made by the prosecutions split up the case of A- 2 from the case of A-1 and A-3 to A-6 and proceeded against the case in so far as it related to A-1 and A-2 TO A-6. The case was taken up for trial in accordance with the procedure prescribed for cases instituted otherwise than on police report. Mr. Puttaveerappa, a senior technical assistant working in the office of the admitted in evidence for the complainant.
13. The trial court, by an order dated June 7, 1985, on consideration o the evidence, held that the complainant had place sufficient material to frame charges against A-3, A-4 and A-5 in respect of the offence alleged in the complaint. It directed a charge to be framed against A-3, A-4 and A-5 for the offence punishable under section 58A(3)(c) read with section 58A(5) of the Act.
14. It is this order that is challenged in these two petitions. In these petitions, A-3 and A-4 have sought to set aside the order dated June 7, 1985, and to discharge them.
15. I have heard learned counsel for A-3 and A-4 and learned Central Government Standing Counsel for the respondent.
16. Learned counsel for A-3 and A-4 urged that the trial court ought to have held that no case against A-3 and A-4 had been made out, which if unrebutted, would warrant their conviction and that the trial court should have discharged A-3 and A-4. In support of their submissions, they invited my attention to the evidence of P.W-1 and the documentary evidence and contended that the trial court fail to consider the evidence in the proper perspective and that it committed a serious error in looking into the allegarions in the complaint and in considering the documentary evidence not proved according to the rules of evidence.
17. As against this, learned Central Government Standing Counsel for the respondent submitted, supporting the order, that the evidence taken by the trial court justified the opinion formed by it and that there is ground for presuming that A-3 and A-4 have committed the offence alleged against them. He further submitted that there are no grounds to upset the well-reasoned order of the trial court in exercise of the inherent powers of this court under section 482 of the code.
18. The short question for consideration is whether the order of the trial court impugned in these petitions is liable to be set aside.
19. The relevant provisions in the Code for the trial of a case of this type are sections 244, 245 and 246 .
20. Section 245(1) provides :
``If, upon taking all the evidence referred to in section 244, the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction, the Magistrate shall discharge him. "
21. Section 246(1) requires :
``If, when such evidence has been taken, or at any previous stage if the case, the Magistrate is of opinion that there is ground for presuming that the accused has committed an offence tribal under this Chapter, which such Magistrate is competent to tray and which,in his opinion, could be adequately punished by him he shall frame in writing a charge against the accused."
22. The Code envisages discharge of the accused by the Court of Sessions under section 227 in a case tribal by it. Cases instituted upon a police report are governed by section 239 and cases instituted otherwise than on police report are covered by section 245.
23. The Supreme Court in R.S. Nayak v. A.R. Antuulay, , has pointed out that sections 227,239 and 245 contain somewhat different provisions in regard to discharge of the accused ; that under section 227, the trial judge is required to discharge the accused if he considers that there is no ground for proceedings against the accused ; that the obligation to discharge the accused under section 239 arises when the Magistrate considers the charge against the accused to be groundless ; that the power to discharge is exercisable under section 245(1) when the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction. The Supreme Court has held that (at page 2071 ) it is a fact that sections 227 and 239 provide for discharge being ordered before the recording of evidence and consideration as to whether a charge has to be framed or not is required to be made on the basis of the record of the case, including documents and oral hearing of the accused and prosecution or the police report, the documents sent along with i and examination of the accused and after affording an opportunity to the two parties to be heard ; that the stage for discharge under section 245 ; on the other hand, is reached only after the evidence referred to in section 244 has been taken ; and that notwithstanding the difference in the position, there is no scope for doubt that the state at which the Magistrated is required to consider the question of framing of charge under section 245(1) is a preliminary one and the test of ``prima facie " case to be applied. It has been further observed, in the said decision, that in spite of the difference in the language of the three sections, the legal position is that if the trial court is satisfied that a prima facie case is made out, charge has to be framed.
24. In Abhey Dass v. Gurdial Singh, , the Supreme Court, in a case instituted on a complaint, applied the prima facie test. In State of Bihar v. Ramesh Singh , the Supreme Court again pointed out that the standard of tests and judgment which are to be finally applied before recording a finding regarding guilt or otherwise of the accused, is snow to be applied at the stage of deciding the matter under section 227. It was further observed ( at page No. 2071 of AIR 1986 SC) :
`` If the evidence which the prosecution proposes to adduce to a prove the guilt of the accused even if fully accepted before it is challenged in cross-examination or rebutted by the defence evidence, if any, cannot show that the accused committed the offence, then there will be no sufficient ground for proceeding with the trial. An exhaustive list of circumstances to what will lead to one conclusion or the other is neither possible nor advisable. We may just illustrate the difference of the law by one more example. If the scales of pan ass to the guilt or innocence of the accused are something like even at the conclusion of the trial, then, on the theory of benefit of doubt, the case is to end in his acquittal. But, if, on the other hand, it is so at the initial stage of making an order under section 227 or section 228, then in such a situation ordinarily and generally, the order which will have to be made will be one under section 228 (charge to be framed ) and not under section 227 (of discharge )."
25. In Ramesh singh's case, , the Supreme Court quoted with approved the view expressed in Nirmaljit Singh Hoon v. state of West Bengal and in Chandra Deo Singh v. Prakash Chandra Bose .
26. In Superintendent and Remembrance of Legal Affairs, West Bengal v. Anil Kumar , the Supreme Court said (at page 2072 of AIR 1986 SC):
"At this state, as was pointed out by this court in State of Bihar v. Ramesh Singh, , the truth, veracity and the effect of the evidence which the prosecution proposes to adduce are not to be meticulously judged. The standard of test, proof and judgment which is to be applied finally before finding the accused guilty or otherwise is not exactly to be applied. At this stage, even a very strong suspicion founded upon materials before the Magistrate which leads him to form a presumptive opinion as to the existence of the factual ingredients constitution the offence alleged may justify the farming of charge..."
27. Under section 245(1) of the Code, the requirement is that the evidence must be of such a character which, if to rebutted, would warrant conviction of t accused. The concept of rebuttable presumption is too well-known to be stated. In his well-knows Treatise on Evidence, it is observed by Taylor, the author (at page 2074 of AIR 1986 SC):
"rebuttable presumptions of law are a result of the general experience of a connection between certain facts or things, one being usually bound to be the companion or effect of the other. The connection, however, in this class is not so intimate or so uniform as to be conclusively presumed to exist in every case; yet, it is so done that the law itself without the aid of a jury infers one fact from the crude existence of the other in the absence of opposing evidence. In this mode, the law advances the nature and amount of the evidence which is sufficient to establish a prima facie case and throws the burden of proof upon the other party; and if no opposing evidence is offered, the injury are bound to find in favour of the presumption. A contrary verdict might be set aside as being against evidence. The rules in this class of presumptions as in the former have been adopted by common consent from motives of public policy and for the promotion of the general good; yet, not as in the former (conclusive proof) class forbidding all further evidence but only dispensing with it till some proof is given on the other side to rebut the presumption raised. Thus, as men do not generally violate the Penal Code, the law presumes every man to be innocent; but some men do transgress it; and,d therefore, evidence is received to repel this presumption."
28. Let me now see whether the trial court has considered and scanned the evidence keeping the above stated aspect of the legal position in mind.
29. Section 58A was inserted by section 7 of the Act 41 of 1974 in the Act with effect from February 3, 1975. Section 58A, so far as it is relevant for the present purpose, reads:
"58A (1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its members.
(2) No company shall invite, or allow any other person to invite or causes to be invited on its behalf, any deposit unless--
(3) such deposit is invited or is caused to be invited in accordance with the rules made under sub-section (1), and
(b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company, in such from and in such manner as may be prescribed.
(3) (a) Every deposit accepted by a company at any time before the commencement of the Companies (Amendment) Act, 1974, in accordance with the direction made by the Reserve Bank of India under Chapter IIIB of the Reserve Bank of India Act, 1934, shall, unless renewed in accordance with clause (b),be repaid in accordance with the terms of such deposit.
(b) No deposit referred to in clause (a) shall be renewed by the company after the expiry of the terms thereof unless the deposit is such that it could have been accepted if the rules made under sub- section (1) were in force at the the time when the deposit was initially accepted the company,
(c) Where, before the commencement of the Companies (Amendment)Act, 1974,any deposit was received by a company in contravention of any direction made under Chapter IIIB of the Reserve Bank of India Act 1934, repayment of such deposit shall be made in full on or before the 1st day of April, 1975, and such repayment shall be without prejudice to any action that may be taken under the Reserve Bank of India Act, 1934, for the acceptance of such deposit in contravention of such direction.
(4) Where any deposit is accepted by a company after the commencement of the Companies (Amendment) Act, 1974, in contravention of the rules made under sub-section (1), repayment of such deposit shall be made b y the company with in thirty days fro the date of acceptance of such depot or within such further time not exceeding thirty days, as the Central Government may, on sufficient cause being shown by the company, allow..
(5) Where a company omits of fails on make repayment of a deposit in accordance with the provisions of clause (c) of sub-section (3), or in the case of a deposit referred to in sub section (4), within the time specified in that sub-section,--
(a) the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made, and out of the fine, if realised, an amount equal to the amount in relation to which the repayment of deposit has not been made, shall be paid by the court, trying the offence, to the persons to whom repayment of the deposit was to be made, and on such payment, the liability of the company to make repayment of the deposit shall, to the extent of the amount paid by the court, stand discharged;
(b) every officer of the company who is in default shall be punishable with imprisonment for a terms which may extend to five years and shall also be liable to fine."
30. Section 58A(3)(c) of the Act provides that where, before the commencement of the Companies (Amendment) Act, 1974, which has come into force with effect from February 3. 1975, any deposit was received by a company in contravention of any direction made under Chapter IIIB of the Reserve Bank of Indian Act, 1934, repayment of such deposit shall be made in full no or before the 1st day of April, 1975, and such repayment shall be without prejudice ;to any action that may be taken under the Reserve Bank of India Act, 1934, for the acceptance of such deposit in contravention of such direction. Section 58A(5) provides that where a company omits or fail to make repayment of a deposit in accordance with the provisions of clause. (c) of sub- section (3), or in the case of a deposit referred to in sub-section (4) within the time specified in that sub-section, the company shall be punishable with fine which shall not be less than twice the amount in relation to which the repayment of the deposit has not been made and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to five years and shall also be liable to fine.
31. The contention of A-3 and A-4 is that the company had not received deposits before the commencement of the Companies (Amendment) Act, 1974, in contravention of any direction made under Chapter IIIB of the Reserve Bank of India Act, 1934, and as such there was no question of repayment of deposits by the company in full on or before the 1st day of April, 1975. The further contention is that A-3 and A-4 cannot be regarded as officers in default within the meaning of the expression given in section 5 of the Act and that the trial court, missing these two points, has erroneously concluded that there is ground for presuming that A-3 and A-4 have committed the offence alleged against them.
32. There is no dispute that the company was incorporated as a private limited company on December 29, 1966, and that it was converted into a public limited company with effect from August 26, 1968, and there is evidence of PW-1 to that effect. There is also no dispute that the company was governed by the Non-Banking Non-Financial Companies (Reserve Bank) Directions, 1966, in force prior to February 3, 1975. There is also the evidence of PW01.
33. The question for consideration is whether, prior to February 3, 1975, the company had accepted deposits in contravention of the directions made in Chapter IIIB of the Reserve Bank of India Act, 1934.
34. These directions were in force up to February 3, 1975. Subsequent to February s3, 1975, the deposits accepted by the companies are governed by Companies (Acceptance of Deposits) Rules, 1975, framed under section 58A of the Act.
35. PW-1 has stated that as per the directions of the Reserve Bank of India, the limit up to which the company could accept deposits from the public is up to 25% of the paid -up capital of the company less the accumulated losses; that the paid-up capita of the company as on December 31, 1974, was Rs. 23, 52,200; that the company was not holding any reserve fund; that at time time, the accumulated losses of the company were Rs. 38, 23,558 inclusive of preliminary expenses, promotional and incorporation expenses and development expenditure; that the financial position of the company as on December 31, 1973, was the same and the net worth of the company was also negative; and that in view of the negative financial position of the company, it should not have accepted or renewed the deposits. It is in his evidence that the balance-sheet of the company as on December 31, 1974, would disclose about its having unsecured loans to extent or Rs. 7,81,176. The extract of the balance-sheet of the company as on December 31, 1974, is exhibit P-10. Exhibit PW-1 has testified that the balance-sheet, exhibit P-10, would make it clear that the company accepted deposits in contravention of the directions issued by the Reserve Bank of India. Exhibit P-10 (a) is an extract of the auditor's report to the shareholders for the years ending December 31, 1974, and exhibit P-10(b) is the addendum to the directors report to the members in respect of the remarks contained in the auditor's report. Referring to these documents, P.W.-1 has vouched that the company should have repaid the deposits on or before April 1, 1975, and that the balance-sheet of the company as on December 31, 1975, would show that the position of unsecured loans was Rs. 7,71,675. The balance-sheet referred to by the witness is exhibit P-11 and the auditor's report is exhibit P-11(a). It is in the evidence of P.W.-1 that the extract of the balance-sheet of the company as on December 31, 1976, exhibit P-12 would also show the unsecured loan position at Rs. 7, 50,675. Referring to exhibit P-12(a),the auditor's report and exhibit P-12(b), the addendum to the director's report, the witness had stated that these documents would indicate the outstanding position of the deposits even on December 31, 1976. It is in his evidence that the company did not file any balance-sheet before the Register of Companies for the subsequent years. The evidence also shows that a notice was issued to that company and A-2 to A-6 calling upon them to explain why the deposits were not repaid and why they should not be prosecuted. The office copy of the notice is exhibit P- 13 and the evidence of P.W. -1 would show that company and A-2 to A-5 received the notice. Exhibits P-14 to P-`8 are the postal acknowledgments marked in the case. It is in the evidence of PW-1 that responding to the notice, the company gave reply as per exhibit P-19 and A-4 gave the reply as per exhibit P-20. He has also testified that the other accused persons did not respond to the notice and that many depositors of the company complained against the company for not repaying the deposits. Exhibits P-21 to P-27 are the copies of the complaints produced along with the complaint referred to by the witness in the course of his evidence.
36. The trial court has referred to the evidence of PW-1 and the documents admitted in evidence for the respondent spoken to by PW-1. Though the trial court has referred to the allegations in the complaint in the course of the order, it is clear from a reading of the orders a whole that it considered the evidence of PW-1 and the documentary evidence and depended upon it in passing the impugned order. The record shows that copies of some of the documents which were not furnished to the company and other accused persons earlier, were furnished during the course of recording of the evidence of PW-1. It appears that A-3 and A-4 cannot now contend that the trial court received inadmissible evidence and referred to it in the course of the order to reach the conclusion that there was ground for presuming that A-3 and A-4 have committed the officer alleged against them.
37. The admission on PW-1on which strong reliance was placed to the effect that after December 31, 1971, the company did not accept any fresh deposits, that it repaid the unsecured loans to some extent and that it could not repay the deposits in full on or before the 1st day of April, 1975, would not ago to the aid of A-3 and A-4 in submitting that no prima facie case has been made out against them. The oral evidence of PW-1 and the documentary evidence referred to in the earlier paragraph, rightly considered in the proper perspective by the trial court, would show prima facie that before February 3, 1975, the company had received deposits in contravention of the directions made under Chapter IIIB of the Reserve Bank of India Act, 1934. The evidence also prima facies shows that the company did not make repayment of the deposits on or before the 1st day of April 1975.
38. There is clear admission on the art of the company in exhibit P-19, the reply given by it to the show-cause notice, exhibit P-13, that the company in accepting the deposits to the extent of Rs. 7,81,170 has contravended the provisions of section 58A(3)(c) of the Act
39. It is not the case of A-3 and A-4 that the company was wound up before April, 1, 1975, or that it was declared as a sick unit by the Government of Karnataka Putting a moratorium with regard to the repayment of deposits and unsecured loans before April 1, 1975. The fact that the company has been wound-up and that it is declared as a sick unit by the Government of Karnataka and that a moratorium has been issued in this regard for payment of deposits and unsecured loans will not go in aid of the contention that the offence has not been made out prima facie, since the oral as well as the documentary evidence place on record by the respondent would show prima facie in ample measure the the company has failed to made repayment of the deposits in accordance with the provisions of clause (c) of sub- section (3) of section 58A of the Act within the time stipulated in the said sub-section.
40. For the aforesaid reasons, I hold that the respondent has made out a prima facie case so as to frame charge against A-3 and A-4 for the offence alleged against them. The trial court has proceeded to scan the evidence keeping the aspect of the correct legal position in view. It is clear that the trial court has shifted and weighed t he evidence for the eliminated purpose of finding out whether or not a prima facie case has been made out. The presumptive opinion formed by the trial court as to the existence of factual ingredients constitution the offence alleged is founded upon the material. In R.S. Nayak's case, , the Supreme Court has pointed out that the language of sub-section (1) of section 45 of the Code places the matter beyond dispute by using the test suggested by the Supreme Court in the case of Ramesh Singh . It cannot be said that the proceedings initiated by the respondent ar in abuse of the process of the court. Nor can it be said that the well-reasoned order of the trial court needs to be disturbed for securing the ends of justice. There are absolutely no grounds o quash the proceedings initiated by the respondent.
41. The next question for consideration is where A-3 and A-4 ,on the basis of the evidence, can be considered as officers of the company in default so as to make them answerable to the charge in respect of the offence alleged against them and the company.
42. Placing reliance on the evidence of P.W-1 that A-2 was the managing directors of the company;that he was in charge of preparing the balance sheet and the entire affairs including the accounts of the company; that he did not know whether A-3 was in charge of the day to day administration of the company; and that A-4 by his failure to attend consecutively three meetings of the board of directors, had ceased to be a directors,it was urged that A-3 and A-4 could not have been held by the trial court as officers of the company in default.
43. Section 5 of the Act gives the meaning of the expression "officer who is in default". It provides:
"For the purpose of any provision in this ACt which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression `officer who is in default' means any officer of the company who is knowingly guilty of the default, non- compliance, failure, refusal or contravention mentioned in that provision, or who knowingly and wilfully authorises or permits such default, non -compliance, failure, refusal or contravention."
44. A reading of this provision would show that any officer of the company who is knowingly quality of the default, non-compliance, failure, refusal or contravention mentioned in e relevant provision or who knowingly and wilfully authorises or permits such default, non- compliance, failure, refusal or contravention, would be an officer who is in default.
45. The evidence of P.W.-1 shows that as on April 1, 1975, A-3 and A-4 were directors of the company; that A-2 and A-5 were directors form the date of the incorporation of the company; that A-3 and A-4 are appointed as directors with affect from August 22, 1968; that A-2 was the managing directors for a period of five years from the date of incorporation; that he was appointed as the managing directs for a period of five years from the date of its conversion as a public limited company and that the ceased to e the managing director with effect from August23, 1976. It is also in his evidence that A-2 to A- 5 continued to be the directors of the company as on April 1, 1975, and that exhibit P-8 is the extract of the annual return made up to June 29, 1974. It is in the evidence of P.W..-1 that there was no change of the directors of the company from ;June 29, 1974, to April 1,1975, and also that there had been no subsequent change. The trial court has referred to exhibit P-8and the evidence of P.W-1. It is in exhibit P-20 that the resignation of A-4 as director of the company was accepted with effect from December 4, 1975. P.W.-1 has denied the suggestion that A-4 ceased to be the directors on his failure to attend three meetings of the board of directors consecutively. Having regard to the offence alleged against the company and its directors and the other material on record, it cannot be said that A-4 was no the directors of the company at the material time. The trial court had adverted to this aspect and has concluded that on the date of the alleged contravention. A-4 was the director of the company. There is also material to show that A-3 and A-4 were directors of the company as on December 31, 1975. Exhibit P-11, the balance-sheet, is accompanied by the reports of the auditors and directs A-3 and A-4 are shown to have signed the balance-sheets, exhibits P-11 and P-12. The reports of the signed the balance-sheets, exhibits P-11,. the balance- sheet is accompanied by the reports of the auditors and directors A-3 and A-4 were directors of the company as on December 31, 1975. Exhibit P-11 and P-12. The reports of the auditors, exhibits P-10 (a), P-11(a)and P-12(a), would show that the company accepted the position that it had received fixed deposits and loans from the public in contravention of the permissible limits as provided under section 58A of the Act.
46. The trial court has held on the basis of the consideration of the evidence that it cannot be said that the company had accepted the deposits without the knowledges of A-3 and A-4 adding that the question as to whether they were the officers who were in default has to be considered at the time of the trial of the case and not at that stage on the basis of the suggestion made to P.W-1.
47. The decision in Sun Paper Mill Ltd., v. Assistant Registrar of Companies (1986) 59 Comp Cas 320, would not help A-3 and A-4 to buttress their contention. In that case, the Registrar of Companies had filed a complaint against the petitioner-company and its directors alleging commission of offence, under section 200 of the Code read with sections 58A(3)(a) and 58A(5) of the Act in view of the company having accepted excess deposits which had not been returned in time. The company and the directors filed petitions before the Madras High Court to quash the proceedings before the Magistrate. The receiving of the deposits which was the offence alleged had been committed during the period between March 23,1973, and January 2, 1975. Till June 3, 1975, the Reserve Bank of India's directions were in force. It was on these facts the High Court held that only section 58B(5)(a) and (b)of the Reserve Bank of India Act, 1934, would stand attracted for such contravention; that as different sentences have been provide for contravention of section 58A(a) and (b) of the Act for receiving a deposit in contravention of section 58A(3)(c), the prosecution of the petitioners under the Act which provided for a greater punishment than the one prescribed by the Reserve Bank of India Act was violative of article 20 of the Constitution; and that, therefore, the prosecution was not valid and had to be quashed.
48. In H. Nanjundaiah v.V. Govindan, Registrar of Companies, Maharashtra (1986) 59 Comp Cas 356, another decision depended upon by learned counsel for A-3 and A-4, the petitioner was director of a company, but he was either the managing directors not a shareholder. The registrar of Companies had called upon the company to show cause why action should not be taken against it for accepting deposits exceeding the limits prescribed by rule 3 (2) (i) and (ii) of the companies (Acceptance of Deposits) Rules, 1975. The petitioner had appealed under section 633 of the Act for relief against apprehended institution of criminal proceedings against him. There was no resolution of the company to which the petitioner was a party which allowed the company to make borrowings in excess of the limit. There was no act of the petitioner wherein the petitioners had knowingly subscribed to the borrowings beyond the limits. There was also no act of the petitioner having wilfully authorised or permitted some-one to borrow monies in excess of the limits. It was on these facts it was held by the High Court of Bombay that the petitioner could not be said to be an "officer in default" and was, therefore, entitled to relief against the apprehended penal action,
49. The facts in the instant case are clearly distinguishable from the facts in the reported case. A-3 and A-4 cannot derive any benefit from the enunication. Having regard to the evidence referred to by the trial court showing prima ;facie A-3 and A-4 as officers in default of the company, it cannot be said that that conclusion of the trial court in that regard is erroneous or perverse. Whether they would-be officers in default or not will have to be considered at the considering that aspect.
50. For the reason aforesaid, I find no merit in these petitions. A-3 and A-4 have not shown that the exercise of inherent powers of this court under section 482 of the Code is called for. The order directing framing of the charge for the offence alleged against A-3, A-4 and another does not suffer from any error or infirmity. The trial court has referred to the oral evidence of P.W-1 and the documentary evidence. No fault could be found with the method adopted by the trial court in considering the question under section 245(1) and 246(1) of the Code. The petitions are, therefore, dismissed.