Karnataka High Court
Chandra Spinning And Weaving Mills (P.) ... vs Registrar Of Companies on 4 September, 1987
JUDGMENT K.B. Navadgi, J.
1. This criminal revision petition is filed under section 397, read with section 401 of the Code of Criminal Procedure (the "Code" for short), by petitioners Nos. 1 to 3 against the judgment of convictions and sentences passed by the Presiding Officer, Special Court for Economic Offences, Bangalore District, Bangalore, in C C No. 79 of 1982.
2. Chandra Spinning and Weaving Mills P Ltd., a company incorporated under the Indian Companies Act, 1913, having its registered office at 5th Main Road, Chamarajpet, Bangalore-18, represented by its director, Sri M Krishnamoorthy (petitioner No. 1), Shri M Krishnamoorthy (petitioner No. 2), and Sri M Nagaraj (petitioner No. 3), the directors of the said company, were A-1, A-2 and A-4, respectively, in the trial court. The other person arraigned in the trial court as accused No. 3 was Sri M Madhusudhan, another director of the said company.
3. Chandra Spinning and Weaving Mills P Ltd., Sarvashree M Krishnamoorthy, M Madhusudhan and M Nagaraj would be hereinafter referred to as "the company", A-2, A-3 and A-4, respectively.
4. I have heard learned counsel for the company, Sri C K Narayana rao and S S Naganand, learned counsel for A-2 and A-4 and Sri. C Shivappa, learned Senior Standing Counsel for the Central Government, for the Registrar of Companies in Karnataka, Bangalore, the respondent.
5. I have examined the record and proceedings in C C No. 79 of 1982 and have read the authorities cited at the Bar.
6. The material facts relevant and necessary to dispose of the revision petition lie in a short compass. Briefly stated, they are as under :
The company is a private limited company. It was incorporated in the year 1954 by one Sri D R Madhavakrishnaiah. A-2, A-3, and A- 4 are his sons. The shareholders of the company at the time of its incorporation and, thereafter, were the four sons and four daughters of Sri. D R Madhavakrishnaiah. The company consists of the members of the joint Hindu family as its shareholders.
7. Sri D R Madhavakrishnaiah passed away in the year 1978.
8. During the accounting year of the company 1979-80. i.e., from July 1, 1979, to June 30, 1980, A-2, A-3 and A-4 were its directors.
9. Under section 220(1) of the Companies Act, 1956 (1 of 1956), ("the Act" for short), the company was required to submit three copies of the balance-sheet and the profit and loss account for the accounting year ended on June 30, 1980, to the Registrar of Companies in Karnataka within 30 days from the date when the balance-sheet and the profit and loss account were laid before the annual general meeting, or in case where the annual general meeting was not held, within 30 days from the latest date on or before which the annual general meeting of the company should have been held, i.e., on December 31, 1980.
10. There is no dispute and it is admitted by both the sides that the company did not hold its annual general meeting for the financial year 1979-80 on or before December 31, 1980, and that it was required to file three copies of the balance-sheet and the loss account before the Registrar of Companies on or before January 30, 1981.
11. A-2, A-3 and A-4 were the directors of the company during the relevant accounting year. There was a legal obligation on the part of A-2 to A-4 to obey or comply with the direction mandated under section 220(1) of the Act. They knowingly and wilfully authorised or permitted the default to be committed. A-2 to A-4 were the officers of the company in default within the meaning of the expression stated in section 5 of the Act.
12. It is with these allegations that the respondent set the criminal law in motion against the company and A-2 to A-4 by the complaint filed on January 25, 1982.
13. It appears from the record that this complaint came to be instituted in the Court of the Metropolitan Magistrate, Bangalore City, and consequent on the establishment of the Special Court for Economic Offences for the District of Bangalore including the metropolitan area, it stood transferred to the Special Court for trial of the offences alleged.
14. The case was tried by adopting the procedure prescribed for the trial so summons cases. Accusation was framed against the company and A-2 to A-4 on October 13, 1982. Both the company and A-2 to A-4 denied the offence alleged against them when the substance of the accusation was read over and explained to each of them. The offence alleged was tried and evidence was recorded.
15. Before recording of the evidence, the company, represented by A- 2, and A-2 and A-4 filed an application under section 633(1) of the Act to relieve them wholly of their liabilities on the grounds stated therein. The respondent on being noticed of the application, filed his objections, opposing the grant of the prayer.
16. The respondent, to substantiate the offence alleged, adduced oral as well as documentary evidence. Gopalakrishna, working in the office of the respondent and in charge of the files relating to the company, gave evidence as PW-1. the documentary evidence, admitted for the respondent in the trial court, consists of the following documents :
Exhibit P-1 is the copy of the incorporation certificate issued in favor of the company by the Registrar of Joint Stock Companies in Mysore, on August 5, 1954. Exhibit P-2 is the annual return of the company for the year ending December 30, 1980, showing the names of A-2 to A-4 as its directors, their addresses and particulars of the dates on which they were appointed as directors. Exhibit P-3 is the copy of the notice for defaults issued by the respondent to the company and A-2 to A-4 informing them about the non-submission of the annual return up to to December 30, 1980, required to be filed on or before March 1, 1981. The balance-sheet and the profit and loss account for the accounting year ended on June 30, 1980, having not been laid in the annual general meeting held or to be held on or before December 30, 1980, and the non-submission of the copies of the balance-sheet and profit and loss account, and calling upon them to give a reply within 15 days from the date of the notice. By this notice, the respondent informed the company that in the event of its failure to comply with direction stated in the notice, it would be liable for prosecution. Exhibits P-4, P-5, P-6 and P-7 are the postal acknowledgment cards showing the receipt of the copies of the notice by the company and A-2, A-3 and A-4. Exhibit P-8 is the letter written by A-2, on behalf of the company as its director, to the respondent by way of reply to the notice, exhibit P-3. It is dated November 19, 1981. Exhibit P-9 is the letter of the Registrar of Companies, dated December 4, 1981, to the company informing them that the department was not concerned with internal disputes and declining the request for extension of time to submit the balance-sheet and profit and loss account and further informing them that no extension in the matte would be granted. The company was also informed under exhibit P-9 that 10 days' time had been granted to it to approach this court for the relief under section 633(2) of the Act. The respondent sent copies of exhibit P-9 to the company and A-2 to A-4. The company and A-2 and A-4 received the copies under exhibits P-10, P-12 and P-11 respectively. A-3 refused to receive the copy of exhibit P-9. Exhibit P-13 is the cover containing the unserved copy of exhibit P-9 with the acknowledgment card attached to it. Exhibit P-14 is the copy of the letter addressed by the respondent to A-3 on December 26, 1981, incorporating in it the substance of the contents stated in exhibit P-9. Exhibit P-14 was sent to A-3 under certificate of posting. Exhibit P-15 is the letter from the partner of the chartered accountants addressed to the company with a copy to the respondent, informing it about the tender of resignation to the office of the auditors of the company for the reasons stated therein.
17. The company, A-2 and A-4, during their statutory examination, referred to the application filed by them under section 633(1) of the Act, whereas A-3 stated that he would file his statement separately.
18. The company and A-2 to A-4 in terms admitted during the course of their statutory examination, the offence alleged against them. A-3 in support of his defence, filed his statement stating that he could not be held guilty of the offence alleged.
19. A-3 entered the witness-box and gave evidence as D. W-1. It was in his evidence that exhibit P-15 came to be marked. A-2 went to the witness-box and gave evidence for A-2 and A-4 and were marked as exhibits D-1 to D-13 to which I would advert in the course of this order if and when necessary.
20. The learned Presiding Officer, on consideration of the evidence, held that the offence alleged against the company and A-2 to A-4 was a continuing offence and that, therefore, the prosecution was not barred by time. Placing reliance on the decision of the Supreme Court in State of Bombay v. Bandhan Ram Bhandani , he held that A-2 to A-4 knowingly and wilfully failed to file the copies of the balance- sheet and the profit and loss account of the company as on December 31, 1980, on or before January 30, 1981, as required under section 220(1) of the Act and that they were not entitled to the relief under section 633(1) of the Act.
21. In the view he took, he convicted the company and A-2 to A-4 for the offence in respect of which accusation has been framed and sentenced the company and each of A-2, A-3 and A-4 to pay a fine of Rs. 100 and directed the company and A-2 to A-4 to suffer simple imprisonment for a week in default of payment of fine.
22. The learned Presiding Officer, while convicting and sentencing the company and A-2 to A-4 as aforesaid, directed them to file the annual returns within three months from November 5, 1984. It appears that the learned Presiding Officer while giving the direction instead of stating the copies of balance-sheet and the profit and loss account, stated the annual return.
23. It is this principal contentions raised, the questions that have arisen for consideration and determination are these :
(1) Whether the contravention of the provisions contained in section 220(1)(a) of the Act is a continuing contravention or not ?
(2) Whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Act?
(3) Whether the judgment of convictions and sentences is legal, correct and proper ?
24. Section 220(1)(a) of the Act stated to have been contravened by the company and A-2 to A-4, in terms admitted by them, reads thus:
"220(1). After the balance-sheet and the profit and loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar within thirty days from the date on which the balance-sheet and the profit and loss account were so laid or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day on or before which that meeting should have been held in accordance with the provisions of this Act.-
(a) three copies of the balance-sheet and the profit and loss account, signed by the managing director, managing agent, secretaries and treasurers, manager or secretary of the company, or if there be none of these, by a director of the company, together with three copies of all documents which are required by this Act to be annexed or attached to such balance-sheet or profit and loss account :
Provided that in the case of a private company, copies of the balance-sheet and copies of the profit and loss account shall be filed with the Registrar separately :"
25. The other relevant provision, for the present purpose, is section 220(3) of the Act. It reads thus :
"If default is made in complying with the requirements of sub- sections (1) and (2), the company, and every officer of the company who is in default, shall be liable to the like punishment as is provided by section 162 for a default in complying with the provisions of sections 159, 160 or 161."
26. Section 220(3) of the Act provides that if default is made in complying with the requirements of sub-sections (1) and (2), the company and every officer of the company who is in default shall be liable to the like punishment as is provided by section 162 for default in complying with the provisions of section 159, 160 or 161.
27. Section 159 deals with the annual return to be made by the company having a share capital, while section 160 refers to the annual return to be made by the company not having a share capital, whereas section 161 makes further provisions regarding annual return and certificate to be annexed thereto.
28. Section 162(1),which is material, is extracted here below :
"162(1). If a company fails to comply with any of the provisions contained in sections 159, 160 or 161, the company, and every of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues."
29. A reading of this provision, in the context of the default in complying with the requirements of section 220(1) of the Act, would show that the company and the officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues. Thus, the default in complying with the requirement of section 220(1) of the Act is punishable only with fine.
30. By the new provisions in Chapter XXXVI of the Code, limitation has been prescribed for the first time for launching criminal prosecution in regard to offences not punishable with imprisonment for a term exceeding three years. Among the grounds in favor of prescribing the limitation, the following may be stated : (i) As time passes, the evidence of witnesses becomes weaker and weaker because of the failure or lapse of memory and it becomes more and more uncertain with the result that the danger of error becomes greater ; (ii) For the purpose of peace and repose, it is necessary that a person accused of an offence should not be kept under continuous apprehension that he may be prosecuted at any time particularly because with the multifarious laws creating new offences many persons at some time or the other commit some crime or the other. People would be having no peace of mind if there is no period of limitation even for petty offences ; (iii) The deterrent effect of punishment would be impaired if prosecution is not launched and punishment is not inflicted before the offence has been wiped off the memory of the persons concerned ; (iv) The sense of social retribution which is one of the purposes, perhaps even the main purpose, of criminal law loses its edge after the expiry of a long period ; (v) The period of limitation would make the organs of investigation and prosecution to make every endeavor to ensure the detection and punishment of the crime quickly.
31. Section 468 of the Code provides that no court shall take cognizance of an offence, after the expiry of the period of limitation, except as otherwise provided elsewhere in the Code, a reference to which is unnecessary, of the categories specified therein.
32. The question as to whether the prosecution launched against the company and A-2 to A-4 on January 25, 1982, which is obviously beyond the prescribed period of limitation is barred or not would depend upon the decision on the question as to whether the default alleged is a continuing one or not. If it is held that it is not a continuing default, then obviously the prosecution initiated on January 25, 1982, beyond the period prescribed would be barred by limitation. In that event, taking cognizance of the offence would be illegal and the trial proceeding on the basis of such illegal order would be vitiated. If it is held otherwise, then section 472 of the Code which provides that in the case of continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues, would be attracted.
33. Before adverting to the law declared by the Supreme Court on the point, it is apposite to refer to the statement in the American Jurisprudence, second edition, volume 21, in section 236 on page 424. The statement reads :
"Significantly, the determination of the timeliness of a prosecution hinges on the nature of the particular offence involved. Some offences are complete upon the commission of certain acts, whereas other so-called continuing offences are not. Typically, the statute of limitations begins to run as soon as every element of the crime occurs and the offence is complete. For a continuing offence, however, the crime is not exhausted for purposes of the statute of limitations as long as the prescribed course of conduct continues. Thus, for example, the crime of conspiracy has been held to continue as long as the conspirators engage in overt acts in furtherance of their plot, and the statute of limitation for a conspiracy prosecution generally commences to run from the time the last overt act in furtherance of the conspiracy was committed. The determination whether a given crime is a continuous offence is a matter of statutory interpretation. It has been held that the doctrine of continuing offences should be applied only in limited circumstances, since the doctrine effectively extends the statute of limitations beyond its stated term. A particular offence should not be deemed continuous unless the explicit language of the substantive criminal statute compels such a conclusion or the nature of the crime involved is such that Congress must have intended that it be treated as a continuing one."
34. The expression "continuing offence" is not defined in the code or in the Act. Expressions which do not have a fixed connotation or a static import are difficult to define. It is difficult to put the concept of continuing offence in a strait-jacket.
35. Explaining the expression "a continuing cause of action", Lord Lindley in Hole v. Chard Union [1894] 1 Ch 293 observed (at page 295) :
"What is a continuing cause of action ? Speaking accurately, there is no such thing ; but what is called a continuing cause of action is a cause of action which arises from the repetition of acts or omissions of the same kind as that for which the action was brought."
36. In the same decision, Lord Justice A L Smith, who agreed with the view of Lord Lindley, said (at page 296) :
"If once a cause of action arises, and the acts complained of are continuously repeated, the cause of action continues and goes on de die in diem. It seems to me that there was a connection in the present case between the series of acts before and after the action was brought ; they were repeated in succession, and become a continuing cause of action. They were an assertion of the same claim-namely, a claim to continue to pour sewage into the stream- and a continuance of the same alleged right. In my opinion, there was here a continuing cause of action within the meaning of the rule."
37. The statement of law made by Lord Lindley and Lord Justice A L Smith in Hole's case [1894] 1 Ch 293 has received approval by the Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328.
38. The distinction between a continuing offence and an offence which is committed once and for all is clearly brought out in the decision of the High Court of Judicature at Bombay in State v. A H Bhiwandiwalla, . In that case, the respondent had been charged with two offences, namely, (a) failure to apply for registration of his factory and to give notice of occupation; and (b) running the factory without a licence issued under the Factories Act, 1948. In the context of the plea of limitation raised by the accused, the High Court of Bombay observed (p. 163):
"In civil law, we often refer to a continuing or recurring cause of action. Similarly, even in criminal law the expression `continuing offence' is frequently used. As observed by Beaumont C J in Emperor v. Chholalal Amarchand, AIR 1937 Bom 1 [FB] the expression `continuing offence' is not a very happy expression. It assumes, says the learned Chief Justice (at pages 6 and 7) :
`...that you can have a continuing offence in the sense in which you can have a continuing tort, or a continuing breach of contract, and I doubt, myself whether the assumption is well founded, having regard to the provisions of the Criminal Procedure Code as to the framing of charges and as to the charges which can be tried at one and the same trial. It is quite cleat that you could not charge a man with committing an offence de die in diem over a substantial period.' Even so, this expression has acquired a well-recognised meaning in criminal law. If an act committed by an accused person constitutes an offence and if that act continues from day to day, then from day to day a fresh offence is committed by the accused so long as the act continues. Normally, and in the ordinary course, an offence is committed only once. But we may have offences which can be committed from day to day and it is offences falling in this latter category that are described as continuing offences."
39. In Balakrishna Savalram Pujari Waghmare v. Shree Dhyaneshwar Maharaj Sansthan, , His Lordship Justice Gajendragadkar (as he then was), dealing with the essence of a continuing wrong, observed (at page 807) :
"It is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the said injury. If the wrong ful act causes an injury which is complete, there is no continuing wrong even though the damage resulting from the act may continue. If, however, a wrongful act is of such a character that the injury caused by it itself continues, then the act constitutes a continuing wrong. In this connection, it is necessary to draw a distinction between the injury caused by the wrongful act and what may be described as the effect of the said injury."
40. In State of Bihar v. Deokaran Nenshi, , the repondents who were owners of a stone quarry in greater Bombay, were required to forward certain annual returns in respect of the preceding year, on or before January 21, in each year. Failure to forward the returns as required is punishable under section 66 of the Mines Act, 1952. On the failure of the respondents to furnish the returns by the due date, a complaint had been lodged against them in the court. One of the contentions raised by the respondents was that the complaint was barred by limitation under section 79 of the Mines Act, 1952, which provides that no court shall take congnizance of the offence under that Act unless the complaint was filed within six months of the date of the offence. The Explanation to section 79 provides that if the offence in question is a continuing offence, the period of limitation shall be computed with reference to every part of the time during which the said offence continued. The Supreme Court held that the default which occurred on January 21 of the relevant year, was complete when the owner failed to furnish the annual returns on that date. Since the regulation did not lay down that the owner would be guilty of an offence if he continued to work the mine without furnishing the returns, the offence was a non-continuing one and, therefore, the complaint was time barred. The Supreme Court observed (at page 909) :
"A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and recurs, there is the offence committed. the distinction between the two kinds of offences is between an act or omission which constitutes an offence once and for all and an act or omission which continues and, therefore, constitutes a fresh offence, there is thus the ingredient of continuance of the offence which is absent in the case of an offence which takes place when an act or omission is committed once and for all."
41. In the case of CWT v. Suresh Seth referred to earlier, the question was whether failure to file returns as required under section 14(1) of the Wealth-tax Act, 1957 (27 of 1957), was a continuing offence or not. Their Lordships observed (at p. 335) :
"A liability in law ordinarily arises out of an act of commission or an act of omission. When a person does an act which law prohibits him from doing it and attaches a penalty for doing it, he is stated to have committed an act of commission which amounts to a wrong in the eye of law. Similarly, when a person omits to do an act which is required by law to be performed by him and attaches a penalty for such omission, he is said to have committed an act of omission which is also a wrong in the eye of law. Ordinarily, a wrongful act or failure to perform an act required by law to be done becomes a completed act of commission or of omission, as the case may be, as soon as the wrongful act is committed in the former case and when the time prescribed by law to perform an act expires in the later case and the liability arising therefrom gets fastened as soon as the act of commission or of omission is completed. The extent of that liability is ordinarily measured according to the law in force at the time of such completion. In the case of acts amounting to crimes, the punishment to be imposed cannot be enhanced at all under our Constitution by any subsequent legislation by reason of article 20(1) of the Constitution which declares that no person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence. In other cases, however, even though the liability may be enhanced it can only be done by a subsequent law (of course subject to the Constitution) which either by express words or by necessary implication provides for such enhancement. In the instant case, the contention is that the wrong or the default in question has been altered into a continuing wrong or the default giving rise to a liability de die in diem, that is, from day to day. The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer continuously liable for penalty. A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however, not a continuing wrong or default. It is reasonable to take the view that the court should not be eager to hold that an act or omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the Legislature...."
42. Their Lordships proceeding further, explaining the true principle with illustrations, observed (at page 338) :
"The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a certain act the test to determine whether such a wrong is a continuing one do that act. Breach of a covenant to keep the premises in good repair, breach of a continuing guarantee, obstruction to a right of way, obstruction to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he is bound to maintain under law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well-being of workmen may be illustrations of continuing breaches or wrongs giving rise to civil or criminal liability, as the case may by, de die in diem."
43. The Supreme Court in Bhagirath Kanoria v. State of M P, adopting the reasoning in the three English decisions, the decisions of the Bombay High Court and the Patna High Court referred to in the decision, observed :
"The question whether a particular offence is a continuing offence must necessarily depend upon the language of the statute which creates that offence, the nature of the offence and, above all, the purpose which is intended to be achieved by constituting the particular act as an offence."
44. This court in W M I Cranes Ltd. v. G G Advani [1984] 1 Kant LC 462, referring to the law laid down by the Supreme Court in the State of Bihar v. Deokaran Nenshi, ; and CWT v. Suresh Seth held that wrongful withholding of possession of property by a director of a company after his termination, does not amount to a continuing offence ; that the director becomes a licensee and the remedy would not be by way of a criminal complaint, but by a suit for recovery of possession ; and that filing of a private complaint by a company against the director after a lapse of six months would be barred by time.
45. It was brought to the notice of the court by learned counsel for the company and A-2 and A-4 that this court in Criminal Revision Petition No. 549 of 1986 (disposed of on November 7, 1986), has held that the default in complying with section 220(1) of the Act is not a continuing default. It was submitted that this court in the said criminal revision petition affirmed the view taken by the trial court. The record and proceedings in the said matter were sent for an perused. The revision petition had been preferred against the order dated September 7, 1985, made by the Special Court for Economic Offences, Bangalore District, Bangalore, in C C No. 115 of 1985, under sections 397 and 482 of the Code, by the Registrar of Companies, Karnataka, dismissing the complaint on the ground that the complaint was barred by time, holding that the default in complying with section 220(1) of the Act was not a continuing offence. Holding that there was no error committed by the court below, this court rejected the revision petition.
46. I now refer to the three decisions of the Calcutta High Court referred to by learned counsel for the company and A-2 and A-4. In Ajit Kumar Sarkar v. Assistant Registrar of Companies [1979] 49 Comp Cas 909 ; 83 CHN 108, the question whether an offence under section 159 punishable under section 162 of the Act is a continuing offence or not came to be considered. It was held that the liability to furnish the return under section 159 continues until it is complied with and each day's failure is visited with penalty.
47. A Division Bench of the Calcutta High Court in National Cotton Mills v. Assistant Registrar of Companies [1984] 56 Comp Cas 222, dissented from the view taken in Ajit Kumar Sarkar's case [1979] 49 Comp Cas 909 (Cal) and held that on a careful review of the legal position it was difficult to agree with that view. Thus, in substance, the decision of the single judge in Ajit Sarkar's case [1979] 49 Comp Cas 909 (Cal) was overruled by the Division Bench.
48. In National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal) on a complaint filed by the Assistant Registrar of Companies alleging violation of the provisions of section 159 of the Act, viz., failure to file the return within sixty days from the date on which the annual general meeting was held, the Jurisdictional Magistrate prosecuted the petitioner-company and its officers. In the revision filed by the petitioners in the High Court for quashing the proceedings against hem on the grounds, (i) that the Magistrate had erred in law in taking cognizance of the cases without examining the complainant or his witnesses. (ii) that since the offence was not a continuing one, cognizance of such an offence could not be taken by the Magistrate after the expiry of the period of the period of limitation provided in section 468 of the Code, it was held that the offence alleged was not a continuing one and the cognizance taken after expiry of the period of limitation provided in section 468 of the Code was not proper and valid.
49. The reasoning which persuaded the Division Bench of the Calcutta High Court to take this view is to be found in the penultimate paragraph of the judgment (at p. 227) :
"On a careful review of the legal position, it is difficult for us to agree with the view expressed by the learned single judge in the above case. As pointed out by the Supreme Court, in order to constitute a continuing offence, the offence must arise `out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or compiled with'. Section 159 of the Companies Act does not impose any liability the failure to furnish the return in the manner or within the time stipulated. Such an offence is committed once and for all as and when one commits the default. That provision does not contemplate that the obligation to submit such returns continues from day-to-day until the return is actually submitted nor does it provide that continuance of business without filing of such return is prohibited so that non-fulfillment of a continuing obligation or continuing offence. When section 162 of the Companies Act prescribed the penalty of fine `which may extend to fifty rupees for every day during which the default continues', it merely prescribed the measure of penalty-such a prescription being made with the object of enforcing strict compliance with the requirement of section 159 under the threat of enhanced penalty and getting relief from such penalty on enhancing scale by early submission of return even after the default. That does not render the initial default a continuing one. It cannot be said that the offence is repeated or committed from day to day after the initial default. It is only where the offence is committed from day to day or repeated from day to day that it can be called a continuing offence. There being no express provision in section 162 in that behalf as there are in sections 234, 598, etc., of the Companies Act, it will not be proper to hold that the offence under section 162 is a continuing offence. When the statute itself provides for continuance of offence irrespective of initial default in some cases but does not make similar provisions in respect of some other offences, it would not be correct to say that the latter class of cases also would be continuing offences."
51. The decision in National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal) was followed by a single judge of the same High Court in Central Manbhum Coal Co. P. Ltd. v. Assistant Registrar of Companies [1986] 59 Comp Cas 176. In the said case, the default involved was omission to comply with the provisions contained in section 220(1) of the Act.
52. As against this, a decision of the Kerala High Court was cited before the court in Sudarsan Chits (India) Ltd. v. Registrar of Companies, [1986] 59 Comp Cas 261. In that case, the contravention involved was the same as the one in the instant case. The learned single judge of the Kerala High Court, referring to the decision in Ajit Kumar Sarkar's case [1979] 49 Comp Cas 709 (Cal) held that the failure to file the balance- sheet and the profit and loss account of the company under section 220 of the Act with the Registrar of Companies is a continuing offence under section 162 of the Act. The learned judge held as under (at page 266) :
"It appears to me on a comparison of the provisions of the various Acts dealt with in these decisions that there is a vital difference between the relevant provisions of the Companies Act and the other Acts. If this offence under the Companies Act is not a continuing offence but an offence which takes place once and for all, then the provision for punishment would have been imprisonment or fine up to a particular limit irrespective of other considerations. The punishment provided in section 162 is not imprisonment or fine up to a limit but a fine which may extend to Rs. 50 for every day during which the default continues. Such a provision is absent in the statues dealt with in most of the above decisions. Section 162 makes it clear that the default or offence is not something which takes place once and for all but is one which continues. That is why, instead of prescribing a fine up to a limit as punishment as in certain other statutes, the Legislature prescribed punishment of fine for every day during which the default continues. The idea implicit in this provision is that the offence is a continuing offence notwithstanding the fact that for the performance of the particular act, a time limit has been prescribed. This has to be taken in the light of the provisions in section 611(2) of the Act which enables filing of documents with the Registrar after the time prescribed on payment of additional fees as prescribed therein. Section 629A of the Act also makes a distinction between the offences of the two types. That is a residuary provision prescribing punishment. The punishment prescribed is a fine which may extend to Rs. 500 and where the contravention is a continuing one, with a further fine which may extend to Rs. 50 for every day after the first during which the contravention continues. Thus, it can be seen that the scheme of the provisions is to constitute an offence punishable under section 162 of the Act as a continuing offence. In this view, I have to hold that section 472 of the Code applied to the instant case and it has not been shown that the complaints are barred by limitation."
53. Mr. Shivappa, learned Senior Standing Counsel for the Central Government, submitted that the Supreme Court has admitted the special leave petition for leave to prefer an appeal against the Division Bench decision of the Calcutta High Court in National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal) and has granted stay. He also submitted that the special leave petition to prefer an appeal against the decision of the Kerala High Court in Sudarsan Chits' case [1986] 59 Comp Cas 261 has been rejected by the Supreme Court. He sought time either to submit certified copies of the orders passed by the Supreme Court or to make a statement as to whether the special leave petition to prefer an appeal against the decision of the Kerala High Court was dismissed in limine without a speaking order. Today he submits that the special leave petition has been dismissed in limine. In Indian Oil Corporation Ltd. v. State of Bihar [1987] 167 ITR 897 ; AIR 1986 SC 1780, it has been held by the Supreme Court that the dismissal of a special leave petition in limine by a non-speaking order does not justify any inference that, by necessary implication, the contentions raised in the special leave petition on the merits of the case have been rejected by the Supreme court and that neither on the principle of res judicata nor on any principle of public policy analogous thereto would the order of the Supreme Court dismissing the special leave petition operate to bar the trial of identical issues in a separate proceeding before the High Court merely on the basis of an uncertain assumption that the issues must have been decided by the Supreme Court at least by implication.
54. Since the special leave petition to appeal against the decision of the Kerala High Court has been rejected by the Supreme Court in limine, 1 agree with the contention urged on behalf of the company and A-2 and A-4 that it cannot be said that the Supreme Court has affirmed the view taken by the Kerala High Court.
55. We have now to consider whether the contravention of section 220(1) of the Act is a continuing contravention attracting section 472 of the Code or not.
56. The determination whether a given crime is a continuous offence is a matter of statutory interpretation. But the judicial consensus is that the doctrine of continuing offences should be applied only in limited circumstances, since the doctrine effectively extends the statute of limitations beyond its stated term. A particular contravention or offence should not be deemed to be a continuous one unless the explicit language of the substantive criminal statute compels such a conclusion. The Supreme Court in CWT v. Suresh Seth [1981] 129 ITR 328 referred to earlier, has held that the court should not be eager to hold that an actor omission is a continuing wrong or default unless there are words in the statute concerned which make out that such was the intention of the Legislature. To the same effect is the dictum laid down by the Supreme Court in Bhagirath Kanoria's case, referred to earlier.
57. The balance-sheet of the company is a document and not an account in the strict sense. It is merely a statement of the company's assets and liabilities as at the financial year. It describes a state of affairs as at a particular point. The profit and loss account presents the figures for a period of activity (for a particular financial year) disigned to show the resulting profit or loss. The fundamental principle and the philosophy behind the Companies Act have been that of a disclosure. Publicity is the object. Disclosure is the principal safeguard on which the Companies Act pins its faith
58. This disclosure can be secured, as observed in Gower's Principles of Modern Company Law, fourth edition, by L.C.B. Gower, page 497, in four ways: (a) by official notification in the Gazette; (b) by provisions for registration at the companies' registry; (c) by complusory maintenance of various registers and the like by the company; and (d) by compulsory disclosure of the financial position in the company's published accounts and by attempting to ensure their accuracy through a professional audit.
59. It is with the object of securing compliance with this fundamental principle and of securing obedience to the principal safeguard that section 220(1) has been enacted.
60. It is relevant to note the provisions contained in section 614A of the Act. It reads:
"6614A(1) Any court trying an offence for a default in compliance with any provision of this Act which requires a company or its officers to file or register with, or deliver or send to, the Registrar, any return, account or other document, may at the time of sentencing, acquitting or discharging the accused, direct by order, if it thinks fit to do so, any officer or other employee of the company to file or register with, deliver or send to, the Registrar on payment of the fee including the additional fee required to be paid under section 611, such return, account or other document within such time as may be specified in the order.
(2) Any officer or other employee of the company who fails to company with imprisonment for a term which may extend to six months, or with fine or with both".
61. Reference may also be made in this regard to section 611(2) of the Act.
62. It is pursuant to this power that the learned trial court has directed the company and A-2to A-4 to file the copies of the balance-sheet and the profit and loss account within three months form November 5, 1984.
63. This then is the provision in the Act which seeks to ensure compliance with the provisions of the Act contravened, to achieve the fundamental principle and secure compliance with the principal safeguard.
64. It was urged on behalf of the respondent that since section 162(1) of the Act imposes penalty at the rate of Rs. 50 for every day during which the default continues, it must be held that the default in complying with the provisions in section 220(1) of the Act is a continuing default.
65. Having examined the language of sections 220(1) and 162(1) of the Act, the nature of the default and the purpose for which the default alleged against the company and A-2 to A-4, for which they were tried, is a continuing default attracting section 472 of the Code.
66. The "reasons are: A continuing cause of action in civil law is a cause of action which arises form the repetition of acts or omissions of the same kind as that for which the action was brought. Similarly, it is the very essence of a continuing wrong that it is an act which creates a continuing source of injury and renders the doer of the act responsible and liable for the continuance of the injury or wrong. If the wrongful act or omission causes an injury which is complete, there is no continuing wrong even though the damage resulting form the wrong may continue.
67. It cannot be said that the failure to submit the copies of the balance sheet and the profit and loss account as provided in section 220(1) of the Act would amount to repetition of the omission even after the omission stands committed on the due date to submit copies. It is difficult to hold that this omission continues after the last date fixed for the submission of the copies. The wrong resulting due to omission (the Legislature has made the effective provision) is minimised by the power to issue necessary and proper directions.
68. Section 220(1) of the Act by itself does not impose any liability the contraventions of which is susceptible of continuance. The default would be complete with a failure to furnish the copies of the balance-sheet and profit and loss account in the manner and within the time stated therein, Such an offence is committed once and for all as and when a person/s commit/s the default. A careful reading of section 220(1) of the Act would show that it neither envisages nor contemplates that the obligation to submitted. No provision in the Act was brought to my notice which would prohibit a company form continuing its business without filing the copies. It such a provision were to exist in the Act, then one could have advanced an argument that such a provision would indicted that filing of copies is a continuous obligation.
69. The Supreme Court in CWT v. Suresh Seth [1981] 12k9 ITR 328 referred to earlier, has laid down that a wrong or default which is complete, but whose effect may continue to be felt. even after its completion is, however, not a continuing wrong or default. Of course, the penalty prescribed under section 162 of the 162 of the Act is the penalty of fine which may extend to fifty rupees for every day during which the default continues. If a section prescribes merely the measure of a penalty, as held by the Calcutta High Court in National Cotton Mills' case [1984] 56 Comp Cas 222 (Cal). it appears that this prescription is made with the object of enforcing strict compliance with the requirement of section 220(1) of the Act under the threat of enhanced penalty and getting relief form such penalty on enhancing scale by early submission of copies even after the default.
70. However, that does not make or render the initial default a continuing one. It is impossible to hold that the default is repeated form day to day after the initial default.
71. There is no express provision in section 162, the penal provision, as we find in sections 234(4)(a) and 598 of the Act. In the absence of such a provision, it would be changing the language of section 162 to infer that the offence punishable under it is a continuing offence.
72. Having carefully examined the language of section 220(1) which creates an obligation and the purpose which is intended to be achieved by section 220(1) is not a continuing offence. I respectfully agree with the reasons given by the Calcutta High Court in National Cotton Mills' case [1984] 56 Comp Cas 222.
73. The principal reason of the Kerala High Court in taking the view that the offence under section 220(3) of the Act is a continuing offence is the punishment provided in section 162. It is reasoned that the punishment provided is not imprisonment or fine up to a limit but fine which may extend to Rs. 50 for every day during which the default continues and that this provision makes it clear that the which the default continues and that which takes place and for all but is one which continues. I have adverted earlier to the penalty under section 162 and have held that the measure of penalty appears to be made with the object of enforcing strict compliance with the provision contained in section 220(1) of the Act under the threat of enhanced penalty. That is the reasoning of the Division Bench the Calcutta High Court also in National Cotton Mills case[1984] 56 Comp Cas 222.
74. For the reasons aforesaid, I hold that the contravention of section 22k0(1) made punishable under section 220(3) of the Act is not a continuing contravention. In view of this conclusion of mine on question No.1, I do not feel it necessary to pronounce in this matter whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Act. The complaint filed on January 25, 1982, was barred by time. There was al limitation on the learned Presiding Officer form taking cognizance of the default taken by his in view of the bar of limitation under section 468 of the Code was bad. the consequent trail on the basis of such illegal and invalid act stands vitiated.
75. I, therefore, allow the criminal revision petition and set aside the order of convictions and sentences passed against the company and A-2 to A-4, The company and A-2 to A-4 are acquitted of the default alleged against them in respect of which they have been held guilty and convicted.