Karnataka High Court
Icici Ltd., Reliance Petroleum Ltd. And ... vs H.V. Jayaram on 28 July, 1998
Equivalent citations: [1998]94COMPCAS425(KAR)
Author: M.P. Chinnappa
Bench: M.P. Chinnappa
JUDGMENT M.P. Chinnappa, J.
1. The brief facts leading to these cases are that the respondent/complainant in all these cases lodged complaints before the learned Special Court for Economic Offences in Karnataka, at Bangalore, on the allegation that the petitioner companies had violated certain provisions of law in not sending the share certificates duly transferred in his name, failed to send the balance-sheet and memorandum of articles, etc. and thereby committed offences punishable under Sections 39(2), 113(2) and 219(4) of the Companies Act, 1956 (for short "the Act"). The learned magistrate has taken cognizance of the offences in all the ca.ses and directed to issue summons to the petitioners herein. In some cases, the petitioners approached the court and made applications under Section 245 of the Criminal Procedure Code to discharge the accused persons on the ground that the said court has no territorial jurisdiction to try the cases as the registered offices of those companies are situated outside the Karnataka State. The learned magistrate after hearing both the parties rejected the application holding that the court had territorial jurisdiction to try the offences. As against thai order criminal petitions are filed. In other cases the petitioners have not approached the court below. On the other hand, they questioned the order passed by the learned court issuing summons to them after taking cognizance of the offences directly in this court,
2. The learned advocates appearing for the petitioner companies have specifically argued that the Special Court for Economic Offences at Bangalore has no territorial jurisdiction and, therefore, directing issue of notices to the petitioners herein after taking cognizance on the complaint filed by the respondent is contrary to the provisions of law. Since the court lacks territorial jurisdiction, the entire proceedings will have to be quashed on the ground that the offence is said to have been committed by the company only where the registered office is located. Admittedly, the registered offices of the petitioner-companies.are not located in Karnataka, much less in Bangalore. On the other hand, the registered office is either at Bombay or Gujarat as per the addresses shown above. They further contended that cognizance taken by the court which is not vested with the power is illegal and, therefore, all these petitions deserve to be allowed.
3. Per contra, the respondent who is a shareholder and also a practising advocate has strenuously argued that the Special Court has jurisdiction as the respondent is a permanent resident of Bangalore and the letters requesting the company to transfer the shares and also to send the memorandum of articles, balance-sheets, etc., were sent from Bangalore, to the addressee at Bombay and Gujarat where the registered office of the companies is situated have not been complied with, within the stipulated time and thereby the offences have been committed. It is not the posting of the letter or the transfer of shares, etc., which will decide the jurisdiction. On the other hand, where those articles were delivered is the place which determines the territorial jurisdiction of the court. As the respondent received the delivery in Bangalore, the Special Court at Bangalore has to try the case. On these grounds, the arguments of learned counsel for the petitioners are liable to be rejected.
4. It may be mentioned that learned counsel for the petitioners also raised the question regarding limitation, Further, they contended there is absence of mens rea in not complying with the request of the respondent within the stipulated time and, therefore, no offence is committed. However, these two questions depend on the finding of this court on the territorial jurisdiction of the court. If the court lacks territorial jurisdiction, then the orders will have to be set aside and appropriate orders will have to be passed.
5. In view of the arguments the question that arises for consideration is whether the Special Court for Economic Offences having jurisdiction over the Karnataka State established in Bangalore has got territorial jurisdiction to try the cases against the petitioners whose registered offices are admittedly situated beyond the territory of Karnataka, notwithstanding the fact that the complainant is a permanent resident of Bangalore. Since a common question is raised in all these cases after having heard both sides, this order is passed. Retain a copy of this order in each file. In support of his argument, learned counsel for the petitioners placed reliance on a decision in Hanuman Prasad Gupta v. Hiralal , wherein their Lordships have held (headnote of AIR) :
"A dividend once declared is a debt payable by the company to its registered shareholders.
Once a dividend warrant is posted to the registered address of the shareholder, dividend is deemed to have been paid within the meaning of Section 205. The section makes the failure to post within the prescribed period and not the non-receipt of the warrant by the shareholder an offence. Prima facie both the obligation to post the dividend warrant and the failure to satisfy that obligation would occur at the place where the obligation is to be performed and that would be the registered office of the company and not the address at which the warrant is to be posted. Payment in cash or the posting of a cheque or a warrant are equivalent and the obligation to pay is discharged when either of them is done.
Where the power to pay dividend by posting a cheque or a warrant as provided in Section 205(5) is incorporated in the articles of association of the company, it constitutes a contract between a company and its members. Hickman v. Kent or Romney Marsh Sheep-Breeders' Association [1915] 1 Ch 881 and Beattie v. Beattie [1938] Ch. 708 Ref.
If under a contract, a promisee prescribes the manner in which the promise is to be performed, the promisor can perform the promise in the manner so prescribed. (See Section 50 of the Contract Act.) Once a mode of payment of dividend is agreed to, namely, by posting a cheque or a warrant, the place where such posting is to be cione is the place of performance and also the place of payment, as such performance in the manner agreed to is equivalent to payment and results in the discharge of the obligation.
The common law rule that the debtor must seek the creditor has no application. Thairlwall v. Great Northern Railway Co. [1910] 2 KB 509, Norman v. Ricketts [1886] 3 TLR 182 Rel. on.
When the company posts the dividend warrant to the registered address of a shareholder, that being done at the shareholder's request, the post office becomes the agent of the shareholder, and the loss of a dividend warrant during transit thereafter is the risk of the shareholder.
Since the obligation to post the warrant arose at the registered office of the company, failure to discharge that obligation also arose at the registered office of the company, Therefore, the alleged offence must be held to have taken place at the place where the company's registered office is situate and not where the dividend warrant, when posted, would be received. Indore Malwa United Mills Ltd. v. CIT , Regina v. James Milner [1846] 175 ER 122, Gunananda Dhone v. Lala Santi Prakash Nandy, AIR 1925 Cal 613, Ref. : Hanuman Pershad Gupta v. Him Lal , reversed."
6. This decision was cited before the court below and the court has held that the decision came to be rendered while dealing with Section 205(5) of the Act wherein the learned trial court differentiated holding that the said case before their Lordships was under Section 205 of the Act and their Lordships observed that once the dividend warrant was posted to the registered address of the shareholder, the dividend is deemed to have been paid. According to the court below, under Section 205(5) of the Act, "personal delivery" is conspicuous in its absence in this section but under Section 53 which governs the mode of procedure in respect of transfer of shares seeking memorandum of articles, etc., personal delivery is appearing in that section. Therefore, the learned court has held that the judgment of the Supreme Court is not applicable to this case, wherein the learned court has held as follows :
"Hence on the basis of power of the company to pay the dividend by posting a cheque or a warrant provided in Section 205(5) the Hon'ble Supreme Court held that the place of commission of offence was at the place of posting dividend warrant. The mode of delivery referred to under Section 113 is mentioned in Section 53 namely personal service or service by post. By virtue of Section 205(5) the word 'paid in cash' was equated to 'the word posting a cheque or a warrant'. But in Section 113, the words deliver is equated to personal service or service by post, but the word personal service is not equated to service by post as is done under Section 205(5). Hence, the offence under Section 113 can also be committed by not personally serving the share certificate. If really personal service was not contemplated and service only by post was contemplated, there was no necessity to use the words 'either personally' in Section 53 of the Act. Hence, it cannot be said that Section 113 and Section 53 are similar to Sections 207 and 205. On this ground also the decision of the Hon'ble Supreme Court relied on by the accused is not applicable to the facts of the case. Hence, from the above discussion, I hold that this court has jurisdiction to try this case and I answer the above point No. 1 in the negative and I proceed to pass the following order.
The prayer of the accused for dismissal of the complaint on the ground that this court has no jurisdiction to try this case is rejected."
7. In the case before their Lordships the question of the posting of the dividend warrant as contemplated under Section 205(5) of the Act was involved. Hut the principle enunciated by their Lordships is squarely applicable to all the cases where the company is expected to comply with certain provisions of law. It is no doubt true that the respondent has not questioned the non-sending of the dividend warrant to him in these cases. But his complaint in these cases is in regard to not transferring the shares within the stipulated time, not sending the memorandum of articles, the balance-sheet, etc. In the case before their Lordships the complaint was filed at Meerut where the addressee was residing but the registered office was situated in Delhi. Under those circumstances, the Supreme Court has held that the offence under Section 205 of the Act would occur at the place where the failure to discharge that obligation arises, namely, the failure to post the dividend warrant within 42 days. Therefore, the venue of the offence would be Delhi and not Meerut. It is further observed that 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 nf 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. Being of that view, their Lordships have held as quoted above.
8. In a case of this nature, the moment there is a failure on the part of the company to comply with the request of the shareholders within the stipulated time, the offence is deemed to have been committed. The said offence is committed at the registered office of the company. It is a different question if the company posts or sends the memorandum or articles or balance sheet or transfer certificate within the stipulated time, and if an addressee does not receive it, it may not amount to an offence. Under these cases, admittedly the request of the complainant was not carried out within the prescribed time. Therefore, the offences were committed and those offences were committed in the registered offices which are situated outside the territorial jurisdiction of Karnataka and particularly at the registered office of the company. Therefore, the place where the offence is committed is within the jurisdiction of such court where the registered office is situated (and it) has territorial jurisdiction to try the offence.
9. The respondent further has drawn my attention to the decision in American Pipe Co. v. State of V. P., AIR 1983 Cal 186, wherein it is held that jurisdiction of the court in a case of acceptance of contract by correspondence would be the place where the acceptance had taken place. In this case the question of acceptance does not arise. On the other hand, only a delivery of articles required by the shareholder as stated above is the question involved. The Delhi High Court in J. K. Synthetics Ltd. v. ITO has held that in a case of prosecution for the offences of supplying false information to the Income-tax Department, the offence is said to have been committed in the place Where the false information is furnished. In that case, a false estimate of advance tax was submitted at Kanpur and the criminal proceedings were initiated at Delhi. The court has held that the court within whose jurisdiction the false estimate was submitted only had the jurisdiction and the offence was not dependent on assessment or penalty proceedings--the court at Kanpur alone had jurisdiction and not the Delhi court.
10. The Patna High Court in Upendra Kumar Joshi v. Manik Lal Chatterjee [1982] 52 Comp Cas 177 held (headnote) :
"Since Section 207 of the Companies Act, 1956, makes the failure by the company to post the dividend warrant to, and not the non-receipt thereof by, the shareholder an offence, prima facie, both the obligations to post the warrant and the failure to satisfy it would occur at the place where the obligation is to be performed, and, as that obligation arises at the registered office of the company and not at the address at which the warrant is to be delivered, the alleged offence must be held to have taken place at the place where the company's registered office was situate and hence the court at that place and not the court where the dividend was to be received has jurisdiction to try the offence.
Where, therefore, the complainant, a shareholder of the accused-company, residing at Bhagalpur filed a complaint under Sections 207 and 630 against the company in the Bhagalpur court for failure to pay a dividend of Rs. 30, due to him as per a declaration in August, 1975, of a dividend for the company's year ending March, 1975, within forty-two days after the declaration under Section 207, and the magistrate dismissed the complaint, the High Court, on a revision application :
Held, dismissing the application, that the alleged offence must be held to have taken place at Calcutta where the company's registered office was situate."
11. Though it is a case in regard to posting a dividend warrant, it is clear from this decision also that the offence has already been committed at the registered office before the same was sent, in other words, the company has failed to perform its obligation to send the required particulars to the shareholder which has made the offence punishable under the section. Therefore, under those circumstances, the offence was committed at the place of the registered office.
12. Their Lordships of the Supreme Court in Morgan Stanley Mutual Fund v. Kartick Das , while considering Sections 19 and 20 and Order 39, Rules 1, 3 and 5, of the Code of Civil Procedure, 1908, and Article 226 of the Constitution of India have held that venue restrictions are needed against adventurism by disgruntled litigants seeking injunctions, damages, etc., against companies by filing suits far away from their registered offices-suits should normally be filed where the registered office is situate and also must be filed well in time to enable issue of notice to the company before passing any interim order. Such facts must be considered before issuing ex parte injunctions. It is also held that as far as India is concerned the residence of the company is where the registered office is located. Normally, a case should be filed only where the registered office of the company is situate. There is an increasing tendency on the part of the litigants to indulge in speculative and vexatious litigation and adventurism which the fora seem readily to oblige. Such a tendency should be curbed. Though it is pertaining to a civil case, yet the object and purpose, observed their Lordships, can also be made applicable to criminal cases. In the light of this judgment and also the finding of the court below learned counsel for the petitioner has drawn my attention to Section 53 of the Act which reads :
"(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 or if he has no registered address in India to the address, if any, within India supplied, by him to the company for the giving of notice to him.
(2) Where a document is sent by post,--
service thereof shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the documents, 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 acknowledgment 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 until it is sent in the manner intimated by the member ; and"
13. Other clauses are not necessary, hence omitted.
14. From a reading of this section, it is clear that two modes are prescribed for serving the document. They are either personally or by post. Personally is possible only if the addressee is residing within the local area where he can collect it directly from the office or the company can send somebody and serve the same on the address. If it is not possible the other mode is to send it by post. In this case admittedly the documents were sent to the respondent by post as requested by him and he received the same at Bangalore. As indicated earlier, the documents were posted after the due date. The offence is thus deemed to have been committed. Therefore, the cause of action arose only where the head office is situated. It is also necessary to refer to the commentary on service by post in Ramaiah's Guide to the Companies Act, fourteenth edition, at page 449, which reads :
"It is not stated at which post office or box the letter has to be po'sted. Presumably it has to be posted at or near the place of the registered office of the company. The provisions in the section will not be satisfied if the posting is made deliberately at any far off place due to delay in the delivery."
15. In view of this, and taking into consideration the fact that if thousands of persons holding shares and residing in different parts of this vast country, were to file complaints in different courts where they are residing, against the company and directors for the offences of not sending the dividend warrants, transfer of share certificates or articles of association as requested by the members and other offences as contemplated in the Act, the representatives of the company and the directors who would be accused before the court will have to attend the court in far off places spending money as well as time which will consequently affect their valuable service to the company. It may not be also possible for them to be present in various courts simultaneously, resulting in issuance of warrants by the courts leading to disastrous consequences besides leading to inconveniences and hardships to the directors of the company. Taking into consideration all these facts their Lordships of the Supreme Court also held that the cause of action arises for the shareholders to file the complaint before the court having jurisdiction over the place where the registered office is located. Learned counsel for the petitioners further submitted that the respondent himself has lodged a large number of cases against these companies for various offences in the court below. This fact is not denied by the respondent. For the foregoing reasons, I hold that the Special Court for Economic Offences having jurisdiction aver Karnataka State in Bangalore, does not have territorial jurisdiction to try the cases against the companies and its directors where the registered office is situated beyond the territory of the Karnataka State, notwithstanding the fact that the complainant is a permanent resident of Karnataka State. On the other hand, the court/courts within whose jurisdiction the registered office of the company is situated, will have territorial jurisdiction to try the case falling under the Companies Act.
16. Learned counsel appearing for the petitioners also contended that these petitions are barred by time and there was no mens rea for committing these offences on the part of the petitioners, etc. These questions need not be gone into when this court has held hereinabove that the court below has no territorial jurisdiction to try the offences. Therefore, this question is left open for the court which has territorial jurisdiction to try the cases and decide.
17. Having come to this conclusion, the next question that arises for consideration is as to whether the complaints are to be dismissed. It is clearly stipulated under Section 201 of the Criminal Procedure Code, 1973, which reads :
"If the complaint is made to a magistrate who is not competent to take cognizance of the offence, he shall,--
(a) if the complaint is in writing, return it for presentation to the proper court with an endorsement to that effect ;
(b) if the complaint is not in writing, direct the complainant to the proper court."
18. In view of this the magistrate will have to return the complaints to the complainant. In the result, therefore, I proceed to pass the following :
ORDER
19. All these petitions are allowed and the impugned orders are set aside. The learned magistrate is directed to return all the complaints to the complainant/respondent with necessary endorsements as provided under Section 201(1) of the Criminal Procedure Code, 1973, for presentation to the proper court.