Karnataka High Court
Chandra Spinning And Weaving Mills Pvt. ... vs Registrar Of Companies on 14 August, 1987
Equivalent citations: [1990]69COMPCAS117(KAR), ILR1988KAR149
ORDER 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 the 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/ 82.
2 Chandra Spinning and Weaving Mills Private Limited, a Company incorporated under the Companies Act, 1913, having its Registered Office at 5th Main Road, Chamarajpet, Bangalore-18, represented by its Director Sri M. Krishnamoorthy (Petitioner No. 1), Sri 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 Private Limited, 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 the learned Counsel for the Company, Sri C.K. Narayana Rao and Sri S.S. Naganand, the learned Counsel for A-2 and A-4 and Sri C. Shivappa, the 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. 79/82 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 share-holders.
Sri D.R. Madhavakrishnaiah passed away in the year 1978.
During the financial year of the Company 1979-80, i.e., from 1-7-1979 to 30-6-1980, A-2, A-3 and A-4 were its Directors.
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 Profit and Loss Account for the financial year ended at 30th June, 1980 to the Registrar of Companies in Karnataka within 30 days from the date when the Balance Sheet and 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 held, i.e., on 31-12-1980.
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 31-12-1980 and that it was required to file three copies of the Balance Sheet and Profit and Loss Account before the Registrar of Companies on or before 30th January, 1981.
A-2, A-3 and A-4 were the Directors of the Company during the relevant financial 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.
It is with these allegations, the respondent set the criminal law in motion against the Company and A-2 to A-4 by the complaint filed on 25-1-1982.
7. 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 offence alleged.
8. The case was tried by adopting the procedure prescribed for the trial of summons case. Accusation was framed against the Company and A-2 to A-4 on 13-10-1982. 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 the evidence was recorded.
9. 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 prayer.
10. The respondent, to substantiate the offence alleged, adduced oral as well as documentary evidence. Gopalakrishna, working in the Office of the respondent and incharge of the Files relating to the Company, gave evidence as P.W-1. The documentary evidence, admitted for the respondent in the Trial Court, consists of the following documents:
Ex.P-1 is the copy of the Incorporation Certificate issued in favour of the Company by the Registrar of the Joint Stock Companies in Mysore, on 5-8-1954. Ex.P-2 is the Annual Return of the Company for the year ending 30th December, 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. Ex.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 upto 30-12-1980 required to be filed on or before 1-3-1981. The Balance Sheet and the Profit and Loss Account for the financial year ended at 30-6-1980 having not been laid in the Annual General Meeting held or to be held on or before 30-12-1980 and the non-submission of the copies of the Balance Sheet and Profit and Loss Account, and calling upon them to give 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 the directions stated in the notice, it would be liable for prosecution. Exs.P-4, P-5, P-6 and P-7 are the Postal Acknowledgment Cards showing the receipt of the copies of notice by the Company and A-2, A-3 and A-4. Ex.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 Ex.P-3 It is dated 19-11-1981. Ex.P-9 is the letter by the Registrar of Companies, dated 4-12-1981, to the Company informing that the Department was not concerned with the internal disputes and declining the request for extension of time to submit the Balance Sheet and the Profit and Loss Account and further informing that no extension in the matter would be granted. The Company was also informed under Ex.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 Ex.P-9 to the Company and A-2 to A-4. The Company and A-2 and A-4 received the copies under Exs.P-10, P-12 and P-11 respectively. A-3 refused to receive the copy of Ex.P-9. Ex.P-13 is the cover containing the unserved copy of Ex.P-9 with Acknowledgment Card attached to it Ex.P-14 is the copy of the letter addressed by the respondent to A-3 on 26-12-1981 incorporating in it the substance of the contents stated in Ex.P-9. Ex.P-14 was sent to A-3 under Certificate of Posting. Ex.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.
11. The Company, A-2 and A-4, during their statutory examination, referred to the application filed by the under Section 633(1) of the Act whereas A-3 stated that he would file his statement separately.
12. 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.
13. A-3 entered the witness-box and gave evidence as D.W-1. It was in his evidence that Ex.P-15 came to be marked. A-2 went to the witness-box and gave evidence in support of his defence. In all 13 documents were admitted in evidence for A-2 and A-4 and were marked as Exs.D-1 to D-13 to which I would advert in the course of this order if and when necessary.
14. 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 (NOW MAHARASHTRA) v. BANDHAN RAM BHANDANI AND OTHERS, he held that A-2 to A-4 knowingly and wilfully failed to file the copies of the Balance Sheet and Profit and Loss Account of the Company as at 31 -12-1980 on or before 30-1 -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.
15. 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.
16. The learned Presiding Officer, while convicting and sentencing the Company and A-2 to A-4 as aforesaid, directed them to file the Annual Return within three months from 5-11-1984. It appears, the learned Presiding Officer while giving the direction, instead of stating the copies of Balance Sheet and Profit and Loss Account, stated 'the Annual Return'.
17. It is this judgment of conviction and sentence that is assailed in this Revision Petition.
18. On the 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?
19. 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:
20. The other relevant provision, for the present purpose, is Section 220(3) of the Act. It reads thus:
21. 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 a default in complying with the provisions of Sections 159, 160 or 161.
22. 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.
23. 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 Section 159, 160, or 161, the company, and every officer of the company who is in default shall be punishable with fine which may exend to fifty rupees for every day during which the default continues."
24. 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 would 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 requirements of Section 220(1) of the Act is punishable only with fine.
25. 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 favour 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 detterent 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 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 endeavour to ensure the detection and punishment of the crime quickly.
26. 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.
27. The question as to whether the prosecution launched against the Company and A-2 to A-4 on 25-1-1982 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 25-1-1982 beyond the period prescribed would be barred by limitation. In that event, taking cognizance of the offence would be illegal and the trial proceeded 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.
28. Before adverting to the law declared by the Supreme Court on the point, it is opposite to refer to the statement in the American Jurisprudence, Second Edition, Vol.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 offenses are complete upon the commission of certain acts, whereas other so-called continuing offenses are not. Typically, the statute of limitations begins to run as soon as every element of the crime occurs and the offense is complete. For a continuing offense, however, the crime is not exhausted for purposes of the statute of limitations as long as the proscribed 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 offense is a matter of statutory intrepretation. It has been held that the doctrine of continuing offenses should be applied only in limited circumstances, since the doctrine effectively extends the statute of limitations beyond its stated term. A particular offense 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,"
29. 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.
30. Explaining the expression 'a continuing cause of action'. Lord Lindley in Hole v. Chard Union, (1894) 1 Ch 293 observed :
"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."
In the same decision, Lord Justice A.L. Smith, who agreed with the view of Lord Lindley, said :
"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 became 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."
31. The statement of law made by Lord Lindley and Lord Justice A.L. Smith in Hole's case, (1894) 1 Ch 293 has received the approval by the Supreme Court in COMMISSIONER OF WEALTH-TAX, AMRITSAR v. SURESH SETH, .
32. 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 :
"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. Chhotalal Amarchand", AIR 1937 Bombay 1 (FB) the expression "continuing offence" is not a very happy expression. It assumes, says the learned Chief Justice-
33. In BALAKRISHNA SAVALRAM PUJARI v. SHREE DNYANESHWAR MAHARAJ SANSTHAN, His Lordship Justice Gajendragadkar (as he then was), dealing with the essence of a continuing wrong, observed:
"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 wrongful 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."
34. In STATE OF BIHAR v. DEOKARAN NENSHI, the respondents who were owners of a stone quarry in the City of 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 cognizance of the offence under that Act unless the complaint was filed within six months of the date of 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 is continued. The Supreme Court held that the default which occurred on January 2 1 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 returs, the offence was non-continuing one and, therefore, the complaint was time barred. The Supreme Court observed :
"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 involved 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 ommission which continues and, therefore, constitutes a fresh offence every time or occasion on which it continues. In the case of a continuing 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."
35. In the case of Commissioner of Wealth-Tax, referred to earlier, the question was whether failure to file returns as required under Section 14(1) of the Wealth-Tax Act (27 of 1957) was a continuing offence or not. Their Lordships observed :
"11. 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 doingit, he is stated to have committed an act of commission which amounts to a wrong in the ye 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 ommission he is said to have comitted 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 commision or of omission, as the case may be, as soon as the arongful act is committed in the former case and when the time prescribed by law to perform an act expires in the latter case and the liability a rising 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 that 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 sequebt 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 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 wrong doer 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 leqislature"
Their Lordships proceeding further, explaining the true principle with illustrations, observed :
"17. 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 is whether the duty in question is one which requires him to continue to 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 be, de die in diem,"
36. The Supreme Court in BHAGIRATH KANORIA AND OTHERS 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 acts as an offence.
37. This Court in W.M.I.CRANES LTD., v. G.G. ADVANI AND ANOTHER, 1984(1) KLC 462 referring to the law laid down by the Supreme Court in the State of Bihar v. Deokaran, and the Wealth-Tax Commissioner v. Suresh Seth, held that wrongful withholding of possession of property by a Director of Company after his termination, does not amount to continuing offence; that the Director becomes a licensee and the remedy would not be a criminal complaint, but a suit for recovery of possession ; and that filing of a private complaint by a company against the Director after lapse of six months would be barred by time.
38. It was brought to the notice of the Court by the learned Counsel for the Company and A-2 and A-4 that this Court in Criminal Revision Petition No. 549/86 (disposed of on 7th day of November, 1986)9 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 and persued. The Revision Petition had been preferred against the order dated 7-9-1985 made by the Special Court for Economic Offences, Bangalore District, Bangalore, in C.C.No. 115/1985, 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.
38 A. I now refer to the three decisions of the Calcutta High Court, referred to by the learned Counsel for the Company and A-2 and A-4. In AJIT KUMAR SARKAR v. ASSISTANT REGISTRAR OF COMPANIES, (1979) 49 Company Cases 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.
39. A Division Bench of the Calcutta High Court in NATIONAL COTTON MILLS OTHERS v. ASSISTANT REGISTRAR OF COMPANIES, WEST BENGAL, AND ANOTHER, (1984) 56 Company Cases 222 dissented with the view taken in Ajit Kumar Sarkar's case, (1979) 49 Company Cases 909 : 83 CHN 108 and held that it was difficult to agree with the view on a careful review of the legal position. Thus, in substance, the decision of the Single Judge in Ajit Kumar Sarkar's case, (1979) 49 Company Cases 909 : 83 CHN 108 was overruled by the Division Bench.
40. In National Cotton Mills case, (1984) 56 Company Cases 222 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 return within sixty days from the date on which the Annual General Meeting was held, the Jurisdictional Magitrate had prosecuted the petitioner-Company and its Officers. In the Revision filed by the petitioners in the High Court for quashing the proceedings against them 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 the failure to file the return did not constitute a continuing offence, and (iii) 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 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 the expiry of the period of limitation provided in Section 468 of the Code was not proper and invalid.
41. 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:
"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 complied with". Section 159 of the Companies Act does not impose any liability which so continues. The offence on the breach thereof is complete with 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-fulfilment of a continuing obligation or continuing of business without filing of such returns becomes a 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 defaults 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 wll 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 cot be correcte to say that the latter class of cases also would be continuing offences."
42. The decision in National Cotton Mills case, (1984) 56 Company Cases 222 was followed by a Single Judge of the same High Court in CENTRAL MANBHUM COAL CO.P.LTD. AND OTHERS v. ASSISTANT REGISTRAR OF COMPANIES, WEST BENGAL, AND OTHERS, (1986) 59 Company Cases 176. In the said case, the default involved was omission to comply with the provisions contained in Section 220(1) of the Act.
43. As against this, a decision of the Kerala High Court was cited before the Court in SUDARSAN CHITS (INDIA) LTD. AND OTHERS v. REGISTRAR OF COMPANIES, KERALA, (1986) 59 Company Cases 261. In that case, the contravention involved was the same as the one in the instant case. The learned Single Judge of the Keral High Court, referring to the decision in Ajit Kumar Sarkar's case, (1979) 49 Company Cases 909 : 83 CHN 108 held that the failure to file the balance-sheet and profit and loss account of the Company under Section 220 of the Act to the Registrar of Companies, is a continuing offence under Section 162 of the Act. The learned Judge held as under:
"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 fine which may extend to Rs.50 for every day during which the default continues. Such a provision is absent in the statutes 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 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. Sections 629(a) 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 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, a continuing offence. In this view I have to hold that Section 472 of the Code appplied to the instant case and it has not been shown that the complaints are barred by limitation."
44. Sri Shivappa, the 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 Mill's case, (1984) 56 Company Cases 222 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 Company Cases 261 has been rejected by the Supreme Court. He sought time either to submit the 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 AND OTHERS, 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 and 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 resjudicata nor on any principle of public policy analogous thereto would be 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.
45. Since the Special Leave Petition to appeal against the decision of the Kerala High Court, (1986) 59 Company Cases 261 has been rejected by the Supreme Court in limine, I 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, (1986) 59 Company Cases 261.
46. We have to now consider whether the contravention of Section. 220(1) of the Act is a continuing contravention attracting Section 472 of the Code or not.
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 Commissioner of Wealth-Tax's case, referred to earlier, has held 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, To the same effect is the dicta laid down by the Supreme Court in Bhagirath Kanoria's case, referred to earlier.
47. 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 end of the financial year. It describes a state of affairs as at a particular point of time. The Profit and Loss Account presents the figures for a period of activity (for a particular financial year) designed 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 Acts pin their faith.
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 compulsory 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.
48. It is with the object of securing compliance to this fundamental principle and of securing obedience to the principal safeguard that Section 220(1) has been enacted.
49. It is relevant to note the provisions contained in Section 614-A of the Act. It reads:
"614A.(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 comply with an order of the Court under Sub-section (1) shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both."
Reference may also be made in this regard to Section 611(2) of the Act.
50. It is pursuant to this power that the learned Trial Court has directed the Company and A-2 to A-4 to file the copies of the Balance-Sheet and the Profit and Loss Account within three months from 5-11-1984.
51. 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 to the principal safeguard.
52. 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 of the provisions in Section 220(1) of the Act is a continuing default.
53. Having examined the language of Sections 220(1) and 162(1) of the Act, the nature of the default and the purpose for which Section 220(1) of the Act was enacted and the purpose which the said provision is intended to be achieved, I am unable to hold that 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.
The reasons are these: A continuing cause of action in civil law 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. 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 from the wrong may continue.
54. 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 the 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 effective provision, is minimised by a power to issue necessary and proper directions.
55. 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 neither it envisages nor contemplates that the obligation to submit the copies continues from day to day until the copies are actually submitted. No provision in the Act was brought to my notice which would prohibit a Company from continuing its business without filing the copies. If such a provision were to exist in the Act, then one could have advanced an argument that such a provision would indicate that filing of copies is a continuous obligation.
56. The Supreme Court in Commissioner of Wealth Tax's case, 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 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 penalty, as held by the Calcutta High Court in the National Cotton Mills case, it appears, 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 from such penalty on enhancing scale by early submission of copies even after the default.
However, that does not make or render the initial default a continuing one. It is impossible to hold that the default is repeated from day to day after the initial default.
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.
57. Having carefully examined the language of Section 220(1) which creates an obligation and the purpose which is intended to be achieved by constituting the omission or default as an offence, I hold that the default of Section 220(1) is not a continuing offence. I respectfully agree with the reasons given by the Calcutta High Court in the National Cotton Mills case, (1984) 56 Company Cases 222.
58. The principal reason of the Kerala High Court to take a 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 upto 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 default or offence is not something which takes place once and for all but is one which continues. I have adverted earlier to the penalty provided under Section 162 and have held that the measure of penalty appears to be made with the object of enforcing strict compliance with the provisions contained in Section 220(1) of the Act under the threat of enhanced penalty. That is the reasoning of the Division Bench of the Calcutta High Court also in the National Cotton Mills case, (1984) 56 Company Cases 222.
59. For the reasons aforesaid, I hold that the contravention of Section 220(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 25-1-1982 was barred by time. There was a limitation on the learned Presiding Officer from taking cognizance of the default alleged against the Company and A-2 to A-4, The cognizance of the default taken by him in view of the bar of limitation under Section 468 of the Code was bad. The consequent trial on the bats of such illegal and invalid act stands vitiated.
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.