Andhra HC (Pre-Telangana)
Ritesh Exports Limited And Anr. vs The Registrar Of Companies Having Its ... on 16 August, 2004
Equivalent citations: [2005]127COMPCAS583(AP), [2006]65SCL397(AP)
JUDGMENT P.S. Narayana, J.
1. Heard the counsel on record.
2.This Criminal Appeal is filed by the accused in S.T.C. No. 1 of 1997 on the file of Special Judge for Economic Offences, Hyderabad. The Registrar of Companies, Andhra Pradesh is the respondent-complainant.
3. Submissions at length were made by both the counsel relating to the applicability of Section 113 of the Companies Act, 1956 (hereinafter referred to as 'the Act' in short).
4. The main contention is that this is not a case of either allotment of shares or debentures of transfer of shares. The shares were in fact allotted and share certificates also had been sent in time and there was a mistake which had crept in while endorsing allottee's name and another name had been included and the same was sent back to the company for rectification of the mistake, and after rectifying the mistake, the same was sent under certificate of posting. Hence, the ingredients of Section 113 of the Act are not attracted at all. It was further pointed out that the Registrar of Companies, who filed the complaint against a company and the Managing director, can not maintain the complaint since the said Registrar of Companies cannot be said to be "aggrieved person" so as to maintain such complaint.
5. The learned counsel had also pointed out to the evidence of DW-1 and also Ex. D-2-certificate of posting, and would contend that by certificate of posting several others were also sent and there was no complaint from any quarter whatsoever and hence, the findings recorded by the learned Special Judge for Economic Offences cannot be sustained, and therefore, the sentence imposing fine may have to be set aside and refund may have to be ordered.
6. On the contrary, on behalf of Registrar of Companies submissions at length were made and it was contended that inasmuch as this was reported by the concerned person who can definitely be said to be "aggrieved person" for non-delivery, the Registrar of Companies had initiated action, and that such complaint by the Registrar of Companies for contravention of the provisions of the Act definitely can be maintained since he is the competent person to initiate such action. Several provisions under the Act also had been referred to in this context.
7. The Registrar of Companies filed a complaint against the appellants A-1-company, and A-2-Managing Director of the company alleging that they had committed contravention of the provisions of Section 113 of the Act. The facts in nutshell are as hereunder:
"Respondent-Registrar of Companies-complainant had received letters from the Department of Company Affairs, New Delhi vide letter No. 6/1/96-IPC-I, dated 05.12.1996 and from the said letter, it was found that A-1 failed to comply with the provisions of Section 113 of the Act by causing delay in effecting transfer in favour of the proposed transferees viz., (1) Binod Kumar Chowdhary,(2) Prikshat Kumar Goel and (3) Vasantrai N.Ashra and also failed to deliver the share certificates to them until the date of filing of the complaint. The details of violation and the number of share certificates have been specified in Annexure-A filed along with the complaint. Basing on the information received from the Secretary, Department of Company Affairs, the complainant had issued a show cause notice to the accused on 14.02.1997 under registered post with acknowledgement due, calling them to show why criminal proceedings should not be initiated against them. There was no reply from the appellants-accused. Hence, the complaint was filed to punish them under Section 113 (2) of the Act."
8. The prosecution had examined PW-1 and got marked Exs. P-1 to P-6. On behalf of defence, DW-1 was examined and got marked Exs. D-1 and D-2.
9. The case of the prosecution is that the appellants A-1 and A-2, the company and the Managing Director of the company respectively, had failed to register and transfer the share certificates in the names specified supra within the stipulated time. It is also stated that a case was separately filed against the accused in respect of the complaint of one Binod Kumar Chowdhary and one Prikshat Kumar Goel, and hence, the prosecution had limited this complainant to Vasantrai N.Ashra in the present case.
10. The case of the defence is that Vasantrai N.Ashra in fact was allotted share certificates but while endorsing certificates in his name, another unconcerned name also figured in the share certificates and the share certificates were allotted to both the persons and hence, the Vasantrai N.Ashra had returned those certificates for deleting the name of the unconcerned person, and after deleting the name of the unconcerned person B. Joshi, the share certificates were sent to Vasantrai N.Ashra. The share certificates were received from Vasantrai N.Ashra as allottee for correction but not as transferee for effecting transfer of share certificates in his name and hence, Section 113 (1) of the Act is not applicable.
11. PW-1 deposed that he has been working as Senior Technical Assistant in the office of Registrar of Companies, Hyderabad and he knows the facts of the case. He deposed that the Secretary, Department of Company Affairs, New Delhi vide letter dated 05.12.1996 forwarded two complaints from one from Binod Kumar Chowdhry, and another one from Vasantrai N.Ashra to the Registrar of Companies, A.P., Hyderabad stating that the share certificates sent to the accused-company by those two complainants were not transferred into their names. Ex. P-1 is the letter received from the Secretary, Department of Company Affairs, New Delhi and Ex. P-2 is the complaint of Binod Kumar chowdhary and Ex. P-3 is the complaint made by V.N. Ashra. The evidence of P.W.1 shows that the said Binod Kumar Chowdhary, in his complaint-Ex. P-2 stated that he had sent share certificates script No. 030464 to A-1 company on 10.11.1995 and A-1 company also had acknowledged the same, but transfer of share certificates had not been effected in his name. PW-1 further deposed that V.N. Ashra in his complaint-Ex. P-3 stated that he had sent 100 shares to A-1 company under certificate No. 15688 in the year 1993 for effecting transfer in his name but transfer was not effected and share certificates were not returned. Further, his evidence shows that V.N. Ashra stated in Ex. P-3 that he had issued several reminders on the dates mentioned therein to A-1 company, but of no use. Therefore, as stated by PW-1 the complainant had issued a show cause notice (Ex. P-4)) to A-1 and A-2 on 14.02.1997 and they were served on A-1 and A-2 as per the acknowledgments-Exs. P-5 and P-6. This witness no doubt was cross-examined at length.
12. DW-1 is the Manager working in shares department of A-1 company and he deposed that the allotment of shares from the time of public issue to the applicants had been made by Rams Financial Service Private Limited, Hyderabad on behalf of A-1 company and after the allotment made by the said consultancy, these people started managing the affairs of share certificates personally. DW-1 further deposed that V.N. Ashra applied for 100 shares, but by mistake the share certificates were allotted in the names of two persons viz., V.N. Ashra and B. Joshi and the said share certificates were sent to V.N. Ashra. According to his evidence, those share certificates were sent to V.N. Ashra in the year 1993 and the same were sent back to A-1 company for the purpose of deletion of the name of B. Joshi, since he was unconcerned person with the same. It is the further evidence of DW-1 that Ex. D-1 is the office copy of the covering letter dated 01.12.1994, through which the share certificates after deleting the name of B. Joshi had been sent to V.N. Ashra, Ex. D-2 is the postal acknowledgment for sending those certificates enclosed to Ex. D-1.
13. On appreciation of the evidence, the Special Judge for Economic Offences holding that this is a continuing offence and computing a particular period, for everyday a fine of Rs. 10/- had been imposed. Aggrieved by the same, the present appeal had been preferred.
14. (i) Section 113 of the Act reads as hereunder:
"(1) Every company, unless prohibited by any provision of law or of any order of any Court, tribunal or other authority, shall, within three months after the allotment of any of its shares, debentures or debenture stock, and within two months after the application for the registration of the transfer of any such shares, debentures or debenture stock, deliver, in accordance with the procedure laid down in Section 53, the certificates of all shares, debentures and certificates of debenture stocks allotted or transferred:
Provided that the Company Law Board may, on an application being made to it in this behalf by the company, extend any of the periods within which the certificates of all debentures and debenture stocks allotted or transferred shall be delivered under this sub-Section, to a further period not exceeding nine months, if it is satisfied that it is not possible for the company to deliver such certificates within the said periods.
The expression "transfer", for the purposes of this sub-Section, means a transfer duly stamped and otherwise valid, and does not include any transfer which the company is for any reason entitled to refuse to register and does not register.
(2) If default is made in complying with sub-Section (1), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to [five thousand] rupees for every day during which the default continues.
(3) If any company on which a notice has been served requiring it to make good any default in complying with the provisions of sub-Section (1), fails to make good the default within ten days after the service of the notice, the [Company Law Board] may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of in the company responsible for the default.
(4) Notwithstanding anything contained in sub-Section (1), where the securities are dealt with in a depository, the company shall intimate the details of allotment of securities to depository immediately on allotment of such securities.
(ii) Sub-Section 2 is the penal provision. Section 53 of the Act dealing with service and documents of members by company reads as hereunder:
"(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 notices to him.
(2) Where a document is sent by post,-
(a) service there of shall be deemed to be effected by properly addressing, prepaying and posting a letter containing the document, provided that where a member has intimated to the company in advance that documents should be sent to him under a certificate of posting or by registered post with or without acknowledgement due and has deposited with the company a sum sufficient to defray the expenses of doing so, service of the document shall not be deemed to be effected unless it is sent in the manner intimated by the member; and
(b) (***) such service shall be deemed to have been effected-
(i) in the case of a notice of a meeting, at the expiration of forty-eight hours after the letter containing the same is posted, and
(ii) in any other case, at the time at which the letter would be delivered in the ordinary course of post.
(3) A document advertised in a newspaper circulating in the neighbourhood of the registered office of the company shall be deemed to be duly served on the day on which the advertisement appears, on every member of the company who has no registered address in India and has not supplied to the company and address within India for the giving of notices to him.
(4) A document may be served by the company on the joint-holders of a share by serving it on the joint-holder named first in the register in respect of the share.
(5) A document may be served by the company on the persons entitled to a share in consequence of the death or insolvency of a member by sending it through the post in a prepaid letter addressed to them by name, or by the title of representatives of the deceased, or assignees of the insolvent, or by any like description, at the address, if any, in India supplied for the purpose by the persons claiming to be so entitled, or until such an address has been so supplied, by serving the document in any manner in which it might have been served if the death or insolvency had not occurred."
(iii) Section 2 (31) of the Act defines " "officer who is in default" in relation to any provision referred to in Section 5, has the meaning specified in that Section."
(iv) Section 5 of the Act reads as hereunder:
"For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means all the following officers of the company, namely:-
(a) the managing director or managing directors;
(b) the whole-time director or whole-time directors;
(c) the manager;
(d) the secretary
(e) any person in accordance with whose directions or instructions the Board of directors of the company is accustomed to act;
(f) any person charged by the Board with the responsibility of complying with that provision:
Provided that the person so charged has given his consent in this behalf to the Board;
(g) where any company does not have any of the officers specified in clauses (a) to (c), any director or directors who may be specified by the Board in this behalf or where no director is so specified, all the directors:
Provided that where the Board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form."
15. It is no doubt true that Section 113 of the Act does not specify whether an "aggrieved person" alone should maintain the complaint or even the Registrar of Companies can maintain the complaint. On the strength of the language of Section 53, submissions at length were made pointing out to Section (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 notices to him.
16. The learned counsel representing the appellants also placed strong reliance on sub-Section (2) and would contend that the person, who had reported this matter, never had specified or suggested the mode of delivery and in such circumstances, in view of Exs. D-1 and D-2 coupled with the evidence of DW-1, the version of defence may have to be believed.
17. In NESTLE INDIA LTD. V. STATE, [2000] 101 Comp. Cas. 263 no doubt the Delhi High Court had arrived at a conclusion that the Registrar is not aggrieved person to maintain the complaint under Section 113 of the Act. Reliance was also placed on SULOCHANA V. STATE REGISTRAR OF CHITS (INVESTIGATION AND PROSECUTION), [1978] Crl. L J 116 (Mad). However, in REGISTRAR OF COMPANIES V. RAJSHREE SUGAR AND CHEMICALS LTD, [2000] 101 Comp. Cas. 271 the three Judge Bench of the Apex Court, while dealing with the person aggrieved and the meaning thereof in relation to the offences under Companies Act, it was held that for failure to deliver share certificates within prescribed time, Registrar is "person aggrieved" and competent to file complaint.
Hence, in the light of the binding decision of the Apex Court, there cannot be any controversy or any doubt whatsoever and at the instance of the information furnished, the Registrar of Companies can maintain a complaint under Section 113 of the Act.
18. In BIMA KUMAR NAPANY V REGISTRAR OF COMPANIES, HYDERBAD, 1990 CRI. L. J. 1902 a case was filed by the Registrar of Companies against a company and others, who were directors of company under Section 233-B (11) of the Act and the allegations in the complaint were that in spite of the notices being given, the petitioners failed to comply with requirements and therefore, they were in default within the meaning of Section 5 of the Act. It was also stated that the petitioners were officers in default and the petitioners applied for quashing of proceeding against them. It was also held that whether the petitioners came within the meaning of Section 5 and were liable for punishment or not was a matter which could be proved during course of trial. It was not possible for High Court to interfere under Section 482 Cr.P.C. and quash the proceedings against them because there were necessary allegations in the complaint which indicated that they had committed an offence.
19. In MADAN GOPAL DEY V. STATE, it was held that any director of the company who is knowingly guilty of the default or who knowingly or willfully authorizes or permits such default would be an 'officer who is in default' under Section 5 read with Section 2 (30). In order that a conviction of "an officer of the company" may be sustained, the only thing to prove is that particular officer knowingly and willfully authorized or permitted the default.
20. Reliance also was placed on HERDILLIA V. APARAJITA CHAUHAN, [2000] 99 Comp. Cas. 145 and H.V.JAYARAM V. ICICI LTD, [2000] 99 Comp. Cas. 341. In Ghanshyam Chaturbhuj V. Industrial Ceramics Private Limited, [1990] 68 Comp. Cas. 36 the Madras high Court held that failure to issue share certificates within prescribed period is a continuing offence.
21. The main version of the defence is that the share certificates in fact were sent to the person to whom it has to be delivered in ordinary course but a bona fide mistake had crept in and unconcerned persons name had also been shown and for deletion of the name, same were returned to the company and again the company had sent the share certificates back to the concerned by certificate of posting as evidenced by Ex. D-1 and D-2 and also the evidence of DW-1. This aspect was no doubt disbelieved by the learned Judge, which resulted in the conviction and the imposition of fine.
22. A careful reading of Section 53 of the Act would go to show that unless specifically, the mode is specified under Sub-Section (2), it is not clearly specified how the share certificates are to be delivered. Hence, at any stretch of imagination in the absence of specific request in this regard, it can be taken that in usual course the company had sent the rectified shares by certificate of posting. It is also pertinent to note that there are no other complaints in this regard though the shares had been dispatched by the same mode to others too. Apart from this aspect of the matter, it is not the case of respondent-complainant that the share certificates were never sent to the concerned party at all. The fact remains that a mistake had crept in and only for the purpose of rectification they were sent back to the company. Viewed from any angle, especially in the light of the version put forth by the defence and also Exs. D-1 and D-2 coupled with the evidence of DW-1 and also in the light of the language employed in Section 53 of the Act, definitely it cannot be said that the prosecution had proved its case beyond all reasonable doubt. Apart from this aspect of the matter, it is no doubt true that the Registrar of Companies as an aggrieved person can maintain the complaint but the person who will be having knowledge about what had transpired had not been examined. Maintaining a complaint before the Court, is something different from proof of an offence with which the accused had been charged with.
23. Viewed from any angle, in the considered opinion of this Court, the benefit of doubt should go in favour of appellants-accused and accordingly the conviction and the imposition of fine are hereby set aside with a direction to refund the fine amount already paid.
24. The criminal appeal is accordingly allowed.