Andhra HC (Pre-Telangana)
Kreba Biochemicals Ltd. vs Registrar Of Companies on 6 June, 2002
Equivalent citations: 2002(2)ALD(CRI)227, [2003]116COMPCAS43(AP)
ORDER S.R.K. Prasad, J.
1. The petitioners invoke the inherent powers vested in this Court under section 482 of the Code of the Criminal Procedure, 1973 ('the Act') to quash the proceedings in S.T.C. No. 61 of 1998 on the file of the Special Judge for Economic Offences, Andhra pradesh, Hyderabad.
2. The factual matrix that led to the filing of this petition can be briefly stated as follows :
The first petitioner is a Public Limited Company engaged in manufacture of life saving drugs. The first petitioner-company for the year 1996-97 at its annual general body meeting held on 16-7-1997 passed a resolution accepting the recommendation of the board of directors to pay dividend of 30 per cent of its shareholders. The aggregate dividend amount declared is Rs. 1.38 crores. Thereupon, the first petitioner-company opened an account with State Bank of India, main branch, bearing No. 25/59528 under the caption 'Krebs Bio Chemicals Limited dividend 1996-97 A/c'. It is averred in the petition that the account opened by the company is dual account for payment of dividend and also for keeping the unpaid/ unclaimed dividend. The dividend amount of Rs. 1.38 crores was deposited on 23-8-1997. The company has also entered into an agreement with the State Bank of India under which the State Bank of India would authorize specified branches of State Bank of India spread throughout the country shall honour dividend warrants issued by the company to its shareholders. It is further alleged that the company got the dividend warrants ready and the dividend warrants numbering about 3,900 were posted to the shareholders under certificate of posting on 27-8-1997. Certain of the other shareholders in particular where the dividend amount is large, the same has been despatched through registered post to be in conformity with SEBI guidelines issued on 23-1-1993. The Registrar of Companies carried out inspection of the company from 19-9-1997 to 29-9-1997 and thereafter he issued a show-cause notice on 5-2-1998. After receipt of reply, he lodged a complaint on 15-4-1998.
3. It is alleged in the complaint that the petitioners violated the provisions of section 205A of the Companies Act, 1958. The complaint filed on 15-4-1998 was taken on file under section 205A(8) by the Special Judge for Economic Offences. Andhra Pradesh, Hyderabad. The complaint made is that the company failed to transfer the unpaid dividend to the special account within the time stipulated under section 205A(1).
4. The learned counsel for the petitioner, Sri C. Kodanda Rao, submits that the dividend has been despatched within the stipulated period and it is not a case of dividend remaining unpaid. It is also contended that since the company has paid the dividend to the shareholders by depositing the same into the bank and despatching the warrants within the stipulated time of 42 days, it has not violated any provisions of section 205A(1). It is also further contended that complaint is barred by limitation, as it is not filed within six months from the date of detection of the offence.
5. Admitting to the same Sub-section (1) of section 205A of the Act reads as follows :
Unpaid dividend to be transferred to special dividend account.
"Where, after the commencement of the Companies (Amendment) Act, 1974, a dividend has been declared by a company but has not been paid, (or claimed) within forty-two days from the date of the declaration, to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of forty-two days, transfer the total amount of dividend which remains unpaid (or unclaimed) within the said period of forty-two days, to a special account to be opened by the company in that behalf in any schedule bank, to be called "Unpaid Dividend Account of...Company Limited/Company (Private) Limited".
6. The section commences with the words 'a dividend has been declared by a company but has not been paid or claimed within 42 days from the date of the declaration to any shareholder entitled to the payment of the dividend. In the present case, the dividend was declared on 16-7-1997. The amount was deposited on 23-8-1997. On 26-8-1997 the dividend warrants were despatched as can be seen from the record. It is mentioned in the Explanation of Sub-section (1) of section 205A that the 'dividend, which remains unpaid' means any dividend the warrant in respect thereof has not been encashed or which has otherwise not been paid or claimed. Obviously, it is a case where dividend warrants were despatched in time and the entire amount was deposited into the bank account.
7. The learned counsel for the petitioners contends that it is impossible for the company to know whether the dividend warrant has been encashed or not unless it is returned. It is also contended that the company is not responsible for non-encashment of the dividend warrant and it cannot be penalized for non-encashment.
8. There is much force in the aforesaid contention of the learned counsel for the petitioners. It is observed by the Supreme Court in a decision reported in Hanuman Prasad Gupta v. Hiralal that once a dividend warrant is posted to the registered address of the shareholder, dividend is deemed to have been paid within meaning of section 205A. It is further observed that the section makes the failure to post within the prescribed period and not the non-receipt of the warrant by the shareholder an offence. 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.
9. Knowledge cannot be attributable regarding the warrants, which are un-encashed. Only the bank informs the company about the non-
encashment of the dividend warrants. Knowledge is attributable to the company and thereafter alone the company can be penalized for not transferring the account towards the dividend, which remains unpaid. Till such time, it cannot be penalized.
10. In a decision reported in Consolidated Pneumatic Tool Co. India Ltd, v. Additional Registrar of Companies [1989] 65 Comp.Cas. 259 (Bom.), a Single Judge of Bombay High Court observed when once the complaint filed after remitting of dividend, no offence is made out under Section 205A(1) 8 of the Act. The relevant portion reads as follows :
"(i) that although the company was protected under Section 207, proviso, Clause (a), so far as non-payment of the dividend to the shareholders was concerned, the protection did riot extend to cover failure by the company to deposit the unpaid dividend in a special account as required under the latter part of Section 205A(i);
(ii) that, however, no evidence was produced by the prosecution nor was there anything in the complaint even to inferentially suggest that petitioners Nos. 2 to 6 were officers in default;
(iii) that, moreover, petitioners Nos. 3, 4 and 5 were themselves entitled to receive dividend as shareholders, as they represented the parent company on the board of directors of the company. The amounts had been Cully paid on June 1, 1984, and January 22, 1985, after permission was obtained from the Reserve Bank of India. The complaint filed after this date, on June 27, 1985, was not justified and deserved to be quashed".
11. A close scrutiny of the aforesaid section reveals if a company fails to pay the dividend in the modes provided, penal section has been incorporated in the Section 205A(8). In the present case, the company has already deposited the unpaid dividend amount into the special dividend account. Unless the petitioners have got knowledge about the non-encashment, the question of transferring to unpaid dividend account will not arise. The complaint taken as a whole does not constitute an offence under Section 205A(8).
12. Coming to the aspect of the limitation, section 468 of the Code of Criminal Procedure, 1957 reads as follows :
"(1) Bar to taking cognizance after lapse of the period of limitation.--Except as otherwise provided elsewhere in this Code, no Court shall take cognizance of an of fence of the category specified in Sub-section (2), after the expiry of the period of limitation.
(2) The period of limitation shall be--
(a) Six months, if the offence is punishable with fine only;
(b) One year, if the offence is punishable with imprisonment for a term not exceeding one year;
(c) Three years, if the offence is punishable, with imprisonment for a term exceeding one year but not exceeding three years.
(3) For the purposes of this section, the period of limitation, in relation to offences which may tried together, shall be determined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most severe punishment."
13. Sub-section (2)(a) of Section 468 makes if the offence is punishable with fine only, the period of limitation is six months. In the present case, the offence under Section 205A(8) is punishable with fine only. The complaint has to be filed within six months. The inspection of the company took place on 29-9-1997. The first respondent-complainant has filed the complaint on 15-4-1998. It is beyond the six months period. When once the limitation begins to run it cannot be stopped. Hence, I am of the considered opinion that the complaint is filed beyond the period of limitation. I see considerable force in the contention of the learned counsel for the petitioners that the proceedings have to be quashed. Hence, by virtue of the inherent powers vested in this Court, I quash the proceedings against the petitioners in S.T.C. No. 61 of 1998 on the file of the Special Judge for Economic Offences, Andhra Pradesh, Hyderabad, as the averment made in the complaint does not constitute an offence under Section 205A(8) and it is barred by limitation.
The Criminal Petition is allowed accordingly.