Kerala High Court
George Philip vs Official Liquidator on 21 August, 2003
Equivalent citations: IV(2004)BC196, [2004]120COMPCAS444(KER), (2004)4COMPLJ193(KER), 2004(1)KLT85, [2004]50SCL485(KER)
Bench: K.A. Abdul Gafoor, A.K. Basheer
ORDER Jawahar Lal Gupta, C.J.
1. Can a person convicted under Section 454(5) of the Companies Act, 1956 by a Single Judge of this Court file an appeal before a Division Bench under Section 483 of the Act or only before the Supreme Court under Section 374(1) of the Code of Criminal Procedure, 1973? This is the short question that has been referred to the Full Bench. The relevant facts may be briefly noticed.
2. A Company Petition, viz., C.P. No. 2 of 1987 was filed against M/s. Mittal Steel Re-rolling and Allied Industries Limited. On February 8,1988, an order for the winding-up of the Company was passed. The Official Liquidator was appointed as the Liquidator of the Company. On May 26, 1988 the Official Liquidator filed C.A. No. 162 of 1988 with the prayer that the Directors of the Company be directed to file the statement of affairs of the Company. Despite extension of time the needful was not done. Thus, he filed a complaint alleging that the Directors were liable to be punished under Section 454(5) read with (5A) of the Companies Act.
3. The complaint was considered by the learned Single Judge. Vide Order, dated September 24, 2002, the first appellant was convicted and sentenced to pay a fine of Rs. 25,000. The second appellant was held liable to pay a fine of Rs. 10,000. In case of default, they were to undergo sentence of simple imprisonment for a period of one year and six months respectively.
4. Aggrieved by the Order of the learned Single Judge, the two appellants filed an appeal under Section 483 of the Act. When the appeal was posted for hearing before a Division Bench, an objection to its maintainability was raised in view of the provision contained in Section 374(1) of the Code of Criminal Procedure. The Division Bench considered the matter. On behalf of the appellants, reliance was placed on a Division Bench Judgment of this Court in C.S. Krishnalyerv. Official Liquidator (1985 KLT942) to contend that the appeal was maintainable under Section 483 of the Act. The Bench, however, felt that the provisions of Section 374(1) of the Code had not been considered. Thus, the decision in Krishna lyer's case (supra) required re-consideration. Consequently, the matter was referred to the Full Bench.
5. Counsel for the parties have been heard. Mr. Kalliath, learned Counsel for the appellants contended that in view of the provisions contained in Section 483 of the Act, the appeal was maintainable. On the other hand, Mr. Moni, learned Counsel for the respondents submitted that in view of the provision contained in Section 374(1) of the Code, the appeal could be filed only before the Hon'ble Supreme Court. Thus, the short question that arises for consideration is - Is the appeal filed by the appellants under Section 483 of the Companies Act incompetent in view Section 374(1) of the Code of Criminal Procedure?
6. A brief reference to the relevant provisions of the Code of Criminal Procedure, 1973, is essential. Section 4(1) inter alia provides that all offences under the Indian Penal Code shall be "investigated, inquired into, tried and otherwise dealt with" according to the provisions contained in the Code. Clause (2) provides as under:
"(2) All offences under any other law shall be investigated, inquired into, tried and otherwise dealt with according to the same provisions, but subject to any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences."
A perusal of the above provision shows that an offence falling outside the Indian Penal Code has also to be "invvestigated, inquired into, tried and otherwise dealt with" according to the procedure prescribed in the Code. This is, however, subject to "any enactment for the time being in force regulating the manner or place of investigating, inquiring into, trying or otherwise dealing with such offences". Thus, in a case where the offence falls outside the Indian Penal Code, its trial etc. are subject to the provisions of the relevant enactment.
7. Chap.XXIX of the Code deals with appeals. Section 374 deals with appeals from convictions. It provides as under:
"374. Appeals from convictions.-
(1) Any person convicted on a trial held by a High Court in its extraordinary original criminal jurisdiction may appeal to the Supreme Court.
(2) Any person convicted on a trial held by a Sessions Judge or an Additional Sessions Judge or on a trial held by any other court in which a sentence of imprisonment for more than seven years has been passed against him or against any other person convicted at the same trial; may appeal to the High Court.
(3) Save as otherwise provided in Sub-section (2), any person,-
(a) convicted on a trial held by a Metropolitan Magistrate or Assistant Sessions Judge or Magistrate of the First Class or of the Second Class, or
(b) sentenced under Section 325, or
(c) in respect of whom an order has been made or a sentence has been passed under S .360 by any Magistrate, may appeal to the Court of Session."
8. This provision embodies Sections 408, 410, 411 and 411A of the 1898 Code. Sub-section (1), with which we are concerned, broadly corresponds to Section 411 A. It provides for an appeal against conviction "on a trial held by a High Court in its extraordinary original criminal jurisdiction". The expression 'extraordinary original criminal jurisdiction' does not appear to have been defined anywhere. However, a reference to Section 411A of the 1898 Code shows that a provision for a trial by a High Court "in the exercise of its ordinary criminal jurisdiction" existed. This was substituted by "a trial held by a High Court in its extraordinary original criminal jurisdiction". Thus, the exercise of jurisdiction by the' High Court has to be something different from what was originally contemplated under the law. This difference was clearly pointed out by their Lordships of the Supreme Court in A.R. Antulay v. R.S. Nayak (AIR 1988 SC 1531). In paragraphs 67 and 68, their Lordships were pleased to observe as under:
"67. It appears to us that there is good deal offeree in the argument that Section 411A of the old Code which corresponds to Section 374 of the new Code contained the expression 'original jurisdiction'. The new Code abolished the original jurisdiction of High Courts but retained the extraordinary original criminal jurisdiction conferred by C1.24 of the Letters Patent which some of the High Courts had.
68. The right of appeal is, therefore, confined only to cases decided by the High Court in its Letters Patent jurisdiction which in terms is 'extraordinary original criminal jurisdiction'."
9. In view of the rule as laid down by the Apex Court, the provision of Section 374(1) of the Code shall be attracted only in a case "decided by the High Court in its Letters Patent jurisdiction which in terms is 'extraordinary original criminal jurisdiction.'"
10. What is the position in the present case? The High Court had passed an order of conviction in the exercise of its jurisdiction under Section 464 of the Act. Clauses (5) and (5 A) are relevant. These provide as under:
"(5) If any person, without reasonable excuse, makes default in complying with any of the requirements of this section, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to one thousand rupees for every day during which the default continues, or with both.
(5A) The court by which the winding-up order is made or the provisional liquidator is appointed, may take cognizance of an offence under Sub-section (5) upon receiving a complaint of facts constituting such an offence and trying the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898 (Act 5 of 1898), for the trial of Summons cases by Magistrates."
11. A perusal of Clause (5) shows that a person who makes default without reasonable excuse can be punished. Under Sub-section (5A) the court, which appoints the provisional liquidator is entitled to take cognizance of the offence under Sub-section (5). It was in exercise of the power under this provision that the High Court had exercised its jurisdiction. This was not "extraordinary original criminal jurisdiction". Thus, the case would not fall within the mischief of Section 374(1) of the Code of Criminal Procedure.
12. The next question that arises is - What is the remedy of the person convicted under Section 454 (5) of the Act?
13. Section 483 of the Companies Act provides as under:
"483. Appeals from orders.- Appeals from any order made, or decision given, in the matter of the winding-up of a company by the court shall lie to the same court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction."
A perusal of the above provision shows that a person aggrieved by "any order made, or decision given" has a right to file an appeal. The expression any order or decision is very wide. It takes within its ambit every order. The only condition is that the order or decision must be "in the matter of winding up of a Company".
14. Mr. Moni submitted that the provision contained in Section 483 of the Act has been considered by a Division Bench of the Gujarat High Court in Niranjan Jayantilal Tolia and Ors. v. Official Liquidator, Trimurthy Agro-Chemical Limited (in liquidation) and Anr. (56 Company Cases 505). In a similar situation, their Lordships were pleased to hold that an appeal under Section 483 was not maintainable. The Bench had observed as under at page 507:
"Whether Section 483 will cover all matters including a decision in a criminal prosecution, is a question which has to be considered in the light of the language of Section 483( 1). That enables appeals against any order made or decision given in the matter of a winding-up of a Company. "In the matter", indicates not "incidental to" the winding-up but is "part of" the winding-up itself. While non-compliance with obligations in the matter of winding-up" have been made punishable under the provisions of the Chapter and the procedure thereof prescribed, proceedings for imposing such punishment being matters "incidental to" the winding-up cannot be said to be a "part of" the winding-up process itself. Evidently, orders contemplated under Section 483 are matters "in the matter of the winding-up of a company" which, according to us, would exclude a decision in a prosecution under Section 454(5A)."
In view of the above observations, it was contended by Mr. Moni that the appellants were not entitled to invoke the provisions contained in Section 483 of the Act.
15. The contention cannot be accepted. Firstly, the broad language of Section 483 does not admit of such a restricted construction. The expression in the matter of winding up is wide enough to include all orders, which are even incidental to the winding up. Section 454 entitles the Official Liquidator to ask for a statement of the affairs of the Company and the failure to comply with the court's order entails penal consequences. The order of conviction is not merely incidental to the winding-up proceedings but is a part of the winding-up of the Company.
16. Secondly, the right to file an appeal under a statute has to be liberally construed. The right to remedy has to be sustained. A restricted interpretation, which results in denial of the right of appeal, has to be avoided. So construed, the appeal is clearly competent.
17. There is another aspect of the matter. There is a well-known rule of construction that the special law over rides the general. The Code of Criminal Procedure embodies the general rules regarding criminal proceedings. Section 4(2), as noticed above, shows that in case of offences under laws other than the Indian Penal Code, the procedure as prescribed in the Code has been expressly made subject to the "enactment. ....regulating the manner........or......dealing with such offences". This provision clearly indicates that the provisions of the Code have to be applied subject to those of the special law. In matters of offences under the Companies Act, the Act provides a special remedy under Section 483. The principle of 'generalia specialibus non derogant' is applicable. It protects the person's right under the special law. It must be given its full effect.
18. Lastly, even on precedent, we find that in a case like the present, the appeal under Section 483 is maintainable. A Division Bench of this Court considered the matter in Krishna Iyer's case (supra). It was held as under:
"8. A Full Bench of the Delhi High Court in Official Liquidator, Security and Finance (P) Ltd. v. P.K. Bedi and Anr. (44 Company Cases 499) stated at page 502:
'It cannot admit of any doubt that the object of Section 454 requiring the person concerned with the Company at the relevant time to submit the statement of affairs is a laudable one and is obviously with a view to facilitate the winding-up proceedings by the Official Liquidator by seeing that full information is made available to it in as short a time as possible.' We are therefore clearly of the view that a proceeding for the enforcement of the requirements of Section 454(1) of the Companies Act, is one in the matter of the winding-up of the Company and not merely incidental or ancillary thereto. We therefore overrule the preliminary objection raised against the maintainability of these appeals and hold that the Judgment of the learned Company Judge convicting the accused under Sub-section (5) of Section 454 of the Companies Act is appealable under Section 483 of the Act read with Section 5 of the Kerala High Court Act."
We find that the above observations are in conformity with the provisions of the Act.
19. No other point was raised.
20. In view of the above, it is held that:
(a) Under Section 374( 1) of the Code, a person can appeal to the Supreme Court only when he has been convicted on trial by the High Court in the exercise of its extraordinary original criminal jurisdiction. Suchjurisdiction may be conferredunder the Letters Patent. Not otherwise.
(b) An order of conviction under Section 454(5) of the Companies Act is connected with the winding up of the Company and the aggrieved person has the right to file an appeal under Section 483 of the Act.
(c) The Code of Criminal Procedure applies primarily to the trial of offences under the Indian Penal Code. In case of offences under other laws, the provisions of the Code apply subject to those in the relevant enactment. In case of offences under the Companies Act, the special provision contained in Section 483, shall be applicable.
21. The question as posed at the outset is, thus, answered in favour of the appellants. It is held that the appeal is maintainable. The matter shall now be placed before the Division Bench for consideration on merits.