Ghanshyam Chaturbhuj vs Industrial Ceramics P. Ltd. and others

Padmini Jesudurai, J.—The petitioner whose complaint against the respondents for an offence u/s 113 of the Companies Act, 1956

(hereinafter referred to as ""the ACt""), for failure to issue to him share certificates had been dismissed by the Additional Chief Metropolitan

Magistrate (E.O.I.), Egmore, Madras, u/s 203,Criminal Procedure Code, has preferred this revision, challenging the above order of dismissal.

The facts briefly are : The petitioner filed a complaint u/s 200, Criminal Procedure Code, before the above court against the respondents, for an

offence u/s 113(2) read with section 621 of the Act, on the allegation that he is the holder of 466 equity shares, 236 preference share and 2069

redeemable preference share that share certificates for the above shares have not been issued to him even though the ordinary and preference

shares had been transferred to him even though the ordinary and preference shares had been transferred to him even on December 2, 1963, and

the redeemable shares were allotted to him on December 13, 1963. Despite several letters requesting the respondents to issue certificates, the

respondents, while admitting the fact that the petitioner was the owner of the above shares, expressed inability to issue the necessary certificates

due to lack of funds to incur expenses for printing the share certificates. This was in violation of section 113 of the Act and since the offence was a

continuing offence, the petitioner preferred the above complaint. The first respondent is the company and respondents Nos. 2 to 5 are the

directors.

The learned Magistrate dismissed the above complaint u/s 203, Criminal Procedure Code, on the following grounds :

(i) that an offence u/s 113 of the Act is not a continuing offence and the complaint, therefore, was barred by limitation u/s 468, Criminal Procedure

Code.

(ii) that since the offence is not a continuing offence, respondents Nos. 3 to 5 who are the directors only for the last three years, could not be held

liable for an offence committed 13 years earlier and the second respondent, who was the managing director,has sent an explanation that the share

certificates could not be printed due to lack of funds. The learned Magistrate also placed reliance on certain decisions.

Thiru Prakash Gokulaney, learned counsel for the petitioner, contended that the offence u/s 113 of the Act is a continuing offence, that the

complaint is saved by section 472, Criminal Procedure Code, and that,therefore, both the findings of the lower court are untenable. The decisions

relied on by the learned Magistrate are no longer good law.

The short question that arises for consideration is whether the offence u/s 113 of the Act is a continuing offence.

The term ""continuing offence"" has not been defined either in the Criminal Procedure Code or in any other statute. However, judicial

pronouncements of the Supreme Court and other High Courts under different statutes give us certain guidelines. The Supreme Court in State of

Bihar Vs. Deokaran Nenshi and Another, , while holding that the offence mentioned u/s 66 of the Mines Act, 1932, in failing to furnish returns and

notice within the prescribed time, is not a continuing offence, observed as follows (at page 909 of AIR):

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 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. On every occasion that such disobedience or non-compliance occurs and

recurs, there is the offence committed.

Again in Bhagirath Kanoria and Others Vs. State of M. P., , the Supreme Court, when considering the question whether the non-payment

before the due date of the employer''s contribution to the provident fund punishable u/s 14(2A) of the Employees'' Provident Fund and Family

Pension Fund Act (19 of 1952), is a continuing offence or not,made the following observations (at page 1692) :

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 act as an offence.

It was held that the above offence was a continuing offence, because though the contribution was required to be paid within the specified date,

the liability to pay the contribution continued despite the expiry of the date, so long as the contribution remained unpaid.

In a recent decision in Maya Rani Punj Vs. Commissioner of Income Tax, Delhi, , the Supreme Court, while holding that section 271(1)(a) of

the Income Tax Act, 1961, was a continuing offence, laid down the acid test to determine the above issue (at page 341) :

If a duty continues from day-to-day, the non-performance of that duty from day to day is a continuing wrong. We are of the view that the

legislative scheme u/s 27(1)(a) of the 1961 Act, in making provision for a penalty coterminous with the default to be raised, provides for a situation

of continuing wrong.

It, therefore, follows that if the penalty is made coterminous with the default, then the offence is a continuing offence.

The Companies Act has been enacted in the interest of the general public who would be contributing shares to the floating of a company and

would, therefore, be entitled to receive certain benefits therefrom. Safeguards, therefore, have been provided in the Act to prevent exploitation of

the shareholders and to ensure proper administration. Elaborate procedure, therefore, has been laid down with regard to formation of companies,

their management and administration and, finally, the winding up of companies. Certain violation of the provisions of the Act have been made penal.

In the scheme of the Act, in the matter of awarding punishment, we find three different categories of punishments provided under the Act. For

certain offences, the punishment provided is a maximum for every offence. In this category, we find sections 105, 108F, 166, 218, 232, 233, 248,

295(4) and other offences. In this second category, u/s 162 of the Act, we find offences:

....shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.

In this category is included offences falling under sections 159, 160, 161, 220 and 142(1) and other offence. In the last category, under

sections 168 and 234 of the Act and other sections, we find:

....shall be punishable with fine which may extend to rupees.... and in the case of a continuing default with a further fine which may extend to

rupees ....for every day after the first during which such default continues.

In this category are included offences under sections 166, 167, 234 and other offence. It is, therefore, clear that the Legislature intended

certain offences under the Act which were committed once and for all, to be non-continuing offences, while certain other offences, because the

default continued were to be treated as a continuing offence, continuing so long as the default continued. Categories 2 and 3 therefore, in spite of

the difference in the language,would fall within the category of continuing offences. Offences under sections 159, 160, 161 and 220, made

punishable u/s 162 of the Act, relate to failure to file certain documents before the Registrar of Companies. Filing of the above documents before

the Registrar is required in the interest of the welfare of the shareholders. While furnishing a false statement to the Registrar, either in the annual

returns or in the balance-sheet, is made punishable u/s 628 of the Act, is punishable merely with a fine of rupees (sic) for the commission of the

offence, thereby indicating that the offence is not a continuing offence, failure to furnish annual returns and audited balance-sheet to the Registrar

under sections 159 and 220 of the Act and made punishable u/s 162 of the Act, entails a fine of rupees.... for every day during which the default

continues. thereby indicating the clear distinction between the two kinds of offences with reference to the same documents.

It would now be useful to extract the relevant part of section 113 of the Act for a better appreciation of the legal issue involved:-

(1) Every company 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, complete and have ready for delivery the

certificates, of the shares, the debentures and the certificates of all debenture stock allotted or transferred, unless the conditions of issue of the

shares, debentures or debenture stock otherwise provide.

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 hundred rupees for every day during which the default continues.

The object of requiring share certificates to be issued is relevant. The share certificate is a declaration by the company that the person in whose

name the certificate is issued is a shareholder in the company and the object of issuing the certificate is to enable the person to use it as proof of the

ownership of the shares and also to enable others to act upon that certificate either for sale or transfer of shares. The share certificate is the only

documentary evidence of title in the possession of the shareholder. It is with this object that the company is required to issue share certificates and

a minimum time of three months after the allotment of any share, and two months after the transfer of any share, is given to the company to get

ready to issue the share certificates and a minimum tome of three months after the allotment of any share, and two months after the transfer of any

share,is given to the company to get ready to issue the share certificates. Once this period is over, the liability of the company to issue the share

certificates commences and continues so long as the share certificate is actually delivered to the shareholder. So long as the share certificate are not

delivered to the shareholder, the default continues and the offence also continues. A reading of section 113(2) of the Act also indicates the mind of

the Legislature that the penalty of Rs.500 for every day during which the default continues has been provided since the offence is a continuing one.

The mere fact that in the penal part of sections 168, 234 and certain other provisions a lump sum fine is indicated for the first day of the

commission of the offence, and a lesser sum for every subsequent day during which the default continues, would not indicate that the offence u/s

113(2) of the Act is not a continuing offence.

The trial court has relied upon a Bench decision of the Calcutta High Court in National Cotton Mills v. Assistant Registrar of Companies, West

Bengal [1984] 56 Comp Cas 222 which had overruled a decision of the single judge of the same court in Ajit Kumar Sarkar v. Asst Registrar of

Companies [1979] 49 Comp Cas 909 and held that the offences punishable u/s 162 of the Companies Act are not continuing offences. It is,

however, significant that in Maya Rani Punj Vs. Commissioner of Income Tax, Delhi, , the Supreme Court has referred with approval to the

decision of the single judge of the Calcutta High Court in Ajit Kumar Sarkar Kalaimagal Corporation Limited v. Assistant Registrar of Companies,

(Order in Crl. R. C. Nos. 390 to 394 of 1984, dated July 28,1987). I have disagreed with the view of the Division Bench of the Calcutta High

Court in National Cotton Mills v. Asst. Registrar of Companies [1984] 56 Comp. Cas 222 accepting the view of the single judge of the same

court in Ajit Kumar Sarkar v. Asst. Registrar of Companies [1979] 49 Comp Cas 909, and held that the failure to file annual returns u/s 159 of the

Act and balance-sheet u/s 220 of the Act punishable u/s 162 of the act are continuing offences. The decision of the Division Bench of the Calcutta

High Court, referred to above, relied on by the learned Magistrate, therefore, cannot be accepted. It therefore, follows that the offence u/s 113 of

the Act is a continuing offence.

In view of the above findings, neither of the grounds put forward by the learned Magistrate in dismissing the complaint u/s 203, Criminal

Procedure Code, can be legally sustained. The petition is allowed and the order of dismissal is set aside and the complaint is sent back to the trial

court for disposal according to law.