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Judgment
K.M. Natarajan, J.—This petition has been filed by the accused in C.C. No. 478 of 1983 on the file of the Additional Chief Metropolitan Magistrate, Madras, to quash the proceedings pending against them.
The second Petitioner is the Managing Director of the first Petitioner-company and Petitioners 3 and 4 are Directors of the said Company. The Respondent, viz., Asst. Registrar of Companies, Madras, filed a complaint against the Petitioners u/s 58-A(3)(c), 58-A(1) and 58(A)(4) of the Companies Act, 1956, on the allegation that the first Petitioner-company has failed to comply with the various provisions indicated above.
Learned Counsel for the Petitioners mainly contended that S. 58-A came into force only on 1-2-1975, and that the deposits alleged in the complaint relate to a period long before 1-2-1975. In view of the decision of S. Natarajan, J., in Crl.M.P. No. 5776 of 1979 dated 14th September, 1983, the prosecution u/s 52-A is liable to be quashed in as much as it is violative of Article 20 of the Constitution of India. It is further contended that the said outstanding loans have been reduced to the permissible limit as on 31-3-1980 and hence no Offence had been committed. Though short term loans of Rs. 30,000 were taken from four parties, they have been repaid and nothing was due to them. Petitioners 3 and 4 were only Directors of the first Petitioner company and they are not liable for any of the offence and it is only the second Petitioner who is in charge of the affairs of the company in his capacity as Managing Director.
On the other hand, learned Counsel for the Respondent submitted that seven deposits were received prior to 1-2-1975 for a period not less than six months, vide returns of deposits as on 31-3-1975, 31-3-1976, 31-3-1977 and hence they had violated the provision of R. 3(1) of Companies (Acceptance of Deposits) Rules, 1975 which is punishable u/s 58-A(6) of the Companies Act. It is further submitted by the learned Counsel that the company has accepted fresh deposits from third parties between 3-4-1975 and 1-12-1975 to the tune of about Rs. 30,000 as is evident from the return of deposits on 31.3.1976 which is in violation of R.3(2)(ii). It was further contended that the offence complained of is a continuing offence and hence the question of limitation does not arise.
I have gone through the complaint and also the affidavit filed by the Petitioners in support of their petition. The basis of the complaint is that the Petitioners had received deposits from seven persons to the tune of Rs. 2,52,000 which is in violation of R. 3(2) (88) of the Companies Act, in as much as it exceeds 25 percent of the paid up share capital and free reserve of the company. Not only did they receive the deposits, but they also renewed deposits in violation of the provision of R. 3(1) and accepted fresh deposits for Rs. 30,000 from four parties. They failed to repay the same within thirty days from the date of acceptance as required u/s 58-A of the Companies Act.
Learned Counsel for the Petitioners finally confined his arguments to the question whether the Petitioners can be prosecuted for receipt of the deposits prior to 1st February, 1975 in view of the decision of this Court referred to above. I have gone through the said decision wherein S. Natarajan, J. held that the prosecution u/s 58-A(5) is violative of Article 20 of the Constitution of India on the ground that the offences alleged to have been committed, viz., receiving of deposits in contravention of the section, from 23rd March, 1973 to 2nd January, 1975 and the said period would fall within the date 3-6-1975 till which date the Reserve Bank of India directions are in force. Under S. 58-B(5),(a) and (b) of the Reserve Bank of India Act, the above offence shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine, as provided under Cls., (i) and (iv) of that section. But, u/s 58-A(5)(a) and (b) of the Companies Act, for receiving a deposit in contravention of Section 58-A(3)(c), the punishment for every offence is imprisonment for a term which may extend to five years and also fine. It was further held by Natarajan, J., that having regard to the different sentences provided in the two enactments, and as under Article 20 no person shall be convicted of any offence except for violation of law in force at the time of the commission of the act charged as an offence, nor 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. The main reason on which the learned Judge quashed the above prosecution was that the prosecution of the Petitioner for an offence u/s 58-A(3)(c) which provides a greater punishment than the one prescribed by the Reserve Bank of India Act is violative of Article 20 of the Constitution.
In the instant case, applying the above principle of law, the Petitioners cannot be prosecuted for an offence u/s 58(A)(3)(c) with regard to seven deposits which were received prior to 1-2-1975. As regards the contention that it is a continuing offence, and as such they can be prosecuted, the learned Counsel drew my attention to the decisions of the Supreme Court in Commissioner of Wealth Tax, Amritsar Vs. Suresh Seth, wherein the Supreme Court held that failure to file return as required u/s 14(1) of the Wealth-tax Act, which is liable for the penalty u/s 18(1)(a) , is not a continuing offence and that the amendments in this regard are not retrospective.
After considering the relevant provisions of the Companies Act and the principle laid down in the decision of the Supreme Court referred to above, I am of the view that it is not a continuing offence as contended by the learned Counsel. But, certainly, the Petitioners can be prosecuted for the subsequent renewal of the deposits, and failure to comply with the provisions of the Act and for having received the four deposits. It is to be noted that even the Petitioners themselves had applied to the Secretary, Department of Company Law Affairs ,for exemption under S. 58-A(8) of the Act. The above application itself will clearly establish that the Petitioners have contravened the provisions and as such they seek for exemption. As regards the other allegations in the complaint, it is open to the Petitioners to put forth their contentions before the Trial Court and it is too premature at this stage to decide the same in this petition.
On a careful analysis of the allegations and the submissions made by either side, I am of the view that there is a prima facie case against the Petitioners in respect of offences u/s 58-A(l) and 58-A(4) (5) and (6) though not u/s 58-A(3)(C). With the above observation, the petition is dismissed.