AI Structured Summary
Not yet generated for this judgment
Judgment
N.J. Pandya J.
Rule. Mr. Padia waives service. It is very surprising that the court of the Metropolitan Magistrate as well as the City Sessions Court both have
been carried away by the argument advanced on behalf of the original accused that in view of the amendment in section 113 of the Companies
Act, 1956 (for short ""the Act""), punishment can be done to the defaulting respondent u/s 113(2) by the Company Law Board (for short ""the
Board""). When the argument was based on this taking it to be a question of jurisdiction, the court of the Metropolitan Magistrate, Ahmedabad,
accepted the plea that it has no jurisdiction.
The matter was carried before the learned City Sessions judge, where also this plea was found acceptable. It is indeed surprising that this plea
has been advanced, much more so, which should have been accepted. Civil liability or responsibility arising out of a civil nature under a statute is
one thing and penalty imposed by that very statute necessarily has to be treated under the Criminal Procedure Code read with relevant provisions
of the statute which market that particular act an offence. Once it is an offence, obviously, no civil court can exercise its jurisdiction and the
punishment has to be awarded by a competent court established under the Code of Criminal Procedure. It is not to say that the statute, creating an
offence may not provide for a forum duly empowered to deal with penal provisions. In the instant case, as one reads the amendment introduced in
the year 1986, in the Companies Act in place of what is ordinarily understood to be court namely, a civil court, which until amendment was a
district court and in some of the cases even the High Court, the Board came to be introduced for which one may read the definition given in section
2 sub-section (10A) of the Companies Act, 1956. It refers to a Board constituted u/s 10E. The Board having been constituted u/s 10E, sub-
section (4)(c) thereof provides for the powers of the Bench of the Board which are those of a civil court and after making reference to the Civil
Procedure Code, certain matters are enumerated. If at all, any indication as to the nature of the function of the Board was required, these
provisions in the Act themselves make it abundantly clear that it is nothing else but a substitution of a civil court.
The civil court, ordinarily is to be understood with reference to the CPC and whenever there is a reference to a principal court of original
jurisdiction, it would be a District Court and that was originally known in the Act and very rarely the High Court came into the picture as the court
of first instance.
In the year 1988, there came to be brought amendments, one of which was to constitute a Company Law Board and assign it the function that
was given to the civil court prior to the amendment.
In this background, if we turn to sub-section (2) of section 113 of the Companies Act, it is quite clear that the default envisaged in that section
pertaining to non-issuance of certificate entails criminal liability in the form of punishment which may extend to Rs. 500 for every day during which
the default continues and it being a fine to be imposed by way of punishment, obviously it is within the province of a magisterial court exercising
criminal jurisdiction in the area.
The learned advocate Mr. Padia drew my attention to sub-section (3) of section 113 where the Company Law Board has been given power to
issue directions for giving certificates. This is nothing else, but the power originally exercised by a civil court, i.e., the District Court in the nature of
passing a decree for specific performance and, therefore, it cannot be read to mean that for exercising penal jurisdiction also, the Board has
power.
The scheme of things that have changed is only with regard to substitution of the court by the Company Law Board in relation to certain civil
matters, but so far as the complaints are concerned, or dealing with the default as prescribed under the Companies Act, 1956, are concerned, it
was and it continues to remain within the provisions of criminal courts established under the Criminal Procedure Code, 1973, and, therefore, the
argument that only the Board can exercise jurisdiction and, therefore, the complaint filed before the Court of the Metropolitan Magistrate has no
jurisdiction, is totally baseless.
In the result, the petition is required to be allowed. It is accordingly allowed. The orders of the courts below are set aside. Rule is made
absolute.