Registrar of Companies vs F.S. Cabral and another

G.D. Kamat J.

All these four appeals could be conveniently disposed of by common judgment as the parties involved are the same and the offences alleged under the Companies Act, 1956, are the various contraventions of not holding the first annual general meeting and not taking appropriate measures as per the mandate under that Act.

Having regard to the controversy involved, I will set out a few facts in each case, the common facts which are indisputable and show how the respondents came to be prosecuted by the Registrar of Companies, Goa, Daman and Diu for various lapses.

The respondents, Mr. F.S.Cabral and Mrs. Ivy Ina Cabral, are the directors of M/s. Cabral & Co. P. Ltd. which was incorporated under the Companies Act, 1956, on April 26, 1980.

In Labour Case No. 329 of 1982, the complaint filed against the directors is for contravention and non-compliance of section 210(1) and (3) as they failed to place before the annual general meeting of the company the balance-sheet and the profit and loss account for the year ending June 30, 1981. In that, the allegation is that despite the fact that the company was incorporated on April 26, 1980, by virtue of the provisions of section 166 read with section 210, it was clearly incumbent upon the directors to have convened and held the first annual general meeting within 18 months therefrom, in any case before October 26, 1981. No meeting was held and the contravention was that no profit and loss account and balance-sheet were placed at the meeting. Indisputably a notice of non-observance and non- compliance of the provisions was addressed by the Registrar to the respondents on January 23, 1982, and the reply duly made by the respondents by their communication dated January 30, 1982, accepted that position. The learned Magistrate on the conclusion of the trial, despite the facts being not disputed with regard to not placing the balance-sheet and profit and loss account at the first annual general meeting, held that the respondents are liable to be acquitted and, in fact, acquitted them. He held that the company is a private company having shareholders from the same family and no money from the public is involved and further that the contraventions committed by them are not wilful.

In so far as the contravention of non-compliance of section 210(1) and (3) of the Companies Act is concerned, sub-section (5) provides imprisonment for a term which may extend to 6 months or with fine which may extend to Rs. 1,000 or with both. But, however, the proviso mentions that no person shall be sentenced to imprisonment for any such offence unless it was committed wilfully. In other words, sub-section (5) of section 210 read with the proviso makes it clear that if the Magistrate comes to hold that the offence committed is not wilful, the only course open to him is to award a sentence of fine and the mandate clearly provides that there cannot be any substantive imprisonment. It is against the acquittal recorded by the Judicial Magistrate, First Class, by the judgment dated March 31, 1987, that the Registrar of Companies has come in appeal, being Criminal Appeal No. 12 of 1987.

Criminal Appeal No. 13 of 1987 arises in Labour Case No. 330 of 1982 in which again by the judgment dated March 31, 1987, the learned Judicial Magistrate, First Class, Margao, has recorded the acquittal of the respondent but, however, this time for the contravention and non-compliance of section 166 of the Act. The requirement of section 166 is that the first annual general meeting must be held within 18 months from the date of incorporation and, as mentioned earlier, it is common ground that such meeting had to be held on or before October 26, 1981, and being not held, an offence was committed u/s 168 of the Act. This section provides that for a default of the company in that behalf, the directors of the company are liable to be punished with the fine which may extend to Rs. 5,000 and in case of continuous default with a further fine which may extend to Rs.250 for every day after the first during which the default continues. This time again, the story of acquittal as recorded by the learned Judicial Magistrate is no better as he mentions that the company is a family matter, no capital from the public is involved and the default being not wilful because the defence was that the accountant had suddenly left the services of the company with the result that the accounts were in a disarray and, therefore, no meeting could be held within the stipulated time.

Criminal Appeal No. 14 of 1987 arises in Labour Case No. 331 of 1982. The judgment is again of the same date March 31, 1987. The complaint, however, this time is u/s 162 for having contravened the provisions of section 159 and 161 of the Act in that the company had not filed its annual returns within 60 days from the date of the first annual general meeting. The facts are again not disputed and the annual return had not been filed and again the defence had been that the directors thereof are family members, the accountant had left the services of the company and there was nothing wilful on the part of the directors in committing any breach of the provisions of the Act. An acquittal was again recorded.

The story in Criminal Appeal No. 15 of 1987, which arises out of Labour Case No. 332 of 1982, is no better and for want of repetition, a brief reference need be made. This time, the complaint filed by the Registrar was u/s 220(3) read with section 162 for having contravened the provisions of section 221, in not having filed there copies of the balance-sheet and the profit and loss account for the year ending January 30, 1981, before the Registrar by November 24, 1981.

In fact, the requirement of the law in this connection is that the profit and loss account and the balance-sheet in three copies have to be submitted to the Registrar within 30 days from the date of the first annual general meeting. The acquittals recorded are for the same reason as in the earlier three cases.

The reasoning of the learned Magistrate who records acquittals lands the Registrar of Companies in this court in four different appeals after obtaining leave to appeal u/s 378 of the Code of Criminal Procedure. On taking me through the impugned judgments, it must be at once mentioned that there is hardly any reasoning worth the name by which the learned Judicial Magistrate has recorded the acquittals of the company and its directors for the various contraventions alleged against them in the matter of the several provisions of the Companies Act. There is considerable grievance made by Shri Bhobe, counsel for the appellants, that merely because the company involved is a private limited company and the shareholders are from one family, no distinction can be made from a public limited company in the nature of lapses. Secondly, no ground can be permitted that no capital or money from the public is involved to grant any benefit, for , the provisions of the Companies Act make no such discrimination and, therefore, these reasons are untenable if not perverse.

The learned Magistrate having accepted facts on behalf of the Registrar in respect of which there can be no dispute qua the contraventions, what Mr. Bhobe urges has great merit. On the facts admitted, there is hardly any scope for recording acquittals of the company and its directors. Their plea that their accountant left the services of the company and left the accounts in a disarray also cannot be a ground for acquittal. Shri Bhobe rightly contends that this circumstance may be a consideration for taking a lenient view-in the matter of imposition of penalty of sentence but, however , that by itself cannot be a ground for acquitting the respondents. He next brings to bear that the Department is not interested in witch- hunting and have no axe to grind against the company or its directors or securing substantive imprisonment of the respondents. But if this type of judgment is made to stand, it may create bad precedents and thereby affect several cases in future as, according to him, offences of this nature are not infrequent. He, therefore, submits that having regard to what is said by the Magistrate, all these appeals are liable to be allowed but, however, he, in all fairness, leaves the matter of sentences to the discretion of the court and thereby submitting to whatever orders that may be finally made.

Mr. Rebello, learned counsel for the respondents, attempted to justify the orders of the learned Judicial Magistrate. He mentions that for whatever reasons the learned Judicial Magistrate has recorded the acquittals, this court ought to be slow in interfering therewith. According to him, the major consideration which prevailed upon the MAgistrate is that the contraventions are not wilful. In any event, he further urges that if the court is inclined to take a different view, the various circumstances of the matter be taken into consideration and in that he lists out in the first place that the directors were new to the provisions of the Companies Act and the company had been incorporated by them only in April, 1980. Secondly, they were relying upon their accountant who suddenly left the services of the company and this being the position, they were unable to comply with the provisions of the Act. Thirdly, he mentions that no sooner the statutory notices were given to the company by the Registrar of Companies, on January 23, 1982, than a due reply was filed dated January 30, 1982, seeking extension of time for carrying out and complying with the requirements. In any event, he next points out that the requirements were thereafter duly carried out and what is more, the company has been complying with the different provisions from time to time for the subsequent years.

The attempt on the part of learned counsel for the respondents is feeble and he knows the limitation in his way to support the acquittals. The contraventions as such are not disputed by the respondents and in any case they cannot be disputed and, therefore, it must be held that whatever is alleged against the respondents by the Registrar of Companies must be held to have been duly proved and there was no scope whatsoever for the learned Magistrate on these facts to have recorded acquittals of the company and its directors.

But, however, Mr. Rebello seems to have some justification when he contends that the court ought to take a lenient view of the matter, being the first lapse committed and which are connected with one another. An imposition of fine, in my opinion, that too, in a token amount, will meet the ends of justice. Apart from the fact that the directors were novices to the companies Act and the company itself was incorporated only in April, 1980, in their statement, the directors have clearly stated that their accountant on whom they had been relying left the services and as a result the company''s accounts were in a disarray and, therefore, no meeting could be held within 18 months from the date of the incorporation, i.e., on or before OCtober 26, 1981, and, therefore, no balance-sheet and profit and loss account could be placed at that meeting nor within 30 days from the date thereof, copies of such accounts were filed before the Registrar of Companies and the same reasons prevailed for not filing the annual return as required in LAbour Case No.331 of of 1982, vide Criminal Appeal No. 14 of 1987. II have, therefore, no alternative but to quash and set aside the impugned orders dated MArch 31, 1987, in each of the four cases. The respondents in each case are guilty of the contraventions of the provisions alleged against them.

In Criminal Appeal No. 12 of 1987, vide Labour Case No. 329 of 1982, the respondents are held guilty for having contravened and not complied with the provision of section 210(1) and (3) and, therefore, are ordered to pay a fine u/s 210(5) in the sum of Rs. 75 each. In Criminal Appeal No. 13 of 1987, vide Labour Case No. 330 of 1982, the respondents are held guilty of contravention of non-compliance with section 166 and, therefore, the punished u/s 168 and are directed to pay a fine of Rs. 60 each. In Criminal Appeal No. 14 of 1987, vide Labour Case No. 331 of 1982, the respondents are held guilty of having contravened the provisions of section 159 and 161 and, therefore, directed to pay a fine of Rs. 25 each. In Criminal Appeal No. 15 of 1987, vide Labour Case No. 332 of 1982, the respondents are held guilty of having contravened section 220 and are directed to pay a fine of Rs. 25 each. In default of the payment of fine of Rs. 75 each in the first case, Rs. 60 each in the second and Rs. 25 each in the third and fourth cases, the directors to undergo 5,3,2, and 2 days of simple imprisonment, respectively. All the appeals are, accordingly, allowed.