The State of Bombay v. Bandhan Ram Bhandani and Others

SARKAR J.-The respondents were Directors of r960 Hirjee Mills Ltd. They were prosecuted before the Chief Presidency Magistrate, Bombay, for two offences The State of under the Companies Act,, 1913, as amended by Act lloniba~,i v. XXII of 1936. The first offence was that they know-Bandhan Ram ingly and wilfully authorised the failure to file the Bhanda11i summary of share capital for the year 1953 and there- ~Others by became punishable under sub-s. (5) of s. 32 of the Act, for a default in carrying out the requirements of Sarkar that section. The second offence was that t.hey were knowingly and wilfully parties to the failure to lay before the Company in general meeting the balance sheet and profit and loss account as at March 31, 1953 aud. thereby became punishable under s. 133(3) of the Act .for a default.in complying with the requirements of s. 131. There was a separate trial in respect of each offence;

The learned Magistrate fo1md that no general meet-ing of the company had been held iµ the year con-cerned. Following lmperator v. The Pioneer Glay and Industrial Works Ltd. (1) he acquitted the respondents, being of the view that no offence under either section could be committed till the general meeting had been held. The learned Magistrate did not go into the merits of the cases on the facts. Appeals by the appellant to the High Court at Bombay from the orders of the learned Magistrate were summarily dis-missed. It has preferred the present appeals from the decisions of the High Court ~t Bombay with special leave granted by this Court. The appeals have been heard together and are both disposed of by this judg-ment.

It appears that respondent No. 7, N. K. Firodia, was discharged by the learned Magistrate because it · was conceded at the trial that he was not a director of the Company at any material time. He has been made a respondent to the present appeals clearly through some misapprehension. The appellant, the State of Bombay, doe8 not and cannot proceed against him. The name of respondent Firodia should there.

fore be struck out from the records of this appeal.

(•) l.L.R. [•948] Bom. 86.

804 SlJPHE~lE COL'HT REPORTS [l\J61) Respondent Ko. 5, l''a.teh Chand J hunjhunwala, died while this appeal wa.s pnnding in thi8 Court. The The Stott tJj appeal is therefore concerned with the rorna.ining five

v. respondents only.

JlandJran Ram Sub-section (l) of o. 32 requires a eompa11y (•nce at

Rhandani least in every year to ma.kc a list of its shareholders

Otlitrs as on the dat{l of tho first or only ordinary gen~ral

meeting in the year. Sub-~ection (2) reguireR that tho S!'rkar j. list shall contain a summary specifying various parti-

culars mentioned in it. Sub.section (3) states that the list and summary sha.11 be completed within twenty. one days after the day of the first or only ordinary genera.I meeting in the year and the company shall forthwith file a copy with the registrar together with a certificate from a director or the manager or the secretary of the company that the list and summary state the facts as they stood on the day aforesaid. Sub-section (5) contains the penal provision, that " If a company makes default in complying with the requirements of this section, it shall be liable to a fine not exceeding fifty rupees for every da.y during which the default continues, and every officer of the com-pany who knowingly a.nd wilfully authorises or permits the default shall be liable to the like penalt.y ".

It is said on behalf of the respondents that there is no default in comp!) ing with the requirements of the section until a general meeting is held. That, it is said, follows from the language of the section, for it requires certain things a.s at the date of the meeting to be stated in the list and summary and also requires these to be filed within a. cert.a.in time of the meeting. So, it is said, that, the section requires certain things to be done only after the meeting has been held and no question of performing those things a.rises till the meeting bas b1,-en held.

A contrary view has been taken in England on the corresponding provisions of the English Companies Acts of 1862 and 1908: see Gibson v. Barton('), Edmonds v. Foster(') and Park v. Lawton('). It was iaid in these cases that a person charged with an

(1) (1875) L.R. lo Q.B. 329. (2) (1873) 45 Law J. Rep. M.C. 4t. (3} [191Jj I }.,:.B. 588.

offence could not rely on his own default as an answer to the charge, and so, if the person charged was res-ponsible for not calling the general meeting, he cannot The State of Bombay be beard to say in defence to the charge that the v. general meeting had not been called. It was also Bandhan Ram said that the company and its officers were borind, to Bhandani perform the condition precedent if they could do that, & Others in order that they might perform their duty. This seems to us to be the correct view to take. If the Sarkar person charged with the failure to carry out the requirements of the section could have called the meeting, he cannot defeat the provisions of the sec-.

tion simply .by not calling the meeting wilfully.

It is true that under s. 76 of the Act a general meeting of a company has to be held once at least in every calendar year and if a default is made, the company and every director or the manager of the company who is knowingly and wilfully a party to the default shall be liable to a fine not exceeding five hundred rupees. That however is, in our opinion, no reason for saying that a person charged with a failure to filp the list and summary as required by s. 32 where a meeting had not been held, could only be prosecuted under s. 76 and not under s. 32. Section 76 imposes au obligation to hold a meeting and attaches a penalty to a failure to perform that obliga-tion. In the case of s. 32 it is necessary that the meetilig should be held in order that the requirements of that section may be carried out. It is no less necessary to call a meeting for performing the obliga.

tions imposed by s. 32, because under s. 76 there is an obligation to call a meeting the breach of which entails an independent penalty. The two sections deal with different matters and s. 76 does not inter-fere with the operation of s. 32. The effect of s. 32 must be derived from its terms: the terms cannot have different effects depending on whether there is a provision like s. 76 in another part of the Act or not.

Without a provision like s. 76 a delinquent officer of the company may make s. 32 infructuons, and there-fore, as already stated, it must be held that liability

806 SCPRE:ME COURT REPORTS [1961]

under s. 32 would be incurred where the officer has wrongly assisted in the meeting not being held. The Tlst Stole of result cannot be different because of the presence of a

Bombay provision like s. 76.

v.

Ba"dlsa" Rani' Nor do we think t.ha.t sub-sec. 5 of s. 32 by impos-

BAandani ing a daily fine during the continua.nee of the default 0-Oiiier$ indicates that the default is not committed till the

meeting has been held. Jn order that the default may SarAar ]. continue it has no doubt first to occur. In our view,

it occurs after the expiry of 2I days from the day when the meeting should have been held within the year.

The respondents referred to the case of Queen v. Newton(') where it having been proved that the general meeting was not held, the persons charged with the default were acquitted. That case however is clearly distinguishable, "hcca..use the decision pro-ceeded on the ground that, the Hummons having alleg-ed in terms that the default was ma.de after the genera.I meeting had been held, it became essentia.1 to prove when the meeting was held a.s a matter of fact, and in the absence of proof the court held that the summons was rightly dismissed ". In this case Cockburn, C. J., expressed some d•Jubts a.bout the cor-rectness of the decision in Edmonds v. Foster (' ). In Park v. Lawton (3) however, Lord Alverstone said that he was unable to share those doubts, and with this view, we agree. We may add that such doubts have not been shared by anyone upto now.

Another ease to which we were referred on beha.lf of the respondents was Dorie v. South Afriron Super- .Aeration Ltd.('). There a company was convicted for a failure t-0 file the list and summary in a case where the genera.I meeting had not been held and fined Id and Id per day upto certain day. Subsequently a further summons against it was ta.ken out in respect of the same default for further penalties from that day to another later day. It was held that the word "default" implied a wilful and continued neglect to do an act required and that the company could not (1) (1879) 48 Law J. Rep. M. C. 77. (3) (1911] 1 K.B. 58A. (1) (1875) 45 Llw J. Rep. M. C. 41. (4) (1904) 20 T.L.R. 415. be lie.hie to a. continuing da.ily fine for an omission Ig6o which it wa.s impossible to remedy. The report does The State of not set out the arguments nor the judgment a.nd it is Bo~bay not clear on what grounds the decision was given. It v. appears, however, that Lord Alverstone was one of Bandhan Ram the Judges who decided that caee. In Park v. Bhandani Lawton('), Lord Alverstone himself observed with b Others regard tor the Dorte' 8 case that there, " there was no Sarkar question of the defendant being also in default as to the general meeting, and that decision, therefore, in .

no way conflicts with the earlier authorities." We do not think, therefore, that Dorte's c,ase assists the respondents at a.II. ·It is authority only for the pro-position that a continuing daily fine will not be exact-ed where, owing to no meeting having been held, it is impossible to remedy the default: see Buckley's Com-pany Law (13th Ed.), p. 3H.

Turning now to s. 131, we find that it requires the directors of a company, once' at least in every calendar year, to lay before the company ,in .general meeting a balance sheet and profit and lo~s account of the com-pany.; Sub-section (3) of s .. 133 makes the company and every officer of it who is knowingly and wilfully a.

party to the default in carrying out the provisions of s. 131, punishable with fine which may extend to five hundred rupees. As in the case of s. 32 and for _the same reasons, here also it is no defence to the charge for breach of s. 131 to say that a meeting was not called.

As regards Imperator v. Pioneer C/,ay and Industrial Works Ltd. (2), on which tbA courts belciw held that the respondents must be \:l.i;quitted, we find that it turned on s. 134 of Me Companies Act, 1913.

The language of that section is to a. certain extent different from the language used in ss. 32 and 131.

Section 134(1) says, "After the bale.nee sheet and -profit and loss account ..... -. ............ have been laid before the compa.ny at the general meeting, three copies thereof ......... shall be filed with the Registrar."

Sub.section (4) of this section provides a penalty for breach of s. 134, in terms similar to those contained in sub-sec. (5) of s. 32. If the language of s. 134(1)

(1) [1911] 1 K.B. 588. (z) I.LR. [1948] Bom. 86,

808 Sl1PHE)IE COl'RT REPOitTS [ 1961 J / makes any difference as to the principle to he applied The State of in ascertaini111! wheth~r a breach of it bas occurred or

Bombay 11ot-as to which we say nothing in this ca8e-then

v. that ca.se can be of no assistancp to tho rPspondPnts. Dandhan Rani If however no Ruch difference can bP made, then we

Bha11da11i think that it was not correctly decided. \\\, ohsen·e

Others that Chagla, C. J., who delivered thP judgment of the Sarkar ]. Court in that case, did not question tlw c1)1Tectness of

the decision in Park v. Lawton (1) which be was asked to follow. All that he said with r(·gard to that case was that the scheme and terms of the section on which it turned were different from s. 134 of tLe Com panics Act, 1913. That may or may not he so. There is howe. ver no difference betweens. 26 of the English Cc1m. panics Act, 1908, on which Parl:er's case turned and which apparently through some mistake Chagla, CJ., cited s. 36, ands. :12 of the lndian Companies Act of 1913, except thM tbc English section required the summary to inelud(, a statement in t.hc form of a balanco sheet COlltaining certain particulars mPntion-ed, whereas our section does not n'quire that. Sect.ion 131 of our _\ct contains surne provision about the laying of the balanco sheet before the general meeting. Tliis provision was inserted in the Act by the amend-ing Act of 1936. The faet, that. one of tho require. men ts of the Euglish section 26 is not present. iu s. :~2 of our Act caul!ot create an v material d ilfcrence bt·t1reen :<. 32of oPr Aet ands. ·26 of the English Act.. If the principle that a fll'rson charged with an 11fl"encfl cannot rely on his own default as an answer to the charge is corrnct, as we think it is, and which we do not find Chagla, C. J., saying it is not, then that prin-ciple would clearly apply when a person is charged with a breach of s. 32 of our Act.

We think therefore that the appeal should be allow-ed. Tho case will now go back to the learned PreHi-dency :lfagistrato and be tried on the merits according to the law as laid down in this judgment.

Appeal allowed. Case remanded. (t) [19u] 1 K.B.;588.