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PETITIONER: H.V.  JAYARAM

       Vs.

RESPONDENT: INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD.

DATE OF JUDGMENT:       15/12/1999

BENCH: K.T.Thomas, M.B.Shah

JUDGMENT:

     Shah, J.

     Leave granted.

     The only question involved in these appeals is whether the  complaint for the offence punishable under Section  113 (2) of the Companies Act, 1956 could be filed only where the registered  office  of the company is situated or where  the complainant is residing.

     The  appellant  had lodged criminal cases  before  the Special   Court  for  economic   offences  in  Karnataka  at Bangalore  on  the allegation that the respondent  companies had  committed  offences punishable under Section 113(2)  of the  Companies Act.  Criminal Petition Nos.240, 1485,  1548, 1848  and 1849 of 1996 before the High Court of Karnataka at Bangalore  challenged  the order passed by the  trial  court rejecting  applications for the discharge on the ground that the  Magistrate  had no territorial jurisdiction to try  the alleged  offences.   In  some cases,  companies  straightway approached  the  High Court questioning the order passed  by the  learned Magistrate issuing summons to them after taking cognizance  of  the  offence.   It   was  pointed  out  that admittedly   the  registered  offices   of  the   respondent companies  are not located in the State of Karnataka but are located  either  at Bombay or at Gujarat.  As against  this, the appellant who is a practising advocate contended that he was a permanent resident of Bangalore and letters requesting the  company to transfer the shares and to send  memorandum, articles of association, balance sheets etc.  were sent from Bangalore  to  the registered offices of the companies  and, therefore,  cause  of action also arose at  Bangalore.   The High  Court  after considering the various decisions  relied upon  by the learned counsel for the parties arrived at  the conclusion  that  under the provision of Section 53  of  the Companies  Act  two  modes are prescribed  for  serving  the documents,  one  to serve personally and the other by  post. As  the  documents were sent to the respondent by  post,  as requested by him, the cause of action would arise only where the  head office is situated.  The Court, therefore, arrived at  the conclusion that having regard to Section 201 of  the Cr.P.C.,  the Magistrate is required to return the complaint

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for presentation before the proper court with an endorsement to that effect.

     The  learned  counsel  appearing  on  behalf  of   the appellant (complainant) strenuously contended that the order passed  by  the High Court is, on the face of it,  erroneous because  admittedly the appellant is residing at  Bangalore. Being  purchaser  of the shares, he was entitled to get  the share  certificates  at Bangalore and, therefore,  cause  of action  would arise at Bangalore also.  For this purpose, he relied upon the decision rendered by Rajasthan High Court in Ranbaxy  Laboratories Ltd.  v.  Smt.  Indra Kala {(1997)  24 CLA 203 (Raj.)}.

     As  against  this, learned senior counsel, Mr.   Desai submitted  that  the  order passed by the High Court  is  in accordance  with  the  provision of Section  113  read  with Section  53  of  the  Companies Act.   He  referred  to  the decision  rendered by the Patna High Court in Upendra  Kumar Joshi  v.   Manik Lal Chatterjee and others, {1982  (Vol.52) Company   Cases  177  (Patna)}.   He  submitted   that   the litigation is frivolous and it should be discouraged.

     For  appreciating the contention raised by the learned counsel  for  the  parties, we would refer to  the  relevant parts of Sections 53 and 113 of the Companies Act, which are as under:-

     53.   Service of documents on members of company.(1) A  document may be served by a company on any member thereof either  personally,  or by sending it by post to him to  his registered  address, if any, within India supplied by him to the company for the giving of notices to him.

     (2) Where a document is sent by post,--

     (a)  service thereof shall be deemed to be effected by properly   addressing,  prepaying  and   posting  a   letter containing  the  document, provided that where a member  has intimated to the company in advance that documents should be sent  to him under a certificate of posting or by registered post  with or without acknowledgement due and has  deposited with  the company a sum sufficient to defray the expenses of doing  so, service of the document shall not be deemed to be effected  unless  it is sent in the manner intimated by  the member;  and

     (Emphasis added) (b)

     (3)  (4)  (5)

     113.     Limitation    of    time    for   issue    of certificates.(1)  [Every company, unless prohibited by any provision  of law or of any order of any court, tribunal  or other  authority,  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,  deliver,  in  accordance  with   the procedure  laid down in section 53, the certificates of  all shares,  debentures  and  certificates of  debenture  stocks allotted or transferred;

     Provided.  ..  ]

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     (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.

     (3) ..

     Section  113  inter  alia requires that  within  three months  after  the  allotment of any shares and  within  two months  after  the application for the registration  of  the transfer of any such shares, every company shall deliver, in accordance  with the procedure laid down in Section 53,  the certificates   of  all  shares   allotted  or   transferred. Sub-section  (2)  provides punishment if default is made  in complying with sub-section (1).  Reading Sections 113 and 53 together,   share  certificates  are  to  be  delivered   in accordance  with  the procedure laid down in Section 53.   A document  is to be served either personally or by sending it by  post  at registered address within India.  Sub-  section (2)  specifically mentions that where a document is sent  by post, such service thereof shall be deemed to be effected by properly  addressing,  prepaying  and   posting  the  letter containing  the document.  Hence, once there is a  statutory mode  of  delivering  the  document   by  post  and  deeming provision  of such delivery, the place where such posting is done  is the place of performance of statutory duty and  the same  stands  discharged as soon as the document is  posted. Hence  the  cause of action for default of not  sending  the share certificates within stipulated time would arise at the place where the registered office of the company is situated as  from that place the share certificates can be posted and are  usually  posted.  If the addressee is available at  the same  locality where the registered office of the company is situated,  it  is  reasonable  to   think  that  service  of documents  may be effected by personally delivering to  him. But  if  the addressee is residing at a distant place it  is unreasonable  to  expect the company to depute  somebody  to travel  upto that distance to personally deliver it to  him. The only usual mode which any company would then adopt is to send  it to him by post.  For such default, as  contemplated under  Section 113(1), there is no question of any cause  of action arising at the place where complainant was to receive postal  delivery.  What is punishable under sub-section  (2) of  Section  113  is non- delivery, in accordance  with  the provision laid down under Section 53, of the certificates of shares  within  prescribed time.  So, if the  documents  are posted  within stipulated time, there would be compliance of Section 113 and that there would not be any offence.

     In  H.P.   Gupta  v.  Hiralal {1970(1) SCC  437},  the Court  considered a similar provision of Section 207 of  the Companies Act, which provides for payment of dividend within 42-days  of its declaration by a company and its non payment within  stipulated period is punishable.  Section inter alia provides  that where dividend is declared by the company but has  not been paid, or warrant in respect of thereof has not been posted within 42-days from the date of its declaration, to any shareholder entitled to the payment of dividend, then it  would  be an offence punishable under Section  207.   In that case, Court also considered Section 205(5)(b), which is similar  to  Section 53, which inter alia provides that  any dividend  payable  may  be  paid by cash or a  cheque  or  a warrant  sent by post directed to the registered address  of

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the  shareholder  entitled to the payment of  the  dividend. The  Court  held  that when the company posts  the  dividend warrant  at  the registered address of the shareholder,  the post  office  becomes the agent of the shareholder  and  the loss  of a dividend warrant during the transit thereafter is at the risk of the shareholder.  The Court further held that the  place where the dividend warrant would be posted is the place  where  the company has its registered office and  the offence under Section 207 of the Act would also occur at the place where the failure to discharge that obligation arises, namely,  the  failure  to post the dividend  warrant  within 42-days.   In  the  facts of that case, the  Court  observed thus:  -

     .The venue of the offence, therefore, would be Delhi and  not Meerut, and the Court competent to try the  offence would  be  that Court within whose jurisdiction the  offence takes place, i.e., Delhi.  This should be so both in law and common-sense,  for,  if  held otherwise,  the  directors  of companies  can  be  prosecuted at hundreds of places  on  an allegation  by shareholders that they have not received  the warrant.   That  cannot be the intention of the  Legislature when  it enacted Section 207 and made failure to pay or post a  dividend  warrant within 42 days from the declaration  of the dividend an offence.

     Same  would be the position for the offence punishable under  Section 113 of the Act.  Cause of action for  failure to  deliver  the  share  certificates  or  documents  within prescribed  time would arise where the registered office  of the company is situated.

     However, learned counsel for the appellant relied upon the decision of Rajasthan High Court in Ranbaxy Laboratories Ltd.   v.  Smt.  Indra Kala {(1997) 24 CLA 203 (Raj.)}.   In the  said  case,  complaint was filed  before  the  Judicial Magistrate   at  Jaipur  in   Rajasthan  for  the   offences punishable  under  Section  113  of   the  Act  against  the directors  and  officers  of the company alleging  that  the complainant  had purchased 200 shares of the Company and had duly  sent such shares to the head office of the company for registration  of  the  transfer in its  books,  but  despite repeated  requests,  reminders and efforts made by her,  the Company  did not register the transfer of the shares in  her name.   Registered office of the company was at Delhi.   The High  Court  negatived  the contention of the  company  that Judicial  Magistrate at Jaipur did not have jurisdiction  to deal with the case by holding thus:  -

     Company  collects  money from the public at large  by selling its shares and transactions of sale and purchase are governed   by   the  provisions  of   the   Companies   Act. Registration  of the transferred shares is one of the duties of  the  company  in the course of conducting  its  business according to the provisions of law.  Therefore, the interest of  the  members  of the public  transacting  such  business cannot  be allowed to be defeated on the plea that relief to the aggrieved persons can be granted only at the place where the office of the company is located.

     In  our  view,  it appears that the attention  of  the learned Judge was not drawn to the decision rendered by this Court  in H.P.  Gupta v.  Hiralal {1970(1) SCC 437} and also to  Section  113 of the Act, which inter alia provides  that

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company  shall deliver the documents, such as,  certificates of  shares, debentures and certificates of debenture  stocks allotted  or  transferred in accordance with  the  procedure laid  down in Section 53.  Section 53 prescribes the mode of delivery  inter  alia  by sending the document  by  post  at registered  address  and  sub-section  (2)  is  the  deeming provision  for  delivery of such letter.  In  Upendra  Kumar Joshi  v.   Manik Lal Chatterjee and others, {1982  (Vol.52) Company  Cases  177  (Patna)},  the  Patna  High  Court  has followed  the decision rendered by this Court in the case of H.P.   Gupta  (Supra)  and  has   rightly  arrived  at   the conclusion that the cause of action would arise at the place where registered office of the company is situated.

     In the result, the aforesaid appeals are dismissed.