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PETITIONER: THE STATE OF BOMBAY

       Vs.

RESPONDENT: BANDHAN RAM BHANDANI AND OTHERS.

DATE OF JUDGMENT: 23/09/1960

BENCH: SARKAR, A.K. BENCH: SARKAR, A.K. IMAM, SYED JAFFER GUPTA, K.C. DAS

CITATION:  1961 AIR  186            1961 SCR  (1) 801  CITATOR INFO :  E          1973 SC2429  (2,7,8)

ACT:  Company--General meeting not called wilfully--Whether it can  be  a defence--Indian Companies Act, 1913 (VII Of 1913),  as  amended  by Companies Act, 1936 (22 of 1936), ss.  5,  32(5)  131 and 133(3).

HEADNOTE:  The  respondents,  directors of a company,  were  prosecuted  under  ss. 32(5) and 133(3) of the Companies Act, 1913,  for  breaches Of ss. 32 and :131 of that Act for having knowingly  and  wilfully authorised the failure to file the summary  of  share  capital  for the year 1953 and  being  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.  The  respondents  contended  that there was no default in complying with the requirements  of  the section as no general meeting had been held  in  the  year concerned.  Held--A  person charged with an offence cannot rely  on  his  default  as  an  answer  to  the  charge  and  so,  if   the  respondents  were  responsible for not calling  the  general  meeting,  they  cannot  be heard to say in  defence  to  the  charges  brought against them that the general  meeting  had  not been called.  The  company  and  its officers were bound  to  perform  the  conditions  precedent, if they could do that, in order  that  they might perform their duty.  802  It is no less necessary to call a meeting for performing the  obligations  imposed  by  s. 32 because  S.  76  creates  an  obligation  to  call a meeting and  imposes  an  independent  penalty  for breach of that obligation.  Liability under  s.  32(5)  or s. 133(3) would be incurred where the officer  has  wrongfully assisted in the meeting not being held though  he  might  also be liable at the same time to the penalty  under  s. 76.  Sub-section (5) Of S. 32 by imposing a daily fine during the  continuance  of  the  default does  not  indicate  that  the  default is not committed till a meeting has been held.   The

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default occurs after the expiry of twenty-one days from  the  day when the meeting should have been held.  Imperator  v.  The Pioneer Clay and Industrial  Works  Ltd.,  I.L.R. 1948 Bom. 86, Queen v. Newton, (1879) 48 Law J.  Rep.  M.C.  77  and Dorte v. South  African  Super-Aeration  Ltd.,  (1904) 20 T.L.R. 425, distinguished.  Gibson  v.  Bayton,  (1875) L.R. 1o  Q.B.  329,  Edmonds  v.  Foster,  (1875) 45 Law J. Rep. M.C. 41 and park  v.  Lawton,  [1911] 1 K.B. 588, approved.  Doyle  v.  South  African Super--Acration  Ltd.,  (1904)  2o  T.L.R. 425, not applicable.

JUDGMENT:  CRIMINAL APPELLATE JURISDICTION: Criminal Appeals Nos. 93  &  94/1958.  Appeals  by special leave from the judgment and order  dated  April  9, 1956, of the former Bombay High Court in  Criminal  Appeals  Nos.  419  and  420 of 1956,  arising  out  of  the  judgment  and  order dated October 15, 1955,  of  the  Chief  Presidency Magistrate, Bombay, in Cases Nos. 370/S and 371/S  of 1955.  C. K. Daphtary, Solicitor-General of India, N. S. Bindra and  R. H. Dhebar, for the appellant (in both the appeals).  S. P. Varma, for respondents Nos. 1, 2 and 3 (In both  the  appeals).  A. N. Goyal, for respondent No. 4 (In both the appeals).  N.  P. Nathwani, S. N. Andley, J. B.  Dadachanji,  Rameshwar  Nath  and P. L. Vohra, for respondents Nos. 5 to 7 (In  both  the appeals).  1960.   September  23.   The  Judgment  of  the  Court   was  delivered by  803  SARKAR  J.-The  respondents were Directors of  Hirjee  Mills  Ltd.   They  were  prosecuted before  the  Chief  Presidency  Magistrate,  Bombay, for two offences  under  the  Companies  Act,  1913,  as  amended by Act XXII  of  1936.   The  first  offence was that they knowingly and wilfully authorised  the  failure  to file the summary of share capital for  the  year  1953 and thereby became punishable under sub-s. (5) of s. 32  of  the Act, for a default in carrying out the  requirements  of  that  section.  The second offence was  that  they  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 and  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 found that no general meeting of  the  company  had  been held in the  year  concerned.   Following  Imperator v. The Pioneer Clay 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 dismissed.  It  has  preferred the present appeals from the decisions of the High  Court  at Bombay with special leave granted by  this  Court.  The  appeals have been heard together and are both  disposed  of by this judgment.  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

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any  material  time.  He has been made a respondent  to  the  present  appeals clearly through some misapprehension.   The  appellant, the State of Bombay, does not and cannot  proceed  against  him.  The name of respondent Firodia should  there-  fore be struck out from the records of this appeal.  (i) I.L.R. [1948] BOM. 86.  804  Respondent No. 5, Fateh Chand Jhunjhunwala, died while  this  appeal  was pending in this Court.  The appeal is  therefore  concerned with the remaining five respondents only.  Sub-section (1) of s. 32 requires a company once at least in  every year to make a list of its shareholders as on the date  of  the first or only ordinary general meeting in the  year.  Sub-section  (2)  requires  that the list  shall  contain  a  summary  specifying  various particulars  mentioned  in  it.  Sub-section  (3) states that the list and summary  shall  be  completed within twenty. one days after the day of the first  or only ordinary general 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  day  during which the default  continues,  and  every  officer of the company who knowingly and wilfully authorises  or permits the default shall be liable to the like penalty".  It  is  said on behalf of the respondents that there  is  no  default  in complying 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  as  at the date of the meeting to be stated  in  the  list and summary and also requires these to be filed  within  a  certain 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 arises till the meeting has been 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(1), Edmonds v. Foster(2)  and  Park v. Lawton (3).  It was said in these cases that  a  person charged with an  (1) (1875) L.R. 1o Q.B. 329.  (2) (1875) 45 Law J. Rep. M.C.  41.  (3) [1911] 1 K.B. 588.  805  offence  could not rely on his own default as an  answer  to  the  charge, and so, if the person charged  was  responsible  for  not calling the general meeting, he cannot be heard  to  say  in defence to the charge that the general  meeting  had  not been called.  It was also said that the company and  its  officers  were bound, to perform the condition precedent  if  they  could do that, in order that they might perform  their  duty.  This seems to us to be the correct view to take.   If  the  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 section 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

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opinion,  no reason for saying that a person charged with  a  failure  to file 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  an  obligation  to  hold a meeting and attaches a penalty  to  a  failure to perform that obligation.  In the case of s. 32 it  is  necessary that the meeting 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  obligations  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  interfere  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  infructuous,  and therefore, as already stated, it  must  be  held that liability        103  806  under s. 32 would be incurred where the officer has  wrongly  assisted  in the meeting not being held.  The result  cannot  be different because of the presence of a provision like  s.  76.  Nor do we think that sub-sec. 5 of s. 32 by imposing a daily  fine  during the continuance of the default  indicates  that  the default is not committed till the meeting has been held.  In order that the default may continue it has no doubt first  to  occur.   In our view, it occurs after the expiry  of  21  days  from  the day when the meeting should have  been  held  within the year.  The respondents referred to the case of Queen v. Newton  (1)  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, " because  the  decision  proceeded on the ground that, the  summons  having  alleged in terms that the default was made after the general  meeting had been held, it became essential to prove when the  meeting was held as 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 doubts about  the  correctness of the decision in Edmonds v.  Foster  (2).  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  case  to which we were referred on  behalf  of  the  respondents  was Dorte v. South African Super-Aeration  Ltd.  (4).   There a company was convicted for a failure  to  file  the list and summary in a case where the general meeting had  not  been  held and fined Id and Id per day upto  a  certain  day.   Subsequently a further summons against it  was  taken  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.  (2)  (1875) 45 Law J. Rep. M. C. 41.  (3)  [1911] 1 K.B. 589.  (4)  (1004) 2o T.L.R. 425.  807  be  liable to a continuing daily fine for an omission  which  it  was impossible to remedy.  The report does not  set  out

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the  arguments nor the judgment and it is not clear on  what  grounds  the decision was given.  It appears, however,  that  Lord Alverstone was one of the Judges who decided that came.  In Park v. Lawton(1), Lord Alverstone himself observed  with  regard  to  the  Dorte’s case that there,  "  there  was  no  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 case assists the respondents at all.  It  is authority only for the proposition that a  continuing  daily  fine will not be exacted where, owing to  no  meeting  having  been held, it is impossible to remedy  the  default:  see Buckley’s Company Law (13th Ed.), p. 311.  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 loss account of  the  company.   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 Clay and  Industrial  Works  Ltd.   (2),  OD  which  the  courts  below  held  that   the  respondents must be acquitted, we find that it turned on  s.  134  of  the  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  balance sheet and profit and loss  account..................  have  been laid before the company 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-see. (5) of s. 32.  If the language of  s.  134(1)  (1) [1911] 1 K.B. 588.  (2) I.L R. [1948] Bom. 86.  808  makes  any difference as to the principle to be  applied  in  ascertaining  whether a breach of it has occurred or  not-as  to  which we say nothing in this case-then that case can  be  of  no  assistance to the respondents.  If however  no  such  difference  can  be  made, then we think  that  it  was  not  correctly  decided.   We  observe that Chagla,  C.  J.,  who  delivered  the judgment of the Court in that case,  did  not  question  the correctness of the decision in Park v.  Lawton  (1)  which  be was asked to follow.  All that he  said  with  regard  to  that case was that the scheme and terms  of  the  section on which it turned were different from s. 134 of the  Companies  Act, 1913.  That may or may not be so.  There  is  however no difference between s. 26 of the English Companies  Act,   1908,  on  which  Parker’s  case  turned  and   which  apparently  through some mistake Chagla, C.J., cited s.  36,  and  s. 32 of the Indian Companies Act of 1913, except  that  the  English  section  required the  summary  to  include  a  statement in the form of a balance sheet containing  certain  particulars mentioned, whereas our section does Dot  require  that.  Section 131 of our Act contains some provision  about  the laying of the balance sheet before the general  meeting.  This  provision was inserted in the Act by the amending  Act  of  1936.   The fact, that one of the  requirements  of  the  English section 26 is not present in s. 32 of our Act cannot  create any material difference between s. 32 of our Act  and

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s.  26 of the English Act.  If the principle that  a  person  charged with an offence cannot rely on his own default as an  answer  to  the charge is correct, as we think  it  is,  and  which  we do not find Chagla, C. J., saying it is not,  then  that principle 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  allowed.  The  case  will now go back to the learned Presidency  Magistrate  and be tried on the merits according to the law as laid down  in this judgment.  A.p.peal allowed.  Case remanded.  (1) [1911] 1 K.B. 588.  809