1984 (7) TMI 321 - HC - Companies Law

Issues Involved:
1. Applicability of Section 58A of the Companies Act, 1956.
2. Constitutionality of enhanced punishment under Section 58A.
3. Competence of the Legislature to create new offences retrospectively under Section 58A(3)(c).
4. Applicability of Article 20 of the Constitution of India.

Detailed Analysis:

1. Applicability of Section 58A of the Companies Act, 1956:
The prosecution was initiated against Sri Meenakshi Mills Ltd. and others for non-repayment of deposits amounting to Rs. 1,95,000, which is a contravention of Section 58A(3)(a) of the Companies Act, 1956, punishable under Section 629A. The deposits were accepted in accordance with the directions of the Reserve Bank of India (RBI) and not in violation thereof. The court clarified that the prosecution pertains to deposits accepted as per RBI directions but not refunded on maturity.

2. Constitutionality of enhanced punishment under Section 58A:
The petitioners argued that the enhanced punishment under Section 58A, introduced by the Companies (Amendment) Act, 1974, violates Article 20 of the Constitution, which prohibits imposing a penalty greater than what was in force when the offence was committed. The court dismissed this argument, stating that the assumption that the deposits were accepted in contravention of RBI directions and thus subjected to greater punishment was incorrect. The deposits were accepted in compliance with RBI directions, and the enhanced punishment under Section 58A(5)(a) and (b) is not applicable in this case.

3. Competence of the Legislature to create new offences retrospectively under Section 58A(3)(c):
The petitioners contended that the Legislature cannot make the failure to repay deposits an offence retrospectively. The court clarified that Article 20 of the Constitution does not prohibit the creation of new offences but restricts their retrospective application. The offence of non-repayment under Section 58A is prospective, as it pertains to deposits remaining unpaid after the specified dates post the Companies (Amendment) Act, 1974. The court held that the offence was committed when the deposits remained unpaid till March 31, 1976, and continued to be unpaid till the complaint was filed on December 17, 1976.

4. Applicability of Article 20 of the Constitution of India:
The court examined the applicability of Article 20, which safeguards against retrospective criminal legislation. The court concluded that Section 58A does not retrospectively criminalize the acceptance of deposits but rather addresses the non-repayment of deposits after the amendment. The offence of non-repayment is a continuing offence, and the punishment under Section 629A of the Companies Act, 1956, is applicable.

Conclusion:
The court dismissed the petition, upholding the prosecution under Section 58A(3)(a) read with Section 629A of the Companies Act, 1956. The court found no merit in the arguments regarding the unconstitutionality of the enhanced punishment and the retrospective creation of offences. The petitioners' assumptions were deemed erroneous, and the prosecution was considered valid and lawful.

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