1987 (9) TMI 367 - HC - Companies Law

Summary

Issues Involved:
1. Whether the contravention of the provisions contained in section 220(1)(a) of the Companies Act is a continuing contravention or not.
2. Whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Companies Act.
3. Whether the judgment of convictions and sentences is legal, correct, and proper.

Detailed Analysis:

1. Whether the contravention of the provisions contained in section 220(1)(a) of the Act is a continuing contravention or not:
The court examined whether the failure to file the balance-sheet and profit and loss account under section 220(1) of the Companies Act constitutes a continuing offence. Section 220(1) requires companies to file these documents within 30 days after the annual general meeting or by a specified date if the meeting is not held. The failure to comply with this requirement results in penalties under section 220(3), which refers to section 162 for punishment.

The court referred to various precedents, including the Supreme Court's decision in State of Bihar v. Deokaran Nenshi and CWT v. Suresh Seth, which clarified that a continuing offence is one where the liability continues until compliance is achieved. The court noted that the default in filing the documents was complete once the due date passed and did not continue thereafter. The court also referred to the American Jurisprudence and decisions from the High Courts of Bombay and Calcutta, which supported the view that the failure to file documents by a specified deadline does not constitute a continuing offence.

The court concluded that the contravention of section 220(1) is not a continuing offence. The default is complete when the deadline for filing passes, and the liability does not continue day-to-day thereafter. The court agreed with the reasoning of the Calcutta High Court in National Cotton Mills' case, which held that the offence under section 220(1) is not a continuing one.

2. Whether A-2 and A-4 have made out a case for the grant of relief, relieving them wholly of the liability for the default alleged against them, under section 633(1) of the Act:
Given the court's conclusion that the contravention of section 220(1) is not a continuing offence, it did not find it necessary to determine whether A-2 and A-4 were entitled to relief under section 633(1) of the Act. The court focused on the primary issue of whether the offence was continuing and found that it was not.

3. Whether the judgment of convictions and sentences is legal, correct, and proper:
The court examined the legality of the convictions and sentences passed by the trial court. The trial court had convicted the company and its directors (A-2 to A-4) for failing to file the required documents and sentenced them to a fine and imprisonment in default of payment. The court noted that the complaint was filed on January 25, 1982, beyond the prescribed period of limitation under section 468 of the Code of Criminal Procedure.

Since the court determined that the offence was not a continuing one, it concluded that the prosecution was barred by limitation. The trial court's cognizance of the offence was illegal, and the subsequent trial and convictions were vitiated.

Conclusion:
The court allowed the criminal revision petition, setting aside the convictions and sentences passed against the company and A-2 to A-4. The company and its directors were acquitted of the default alleged against them. The court emphasized that the default in complying with section 220(1) of the Companies Act is not a continuing offence, and the prosecution was barred by limitation.