2001 (2) TMI 963 - HC - Companies Law

Summary

Issues Involved:
1. Non-compliance with the provisions of section 294(2) of the Companies Act, 1956.
2. Whether non-compliance constitutes an offence punishable under section 629A of the Companies Act, 1956.
3. Whether the offence is a continuing offence.
4. Bar of limitation in filing the complaint.

Issue-wise Detailed Analysis:

1. Non-compliance with the provisions of section 294(2) of the Companies Act, 1956:
The respondent filed a complaint alleging that the petitioners did not comply with the mandatory requirements of section 294(2) while appointing Medley Marketing Private Limited and P.V. Kuruvilla as sole selling agents. The agreements did not stipulate that the appointments would cease to be valid if not approved by the company in the first general meeting after the appointments, which is a mandatory requirement under section 294(2).

2. Whether non-compliance constitutes an offence punishable under section 629A of the Companies Act, 1956:
The petitioners contended that non-compliance with section 294(2) does not constitute an offence punishable under section 629A. They argued that the consequence of non-inclusion of the condition would only render the appointments invalid from the date of the first general meeting. They cited the Bombay High Court decision in Arantee Manufacturing Corporation v. Bright Bolts (P.) Ltd., which stated that appointments without the condition mentioned in section 294(2) are void ab initio. However, the respondent argued that the mandatory nature of section 294(2) attracts the penal provisions of section 629A, which penalizes contraventions for which no specific penalty is provided elsewhere in the Act. The court agreed with the respondent, stating that the language of section 294(2) is mandatory and that section 629A applies in this case.

3. Whether the offence is a continuing offence:
The petitioners argued that the offence is not a continuing offence and that the complaint is barred by limitation, as it was not filed within six months from the dates the agreements were signed. They relied on the decision in Chandra Spinning and Weaving Mills (P.) Ltd. v. Registrar of Companies, which held that contraventions under section 220(1)(a) are not continuing offences. However, the court found that the agreements were renewed multiple times, indicating that the non-compliance continued. Therefore, the court held that the offences are of a continuing nature.

4. Bar of limitation in filing the complaint:
The petitioners contended that the complaint is barred by limitation, as it was not filed within the prescribed period. They cited the Supreme Court decision in State of Himachal Pradesh v. Tara Dutt, which emphasized the need for a speaking order when condoning delays. The court noted that the question of limitation should be considered by the trial court, which has the discretion to condone delays under section 473 of the Criminal Procedure Code. The court directed the trial court to consider the limitation issue at the initial stage and to decide whether to take cognizance of the offence after giving both parties an opportunity to present their views.

Conclusion:
The petition was dismissed, with the court directing the trial court to consider the limitation issue before taking cognizance of the offences. The court also noted that the offence is compoundable, allowing the petitioners to seek compounding of the offence from the respondent.