2007 (6) TMI 294 - HC - Companies Law

Balance sheet - Default in filing copies of, Court - Power of, trying offences under Act to direct filing of documents with Registrar

Issues Involved
1. Validity of the second part of the order dated 24-1-2006 requiring petitioners to file balance sheets and profit and loss accounts.
2. Non-appointment of statutory auditor by the Comptroller and Auditor General (CAG) and its implications.
3. Mandatory nature of Section 220(1) of the Companies Act, 1956.
4. Jurisdictional error in the impugned order of the learned Judicial Magistrate.

Detailed Analysis

1. Validity of the Second Part of the Order Dated 24-1-2006
The petitioners challenged the order dated 24-1-2006 passed by the learned Judicial Magistrate, Shillong, which required them to file three copies of the balance sheets and profit and loss accounts for financial years from 31-3-1997 to 31-3-2004 with the Registrar of Companies within one month, failing which Section 614A(2) would be attracted. The petitioners argued that the direction to file these documents was impossible to comply with as no statutory auditor was appointed by the CAG, a requirement for government companies under Section 619(2) of the Companies Act, 1956. The learned magistrate found the petitioners guilty under Section 162(1) and imposed a fine, which the petitioners paid.

2. Non-appointment of Statutory Auditor by the CAG
The petitioners contended that the CAG did not appoint a statutory auditor, making it impossible to file the required documents. The learned counsel for the petitioners argued that this non-appointment should exempt them from the statutory requirement. However, the learned counsel for the respondents maintained that the statutory duty to file these documents under Section 220(1) of the Act admits no exception, and the petitioners could not rely on their own default as a defense.

3. Mandatory Nature of Section 220(1) of the Companies Act, 1956
Section 220(1) mandates that a company must file three copies of the balance sheet and profit and loss account with the Registrar within thirty days from the date they were laid before the company at an annual general meeting. The court noted that the word "shall" in Section 220(1) indicates that the provision is mandatory. The court referenced various sections of the Act, including Sections 210(1), 215(3), and 216, to emphasize that the auditor's report is an integral part of the balance sheet and profit and loss account. The court concluded that the requirement to file these documents is mandatory and not directory, and the failure to comply attracts penalties under Section 220(3).

4. Jurisdictional Error in the Impugned Order of the Learned Judicial Magistrate
The court examined whether the learned Judicial Magistrate committed a jurisdictional error in directing the petitioners to file the documents. The court found no such error, noting that the petitioners had not approached the Central Government for condonation under Section 637B(b) of the Act, which allows for condonation of delay in filing documents with the Registrar. The court upheld the learned magistrate's order, emphasizing that the magistrate was exercising discretionary jurisdiction in issuing the impugned order.

Conclusion
The court dismissed the revision petition, finding no merit in the arguments presented by the petitioners. The court held that the requirement to file balance sheets and profit and loss accounts under Section 220(1) is mandatory, and the petitioners' failure to comply due to the non-appointment of a statutory auditor by the CAG does not exempt them from this statutory duty. The court found no jurisdictional error in the learned Judicial Magistrate's order and directed the parties to bear their own costs.

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