2011 (12) TMI 264 - HC - Companies Law

Daily fine - Period of limitation - Default on submission of annual returns - Continuing Default - Held That - In view of Bhagirath Kanodia (Supreme Court) default in filing the balance-sheet of the profit and loss of the Companies within the prescribed statutory period was a continuing offence. Decided against assessee.

Issues Involved:
1. Validity of the prosecution under Section 162(1) of the Companies Act.
2. Applicability of the limitation period under Section 468 of the Cr.P.C.
3. Determination of the petitioners' responsibility under Section 5 of the Companies Act.
4. Nature of the offence as a continuing offence.

Issue-wise Detailed Analysis:

1. Validity of the prosecution under Section 162(1) of the Companies Act:
The petitioners challenged the order dated 6.7.2007 summoning them to face trial for an offence under Section 162(1) of the Companies Act, linked to the non-submission of annual returns from 31.3.1992 to 31.3.2006. The complaint was filed by the Registrar of Companies on 4th July 2007 and cognizance was taken on 6.7.2007. The petitioners argued that the prosecution was false and malicious, suffering from both factual and legal deficiencies.

2. Applicability of the limitation period under Section 468 of the Cr.P.C.:
The petitioners contended that the prosecution was barred by the limitation period prescribed under Section 468 of the Cr.P.C., which mandates that cognizance should be taken within six months for offences punishable only by fine. However, the counter affidavit from the Union of India argued that the offence was a continuing one, making Section 468 inapplicable. The court referred to Section 472 of the Cr.P.C., which states, "in the case of continuing offence, a fresh period of limitation shall begin to run at every moment of the time during which the offence continues."

3. Determination of the petitioners' responsibility under Section 5 of the Companies Act:
Section 5 of the Companies Act defines "officer who is in default" and includes managing directors, whole-time directors, managers, secretaries, and any person charged with the responsibility of complying with the provisions of the Act. In this case, the petitioners were identified as directors responsible under Clause (g) of Section 5, which applies when no specific directors are entrusted by the Board. The court found that all directors, including the company, were made accused due to the lack of necessary pleading by the rival party.

4. Nature of the offence as a continuing offence:
The court examined whether the offence under Section 162(1) of the Companies Act was a continuing offence. Section 162 states that failure to comply with Sections 159, 160, or 161 results in a fine for every day the default continues. The court cited the Supreme Court's decision in State of Bombay v. Bandhan Ram Bhandani AIR 1961 SC 186, which supported the view that the offence continues as long as the default persists. Additionally, the court referenced a decision reported in 2004(2) East Cr.C. 213, which held that the default in filing balance sheets and profit and loss accounts within the statutory period was a continuing offence.

Conclusion:
The court concluded that the prosecution under Section 162(1) of the Companies Act was valid and not barred by the limitation period under Section 468 of the Cr.P.C. The offence was determined to be a continuing one, and the petitioners, as directors, were responsible for the default. Consequently, the petition was dismissed, and the prosecution was allowed to proceed.

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