1987 (7) TMI 594 - HC - Companies Law

Summary

Issues Involved:
1. Whether the offences under Sections 159 and 220 made punishable under Section 162 of the Companies Act are continuing offences.
2. Whether the liability to furnish returns under Section 159 and audited balance sheet under Section 220 of the Companies Act continues even if the company has become defunct.
3. Whether violation of Sections 159 and 220 of the Companies Act requires mens rea.

Issue-Wise Detailed Analysis:

1. Continuing Offences:
The court first addressed whether the offences under Sections 159 and 220 of the Companies Act, punishable under Section 162, are continuing offences. The court referred to judicial pronouncements, including the Supreme Court's observations in *State of Bihar v. Deokaran* and *Bhagirath Kanoria v. State of M.P.*, which provided guidelines on what constitutes a continuing offence. The court noted that a continuing offence is one where the non-compliance or disobedience persists, thereby incurring liability until compliance is achieved. The Companies Act is designed to protect shareholders and ensure proper company administration. The Act categorizes offences and specifies penalties, with some offences incurring daily fines for ongoing non-compliance. The court concluded that the offences under Sections 159 and 220 are continuing offences because the failure to file required documents persists until compliance. This interpretation aligns with the legislative intent to enforce strict compliance through recurring penalties.

2. Liability Despite Defunct Status:
The court examined whether the liability to submit returns and audited balance sheets continues if the company is defunct. The court referred to decisions in *Madan Gopal v. State* and *Sukhbir Saran v. Registrar of Companies*, which held that a company's non-functioning status does not exempt it from filing returns or balance sheets, even if they are nil returns. The court emphasized that under Section 220(1) of the Act, the balance sheet must be filed even if no annual general meeting is held. The court rejected the petitioners' argument that the company's defunct status absolved them of their filing obligations, stating that the Act's provisions clearly mandate compliance regardless of the company's operational status.

3. Requirement of Mens Rea:
The court considered whether mens rea (criminal intent) is required for offences under Sections 159 and 220. The court referred to a Patna High Court decision in *Calculating & Business Machines v. State of Bihar*, which suggested that mens rea might not be necessary in certain circumstances. However, the court noted that the Companies Act explicitly excludes mens rea as a constituent element for these offences. Sections 159 and 220 impose penalties for mere failure to comply, without requiring proof of intent. The court highlighted that the Act includes specific terms like "willingly," "knowingly," and "fraudulently" in other sections where mens rea is necessary. In contrast, Sections 159 and 220 do not incorporate such terms, indicating that mens rea is not required. The court concluded that once the failure to furnish returns or audited balance sheets is proven, the offence is established, and mens rea is not a necessary element.

Conclusion:
The court dismissed the revisions, affirming the convictions and sentences imposed by the trial court. The offences under Sections 159 and 220 of the Companies Act are continuing offences, the liability to file returns and balance sheets persists even if the company is defunct, and mens rea is not required for these offences. The petitioners' contentions were rejected, and the trial court's decision was upheld.