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Issues:
Conviction under section 4, sub-section 2, Companies Act, 1913 for forming a company without registration. Conviction for carrying on business using the word 'limited' without incorporation under section 283, Companies Act. Analysis: The appellant was convicted under section 4, sub-section 2 of the Companies Act, 1913 for forming a company known as "Indo-Burma Union Limited" without registering it. The charge did not specify the requirement for the company to consist of more than twenty members, but evidence showed that there were indeed more than twenty members who subscribed for shares. The appellant was also convicted for carrying on business under the name "Indo-Burma Union Ltd." using the word 'limited' without the company being incorporated with limited liability, an offense under section 283 of the Companies Act. The defense did not contest this charge. The evidence presented showed that the company had more than twenty members, as evidenced by the appointment of district organizers who induced individuals to subscribe for shares, resulting in over 250 shareholders and 34 members actively involved in the business. The main argument raised by the defense was that in order for an association of persons to be illegal, there must be a legal relationship between more than twenty persons giving rise to joint rights or obligations. Reference was made to a previous case involving a chit fund, where the court held that a legal relationship between the subscribers was necessary to constitute an association. The defense contended that in the present case, there was no such legal relationship established between the shareholders. However, the court disagreed, stating that as soon as the subscribers paid for shares, the contract was clinched, making them shareholders with joint rights. The court held that sub-section 2 of section 4 applied to the case, despite the absence of share certificates being issued. The defense also argued that the appellant made genuine efforts to register the company, but due to procedural issues, the registration was not completed. The court acknowledged the efforts made but emphasized that the company remained unregistered, leading to the offense being proven. Additionally, it was argued that since the offenses were non-cognizable, the police should not have investigated them. However, the court found no obstacle to the case being tried by the Magistrate, even if wrongly investigated by the police. The court reduced the fine imposed on the appellant for the first offense due to the genuine efforts made to register the company but maintained the sentence for the second offense, altering the type of imprisonment in default of payment.
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