1978 (11) TMI 124 - HC - Companies Law

Summary

Issues:

Conviction and sentencing under section 162 of the Companies Act, 1956 for failure to file annual return. Interpretation of the term "officer who is in default" as per section 5 of the Act.

Analysis:

The petitioner was convicted and sentenced under section 162 of the Companies Act, 1956 for the company's default in filing the annual return for the year 1975. The complaint initially listed the petitioner as the third accused, with the company as the first accused and its managing director as the second accused. The company and the managing director pleaded guilty, leading to the case against the petitioner being separated and renumbered.

The court below found the petitioner guilty based on the evidence presented. However, the petitioner's counsel argued that the court overlooked the provisions of sections 45 and 73 of the Evidence Act and failed to question the petitioner on the evidence against him during section 313 of the Cr. PC. The key contention was whether the petitioner, assuming he was a director during the relevant time, was an officer in default under section 162 of the Act.

Section 162 of the Act imposes penalties on the company and officers who are in default for non-compliance with specific sections. The term "officer who is in default" is defined in section 5 of the Act as an officer knowingly guilty of default or who knowingly permits such default. The prosecution argued that the petitioner, as a director, knowingly permitted the default by not signing the annual return.

However, a closer examination of the Act revealed that the return could be signed by a director and the manager or secretary of the company, not necessarily by two directors. The evidence showed that the company had a manager or secretary who could have signed the return along with the managing director. The court concluded that there was no evidence to prove that the petitioner knowingly and willfully authorized or permitted the default.

Based on the interpretation of relevant sections of the Act, the court found that the prosecution failed to establish that the petitioner was an officer in default. Therefore, the conviction and sentence under section 162 were deemed legally baseless, leading to the revision being allowed, and the conviction and sentence being set aside with any fine paid to be refunded to the petitioner.