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TMI Blog1957 (12) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... the direction contained in sub-section (1) of section 76 of the Companies Act they were guilty of an offence punishable under sub-section (2) of the same section. In all the other three cases the charge was that the company and its directors had failed to comply with the directions contained in sub-section (1) of section 131 of the Companies Act and had thus become guilty of an offence punishable under sub-section (3) of section of 133 of the Act. Sub-section (1) of section 131 states that directors of every company shall at some date not later than 18 months after the incorporation of the company and subsequently once at least in every calendar year lay before the company in general meeting a balance-sheet and profit and loss account. The prosecution in Summary Case No. 395 of 1955 was for the failure on the part of the directors of the company to comply with this provision in the year 1952. The prosecution in Summary Case No. 395 was for a similar default in the year 1951 and the prosecution in Summary Case No. 397 was for a similar default in the year 1953. Such defaults are made punishable under sub-section (3) of section 133. That sub-section states that "if any default is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentence of fine should suffice, the offence being only technical." This view of the Magistrate is clearly erroneous. It is in the interest of the general public and particularly to safeguard the interests of the shareholders of a company that specific provisions have been made in the Companies Act casting certain duties on the officers of the company. Wilful default in the discharge of these duties has also been made punishable. It will not be correct to say that an offence of that nature is only a technical offence. In the present case the offences consist in the default to comply with the directions contained in sections 76 and 133 of the Companies Act and the maximum sentence that could be awarded under sub-section (2) of section 76 and under sub-section (3) of section 133 is a fine of Rs. 500. This is clear indication that the Legislature considered the offence under these sections to be real offences deserving substantial punishment. No doubt the Legislature has only fixed the maximum of the sentence that could be awarded in a particular case being left to the discretion of the court. Such discretion has to be judicially exercised. The court must be guided by a sense of prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying with the requirements of the respective sections, the officers of the company are not liable to be punished. In this respect, a clear distinction is maintained between the company and its officers. As against the company it is enough to prove that there has been a default as contemplated by the sections. But as against the officers of the company, something more has to be proved. It must be shown that the officer concerned was knowingly and wilfully a party to the default and then only he will be liable to be punished. This is made clear by the closing portions of sub-section (2) of section 76 and sub-section (3) of section 133 wherein the penal provision is couched in substantially the same terms. What is significant to note is that any director or any other officer of the company becomes liable to be punished under these sub-sections only if he is knowingly and wilfully a party to the default contemplated by the respective sections. The force and significance of the expression "knowingly and wilfully a party to the default" cannot be lost sight of in any prosecution under these sections against the directors and officers of the company. If it was the intention of the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of shareholders and also the summary described in section 32 should be intentional and not merely inadvertent to sustain a conviction. The significance of the expression "knowingly or wilfully" as used in the section to determine the penal liability of the officers of the company as distinguished from the company itself has been explained in Public Prosecutor v. B.V.A. Lury Company [1941] 11Comp. Cas. 331 in the following terms : "A company as a corporate body cannot either 'know' or 'will'. That the Legislature did not personify companies and impute to them minds is made clear by the wording of the relevant sections. The punitive clause of section 32 for example, reads: 'If a company makes default in complying with the requirements of this section, it shall be liable to a fine not exceeding Rs. 50 for every day during which the default continues, and every officer of the company, who knowingly and wilfully authorises or permits the default, shall be liable to the like penalty'. It is to be noted that the words 'knowingly' and 'wilfully' are used with reference only to the officers of the company and not to the company itself, obviously for the reason I have given above. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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