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TMI Blog1960 (2) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company was held on the 24th December, 1952. Thereafter no such meeting was held until the nth January, 1957. The petitioners were, therefore, prosecuted at the instance of the Registrar of Companies, Rajasthan, for not having held a general meeting under section 76 of the Indian Companies Act (VII of 1913) (hereinafter referred to as the Act), and for not submitting the annual list of its members and the various other particulars under section 32(3) of the Act, and for not laying before the company in general meeting a balance-sheet and a profit and loss account under section 131(1), and for not sending three copies of such balance-sheet, and profit and loss account to the Registrar under section 134 of the said Act with respect to the years 1953 to 1956. It is also alleged that notices were issued from time to time to the company and its officers asking them for compliance with respect to the provisions afore-mentioned but without any effect. The defence of the petitioners was that it was found some time towards the end of 1952 that the company was working at a loss and so it was resolved that with a view to meet the claims of the various creditors of the company the board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here an annual general meeting was not held for a particular year, then it was impossible to lay the balance-sheet or the profit and loss account of the company before the said meeting or to send a copy thereof to the Registrar or even to send a list of the members and the other particulars required under section 32 of the Act. Putting the same argument from another angle, it was contended that if a general meeting had been held for a particular year and then the various requirements had not been fulfilled as laid down in section 32 or 131 or 134 of the Act, then a prosecution for these other defaults could well have been successfully launched, but not where the annual general meeting itself had not been held, and, therefore, it was physically impossible to comply with the various requirements of the other sections with which we are concerned. Learned counsel for the petitioners placed strong reliance on In re Narasimha Rao [1937] 7 Comp Cas 80, Surendra Nath v. Emperor [1942] 12 Comp Cas 252 and Emperor v. Pioneer Clay & Industrial Works [1948] 18 Comp Cas 31 . In In re Narasimha Rao3 , certain directors of the company were prosecuted for not sending a copy of the balance-sheet a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock company and was convicted under section 134 of the Act in respect of a default made about filing with the Registrar the balance-sheet for a certain year. The defence of the petitioner in revision was that there was no general meeting in that year, and, therefore, no balance-sheet was laid before the company at any such general meeting, and as these preliminaries had not been fulfilled, it was impossible for him or his company to comply with the provisions of section 134, and that if at all he should have been convicted under section 76 or section 131 but not under section 134. This contention was repelled, it having been held that the petitioner as one of the directors was himself responsible for ensuring that all necessary preliminaries should have been observed, and that on the principle of the decision of the Court of Appeal in Park case (supra ), it was not open to the petitioner to plead his prior default with respect to the calling of the prescribed general meeting. This brings me to the decision of the Bombay High Court in Emperor v. Pioneer Clay & Industrial Works [1948] 18 Comp Cas 31. The default in this case arose under section 134(4) of the Act in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rosecute them under either of these two sections. What seems to have prevailed with the learned Acting Chief Justice in that case was the peculiar language of section 134 which, to my mind, is rather unhappy. The wording of the section is that "after the balance-sheet and profit and loss account (or the income and expenditure account as the case may be) have been laid before the company at the general meeting", three copies thereof signed by: the manager or secretary of the company shall be filed with the Registrar at the same time as the copy of the annual list of members and summary prepared in accordance with the requirements of section 32. In other words, certain copies of the balance-sheet and the profit and loss account have to be filed with the Registrar only after the balance-sheet and the profit and loss account or the income and expenditure account, as the case may be, have been laid before the company at the general meeting. Where, however such balance-sheet and account have not been placed before a general meeting of the company, it would appear, on the authority of this case, that an offence under section 134 would not be committed. I propose to examine the Bombay view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a default in this respect is punishable under sub-section (2) of the section. Then comes section 131. This section, broadly speaking, provides for the laying of a balance-sheet and profit and loss account or an income and expenditure account duly audited by the auditors of the company with their report at a general meeting which must be called by the directors with reference to certain points of time stated in subsection (1) of section 131. Sub-section (3) of section 133 inter alia then provides that if any default is made in laying before the company, or in issuing a balance-sheet and profit and loss account or income and expenditure account as required by section 131, the company and every officer of the company who is knowingly and wilfully a party to the default shall be punishable with fine which may extend to five hundred rupees. In my opinion, this provision, on its plain language, provides for a distinct default. Thus, where the directors are in default in not calling a general meeting or in not laying the balance-sheet or profit and loss account before such a meeting or in not sending the list of members together with a summary under section 32, I am of opinion that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible to calculate a continuing penalty from a day which has never come into existence; but when one sees that section 26 requires a number of important matters to be included in the list of members which are entirely independent of the holding of a general meeting, this very much weakens the contention that no list need be compiled if, owing to the failure to hold a general meeting, it is impossible to say what day is the fourteenth day thereafter." Therefore, it was held that it was no defence to the charge under section 26 for the directors that no general meeting had been held the directors themselves having been parties to the default in holding the general meeting. In this view of the matter, I have no hesitation in coming to the conclusion that the conviction of the petitioners under sections 32 and 131 read with section 133 cannot be said to be wrong on the reasoning that their default under section 32 or 131 read with section 133 proceeded from an earlier default under section 76 of the Act and for which they stand prosecuted and punished. The further question which requires to be considered in this connection is whether the default of petitioners Nos. 2 to 6 under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out, and where this has not been done, the courts can and would legitimately infer that the defaults though not expressly authorised were still wilfully permitted. See Ballav Das v. Mohan Lal Sadhu [1936] 6 Comp Cas 432 and Bhagirath Chandra Das v. Emperor [1947] 17 Comp Cas 93 Now, so far as the instant cases are concerned, there is evidence on the record to show that the Registrar of the Companies, Rajasthan, had sent notices to the petitioners to comply with the various requirements with respect to which they have been subsequently prosecuted (exhibits P-3, P-4, P-5 and P-6) but without any effect whatever. That being so, the conclusion is inescapable that the defaults on the part of the petitioners were committed knowingly and wilfully and not inadvertently. This disposes of the second question raised by learned counsel for the petitioners. The next point that remains to decide is whether the conviction of the petitioners under section 134(1) is correct. I have already referred to the authorities on which learned counsel for the petitioners relies, and the leading authority which supports him on this aspect of the case is Emperor v. Pioneer Clay & Industrial Works [1948] 18 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed to comply with the requirements of section 134, can be allowed to plead that the balance sheet and the profit and loss account or the income and expenditure account had not been laid before the company at the general meeting, and, therefore, he could not send the requisite copy to the Registrar and, therefore, he has not committed any offence under section 134(1) even though the directors who were sought to be prosecuted under section 134(1) are the very persons who were responsible for not calling the general meeting and not placing the balance sheet and the profit and loss account before the general meeting of the company. On a careful and anxious consideration of the pros and cons of the two views, I think, on the whole, with respect, that though the Bombay view is plausible, it is not sound and is perhaps needlessly narrow. As I look at, the matter, untramelled by authority one way or the other, the substantial requirement of section 134(1) appears to me to be the sending of a certain number of copies of the balance sheet and the profit and loss account or the income and expenditure account as the case may be to the Registrar and it is there that the true emphasis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 134(1) is not untenable in law and does not call for any interference. Further, as to whether the default under this section also was knowingly and wilfully committed by the accused petitioners, my observations under this head made in the foregoing part of this judgment with respect to their default under other sections fully apply as to the present count and I consider it unnecessary to repeat them. The last question raised by learned counsel for the petitioners is that even if this court concurs in the conclusion of the courts below that the accused petitioners are guilty of the various offences discussed above, they should be given the benefit of section 281 of the Act. The short answer to this submission is that before section 281 can be properly invoked, it must be shown that the person or persons so seeking relief had "acted honestly and reasonably". In other words, the conduct of the accused must satisfy the two-fold requirement of lack of dishonesty as well as lack of unreasonableness, and honesty by itself would not be enough. Assuming that the petitioners in this case were not dishonest, I find it difficult to hold that their behaviour satisfies the test of reasonablenes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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