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TMI Blog1968 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... tered under the Companies Act. Two cases, being Cases Nos. C/380 and C/381 of 1965, were started against them under sections 162(1) and 220(3), respectively, of the Companies Act, 1956, by the Registrar of Companies before the Chief Presidency Magistrate, Calcutta, for failure to submit the annual return of the company for the year ending the 31st December, 1963, and also three copies of the balance-sheet for the same period. As a result of the trial, the accused-appellants were convicted on April 29, 1965, of the offences charged and sentenced in each case to pay a fine of Rs. 100 each, with a further direction on them under section 614A(1) of the Companies Act, 1956, to file the requisite documents and papers, within six months from the date of the said order, that is, within October 28, 1965. After the above-mentioned conviction a notice by registered post was sent on May 14, 1964, by the Registrar of Companies (exhibit 2) for submission of the returns as directed in due time and the same was acknowledged duly by the accused persons (exhibit 3 collectively). The accused-appellants, however, did neither reply to the said notice (exhibit 2) nor comply with its directions. On June ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject-matter of the present Appeal. Mrs. Jyotirmoyee Nag, advocate (with Mr. Chinmoy Choudhury, advocate), appearing on behalf of the accused-appellants, has made a three-fold submission. The first submission made by Mrs. Nag is that there has been no contravention of the provisions of section 614A(1) of the Companies Act, 1956, as alleged or at all, and the evidence on record at its highest only gives rise to a benefit of doubt. The second contention advanced on behalf of the accused-appellants is that, even if there was such a contravention, it was due to the managing director who is responsible for submitting the returns and carry out the directions and the other directors had not knowingly defaulted and consequently they have no mens rea and are not "officers in default" within the meaning of the Act. The third and the last contention of Mrs. Nag is that, in any event, the default on the part of the accused-appellants in complying with the court's order passed under section 614A(1) of the Companies Act, 1956, is bona fide due to circumstances beyond their control, because the relevant books of account and other papers of the company were taken away by the income-tax auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y acknowledged by them (exhibit 3 collectively). The accused even did not reply to the same. These facts go unchallenged and there is even no cross-examination on the point. The failure to comply with the mandatory provisions of section 614A(1) of the Companies Act, 1956, is thus established clearly and conclusively and the contention advanced by Mrs. Nag in this behalf accordingly fails. The second contention put forward by Mrs. Nag that, even if there was such a contravention, the same was due to the managing director, who was responsible for the returns and the compliance, and not the other directors, who having not knowingly non-complied, have no mens rea and as such are not "officers in default", appears also to be a belated one and not ultimately borne out by the evidence on record. There is neither any line of cross-examination on this point when P.W. 1 was examined nor any averment thereof in the evidence of the only defence witness examined in this case. There is even no statement to that effect in the examination of the accused persons under sections 242 and 342 of the Code of Criminal Procedure. The said contention is also not sustainable in law. There cannot be any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5., Mr. Justice Ramaswami approved of the view expressed in the case, Bhagirath Chandra Das v. Emperor [1947] 17 Comp. Cas. 93, 95; AIR 1948 Cal. 42, and observed at page 678 that: "We find that the prosecution has brought home to these revision petitioners by circumstantial evidence knowing and wilful non-compliance. The revision petitioners knew what they had to do and deliberately refrained from complying with those obligations and that too in spite of repeated reminders from the Registrar, on pretexts which cannot bear scrutiny." A reference in this context may also be made to the case of Dulal Chandra Bhar v. State of West Bengal [1962] 32 Comp. Cas. 1143; 66 C.W.N. 852, wherein Mr. Justice Amaresh Roy referred to and agreed with the decision of Mr. Justice R.C. Mitter in the case of Ballav Doss v. Mohan Lal Sadhu [1936] 6 Comp. Cas. 432 ; 39 C.W.N. 1152 and ultimately held that "Offences under sections 162, 168 and 200 of the Companies Act may be committed not only when the particular officer knowingly and wilfully authorised or permitted the defaults in question but the offence is also complete if the said officer knew of the said defaults and permitted the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, such crimes can be committed negligently". I entirely agree with Prof. Edward's conclusion at page 206 of that monograph that, so far as this particular field of criminal liability is concerned, "negligence or blameful inadvertence or failure to supervise may properly be designated as mens rea." As regards the second group of offences, which is the subject-matter of the instant case, the position is entirely different from that in the case of the first group of offences considered above. The language used by the legislature in section 614A(2) is quite significant. It lays down that "any officer or other employee of the company who fails to comply with an order of the court under sub-section (I) shall be punishable with imprisonment for a term which may extend to six months or with fine or with both ". It is to be observed that the language used in section 614A(2) is "fails to comply " and not "every officer of the company who is in default". Section 614A of the Companies Act, 1956, has been introduced by the Companies (Amendment) Act, LXV of 1960, because section614of the said Act neither provides for any punishment for disobedience of the court's order nor contains any pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income-tax department attached to special investigation branch, proved the receipt dated June 22, 1965 (exhibit B), granted by M. Ramaswami, Income-tax Officer, to the Khaitan Finance Corporation. In cross-examination the said witness significantly stated that "the accused are allowed to take notes from the account books lying with the income-tax department after due application". It would, therefore, appear from the evidence on record that the relevant account books required for the compilation of the company's annual return and the balance-sheet for the year ending December 31, 1963, were in the possession of the company and as a matter of fact all the documents were with the accused at least up-till June 22, 1965, and it is futile to argue on the basis of exhibit B that the said annual return or balance-sheet could not be submitted to the Registrar of Companies, West Bengal, for any purported non-availability thereof. It will be found, moreover, that the accused-appellants were sitting on the fence up-till June 22, 1965, which is about two months from the date of the order of conviction and the direction under section 614A(1) of the Companies Act, 1956. If really they had the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they are unable to prepare the balance-sheet and the profit and loss account for reasons mentioned therein, the accused in R.K. Dalmia's case ( supra ) could not comply with the statutory requirements. Their Lordships held at page 343 that: "It seems to us that the petitioners had ample time for preparation of balance-sheet and profit and loss account which primarily is the concern of the company and not the auditors ..As stated in section 215 of the Companies Act, every balance-sheet and profit and loss account has to be authenticated by the directors. It follows that it is the primary responsibility of the directors to have these documents prepared ..There is no conceivable reason why the balance-sheet and profit and loss accounts could not be prepared without assistance of the books which are with the Commission of Inquiry. " I respectfully agree with the said observations and hold that the conduct of the accused-appellants in this case is still worse. They did not even apply to the income-tax department for making an inspection and did not even inform the Registrar of Companies, West Bengal, about their purported difficulty in this respect. This submission, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls as the organ of the company, for whose action the company is to be liable just as a natural person is for the action of his limbs. The theory mainly sprang from the well-known judgment of Lord Haldane in Lennard's Carrying Co. v. Asiatic Petroleum Co. [1915] AC 705. The Lord Chancellor, in delivering the judgment of the House, saidat page 713 that: " ....a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation. This new conception of an organic relationship between the company and its managers was adopted in a number of cases and as L. C. B. Gower observed in his Modern Company Law (2nd edition), at page 136, "the ! negligence of the company's governing body, directors, managing directors, or general manager was said to be the negligence of the company itself. Lord Justice Greer observed in the case of Fanton v. Denville [1932] 2 K.B. 309, 329; [1932] 101 L.J.K.B. 641, 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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