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TMI Blog1990 (9) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... Punj, are being prosecuted in the court of the Chief Metropolitan Magistrate, Delhi, on a complaint filed by the Registrar of Companies, Delhi, under rule 11 of the Rules, read with section 58A of the Act, for non-filing of returns under rule 10 of the Rules for the years 31st March, 1976, to 31st March, 1982. There are complaints now pending against them. Shri Satya Narain Prakash Punj has been acting as director in charge-managing director of the company, right since its incorporation. The petitioners, being ordinary directors, have never been in control of the affairs and day to day management of the company and were never apprised of the excess borrowings nor was any resolution passed to which they are parties that permitted the alleged borrowings, beyond limits, by the company. Shri Satya Narain Prakash Punj who is in possession of the books of account, minutes books, correspondence files and the statutory books has been managing the affairs of the company and did not take the petitioners into his confidence about the alleged excess borrowings by the company. It is further alleged that petitioner No. 1 is aged about 70 years. Smt. Maya Rani Punj, petitioner No. 2 herein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prosecution for the alleged defaults which were committed by the company prior to his induction as director. Reliance is placed upon the judgment in Assistant Registrar of Companies v. R. Narayanaswamy [1985] 57 Comp. Cas. 787 (Mad). Mr. Nayyar has further urged that the complaints filed by the respondent under rule 11 of the Rules in the Court of the Chief Metropolitan Magistrate, Delhi, are time barred as the same were filed after a period of 3 years, from the alleged defaults, which were committed in the year 1982. The period of limitation is 6 months and the respondent has not filed any application under section 473 of the Criminal Procedure Code, for condonation of delay. In other words, no cognizance of the offence could be taken by the court as the prosecutions were hopelessly time-barred. Cognizance of the offence in such cases is deemed to have been taken when the delay is condoned under section 473 of the Criminal Procedure Code. Mr. Nayyar submits that, in view of the judgment of the Calcutta High Court in In re Hindustan Wire and Metal Products [1983] 54 Comp. Cas. 104, the petitioners are entitled to be relieved of the liability, not only regarding the appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are actually brought, then, ordinarily, there is no apprehension any more, as contemplated in sub-section (2). In Sri Krishna Parshad v. Registrar of Companies [1978] 48 Comp. Cas. 397 (Delhi), Mr. Justice D.K. Kapur (as he then was) was considering the question with regard to the jurisdiction of the court under section 633(2) of the Act. In that case, the facts were that petitioners, who were directors of M/s Western U.P. Electric Power and Supply Co. Ltd., committed defaults in respect of holding the annual general meeting for the period ending March 31, 1976. It was held (at p. 400): "I may also indicate that the other court covered by section 633(1) need not necessarily be a criminal court because there may very well be a civil proceeding, criminal proceeding or even a revenue proceeding in respect of which section 633(1) may apply. In all such cases, if a proceeding is anticipated, the officer concerned can move the High Court at an early stage and get relief in a suitable case. This has the great advantage of avoiding that other proceeding if the High Court grants relief. If that other proceeding has commenced, then the officer concerned has no other course open but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nishment is provided in the Act, the company and every officer of the company who is in default or such other person shall be punishable with fine which may extend to five hundred rupees and where the contravention is a continuing one, with a further fine which may extend to fifty rupees for every day after the first, during which the contravention continues." In support of its contention that the offence under rule 11 of the Rules is a continuing one, the respondent has placed reliance on the nature of fine which is to the extent of Rs. 500 and where, the contravention is a continuing one with a further fine which may extend to Rs. 50 for every day after the first. In CWT v. Suresh Seth [1981] 129 ITR 328, their Lordships of the Supreme Court were considering the question whether the default committed under section 18(1)( a ) of the Wealth-tax Act, 1957, was a single default or a continuing one. The facts in that case were that the assessee filed his wealth-tax returns, for the assessment years 1964-65 and 1965-66, on March 18, 1971, while he was required, by section 14(1) of the Wealth-tax Act, to file the same, for the year 1964-65, on or before June 30, 1964, and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Act, 1934, and the rules, framed thereunder, and it failed to repay the excess, on or before April 1, 1975, as required by law. Following the judgment in CWT v. Suresh Seth [1981] 129 ITR 328 (SC), the Madras High Court held (at pages 788 and 789 of 57 Comp Cas) : "It is not disputed before me by learned counsel for the petitioner that the respondents became directors of the first accused-company only from July, 1975, and they were not directors on April 1, 1975, when the excess deposits had to be returned as per section 58A(3)( c ) of the Act. It is, however, contended by him that the failure to repay the deposits on or before April 1, 1975, is a continuing offence and persons who became directors even subsequent to April 1, 1975, are liable for the default, so long as the excess deposits are not repaid. But, there is nothing in section 58A(3)( c ) or any other provision of the Act to hold that the non-repayment of the excess deposits on or before April 1, 1975, is a continuing offence. In CWT v. Suresh Seth [1981] 129 ITR 328 (SC), the question came up before the Supreme Court whether the failure to file a wealth-tax return by the assessee after the last date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be ( a )six months, if the offence is punishable with fine only; ( b )one year, if the offence is punishable with imprisonment for a term not exceeding one year; ( c )three years, if the offence is punishable with imprisonment for a term exceeding one year but not exceeding three years. (3) For the purposes of this section, the period of limitation, in relation to offences which may be tried together, shall be deter mined with reference to the offence which is punishable with the more severe punishment or, as the case may be, the most severe punishment. 469. (1) The period of limitation, in relation to an offender, shall commence ( a )on the date of the offence; or ( b )where the commission of the offence was not known to the person aggrieved by the offence or to any police officer, the first day on which such offence comes to the knowledge of such person or to any police officer, whichever is earlier; or ( c )where it is not known by whom the offence was committed, the first day on which the identity of the offender is known to the person aggrieved by the offence or to the police officer making investigation into the offence, whichever is earlier. (2) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. It must be held, according to the provisions of the Criminal Procedure Code, which I have set out before, that there was no pending criminal proceeding or initiation of any criminal proceeding against the petitioner before the present application was made. It is only after the present application was made and an ad interim order was issued, as hereinbefore stated, that the said order condoning the delay was passed ex parte without any notice to the accused and cognizance of the offence was taken at the instance of the respondent, who was restrained by an injunction of this court from taking any step in the matter." I am in respectful agreement with the view expressed by the Calcutta High Court in the said judgment. The offence under rule 11 of the Rules is punishable with fine as such; the period of limitation is six months subject to other exceptions as provided in Chapter XXXVI. It is not disputed that the respondent has not filed any application under section 473 of the Criminal Procedure Code for condonation of delay in filing the complaint for which the period of limitation is six months. Section 468 of the Criminal Procedure Code lays down that, except as otherwise p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives of directors or shareholders of the company, or were guaranteed by the directors and did not come under the definitipn of deposits, as given under rule 2( ix )( b ) of the Rules. He has filed a photo copy of the relevant circular. According to Mr. Nayyar, a bare reading of the provisions of section 5 of the Act, prior to its substitution by the Companies (Amendment) Act, 1988, shows that if any prosecution is launched by the Registrar of Companies, he has to investigate as to who is the officer in default and not to launch prosecution against all the directors, when they are part time, whole time or outstation directors, or are not concerned with the day to day working of the company. The next contention of Mr. Nayyar is that various circulars have been issued by the Department of Company Affairs, Government of India, from time to time, for the guidance of the Registrars of Companies, and for following up of the policy regarding institution of prosecution for defaults of non filing of returns under rule 10 of the Rules. He has placed reliance upon the judgment in H. Nanjundiah v. V. Govindan, Registrar of Companies, Maharashtra [1986] 59 Comp. Cas. 356 (Bom.). In H ..... 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