JUDGMENT - V.S. KOTWAL, J.:---Three Directors of company are non-residents in India, two ordinarily residing in United States of America while one in United Kingdom. These Directors represent parent company and in that capacity are on the Board of Directors of the company in question. They themselves were entitled for the payment of dividend from the company of which they are Directors and for not having paid the amount or not separated the said amount due to non-payment, they faced the prosecution. Ultimately all requisite amounts of dividend after permission of the Reserve Bank of India have been remitted to them. The complaint is filed after this payment when the default, if any, was already rectified. The relevant provisions of the Companies Act as also all these features are not properly considered by the learned Magistrate. All these characteristic features are enveloped in this proceeding, which make the continuation of the proceeding sheer waste of public money, time and energy and even on the ground of propriety it is desirable to close the chapter at this stage itself. 2. The first petitioner is a public limited company (Company) registered under the companies Act with their registered office located on Lal Bahadur Shastri Marg in Mulund area of this metropolis. Petitioners Nos. 2 to 6 are Directors of the Company. Petitioners Nos. 3 and 4 are ordinarily residing in United States of America, while petitioner No. 5 ordinarily resides in United Kingdom and thus they are non-resident in India. They represent the parent company M/s. Chicago Pneumatic Holding Limited, U.K. and the Board of Directors of the company. 3. As per the balance-sheet of the company as on 31st December, 1982 it is disclosed that the company had paid interim dividend of 10% equity shares in February 1984 and declared the final dividend of 5% on 27th June, 1984. The petitioners Nos. 3 to 5 were entitled to the said amounts of dividend. 3. As per the balance-sheet of the company as on 31st December, 1982 it is disclosed that the company had paid interim dividend of 10% equity shares in February 1984 and declared the final dividend of 5% on 27th June, 1984. The petitioners Nos. 3 to 5 were entitled to the said amounts of dividend. However, the company had not remitted the said dividend nor warrant in respect thereof has been posted within 42 days from the date of the declaration to this respondent in the capacity as share-holders, who were entitled to dividend nor had the company within 7 days thereafter transferred the total amount of dividend which remained unpaid or in respect of which no dividend warrant has been posted to a special account, which was to be opened by the company in that behalf, in any scheduled Bank, as prescribed by section 205-A (1) of the Companies Act which is made an offence being made punishable as prescribed in sub-clause (8) of section 205-A of the Act. 4. It is on these allegations that the Additional Registrar of the Companies, Maharashtra, filed a private complaint against the company and five of its directors, petitioners Nos. 1 to 6 respectively being Criminal Case No.1301/RC of 1985 under section 205-A(8) for contravention of section 205-A(1) of the Companies Act of 1956 in the Court of the learned Additional Chief Metropolitan Magistrate, 3rd Court, Esplanade, Bombay. 5. The process has been issued on the said complaint by the learned Magistrate and the said order is being placed under challenge in this petition invoking the inherent powers under section 482 of the Code of Criminal Procedure as also powers of superintendence under Article 227 of Constitution of India. 6. The dominant plank submitted by Shri Vashi, the learned Counsel for the petitioner, in assailing the impugned order relates to the construction of provisions of section 205-A as also section 207 of the Act. According to him, since there was an obstacle or prohibition under the operation of law for not paying the money as under the provisions of the Foreign Exchange Regulation Act the permission of the Reserve Bank of India is necessary for transmitting any amount to non-residents in India and since the said permission was not obtained till then the moneys could not be remitted. So contends further Shri Vashi, the learned Counsel, that if that be so then once non-payment is excluded even specifically under section 207 under its proviso then it must be tagged and transplanted in to second provision of section 205-A holding that if the payment was not permissible by operation of law then further fact that the said amount was being treated as unpaid dividend was not required to be deposited in the unpaid dividend account since according to him, the initial disqualification would continue till the end creating an umbrella of protection for the petitioner. In other words, when there was no default at the initial stage there cannot be default for the consequential stage also. The alternate plank is that even assuming there was a default it could not be said as wilful as required by law, especially when three of the Directors are ordinarily residing abroad while other two are not associated with the daily routine work. As third count, it was submitted that even assuming otherwise still on facts, if properly constructed there is no propriety of continuing the persecution especially when the amounts have been deposited in full even prior to the lodging of the company. All these contentions are countered by Shri P.M. Vyas, the learned Public Prosecutor, for the State. According to him, even though there might be protection under the proviso of section 207 of the Act for not depositing the amount on account of statutory disqualification since the Reserve Bank's permission was not obtained, still protection stops at that and the further consequence of non-depositing the said unpaid amount to the Special Account cannot be excused. It is also submitted that petitioners Nos. 2 to 6 being the Directors would be presumed to have acted wilfully. It is, therefore, submitted that issuance of process is justified. 7. As regards the first count canvassed by Shri Vashi, the learned Counsel, the contention is wholly unsustainable. In that behalf the provisions of section 205-A sub-section (1) and sub-section (8) and section 207 become relevant. 2 to 6 being the Directors would be presumed to have acted wilfully. It is, therefore, submitted that issuance of process is justified. 7. As regards the first count canvassed by Shri Vashi, the learned Counsel, the contention is wholly unsustainable. In that behalf the provisions of section 205-A sub-section (1) and sub-section (8) and section 207 become relevant. Section 205-A(1) reads as :- "205 (1) -Where, after the commencement of the Companies (Amendment) Act, 1974, a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within forty-two days from the date of declaration, to any shareholder entitled to the payment of the dividend, the company shall, within seven days from the date of expiry of the said period of forty-two days, transfer the total amount of dividend which remains unpaid or in relation to which no dividend warrant has been posted within the said period of forty-two days, to a special account to be opened by the company in that behalf in any scheduled bank, to be called "Unpaid Dividend Account of......Company Limited/Company (Private) Limited"....." Sub-section (8) reads as :- "If a company fails to comply with any of the requirements of this section, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the failure continues." Section 207 defines as :- "Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted within forty-two days from the date of the declaration, to any shareholder entitled to the payment of the dividend, every director of the company, its managing agent or secretaries and treasurers, and where the managing agent is a firm or body corporate, every partner in the firm and every director of the body corporate, and where the secretaries and treasurers are a firm, every partner in the firm and where they are a body corporate, every director thereof, shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine." 8. This provision has a proviso of which proviso (a) is quite relevant which can be reproduced as :- "Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the following cases, namely (a) where the dividend could not be paid by reason of the operation of any law." 9. The scheme, legislative intent and the object behind this enactment would be quite relevant in this field. The requirement of section 205-A can be dissected in seven clauses. The first there should by a declaration by the company about the dividend. Then there is prescribed mode of payment of the dividend, first by actual payment and second by posting warrant in respect thereof. The second ingredient suggests that the said amount is required to be paid or warrant to be despatched for which a fixed period of forty-two days from the date of declaration is stipulated. The third part indicates that this would apply vis-a-vis shareholders who are entitled to receive the said dividend, Fourth part indicates the consequence of not fulfilling this obligation within forty-two days whereunder a further obligation comes into play that within seven days after completion of the said period of forty-two days the company is enjoined to transfer total amount of unpaid dividend to a special account to be opened by the company in that behalf in any scheduled Bank with a label as "Unpaid Dividend Account" of the Company. 10. Sub-section (8) creates the default of not depositing unpaid dividend amount in special account as an offence prescribing certain punishment. 11. Correspondingly, provisions of section 207 are required to be analysed under which non-payment of the dividend by any of the said two modes after declaration of dividend to any shareholder entitled to the said dividend entails into commission of offence for which certain punishment is prescribed thereunder. The proviso is carved out that it would be a defence to this charge if the dividend could not be paid due to operation of any law. 12. The proviso is carved out that it would be a defence to this charge if the dividend could not be paid due to operation of any law. 12. It would, therefore, be proper in juxtaposition to read the provisions of section 207 and then to go to provisions of section 205-A. The composite reading of these provisions make it clear that once the dividend is declared and once it is shown that the shareholder is entitled to the said dividend then the company is enjoined to pay the said dividend to such shareholder within a period of forty-two days after declaration through either of the two prescribed modes of payment. If that is not done within the stipulated period then it becomes an offence for which punishment is prescribed. However, the company or its officers concerned can legitimately raise a defence that they could not make the payment only because of hurdle created by operation of law and if they succeed in that behalf then offence is wiped out. However, whether it creates an offence or not by reason of such a defence as contemplated by section 207 of the Act still the basic fact remains intact that there is primary obligation on the company to be responsible for making payment to a shareholder, who is entitled to such payment within forty-two days after the declaration is made. The obligation comes into play but is implementation may be deferred by reason of operation of law, which may serve as a defence for the prospective offence. In effect, therefore, though the obligation is not wiped out still legal disqualification is removed and it is thereafter that the obligation becomes excusable. 13. However, the defence as carved out under the proviso to section 207 as incompetence on the part of the company to make the payment due to some legal hurdle cannot be transplanted into the provisions of section 205-A to serve as a parallel defence for the consequence of non-payment. In other words, it may be a good defence for non-payment to shareholder entitled to payment but it is hardly a defence to the consequence which ensue under section 205-A under which the company is under an obligation to deposit all such amounts of unpaid dividend in special account of the said company. In other words, it may be a good defence for non-payment to shareholder entitled to payment but it is hardly a defence to the consequence which ensue under section 205-A under which the company is under an obligation to deposit all such amounts of unpaid dividend in special account of the said company. The protection, therefore, for non-payment very much stops at that point of time inasmuch as if the payment cannot be made due to operation of law then no offence is made out under section 207, since the payment could not be made. However, inspite of this protection which is for the limited purpose of non-payment to the shareholder, the further consequence is not suspended, much less wiped out. In other words, even if the company is exempted from paying such amounts on account of operation of law still the said amount which remains unpaid will fall in the same category along with other amount which remained unpaid to the shareholder entitled to the payment. The capacity of the shareholder entitled to the payment as also the obligation of the company to make payment to such shareholder both remain intact, though obligation to make immediate payment is suspended till the legal hurdle is wiped out. That does not affect in any manner further obligation as stipulated under, section 205-A which comes into operation only after the non-payment and that too only after the period of forty-two days is over. It is thereafter that the company is enjoined to deposit the said unpaid amount in the special account as prescribed thereunder, until the further formalities are observed. In other words, therefore, there is nothing in section 205-A to support the claim that dividend remittable to a shareholder entitled to the said payment which, however, cannot be made due to some legal hurdle or impediment as in the instant case it could not be done without Reserve Bank's permission, is exempted from provisions of section 205-A(1) in not depositing the said unpaid dividend amount in the Unpaid Dividend Account of the company. The obligation case within the span of 42 days and the obligation that comes into existence after the said period of 42 days is over and within 7 days thereafter are distinct, and the protection afforded under proviso to section 207 obviously cannot be engrafted to serve as a protection even for second part in section 205-A. This is also because the disqualification is for the payment of the amount to the shareholder entitled to the payment as in the instant case it could not be paid unless there is a permission of Reserve Bank as the Directors are non-residents in India and as stipulated by the Foreign Exchange Regulation Act. However, this so-called disqualification merely suspends the payment to be made till the hurdle is removed and it is not as if that protection of non-payment remains in force all throughout or even assuming otherwise, it hardly makes any difference to the conclusion because non-payment to the shareholder does not serve as exemption for non deposit of the said unpaid amount to the special account, whereas the obligation to deposit unpaid amount to the special account is independent of everything and comes into operation when the bare fact that the amount has not been paid or could not be paid within the stipulated period is established. Compliance with the stipulations under section 205-A(1) is necessary as per the scheme of the provisions contained in all the sub-sections of section 205-A as the amount after a particular period has to be transferred to the general revenue account of the Central Government while the person to whom the amount is due can lodge his claim and get the amount. All these provisions form a complete unit with a specific purpose in the interest of all the parties concerned, high-lighting the object and utility of transferring such amounts of unpaid dividends. Therefore, in effect, it is not the reason for non-payment but it is the consequence of non-payment that brings into play the second part of section 205-A casting obligation on the part of the company to deposit the unpaid amount in special account within the period of seven days after the said stipulated period of forty-two days is over. This position is manifestly clear and admits no doubt. 14. This position is manifestly clear and admits no doubt. 14. Examined on the facts of the instant case on the analysis of these provisions, the position is clear that the dividend was declared in February 1984 but it was actually paid on 1st June, 1984 while final dividend was declared on 21st June, 1984 but it was actually paid on 22nd January, 1985. These amounts could not be paid till June 1984 and January 1985 because till then the permission of the Reserve Bank under the provisions of Foreign Exchange Regulation Act was not obtained. Obviously that permission was granted sometime in June, 1984 in the matter of first payment and prior to 22nd January, 1985 in respect of second payment. It is accepted that both these payments have been made after the permission was granted by the Reserve Bank. It would, therefore, follow that till the permission was not granted statutory hurdle was operating in the way of making payment to these petitioners by the company and, therefore, under the first proviso (a) to section 207 of the Act the company was fully protected and no offence could be made out. However, as observed earlier, the protection stops at that and the obligation came into effect immediately thereafter i.e. after the period of forth-two days after declaration was over under section 205-A (1) under which the company ought to have deposited the said amount of unpaid dividend in the special account as prescribed thereunder. Admittedly, the company has not done that within the stipulated period of seven days or for that matter of any time, but directly paid to these three petitioners in June 1984 and January, 1985. 15. In view of the discussion hereinabove on the basis of analysis of these provisions and in the context of the facts of instant case it is inescapable to hold that the company has failed to discharge the obligations as prescribed under the second part of section 205-A, sub-section (1). Once that is done, then the provisions of sub-section (8) which create an offence for this lapse and prescribe punishment would obviously come into play and consequently normally the company and concerned officers would make themselves liable for the penal consequence. The first count will have to be held against the petitioners and the contention raised by Shri Vashi, the learned Counsel, in that behalf is negatived. 16. The first count will have to be held against the petitioners and the contention raised by Shri Vashi, the learned Counsel, in that behalf is negatived. 16. It would, therefore, obviously be necessary now to consider the second count canvassed by Shri Vashi, the learned Counsel, as to whether inspite of such a default, the petitioners can be made liable as contemplated by provisions of the Act. In that behalf some other provisions are required to be examined. 17. I have already indicated that sub-section (8) prescribes that if a company fails to comply with the provisions of section 205-A (1) then it gives indication as to which of the officers of the company would be held liable for punishment and for that purpose a specific terminology has been used as "the company and every officer of the company, who is in default" who are made liable for punishment. It, therefore, follows that with some purport the legislation has employed this term "every officer of the company, who is in default", and the prosecution must establish that petitioners Nos. 2 to 6 squarely fall in this category. This, however, is incomplete reading of the situation as it would be necessary to find out as to what was really intended by the legislature, in enacting this provision using this particular terminology embracing not "every officer of the company" being made liable for punishment but restricting only to such officer of the company who is in default being made liable for punishment. 18. 18. Section 5 of the Act furnishes the meaning of the term "Officer who is in default" and it reads as :--- "For the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any punishment or penalty, whether by way of imprisonment, fine or otherwise, the expression "officer who is in default" means any officer of the company who is knowingly guilty of the default, non-compliance, failure, refusal or contravention mentioned in that provision, or who knowingly and wilfully authorises or permits such default, non compliance, failure, refusal or contravention." Even this remains incomplete unless the meaning of the term "officers" simplicitor is properly followed that finds incorporated in sub-section (30) of section 2 of the Act, which defines the officer as:- "officer includes any director, managing agent, secretaries, and treasurers, managers or secretary, or any person in accordance with whose directions or instructions the Board of Directors or any one more of the directors is or are accustomed to act, and also includes- (a) where the managing agent, or the secretaries and treasurers is or are a firm, any partner in the firm; (b) where the managing agent or the secretaries and treasurers is or are a body corporate, any director or manager of the body corporate...." 19. On a composite reading of section, sub-section (3), section 5 and sub-section (8) of section 205-A a conclusion harmoniously flows out of the same. Firstly, there must be a default as contemplated by section 205-A sub-clause (1), either in not depositing the said amount in the special account. Though there is a default it is not that every officer who would be made liable, but only such officers, who are deemed to be in default as contemplated by section 5 only would be made liable. The term "officer in default" cannot be complete unless the provisions of section 2 (3) and section 5 are read together or otherwise it would be a truncated form. 20. The term "officer in default" cannot be complete unless the provisions of section 2 (3) and section 5 are read together or otherwise it would be a truncated form. 20. The harmonious reading of these three provisions, therefore, would properly prescribe as:- "If a company fails to comply with any of the requirement of section 205-A the company or any director, managing agent, secretaries, treasurers, manager or secretary or any person in accordance with whose directions or instructions the Board of directors or any one or more of the directors, is or are accustomed to act, including where the managing agent is a firm then any partner of that firm, or where the managing agent is a body corporate then manager or agent of body corporate, and who is knowingly guilty of non-compliance, failure or refusal or contravention mentioned in that provision or who knowingly and wilfully authorises or permits such default, non compliance, failure, refusal or contravention, would be liable for punishment with fine which may extend to 500 rupees for every day during which failure commenced ......" It would, therefore, be manifest from this composite definition emerging out of those provisions that it is not as every officer of the company, who will be liable but that officer must be an officer in default and for that purpose he might have been guilty of that default knowingly or who had authorised the said default knowingly or wilfully. It is true that in the first part the wilful default is not contemplated but nonetheless the person must be knowingly guilty of the said default, contravention or non-compliance and in respect of authorising the act then it must be not only knowingly but also wilfully. 21. Applying this composite definition to the case, Shri Vashi, the learned Counsel, contends that respondent Nos. 2 to 6 by merely being the directors of the company cannot be presumed to have been knowingly guilty or have knowingly and wilfully authorised the said default. This is to counter the contention of Shri Vyas, the learned Public Prosecutor, that their mere capacity as directors would make them knowingly guilty or also make them knowingly or wilfully authorising the said default or contravention. I am afraid, such a spacious interpretation as sought to be placed by Shri Vyas is difficult to be upheld. This is to counter the contention of Shri Vyas, the learned Public Prosecutor, that their mere capacity as directors would make them knowingly guilty or also make them knowingly or wilfully authorising the said default or contravention. I am afraid, such a spacious interpretation as sought to be placed by Shri Vyas is difficult to be upheld. Obviously the legislature did not want every officer to be tagged in this category to suffer the penal consequence, but such officer is to be supplemented by the knowledge or also with intention. Consequently, therefore, the element of mens rea is obviously sought to be introduced through this provision for the purpose of formulation of offence. In other words, the prosecution must establish, though not necessarily by direct evidence but atleast inferentially by enough material that the default has been done knowingly or authorising default knowingly or wilfully. In other words, bare fact of default or contravention does not make an officer of the company to suffer penal consequence but to incur that disqualification he must have knowledge and that for the second part he must have also intention. This would be in contrast with the other provisions under the Act itself or under other laws such as Customs Act, Prevention of Food Adulteration Act etc. where in respect of some offences there is no further qualification but an officer of the company or partner of the firm by reason of his capacity in that behalf is made liable. Consequently, user of this terminology is obviously with some purpose. Significantly, there is not even a whisper in the complaint either about the knowledge much less about the intention. This is practically conceded on behalf of prosecution. It is not even suggested that by reason of they being the directors consequence must follow. As stated, petitioners Nos. 3, 4 and 5 are ordinarily residing abroad and they rarely come to India to attend some of the meetings, while petitioners Nos. 2 and 6 say that they were not concerned with the day to day affair of the company and they had no knowledge of the case. Under the circumstances, knowledge cannot imputed to these directors mush less intentions. As stated at the threshold the peculiar feature is that petitioners Nos. 2 and 6 say that they were not concerned with the day to day affair of the company and they had no knowledge of the case. Under the circumstances, knowledge cannot imputed to these directors mush less intentions. As stated at the threshold the peculiar feature is that petitioners Nos. 3, 4 and 5 are themselves recipient of the dividend and they being aboard their counter part of the company, having not deposited the said amount to the special account cannot be tagged to that as a wilful default or a default committed knowingly. As stated, there is absolutely no evidence worth the name which is sought to be produced by the prosecution nor is there anything in the complaint even to inferentially suggest application of these provisions of the 'Act' vis-a-vis the petitioner Nos. 2 to 6. In the absence of any such material and in the event of the glaring features which are indicated earlier the vital ingredients of the offence are blissfully missing. Consequently, notwithstanding there has been a default by the company in not depositing the said amount in special account still the petitioners Nos. 2 to 6 cannot be made liable for the same. The case of the company of course may stand on different footing. Shri Vashi, the learned Counsel, also contended that the company and the concerned officers bona fide believed that as per their interpretation of section 205-A (1) read with section 207 along with proviso (a) once they were protected by that proviso from not incurring any penal liability for non-payment of the amount as they could not do the same in the absence of permission from the Reserve Bank they were also excused or exempted from depositing the same in the special account and this is fortified as they obtained legal opinion in that behalf. He has also brought to my notice the correspondence exchanged between the parties and the consistent replies given by the company to show cause notices and other queries made by the complainant that it is mainly because of the absence of permission from the Reserve Bank that they not only could not pay but also they felt honestly that it was not necessary to deposit the amount in the special account, and but for which advice perhaps they would have acted otherwise. Since however, the material on this crucial aspect not only about the element of mens rea but also about these petitioners were knowingly associated with the said default being wholly non-existent on which point alone the petitioners deserve to be exonerated. This further plank in the argument of Shri Vashi, the learned Counsel, for the absence of mens rea and acting in good faith need not detain us. 22. All said and done and even otherwise, the facts are so peculiar that there is no propriety of allowing this proceeding to continue. In that behalf as already indicated at the threshold, the three of the petitioners are normally residents abroad and those are non-residents in India. They themselves are recipient being entitled to dividend as shareholder as they were representing the parent company on Board of Directors of the company, and the amounts have been fully paid on 1st June, 1984 and second on 22nd January, 1985. Inspite of that we find that it is an admitted position that the complaint was filed on 27th June, 1985. This would, therefore mean that the complaint was filed even after full payment was made to these petitioners by the company after obtaining the permission of the Reserve Bank of India. The delay can be justified as the permission was not granted till then. These three petitioners rarely come to India as they are ordinarily residing in United Stated and United Kingdom. There is no charm in compelling these people to face the trial in India in view of all these features. 23. Having regard to the totality of all the circumstances in proper perspective, I have no reservation to hold that on the ground of propriety also this prosecution should not be encouraged much less should be allowed to be continued which exercise would be sheerly waste of public money and time and energy and may even be abuse of process of law. It is better if the Court's precious time is preserved to attend to better proceedings than the one at hand. Prolonging agonies of the petitioners under these circumstances would be thoroughly unjustified. Even the complainant should have considered the propriety of lodging the complaint even after the payment was remitted in full. Any way, it is a past event while at present and for the future the same can be rectified by not continuing the proceeding. 24. Prolonging agonies of the petitioners under these circumstances would be thoroughly unjustified. Even the complainant should have considered the propriety of lodging the complaint even after the payment was remitted in full. Any way, it is a past event while at present and for the future the same can be rectified by not continuing the proceeding. 24. Unfortunately, the learned Magistrate did not consider any of these facets and almost mechanically issued the process. It is true that the inherent jurisdiction should not be lightly exercised in favour of quashing of the proceeding. However, when even ex-facie it appears to be manifestly clear and even desirable on the ground of propriety not to continue the proceeding then this Court on the ratio of (R.P. Kapur v. State of Punjab)1, A.I.R. 12960 S.C., 866; (State of Karnataka v. L. Muniswamy)2, A.I.R. 1977 S.C. 1489 and (Trilok Singh v. Satya Deo Tripathi)3, A.I.R. 1979 S.C. 850, would be entitled to step in, in the interest of justice to quash the proceeding or otherwise expressing inability and merely assuming the character of spectator would really be against the interest of justice. Under the circumstances, I am satisfied that this is a fit case to exercise such discretion in favour of quashing of the proceeding. 25. Rule made absolute. The impugned order recorded by the learned Additional Chief Metropolitan Magistrate, 3rd Court, Esplanade, Bombay issuing process under section 205-A (8) for contravention of provisions of section 205-A (1) of the Companies Act on the basis of the complaint filed by the Additional Registrar of the Companies, Maharashtra in Criminal Case No. 1301/RC of 1985 is set aside and the said proceedings are quashed and the said complaint stands dismissed. The petitioners-accused are discharged. Rule made absolute. ------