Amison Foods Ltd. v. Registrar of Companies — 1998 DIGILAW 450 (KER)

Judgment :- This Crl. M.C. is filed by the accused in S.T. No. 80/1997 pending before the Addl. Chief Judicial Magistrate's Court (Economic Offences), Ernakulam to quash the complaint tiled by the Registrar of Companies. 2. The respondent - Registrar of Companies filed a complaint against the petitioners alleging offence punishable under S.97(3) of the Companies Act on the ground that the petitioners herein failed to file Form No. 5 being the notice of increase of authorised share capital within 30 days after the passing of the resolution to increase the capital in terms of S.97(1) of the Companies Act with the prescribed fee and additional fee and therefore, they have committed the offence punishable under S.97(3) of the Companies Act. 3. The petitioners who are the accused before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam are the Company, its Chairman and Managing Director and its Secretary respectively. Though the 1st petitioner-company was incorporated as a private limited company in the year 1987 it was converted into a public limited company in the year 1992. Though the authorised share capital of the company was initially Rs. 5 crores divided into 5000 equity shares of Rs. 100/- each, subsequently the authorised share capital of the company was increased to Rs. 7 crores by the resolution adopted on 30.4.1993. 4. In the annual general meeting held on 29.9.1994 of the 1 st petitioner a special resolution was adopted resolving to enhance the share capital of Rs. 7 crores to Rs. 32 crores and to make necessary alterations in the Articles of Association of the Company, The resolution was passed under S.97 of the Companies Act and the petitioners filed Form No. 23 as required under S.192 of the Act before the respondent, Registrar of Companies intimating about the resolution adopted by the Company to increase the authorised share capital. The petitioners did not file the notice in Form No. 5 along with the fee prescribed to be paid amounting to Rs. 7,50,000/- either within 30 days of the passing of the resolution or subsequently to record the increase and to make necessary alterations in the Memorandum and Articles of Association of the Company. The petitioners did not file the notice in Form No. 5 along with the fee prescribed to be paid amounting to Rs. 7,50,000/- either within 30 days of the passing of the resolution or subsequently to record the increase and to make necessary alterations in the Memorandum and Articles of Association of the Company. Therefore, the respondent sent show cause notice to the petitioners and dissatisfied with the reply sent by the petitioners, the respondent has filed Annexure D complaint before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam against the petitioners. 5. The petitioners have contended that though the petitioners had adopted a resolution in the annual general meeting held on 29.9.1994 resolving to enhance, the authorised share capital from Rs. 7 crores to Rs. 32 crores, subsequently due to various reasons including financial constraints of the company and general recession in the trade it was decided that the 1st petitioner need not increase its share capital and it was resolved in the 9th annual meeting held on 23.9.1996 to reduce the share capital of the company to Rs. 7 crores. Therefore, according to the petitioners, the resolution passed on 29.9.1994 was cancelled by the resolution dated 23.9.1996 and a copy of that resolution dated 23.9.1996 was filed before the respondent. Therefore, according to the petitioners, the authorised share capital of the company continued to be Rs. 7 crores as it originally stood. Therefore, according to them, they have not violated the provisions of S.97(3) of the Companies Act as alleged by the respondent. 6. Though various contentions are raised by the petitioners in the Crl. M.C. when it came up for hearing the counsel for the petitioners mainly urged two contentions. The first contention is that since the petitioners have revoked the earlier resolution to enhance the share capital by the subsequent resolution, there is no violation of S.97(2) of the Companies Act punishable under S.97(3) of the Act. The f act that the petitioners passed resolution dated 29.9.96 to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores and the petitioners had filed Form No. 23 before the Registrar of Companies in respect of the resolution to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores is admitted. The f act that the petitioners passed resolution dated 29.9.96 to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores and the petitioners had filed Form No. 23 before the Registrar of Companies in respect of the resolution to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores is admitted. It is also admitted that in the Balance Sheets as on 31.3.1995 and 31.3.1996 the authorised share capital of the company was stated as Rs. 32 crores. The fact that the notice in Form No. 5 along with the prescribed fee which is liable to be filed before the respondent within 30 days of adopting the resolution dated 29.9.94 is not filed is also not in dispute. But the contention of the petitioner is that since the share capital was not actually increased from Rs. 7 crores to Rs. 32 crores and the resolution enhancing the share capital was subsequently rescinded by adopting another resolution in the annual general meeting held on 23.9.1996, there was no necessity to file Form No. 5 along with the prescribed fee without any purpose and causing huge monetary loss to the company. This contention of the petitioners is not sustainable. Admittedly the resolution to enhance the share capital was adopted in the annual general meeting held on 29.9.1994 and that resolution was cancelled by resolution dated 23.9.1996 by resolving to reduce the authorised share capital from Rs. 32 crores to Rs. 7 crores. If in fact, the petitioners had adopted a resolution to increase the share capital and immediately within a short time had decided either to rescind that resolution or to reduce the share capital and intimated that fact to the respondent, there would have been some force in the contention raised by the petitioners. But in view of the fact that the petitioners adopted the resolution to enhance the -share capital on 29.9.1994 and after more than two years and mentioned in the Balance Sheets as on 31.3.1995 and 31.3.1996 that the share capital of the company is Rs. 3 2 crores, decided to reduce the share capital by the resolution dated 23.9.1996, the contention of the petitioners that since the share capital was not in fact enhanced from Rs. 7 crores to Rs. 32 crores, filing of Form No. 5 notice and payment of the fee amounting to Rs. 3 2 crores, decided to reduce the share capital by the resolution dated 23.9.1996, the contention of the petitioners that since the share capital was not in fact enhanced from Rs. 7 crores to Rs. 32 crores, filing of Form No. 5 notice and payment of the fee amounting to Rs. 7.5 lakhs causing heavy loss to the company, cannot be countenanced since the petitioners are liable to file notice in Form No. 5 before the Registrar intimating the increase of shire capital along with the prescribed fee within 30 days after the passing of the resolution increasing authorised share capital. Therefore, the subsequent cancellation of the resolution to increase the share capital or adoption of the resolution to reduce, the share capital will not absolve the petitioners from their liability to file Form No. 5 notice along with the prescribed fee before the Registrar of Companies within 30 days of adoption of the resolution to increase the share capital. Therefore, the contention raised by the petitioners is of no substance. 7. The next contention raised by the petitioners is that the complaint is barred by limitation, S.97(3) of the Companies Act imposes a punishment of fine which may extend to Rs. 50/- for every day during which the default continued and no imprisonment is provided under the section. The counsel for the petitioners submitted that under Section 49X of the Cr.P.C. the period of limitation in cases where only punishment of fine is prescribed is six months from the date of occurrence. Therefore, according to the petitioners-the above complaint filed by the respondent dated 31.3.1997 alleging offence punishable under S.97(3) of the Companies Act is hopelessly barred by limitation. The counsel for the petitioners vehemently argued that S.97(3) of the Companies Act contemplates single default and it does not contemplate continuing default and therefore, limitation runs from the 30th day of the adoption of the resolution dated 29.9.1994 to increase the authorised share capital and therefore, the prosecution launched against the petitioners is barred by time. In support of this argument the learned counsel for the petitioners relied upon the decisions of the various High Courts including the decisions in National Cotton Mills v. Asst. Registrar of Companies (1984) 56 Comp. Cas. 222); Shivalik Ice Factory v. Registrar of Companies (1988) 64 Comp, Cas. 113), and K.K. Mehra v. Registrar of Companies (1991) 71 Comp, Gas. 669). 8. Registrar of Companies (1984) 56 Comp. Cas. 222); Shivalik Ice Factory v. Registrar of Companies (1988) 64 Comp, Cas. 113), and K.K. Mehra v. Registrar of Companies (1991) 71 Comp, Gas. 669). 8. The decisions relied upon by the counsel for the petitioners lay down that the default committed under S.220 of the Companies Act in not filing the Balance Sheet before the Registrar. The punishment imposed for the default under S.220(3) is as provided under S.162 of the Companies Act. The punishment provided under S.162(1) and S.97(3) of the Companies Act is similar which stipulates a fine extending up to Rs. 50/-for every day for which the default continues. Therefore, the counsel for the petitioners argued that the above decisions though rendered considering the provisions of S.220 of the Companies Act, are applicable to the facts of this case coming within the ambit of S.97 of the Act. 9. But this argument advanced by the counsel for the petitioners relying upon the aforesaid decisions and other decisions of various High Courts cannot be accepted or followed by this Court since the principles enunciated in those decisions are in conflict with the judgment of this Court in Rani. Joseph v. Registrar of Companies (1995 (1) KLT 14) wherein a Division Bench after considering various decisions of various High Courts including the decisions relied upon by the counsel for the petitioners found that those decisions cannot be followed in view of the decisions of the Supreme Court. In para 18 of the judgment the Division Bench observed as follows: "We have carefully gone through the judgments referred to above. In view of the authoritative pronouncement of the Supreme Court in State ofBiharv.Deokaran (AIR 1973 SC 908) and in Dhagiralh Kanoria v. State of MP (AIR 1984 SC 1688), we cannot agree with the view expressed by the High Courts of Calcutta, Karnataka, Delhi and Punjab & Haryana. The only possible conclusion which we can legitimately arrive at is that the offences which are the subject matter of the complaint or violation of the provisions of Ss.159 and 220 of the Act are continuing in nature and until and unless the legal requirements contained in the provisions mentioned above are complied with, the Company and the personnel incharge of the Company are liable to be prosecuted and the complaints are not liable to be quashed on the ground of limitation. Fresh period of limitation starts on each day until the requirements of the provisions are satisfied. We can take only this interpretation bearing in mind the social object of the legislation which is intended to be achieved." 10. From the above judgment of the Division Bench of this Court it is clear that the default under S.220 of the Companies Act is a continuing default and not a single default as contended by the petitioners. Si nee the provisions of S.97 are also identical to that of the provisions of S.220 of the Act, the principles laid down by the Division Bench of this Court in the aforesaid decision are applicable to the facts of this case coming under S.97 of the Companies Act. Therefore, the default contemplated under S.97 of the Companies Act being continuing default arising on each day until the requirements of the provisions are satisfied, the above complaint filed by the respondent against the petitioners is within time and not barred by limitation. Therefore, this contention of the petitioners is not sustainable. 11. The counsel for the petitioners submitted that S.94 of the Companies Act deals with increase and reduction of share capital and the 1 st petitioner-company has passed resolution to increase the share capital as contemplated under S.94(1)(a) of the Act to enhance the share capital on 29.9. ] 994 and subsequently the company adopted the resolution dated 23.9.1996 to reduce the share capital as per S.94(1)(e) of the Act. He argued that there is no provision under the Companies Act to rescind or cancel the resolution already passed under S.94(1)(a) enhancing the share capital and S.94(1)(e) only provides for reduction, of share capital. 'Therefore, according to him, the subsequent resolution passed by the Company reducing the share capital to Rs. 7 crores tantamount to cancellation of .the previous resolution enhancing the share capital and therefore, it will be very harsh if the company is directed to pay Rs. 7.5 lakhs for nothing as fee provided under the Act for enhancement of share capital from Rs. 7 crores to Rs. 32 crores which never came into existence. 12. The petitioners arc bound by the provisions of the Companies Act and the rules framed thereunder while dealing with the affairs of the company. 7.5 lakhs for nothing as fee provided under the Act for enhancement of share capital from Rs. 7 crores to Rs. 32 crores which never came into existence. 12. The petitioners arc bound by the provisions of the Companies Act and the rules framed thereunder while dealing with the affairs of the company. The fact that enforcement of any of the provisions of the Companies Act against the company will be harsh, is not a matter for consideration by this Court in the above petition filed by the petitioners under S.482 of the Cr.P.C. to quash me criminal proceedings launched against them for non-compliance of the provisions of the Companies Act. Whether the petitioners are liable for the penalty as contemplated under S.97(3) of the Act or whether there are any extenuating or mitigating circumstances by which the petitioners can be absolved from the liability has to be considered by the Magistrate's Court. In view of what is stated above, absolutely no ground is made out by the petitioners to quash the criminal proceedings launched against the petitioners by invoking the provisions of S.482 of the Cr.P.C. and hence the Crl. M.C. is dismissed.