@JUDGMENTTAG-ORDER
1. The petitioner is the accused in STR No. 2644 of 2000 on the file of Sub-Divisional Judicial Magistrate, Pondicherry and he seeks to quash the
proceedings in the case.
2. The respondent filed a complaint u/s 211(7) of the Companies Act, 1956 (''the Act'') against the petitioner in which it is alleged that a sum of Rs.
1,44,71,902 has been shown as other expenses, including bad debts, in schedule J in the profit and loss account filed by the petitioner for the
period ending 31st March, 1997 and on a direction to furnish break-up for the said expenses, the petitioner furnished break-up figures in the letter
dated 28th December, 1998 and it has been noticed in it that out of the total expense of Rs. 1,50,18,708.23, a sum of Rs. 4,46,806.24 being
other income and Rs. 1,00,000 being profit on sale of trade mark had been deducted and the balance of Rs. 1,44,71,901.99 was shown as other
expenses. The respondent alleged in the complaint that the profit and loss account for the year ending 31st March, 1997 has not disclosed the
other income of Rs. 4,46,806.24 and the profit on sale of trade mark amounting to Rs. 1,00,000 and the miscellaneous expense of Rs. 59,790.74
separately.
2.1 According to the petitioner, the contention of the respondent in the complaint stating that the default commenced on 1st April, 1997 and is a
continuing offence within the meaning of Section 472 of the Code of Criminal Procedure, 1973 (''Cr. PC'') is not correct. The offence complained
of u/s 211(7) of the Act is punishable with imprisonment for a term which may extend to six months or with fine or with both. The limitation for
filing the complaint lapses on the expiry of one year. The present complaint was not filed within the time prescribed and hence it is barred by
limitation. The learned Magistrate ought not to have taken cognisance of the offence. Hence, proceeding with the present complaint is an abuse of
the process of court and the complaint is liable to be quashed. The petitioner has not concealed any material facts. The profit and loss account was
audited and certified as true and fair by the qualified chartered accountant. The other income of Rs. 4,46,806 represents recovery of expenses and
therefore it has been shown under the head ''other expenses''. The sale profit of trade mark has been disclosed under Clause 3 of schedule D. The
accounts reflect true and fair view. The proceedings against the petitioner are unsustainable and liable to be quashed.
3. Mr. Arvind P. Dattar, learned senior counsel, appearing for the petitioner, mainly contended that the offence complained of u/s 211(7) of the
Act is punishable with imprisonment for a term which may extend to six months or with fine or with both and the limitation for filing the complaint
lapses on expiry of one year and since the respondent did not file the complaint within the time prescribed, the learned Magistrate ought not to
have taken cognisance of the offence for the reason that the complaint was barred by limitation. Per contra, Mr. T.S. Sivagnanam, learned
Additional Central Government Standing Counsel, appearing for the respondent, contended that the offence alleged in the complaint against the
petitioner is a continuing offence u/s 472 of the Cr. PC and the offence continued till the date of the complaint.
4. As per the complaint, the accused, namely, the petitioner herein, has failed to comply with the statutory requirements of Section 211(3) read
with Schedule VI, Part II, Clause 2(b) of the Act and hence liable for prosecution u/s 211(7) of the Act. The relevant portion in the complaint is
extracted below :
7. As per Schedule VI, part II, Clause 2(b) under the provisions of Section 211(2) of Companies Act, the profit and loss account of the company
shall disclose every material feature including credits and debts or expenses in respect of non-recurring transactions or transaction of an exceptional
nature and as per Schedule VI, Part II, Clause 3(x)(i), the profit and loss account shall disclose the miscellaneous expenses separately.
8. As the P&L account for the year ending 31st March, 1997 has not disclosed separately the other income of Rs. 4,46,806.24 and the Profit or
Sale of Trade Mark amounting to Rs. 1,00,000 and the Miscellaneous Expenses of Rs. 59,790.74 separately a show-cause notice u/s 211(7) of
Companies Act, 1956 was issued to company with copy to the accused managing directors and company vide this office letter dated 9th
February, 1999.
5. The offence u/s 211(7) of Act is punishable with imprisonment for a term which may extend to six months or with fine which may extend to Rs.
10,000 or with both and as such, u/s 468(2)(b) of the Cr. PC, the period of limitation is one year. The relevant part of Section 469(1) of the Cr.
PC relating to the commencement of the period of limitation is as follows:
4. Commencement of the period of limitation.--(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.
According to the respondent, the offence alleged against the petitioner is a continuing offence and if it is so, a fresh period of limitation shall begin to
run at every moment of the time during which the offence continues.
6. The petitioner filed a balance sheet as on 31st March, 1997 and the profit and loss account for the period ending 31st March, 1997 in the office
of the respondent. According to the respondent, on technical scrutiny of the profit and loss account, it was noticed that a sum of Rs. 1,44,71,902
was shown as other expenses in scheduled ''J'' and the break-up of the said expenses was not furnished and the respondent called for the same in
his letter, dated 21st December, 1998. The petitioner furnished the breaking figures in his letter, dated 28th December, 1998, pursuant to which,
the respondent issued show-cause notice, dated 9th February, 1999, calling upon the petitioner to show-cause as to why prosecution u/s 211(7)
of the Act for contravention of Section 211(2) read with Schedule VI of the Act should not be initiated against the petitioner. The petitioner gave
explanation, dated 20th February, 1999. Thereafter, the respondent issued another show cause notice, dated 9th August, 1999, for which the
petitioner submitted his explanation, dated 20th September, 1999. Not satisfied with the explanation of the petitioner, the respondent has lodged
the present complaint on 10th April, 2000.
7. Failure to take all reasonable steps to secure compliance by the company as respects any accounts laid before it in general meeting with the
provisions of the section as to the matters to be stated in the accounts by the person concerned is undoubtedly an offence punishable u/s 211(7) of
the Act and it is punishable with imprisonment for a term which may extend to six months or with fine or with both. A complaint in respect of such
an offence has to be filed within one year as per Section 468(2)(b) of the Cr. PC. The question is whether the offence alleged in the complaint is a
continuing offence or not for the purpose of limitation.
8. Mr. Dattar, learned senior counsel, contended that there is nothing mentioned in Section 211(7) of the Act rendering the offence a continuing
one and the offence is complete with the failure to take all reasonable steps to secure compliance as respects any accounts laid before the
company and such an offence is committed once and for all as and when one commits the default and the section does not lay down that the
person concerned would be guilty of an offence if he continues to carry on without compliance or that the offence continues until the requirement is
complied with. In this connection, he pointed out the offences mentioned in Sections 113, 162 and 168 of the Act which were made to be
continuing offences therein and contended that an act or omission should not be held as a continuing wrong or default, unless there are words in the
statute which make out that such was the intention of the Legislature and he relies on two decisions of the Apex Court in this regard.
8.1 In State of Bihar Vs. Deokaran Nenshi and Another, : the Apex Court has laid down as follows :
5. Continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one
of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which
continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and
recurs, there is the offence committed. The distinction between the two kinds of offences is between an act or omission, which constitutes an
offence once and for all and an act or omission which continues and therefore, constitutes a fresh offence every time or occasion on which it
continues. In the case of a continuing of fence, there is, thus, the ingredient of continuance of the offence which is absent in the case of an offence
which takes place when an act or omission is committed once and for all.
** ** **
9. Regulation 3 read with Section 66 of the Mines Act makes failure to furnish annual returns for the preceding year by the 21 st of January of the
succeeding year an offence. The language of Regulation 3 clearly indicates that an owner, manager, etc., of a mine would be liable to the penalty if
he were to commit an infringement of the regulation and that infringement consists in the failure to furnish returns on or before January 21 of the
succeeding year the infringement therefore, occurs on January 21 of the relevant year and is complete on the owner failing to furnish the annual
returns by that day. The regulation does not lay down that the owner, manager, etc. of the mine concerned would be guilty of an offence if he
continues to carry on the mine without furnishing the returns or that the offence continues until the requirement of Regulation 3 is complied with. In
other words, Regulation 3 does not render a continued disobedience or non-compliance of it an offence. As in the case of a construction of a wall
in violation of a rule or a bye-law of a local body, the offence would be complete once and for all as soon as such construction is made a default
occurs in furnishing the returns by the prescribed date. There is nothing in Regulation 3 or in any other provision in the Act or the regulations which
renders the continued non-compliance an offence until its requirement is carried out."" (p. 909)
In Commissioner of Wealth Tax, Amritsar Vs. Suresh Seth, : Their Lordships of the Supreme Court held as follows :
...In the instant case, the contention is that wrong or the default in question has been altered into a continuing wrong or default giving rise to a
liability de die in diem, that is, from day-to-day. The distinctive nature of a continuing wrong is that the law that is violated makes the wrongdoer
continuously liable for penalty. A wrong or default which is complete but whose effect may continue to be felt even after its completion is, however,
not a continuing wrong or default. It is reasonable to take the view that the court should not be eager to hold that an act or omission is a continuing
wrong or default unless there are words in the statute concerned which make out that such was the intention of the Legislature.
** ** **
17. The true principle appears to be that where the wrong complained of is the omission to perform a positive duty requiring a person to do a
certain act the test to determine whether such a wrong is a continuing one is whether the duty in question is one which requires him to continue to
do that Act. Breach of a covenant to keep the premises in good repair, breach of a continuing guarantee, obstruction to a right of way, obstruction
to the right of a person to the unobstructed flow of water, refusal by a man to maintain his wife and children whom he is bound to maintain under
law and the carrying on of mining operations or the running of a factory without complying with the measures intended for the safety and well-being
of workmen may be Illustrations of continuing breaches or wrongs giving rise to civil or criminal liability, as the case may be, de die in diem."" (pp.
1110-1112)
9. Section 211(2) of the Act requires every company to give a true and fair view of the profit and loss of the company for the financial year and
shall comply with the requirements of Part II of Schedule VI and the offence of the breach thereof is complete with the failure of the person
concerned to take all reasonable steps to secure compliance by the company as respects any accounts laid before the company with the provisions
of the section as to the matters to be stated in the accounts. Such an offence is committed once and for all as and when one commits the default. It
gives rise to a single default and to a single punishment. The provision does not contemplate that the obligation to secure compliance continues from
day-to-day until the compliance is actually met nor does it provide that continuance of business without securing compliance becomes a continuing
offence. Hence, the offence u/s 211(7) of the Act is not a continuing offence and there is a period of limitation for taking cognisance of such
offence.
10. Insofar as the limitation is concerned, the question would arise as to when the Registrar of Companies could be said to have had the
knowledge of the commission of offence by the petitioner. The learned senior counsel for the petitioner contends that the Registrar of Companies is
deemed to have knowledge about the contents of the profit and loss accounts when it was received by him and the limitation will start running from
that date onwards and he relies on the decision of this Court in Asstt. ROC v. H.C. Kothari [1992] 75 Comp. Cas. 688 wherein Padmini
Jesudural, J. has held as follows ;
After receiving the balance sheets, it is not open to the Registrar to keep these balance sheets in cold storage, keep his eyes closed to them and
then to deny knowledge of these contents, thereby defeating the law of limitation. The very object of the bar of limitation would be defeated if the
contention of the appellant is accepted. When the balance sheets are received by the Registrar of Companies, he is deemed to have knowledge
about the contents of the balance sheets and, consequently, of the offence, and limitation will start running from that day onwards. The complaint
relating to the year 1980 will have to be filed within six months from the date of receipt of exhibit P-1, namely, 9th June, 1981, the complaint for
the offence relating to the year 1981 within six months from the date of receipt of exhibit P-2, namely, 12th May, 1982, and the complaint relating
to the year 1982 within six months from the date of receipt of exhibit P-3, that is, 30th May, 1983. The present complaint is filed only on 2nd
February, 1985, which is far beyond the period of limitation...."" (p. 693)
In the present case, the petitioner filed profit and loss account for the year ending 31st March, 1997 in the office of the respondent. The
respondent by letter, dated 21st December, 1998, required the petitioner to furnish break-up for ''other expenses'' mentioned in Schedule ''J'' and
the petitioner furnished the same by letter dated 28th December, 1998. In his letter, dated 9th February, 1999, the respondent called upon the
petitioner to show cause as to why prosecution u/s 211(7) of the Act for contravention of Section 211(2) read with Schedule VI of the Act shall
not be initiated against the directors of the company.
11. The learned Additional Central Government Standing Counsel appearing for the respondent contended that it has to be taken that the
respondent had knowledge about the offence only on 9th August, 1999 when the second show-cause notice was issued and the complaint filed on
10th April, 2000 is within the period of one year from that date and it is in time. This contention can never be accepted. As already seen,
respondent is deemed to have knowledge about the contents of profit and loss accounts when he received the same and at any event, it cannot be
denied that the respondent had knowledge of the offence in question on 9th February, 1999 when he issued show-cause notice for prosecution to
the petitioner and limitation will start running from that date onwards. The complaint has to be filed within one year from that date. The present
complaint is filed only on 10th April, 2000 beyond the period of limitation. If it is so, there is bar to taking cognisance after the lapse of the period
of limitation u/s 468 of the Cr. PC.
12. The learned Additional Central Government Standing Counsel for the respondent contended that the court may take cognisance of an offence
after the expiry of the period of limitation if it is satisfied that it is necessary to do so in the interest of justice u/s 473 of Cr. PC and cited decisions
in this regard. It is specifically averred in the complaint that the offence u/s 211(7) of the Act is a continuing offence within the meaning of Section
472 of the Cr. PC and it is also averred that the offence in the complaint continued for 110 days till the date of the complaint. It is no doubt true, in
the last line of the complaint, it is stated that the delay in filing the complaint may be condoned u/s 473 of the Cr. PC. This is inconsistent with the
earlier averment in the complaint and cannot be taken note of. The complaint is mainly based on the footing that the offence is a continuing one and
there is no period of limitation and in such circumstances, the contention with regard to invoking the power u/s 473 of the Cr. PC is devoid of merit
and cannot be accepted.
13. Since the offence u/s 211(7) of the Act is not a continuing one, the learned Magistrate ought not to have taken cognisance of the offence in the
present case after the expiry of the period of limitation in view of the bar u/s 468 of the Cr. PC and the proceedings are liable to be quashed.
14. In view of the conclusion arrived above, it is not necessary to go into the other contention of the petitioner that the allegations mentioned in the
complaint do not constitute the offence alleged.
15. In the result, the petition is allowed and the proceedings against the petitioner in STR No. 2644 of 2000 on the file of Sub-Divisional Judicial
Magistrate, Pondicherry are quashed.
