V.K. Singhal, J.@mdashThis petition u/s 482 of the Criminal Procedure Code has been submitted to quash the proceedings of Criminal Case No. 164 of 1994--Renu Jain v. Herdilia Unimers pending before the Special Court of Judicial Magistrate (Economic Offences), Rajasthan, Jaipur, and to discharge the accused petitioners.
2. The brief facts of the case are that Mrs. Renu Jain had applied for allotment of 100 shares of the petitioner-company on the basis of its prospectus dated April 30, 1992, vide Application Nos. 2533789, dated June 1. 1992 The cheque was also given along with the application form for the requisite amount and the same was encashed on or about June 18, 1992. The complainant came to know of the allotment through her broker, Shri S. C. Jain, who received the brokerage amount in respect of the application made by the complainant. The shares were required to be sent by the petitioner-company on or before November 1, 1992, but the shares were not sent. According to the conditions incorporated in the prospectus, the company had undertaken to allot the shares within 10 weeks of the close of the public issue and the shares were required to be sent by registered post to the address given in the application form itself. Since the shares were not sent within the stipulated time; violation of provisions of sections 61, 73 and 113 of the Companies Act was alleged. For the alleged contravention of the provisions of Section 61 it was prayed that an enquiry be made into the conduct of the accused and the accused be punished u/s 63 of the Companies Act. And that for the breach of Section 73 the punishment as provided u/s 73(2B) of the Companies Act was prayed for. In respect of contravention of the provisions of section 113 it was stated that the punishment of fine upto Rs. 500 per day during the period of default be awarded and the amount so received be directed to be given u/s 626 of the Companies Act by way of award.
3. The submission of learned counsel for the petitioner is that the complaint could be filed against the officer who is in default. The words "officer who is in default" has been defined u/s 5 of the Act, which are managing director, whole-time director, manager, secretary or any person in accordance with whose directions or instructions the board of directors is accustomed to act and any person charged by the board with the responsibility of complying with the provisions. It is provided in Clause (g) that where any company does not have any of the officers specified in Clauses (a) to (c) any director or directors who may be specified by the board in this behalf or where no director is so specified, all the directors are considered within the meaning of "officer who is in default".
4. It is submitted that the company is having the managing director and manager as well and, as such, the chairman or the directors cannot be held responsible and the proceedings against them should not be allowed to be continued. The provisions of Section 5 have contemplated the managing director, whole-time director and the manager responsible and it is only in a situation where the persons specified in Clauses (a), (b) and (c) are not existing in a company, that the director or the directors can be made responsible. This by itself is a question of fact as to whether the managing director or the whole-time director or the manager exists so as to exclude the directors of the company from being considered "as officer who is in default". It may also be observed that, under the Companies Act, 1956, section 175 has contemplated the chairman of a meeting and it may be by virtue of the articles of association that a chairman is being appointed. The definition of managing director have been given under Clause (26) of section 2, which is as under :
" ''Managing director'' means a director who, by virtue of an agreement with the company or of a resolution passed by the company in general meeting or hy its board of directors or by virtue of its memorandum or articles of association, is entrusted with (substantial powers of management) which would not otherwise be exercisable by him, and includes a director occupying the position of a managing director, by whatever name called."
5. The designation of a person as chairman cannot be considered as not falling within the definition of "officer who is in default" unless it is so provided by the memorandum and articles of association of the company and/or by agreement entered into with him as to what are his duties. Similarly, the question as to whether Clause (a), (b) or (c) is applicable so as to exclude the other directors is also to be determined with reference to the documents which may be placed before the trial court and on that point no interference at this stage can be made.
6. It is also submitted by learned counsel for the petitioner that 100 shares were allotted to Mrs. Renu Jain and they were sent by registered post and the petitioner itself has written to her to send an indemnity bond duly signed so that the duplicate share certificate may be issued to her. Since she failed to do the same the complaint could not have been filed. It is submitted that annexure 2 is a public document with regard to the certificate issued by the postal authorities and, therefore, it should be presumed that the obligation which was on the petitioner-company has also been discharged. It is submitted that section 113 requires the delivery of the share certificates in the manner provided u/s 53. Since the procedure prescribed has been followed, it should be considered that the obligation which was on the company has duly been discharged in accordance with law.
7. Section 113 has contemplated the delivery of the share certificate, etc., within three months after the allotment. Section 53 provides that a document may be served by a company or any member thereof either personally or by sending it by post to him to his registered address. A presumption has been drawn that where a document is sent by post, service thereof shall be deemed to be effected by properly addressing, pre-paying and posting the letter containing the document. The presumption which has been raised u/s 53 is rebuttable and a shareholder may allege that he has not been delivered the share certificate or it is not properly addressed. The document annexure-2 refers to bulk registered receipt with name of the addressee and post office of destination. Since from the above document it is not evident as to whether it was sent to the registered address and/or on the basis of a document which is not complete in itself, it cannot be said that the proceedings are to be quashed at the stage. This contention has, therefore, no force.
8. It is also submitted that the petitioner is not a holder of the share and cannot file a complaint u/s 621 of the Companies Act. This argument of the learned counsel for the petitioner is contrary to his own submission when it is clearly admitted that 100 shares of the company are allotted. The moment the shares are allotted and the share certificate is signed, and the name is entered in the register maintained for the purpose, the person becomes the shareholder whether the person has received the share certificate or not. This contention has also no force and is rejected.
9. It is submitted that the registered office of the company is situated at Bombay outside the jurisdiction of the trial court and no part of the cause of action is alleged in the jurisdiction of the trial court. According to section 177 of the Criminal Procedure Code, every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed. If any mis-statement or untrue statement have been given in the prospectus, it was at Bombay, and this trial court has no jurisdiction. Learned counsel for the respondent has submitted that the application was submitted at Jaipur and the amount was also collected at Jaipur. The company was acting through its agents at Jaipur and, therefore, the Special Court of Judicial Magistrate (Economic Offences), Rajas-than, Jaipur, has jurisdiction. The question also involves certain factual position and it cannot be examined in a petition u/s 482 of the Criminal Procedure Code. The petitioner could raise this point before the trial court.
10. It is submitted that the complaint is barred by limitation as it was filed beyond six months and no cognizance could be taken in accordance with the provisions of Section 468 of the Criminal Procedure Code.
11. Learned counsel for the respondent has relied on the decision of the Madras High Court given in the case of
12. It is also submitted that amendment has been made in the Companies Act by which the action now could be taken by the Company Law Board and not by the court. This submission of the learned counsel for the petitioner has also no substance as the power to punish would be exercised by a court only. The proviso to Section 113(1) has conferred the power on the Company Law Board to extend the time for the delivery of share certificates, Under Sub-section (3) any company on which the notice has been served requiring it to make good any default in complying with the provisions of Sub-section (1) if he fails to make good the default within ten days after the service of the notice, the Company Law Board may, on the application of the person entitled to have the certificate make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order; and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer responsible for the company in default. Sub-section (3) does not authorise the Company Law Board to punish the company with fine and the Company Law Board cannot be considered to be a court having jurisdiction to punish with fine, and, as such this objection of learned counsel for the petitioner has no substance.
13. An objection has also been raised by learned counsel for the respondent that the petition u/s 482 of the Criminal Procedure Code is not maintainable as the Magistrate himself is empowered to recall his order of summoning and proceedings can be dropped if the accused satisfies the Magistrate that no case is made out against him, when he enters appearance after being summoned. Reliance has been placed on the decision of the Delhi High Court in the case of Thirani Chemicals Ltd. v. Registmr of Companies [1994] Cri.LJ 95 .
14. The decision of
"(1) Where the allegations made in the complaint or the statement of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused ;
(2) Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused ;
(3) Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible ; and
(4) Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by a legally competent authority and the like".
15. Since the allegations are neither patently absurd nor improbable or based on no material can be considered where no case is made out against the accused. Since all the essential ingredients of the offence have been disclosed in the complaint the complaint does not suffer from any legal defect nor could the discretion of the Magistrate be said to be capricious or arbitrary. Since the petitioner is having an alternative remedy u/s 204 of the Code before the Magistrate who is seized of the matter no interference can be made in view of the decision of the Bombay High Court in the case of
16. The various submissions which have been made by learned counsel for the petitioner, as discussed above, do not justify that the petitioner should be discharged at this stage u/s 482. The inherent powers could be exercised in a case where there is abuse of the process of law or the petitioner is able to satisfy the court that the proceedings are frivolous or vexatious and not in a case where the facts are yet to come on record.
17. In view of the observations made above, it is considered appropriate that the personal attendance of the directors of the company shall not be insisted upon by the trial court. The question with regard to jurisdiction and other issues which are available to the petitioner would be decided on an application being submitted u/s 245(2). With the observations made above and directions given in this para, the petition stands disposed of.
