H.V. Jayaram
Vs. Industrial Credit and Investment Corporation of India Ltd. [1999] INSC 425
(15 December 1999)
K.T.Thomas,
M.B.Shah Shah, J.
Leave
granted.
The
only question involved in these appeals is whether the complaint for the
offence punishable under Section 113 (2) of the Companies Act, 1956 could be
filed only where the registered office of the company is situated or where the
complainant is residing.
The
appellant had lodged criminal cases before the Special Court for economic offences in Karnataka at Bangalore on the allegation that the
respondent companies had committed offences punishable under Section 113(2) of
the Companies Act. Criminal Petition Nos.240, 1485, 1548, 1848 and 1849 of 1996
before the High Court of Karnataka at Bangalore challenged the order passed by the trial court rejecting applications
for the discharge on the ground that the Magistrate had no territorial
jurisdiction to try the alleged offences. In some cases, companies straightway
approached the High Court questioning the order passed by the learned
Magistrate issuing summons to them after taking cognizance of the offence. It
was pointed out that admittedly the registered offices of the respondent
companies are not located in the State of Karnataka but are located either at Bombay or at Gujarat. As against this, the appellant who
is a practising advocate contended that he was a permanent resident of Bangalore and letters requesting the company
to transfer the shares and to send memorandum, articles of association, balance
sheets etc. were sent from Bangalore to
the registered offices of the companies and, therefore, cause of action also
arose at Bangalore. The High Court after considering
the various decisions relied upon by the learned counsel for the parties
arrived at the conclusion that under the provision of Section 53 of the
Companies Act two modes are prescribed for serving the documents, one to serve
personally and the other by post.
As the
documents were sent to the respondent by post, as requested by him, the cause of
action would arise only where the head office is situated. The Court,
therefore, arrived at the conclusion that having regard to Section 201 of the Cr.P.C.,
the Magistrate is required to return the complaint for presentation before the
proper court with an endorsement to that effect.
The
learned counsel appearing on behalf of the appellant (complainant) strenuously
contended that the order passed by the High Court is, on the face of it,
erroneous because admittedly the appellant is residing at Bangalore.
Being
purchaser of the shares, he was entitled to get the share certificates at Bangalore and, therefore, cause of action
would arise at Bangalore also. For this purpose, he relied
upon the decision rendered by Rajasthan High Court in Ranbaxy Laboratories Ltd.
v. Smt. Indra Kala {(1997) 24 CLA 203 (Raj.)}.
As
against this, learned senior counsel, Mr. Desai submitted that the order passed
by the High Court is in accordance with the provision of Section 113 read with
Section 53 of the Companies Act. He referred to the decision rendered by the Patna
High Court in Upendra Kumar Joshi v. Manik Lal Chatterjee and others, {1982
(Vol.52) Company Cases 177 (Patna)}. He submitted that the litigation is
frivolous and it should be discouraged.
For
appreciating the contention raised by the learned counsel for the parties, we
would refer to the relevant parts of Sections 53 and 113 of the Companies Act,
which are as under:-
53.
Service of documents on members of company.(1) A document may be served by a
company on any member thereof either personally, or by sending it by post to
him to his registered address, if any, within India supplied by him to the
company for the giving of notices to him.
(2)
Where a document is sent by post,-- (a) service thereof shall be deemed to be
effected by properly addressing, prepaying and posting a letter containing the
document, provided that where a member has intimated to the company in advance
that documents should be sent to him under a certificate of posting or by
registered post with or without acknowledgement due and has deposited with the
company a sum sufficient to defray the expenses of doing so, service of the
document shall not be deemed to be effected unless it is sent in the manner
intimated by the member; and (Emphasis added) (b) (3) (4) (5) 113. Limitation
of time for issue of certificates.(1) [Every company, unless prohibited by any
provision of law or of any order of any court, tribunal or other authority,
shall, within three months after the allotment of any of its shares, debentures
or debenture stock, and within two months after the application for the
registration of the transfer of any such shares, debentures or debenture stock,
deliver, in accordance with the procedure laid down in section 53, the
certificates of all shares, debentures and certificates of debenture stocks
allotted or transferred;
Provided.
.. ] (2) If default is made in complying with sub-section (1), 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 default
continues.
(3) ..
Section
113 inter alia requires that within three months after the allotment of any
shares and within two months after the application for the registration of the
transfer of any such shares, every company shall deliver, in accordance with
the procedure laid down in Section 53, the certificates of all shares allotted
or transferred.
Sub-section
(2) provides punishment if default is made in complying with sub-section (1).
Reading Sections 113 and 53 together, share certificates are to be delivered in
accordance with the procedure laid down in Section 53. A document is to be
served either personally or by sending it by post at registered address within India. Sub- section (2) specifically
mentions that where a document is sent by post, such service thereof shall be
deemed to be effected by properly addressing, prepaying and posting the letter
containing the document. Hence, once there is a statutory mode of delivering
the document by post and deeming provision of such delivery, the place where
such posting is done is the place of performance of statutory duty and the same
stands discharged as soon as the document is posted.
Hence
the cause of action for default of not sending the share certificates within
stipulated time would arise at the place where the registered office of the
company is situated as from that place the share certificates can be posted and
are usually posted. If the addressee is available at the same locality where
the registered office of the company is situated, it is reasonable to think
that service of documents may be effected by personally delivering to him.
But if
the addressee is residing at a distant place it is unreasonable to expect the
company to depute somebody to travel upto that distance to personally deliver
it to him.
The
only usual mode which any company would then adopt is to send it to him by
post. For such default, as contemplated under Section 113(1), there is no
question of any cause of action arising at the place where complainant was to
receive postal delivery. What is punishable under sub-section (2) of Section
113 is non- delivery, in accordance with the provision laid down under Section
53, of the certificates of shares within prescribed time. So, if the documents
are posted within stipulated time, there would be compliance of Section 113 and
that there would not be any offence.
In
H.P. Gupta v. Hiralal {1970(1) SCC 437}, the Court considered a similar
provision of Section 207 of the Companies Act, which provides for payment of
dividend within 42-days of its declaration by a company and its non payment
within stipulated period is punishable. Section inter alia provides that where
dividend is declared by the company but has not been paid, or warrant in
respect of thereof has not been posted within 42-days from the date of its
declaration, to any shareholder entitled to the payment of dividend, then it
would be an offence punishable under Section 207. In that case, Court also
considered Section 205(5)(b), which is similar to Section 53, which inter alia
provides that any dividend payable may be paid by cash or a cheque or a warrant
sent by post directed to the registered address of the shareholder entitled to
the payment of the dividend.
The
Court held that when the company posts the dividend warrant at the registered
address of the shareholder, the post office becomes the agent of the
shareholder and the loss of a dividend warrant during the transit thereafter is
at the risk of the shareholder. The Court further held that the place where the
dividend warrant would be posted is the place where the company has its
registered office and the offence under Section 207 of the Act would also occur
at the place where the failure to discharge that obligation arises, namely, the
failure to post the dividend warrant within 42-days. In the facts of that case,
the Court observed thus: - .The venue of the offence, therefore, would be Delhi and not Meerut, and the Court competent to try the
offence would be that Court within whose jurisdiction the offence takes place,
i.e., Delhi. This should be so both in law and
common-sense, for, if held otherwise, the directors of companies can be
prosecuted at hundreds of places on an allegation by shareholders that they
have not received the warrant. That cannot be the intention of the Legislature
when it enacted Section 207 and made failure to pay or post a dividend warrant
within 42 days from the declaration of the dividend an offence.
Same
would be the position for the offence punishable under Section 113 of the Act.
Cause of action for failure to deliver the share certificates or documents
within prescribed time would arise where the registered office of the company
is situated.
However,
learned counsel for the appellant relied upon the decision of Rajasthan High
Court in Ranbaxy Laboratories Ltd. v. Smt. Indra Kala {(1997) 24 CLA 203 (Raj.)}.
In the said case, complaint was filed before the Judicial Magistrate at Jaipur
in Rajasthan for the offences punishable under Section 113 of the Act against
the directors and officers of the company alleging that the complainant had
purchased 200 shares of the Company and had duly sent such shares to the head
office of the company for registration of the transfer in its books, but
despite repeated requests, reminders and efforts made by her, the Company did
not register the transfer of the shares in her name. Registered office of the
company was at Delhi. The High Court negatived the
contention of the company that Judicial Magistrate at Jaipur did not have
jurisdiction to deal with the case by holding thus: - Company collects money
from the public at large by selling its shares and transactions of sale and
purchase are governed by the provisions of the Companies Act.
Registration
of the transferred shares is one of the duties of the company in the course of
conducting its business according to the provisions of law. Therefore, the
interest of the members of the public transacting such business cannot be
allowed to be defeated on the plea that relief to the aggrieved persons can be
granted only at the place where the office of the company is located.
In our
view, it appears that the attention of the learned Judge was not drawn to the
decision rendered by this Court in H.P. Gupta v. Hiralal {1970(1) SCC 437} and
also to Section 113 of the Act, which inter alia provides that company shall
deliver the documents, such as, certificates of shares, debentures and
certificates of debenture stocks allotted or transferred in accordance with the
procedure laid down in Section 53. Section 53 prescribes the mode of delivery
inter alia by sending the document by post at registered address and
sub-section (2) is the deeming provision for delivery of such letter. In Upendra
Kumar Joshi v. Manik Lal Chatterjee and others, {1982 (Vol.52) Company Cases
177 (Patna)}, the Patna High Court has followed the decision rendered by this
Court in the case of H.P. Gupta (Supra) and has rightly arrived at the
conclusion that the cause of action would arise at the place where registered
office of the company is situated.
In the
result, the aforesaid appeals are dismissed.
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