H.V.
Java Ram Vs. Industrial Credit and Investment Corporation of India Ltd. [1999]
INSC 427 (15 December 1999)
K.T.
THOMAS, M.B.Shah
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 Kamataka 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 Kamataka 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 I 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 arc 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 (complamant) 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 Ranboxy Laboratories Ltd
v. Smt. Indra Kala {(1.997)24 CLA203 (Raj.)}.
As
against this, learned senior counsel, Mr. Desai submitted that the order paused
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 Kuniar
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 arc as under:- *'53. Service of documents on members of company.(1) A
document may be served by acompany 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,
prepaving and posting a letter containing the document, provided that where a
member has intimated to th" 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 (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.
Section
113 infer aha 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 insection 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 Procedure laid down in Section 53. A document is to be
served cither personally or 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
demed to be effected by properly addressing prepay ing and posting the lelter
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 statutoryy 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 oJiice 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 compainant 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. 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
wilhin stiplulated period is punishable. Section inter (ilia 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
dacia ration, to any shareholder enticed 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 lias 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 aUa 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 proscribes 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 tills 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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