Bausch & Lomb India Ltd. & Ors. vs Registrar Of Co., Delhi & Haryana, ...
2000 Latest Caselaw 359 Del

ORDER

D.K. Jain, J.

1. A short but interesting question that arises for consideration in the instant case is whether the offence under Section 73(2B) read with Section 72(2A) of the Companies Act, 1956 (for short 'the Act') is a continuing offence within the meaning of Section 472 of the Code of Criminal Procedure, 1973 (for short 'the Code') for that if it is held to be so, then the bar of limitation under Section 468 of the Code, to take cognizance of the offence alleged, would not apply.

2. In November 1991, petitioner No. 1, an incorporated company, (of which petitioners No. 2, 3 and 4 are the Chairman, Managing Director and the Company Secretary respectively) came out with a public issue of 14% partially convertible debentures and 17% non-convertible debentures. Subscription list of the issue was to close on 18th November, 1991. Permission under Section 73 of the Act was granted to petitioner No. 1 by the Delhi Stock Exchange for dealing in the said debentures on 27th January 1992 and hence, under Section 73(2A) of the Act, the liability to repay the monies received from the applicants in excess of the aggregate of the application monies relating to the debentures in respect of which allotments had been made arose on 27th January 1991 and the said excess monies were to be repaid to the applicants within eight days thereof. According to the petitioner all the shares/debentures certificates, refund warrants, brokerage and underwriting commission cheques had been mailed on 27th January 1992 itself whereas the statutory date by which the refund orders were to be sent under Section 73(2A) was 4th February 1992.

However, on 17 December 1992, a notice under Section 73 was received by the petitioners to show cause as to why action as contemplated under Section 73(28) should not be taken against them for committing default under Section 73(2A), for not refunding the excess application monies within the stipulated time. It is a averred that the petitioners replied to the show cause notice, denying the allegations. In October 1993, the petitioners received yet another show cause notice, dated 30th September 1993, on similar lines, which is said to have been duly replied to. Not being satisfied with the explanation furnished by the petitioners, the Registrar of Companies filed a Complaint against the company, its Chairman, Managing Director and the Secretary, the petitioner herein, on 30th November 1993 under Section 73(28) of the Act. The Trial Court took congnizance of the complaint and summoned the petitioners to appear before it. The challenge in this Petition under Section 482 of the Code is to this complaint.

3. The petitioners pray for quashing of the complaint, inter alia, on the grounds that (1) since the alleged default was punishable only with fine under Section 73(2B) of the Act, the period of limitation for filing the complaint had expired on 16 August 1992 and, therefore, the complaint filed on 30th November 1993 was hopelessly time-barred; (ii) the complainant had suppressed material facts, particularly the issue of the first show cause notice dated 17 December, 1992, with a view to mislead the Court with respect to the period of limitation and (iii) the allegations in the complaint do not make out a for an offence under Section 73(2B) of the Act.

4. The petition is opposed by the respondent-Registrar of Companies, mainly on the ground that the present case for quashing the complaint does not fall in any of the contingencies spelt out in the decision of the Supreme Court in State of Haryana & Ors. Vs. Ch. Bhajan Lal & Ors., and further, before approaching this Court, the petitioners have not moved the Trial Court for dropping the proceedings initiated against them.

5. I have heard Mr. Rakesh Sawhney, learned counsel for the petitioners and Mr. Sachin Dutta on behalf of the Registrar of Companies.

6. It is submitted by Mr. Sawhney that offence under Section 73(2B) of the Act contravening the provisions of Section 73(2A) is not a continuing offence and, therefore, the complaint having been filed beyond the period of limitation as prescribed under sub -section (2) of Section 468 of the Code, the Court should not have taken cognizance. Alternatively, it is also urged that even on the facts, there being no delay in refunding the excess amount etc., no case for complaint under Section 73(2B) is made out.

7. On the contrary Mr. Sachin Dutta, learned counsel for the respondent, contended that the offence under Section 73(2B), for default under Section 73(2A) , is a continuing offence; Section 468 of the Code is not attracted and, as such the learned Magistrate was justified in entertaining the complaint and taking cognizance of the offence. In support, reliance is placed on a few judicial pronouncements dealing with: Section 113 of the Act - (failure to issue certificates); Sections 162(1) and 220(3) - (failure to submit balance sheet etc ., within time); Section 454 - (non-filing of statement of affairs in time); and Section 159 and 162 - (failure to file the annual return), holding that breach of any of these provisions was a continuing offence and, on this analogy, it was contended that the period of limitation provided by Section 468 of the Code did not have any application in the instant case as well and the offence under Section 73(2B) of the Act will be governed by Section 472 of the Code. However, no direct pronouncement on the issue has been cited.

8. Since it is well settled that this Court, in exercise of its jurisdiction under Section 482 of the Code, cannot make inquiries into the disputed questions of fact and record its own findings thereon, it is neither possible nor do I propose to express any opinion with reference to the alternative plea of learned counsel for the petitioner that there was no delay in refund of excess amounts along with interest as envisaged under Section 73(2A). This is to be established before the Trial Court.

9. Section 468 of the Code lays down that a Court cannot take cognizance of an offence after the expiry of the period of limitation provided in sub-section (2) of that Section. In the instant case, where the offence is punishable with imprisonment for a term which may extend to one year, the period of limitation prescribed under Clause (b) of sub-section 2 is one year. However, Section 472 of the Code provides that in the case of a continuing offence, a fresh period of limitation shall begin to run on every moment of the time during which the offence continues. It is common ground that if the offence alleged in the present case is non-continuing, the complaint would be barred by limitation.

10. The expression "continuing offence" has not been defined in any Statute, including the Code, where it appears. However, the Supreme Court had the occasion to consider the question as to whether a particular offence is a continuing offence. In Bhagirath Kanoria & Ors. Vs. State of M.P. , while considering the question whether failure to pay the employer's contribution to the provident fund within the time prescribed therefor was a continuing offence for the purpose of Section 14(2A) of the Employees Provident Fund and Family Pension Act, 1952, the Supreme Court observed that the question whether a particular offence is a continuing offence must necessarily depend upon the language of the statute which creates that offence, the nature of the offence and the purpose which is intended to be achieved by constituting the particular act as an offence.

11. Again in Maya Rani Punj Vs. Commissioner of Income-tax, Delhi, , while construing the provisions of Section 271(1)(a) of the Income-tax Act, 1961 and considering the question whether the default of non-filing of the return within the time stipulated by law was a continuing offence, the Supreme Court held as follows :

"The imposition of penalty not confined to the first default but with reference to the continued default is obviously on the footing that non-compliance with the obligation of making a return is an infraction as long as the default continued. Without sanction of law, no penalty is impossible with reference to the defaulting conduct. The position that penalty is impossible not only for the first default but as long as the default continues and such penalty is to be calculated at a prescribed rate on monthly basis is indicative of the legislative intention in unmistakable terms that as long as the assessee does not comply with the requirements of law, he continues to be guilty of the infraction and exposes himself to the penalty provided by law".

12. It was thus held that if a duty continues from day to day, the non-performance of that duty from day to day was a continuing wrong and the concept of continuing offence does not wipe out the original default and it keeps the contravention alive day by day till the breach continues. It is significant to note that though in the case of Maya Rani Punj (supra) one of the factors taken into consideration for holding the default of non-filing of return as a continuing offence was the prescription of rate of penalty on monthly basis but Section 14(2A) of the Employees Provident Fund and Family Pension Fund Act, 1952 does not prescribe for payment of fine for every day or every month for which the default in paying the employer's contribution to the fund continues. Yet the Supreme Court in Bhagirath Kanoria's case (supra) had held that the offence of which the appellants were charged, namely, non-payment of the employer's contribution to the provident fund before the due date, was a continuing offence, considering the object and purpose of that Act.

13. In the light of the above broad test, I take up the question whether the offence under Section 73(2B) is a continuing offence. Section 73, as it stood prior to 1975, did not contain any specific provision compelling the Company or its Directors to repay the amounts received in excess of the aggregate of the application money relating to shares or debentures in respect of which allotments have been made. Therefore, in order to protect the interests of the applicants, who would be subscribing to the issue, elaborate procedure has been laid down to ensure that the company and its directors do not retain the over-subscribed subscription for usually long period and derive undue benefit therefrom.

14. Sub-sections (2A) and (2B) to Section 73 were inserted by the Companies (Amendment) Act, 1974 with effect from 1st February, 1975 and after the omission of proviso to sub-section (2A) and further amendments carried out by the Companies (Amendment) Act, 1988 with effect from 15 June, 1988, the sub-section read as under:

"(2A) Where permission has been granted by the recognised stock exchange or stock exchanges for dealing in any shares or debentures in such stock exchange or each such stock exchange and the moneys received from applicants for shares or debentures are in excess of the aggregate of the application moneys relating to the share or debentures in respect of which allotments have been made, the company shall repay the moneys to the extent of such excess forthwith without interest, and if such money is not repaid within eight days, from the day the company becomes liab le to pay it, (the company and every director of the company who is an officer in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at such rate, not less than four per cent and not more than fifteen per cent, as may be prescribed, having regard to the length of the period of delay in making the repayment of such money.)

(28) If default is made in complying with the provisions of sub-section (2A), the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where repayment is not made within six months from the expiry of the eighth day, also with imprisonment for a term which may extend to one year."

15. Sub-section (2A) was inserted to cover cases where permission of the stock exchange has been obtained, but the shares or debentures have been over-subscribed and the company is consequently in possession of excess amounts. The sub-section makes the company and its Directors liable to repay the excess amounts forthwith. If the excess amount is not repaid within eight days from the date the company becomes liable to pay it , the company and the directors are made jointly and severally liable to repay such amount with interest at such rate, as may be prescribed, which may vary between 4% to 15%, having regard to the length of the period of delay in making repayment of such money. Vide Rule 4D of the Companies (Central Government) General Rules and Forms, 1956, the rate of interest has been prescribed at 15% per annum.

16. Sub-section (2B) provides for punishment for default in not complying with the requirement of sub-section (2A), namely, non-payment of excess money received. Failure to repay excess money, as required by sub-section (2A) visits the company and other officers of the company, who are in default, with the stipulated punishment. Needless to say that the punishment under sub-section (28) does not wipe out the liability to pay interest under sub-section (2A). This is in addition to the payment of prescribed interest.

17. As noted above, under sub-section (2A), the company and its officers are obligated to repay the over-subscribed amount paid by the persons who have responded to the prospectus issued by the Company. When the subscription lists are closed, the excess money is ascertained with reference to the actual allotments made and it becomes repayable. The Company has no right to retain it and is required to refund the excess amount forthwith. Once the period stipulated under sub-section (2A) is over, the liability of the Company to pay the interest commences and continues so long as the refund with interest is actually paid. So long as the excess amount is not repaid, the default under sub-section (2A) continues and the offence under Sub-section (2B) also continues. Having regard to the avowed object and purpose of the legislation namely, that the company should not be permitted to retain the excess amount received from a subscriber to his detriment, I am of the considered view that offence under Section 73(2B) is a continuing offence within the meaning of Section 472 of the Code, according to which, a fresh period of limitation begins to run at every moment of the time during which the offence continues, and, therefore the period of limitation as prescribed by Section 468 of the Code does not have any application.

18. For the foregoing reasons, the petition is devoid of any merit and the same is accordingly dismissed. Interim orders stand vacated. There will, however, be no order as to costs.

19. The Trial Court shall now proceed with the trial in accordance with law, un-influenced by the observations, if any, made in this judgment on the merits of the case.

20. Before parting with the case, I must record my deep appreciation of the assistance rendered by Mr. Sachin Dutta, a young Advocate, who, appearing for his senior, argued the matter on behalf of the Registrar of Companies. His preparation and presentation of the case was impressive.