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 under Section 211(7) of the Companies 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 31.3.1997 and on a direction to furnish break-up for the said expenses, the petitioner furnished break-up figures in the letter, dated 28.12.1998 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 31.3.1997 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.
According to the petitioner, the contention of the respondent in the complaint stating that the default commenced on 1.4.1997 and is a continuing offence within the meaning of Section 472 of Criminal Procedure Code is not correct. The offence complained of under Section 211(7) of the Companies 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 cognizance of the offence. Hence proceeding with the
present complaint is an abuse of the process or 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 reflects 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 under Section 211(7) of the Companies 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 cognizance 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 under Section 472 of Cr.P.C. 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(2) read with schedule VT, Part-II, C1ause 2(b) of the Companies Act and hence liable for prosecution under Section 211(7) of the Act. The relevant portion in the complaint is extracted below.
“7. As per Schedule VT, Part II, C1ause 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, C1ause 3(x)(i) the profit and loss account shall disclose the Miscellaneous expenses separately.
8. As the P&L account for the year ending 31.3.97 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 under Section 211(7) of Companies Act, 1956 was issued to company with copy to the accused Managing Directors and company vide this office letter dated 9.2.99.”
5. The offence under Section 211(7) of Companies 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, under Section 468(2)(b) of Cr.P.C., the period of limitation is one year. The relevant part of Section 469(1) of Cr.P.C. relating to the commencement of the period of limitation is as follows.
“469. 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 31.3.1997 and the profit and loss account for the period ending 31.3.1997 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. 14,471,902 was shown as other expenses in Schedule ‘J’ and the break-up of the said expenses was not furnished and the respondent called for the same in his letter, dated 21.12.1998. The petitioner furnished the breaking figures in his letter, dated 28.12.1998, pursuant to which, the respondent issued show cause notice, dated 9.2.1999, calling upon the petitioner to show cause as to why prosecution under Section 211(7) of the Companies Act for contravention of Section 211(2) read with Schedule VI of the Companies Act should not be initiated against the petitioner. The petitioner gave explanation, dated 20.2.1999. Thereafter, the respondent issued another show cause notice, dated 9.8.1999, for which, the petitioner submitted his explanation, dated 20.9.1999. Not satisfied with the explanation of the petitioner, the respondent has lodged the present complaint on 10.4.2000.
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 under Section 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 Cr.P.C. 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 Companies 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-In State of Bihar v. Deokaran Nenshi and Anr., , 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 offence, 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 in committed once and for all.
9. Reg. 3 read with Section 66 of the Mines Act makes failure to furnish annual returns for the preceding year by the 21st of January of the succeeding year an offence. The language of Reg, 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 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 Reg. 3 is complied with. In other words, Reg.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 Reg. 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.”
In Commissioner of Wealth Tax, Amritsar v. Suresh Seth, 1981 (129) ITR 328, 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 lake 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.
The true principle appears to be that where the wrong complained of is the omission to perfom 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.”
9. Section 211(2) of the Companies 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 Patt-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 under Section 211(7) of the Companies Act is not a continuing offence and there is a period of limitation for taking cognizance of such offence.
10. In so far 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 Assistant Registrar of Companies v. H.C.Kothari and Ors., 1992 (75) Com. Cases 688, wherein, Padmini Jesudurai, 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-sheet 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, June 9, 1981, the complaint for the offence relating to the year 1981 within six months from the date of receipt of exhibit P-2, namely, May 12, 1982, and the complaint relating to the year 1982 within six months from Ihe date of receipt of exhibit P-3, that is, May 30, 1983. The present complaint is filed only on February, 2, 1985, which is far beyond the period of limitation.”
In the present case, the petitioner filed profit and loss account for the year ending 31.3.1997 in the office of the respondent. The respondent by letter, dated 21.12.1998, required the petitioner to furnish break-up for ‘other expenses’ mentioned in Schedule ‘J’ and the petitioner furnished the same by letter, dated
28.12.1998. In his letter, dated 9.2.1999, the respondent called upon the petitioner to show cause as to why prosecution under Section 211(7) of the Companies Act, 1956 for contravention of Section 211(2) read with Schedule VI of the companies Act, 1956 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 9.8.1999 when the second show cause notice was issued and the complaint filed on 10.4.2000 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 9.2.1999 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 10.4.2000 beyond the period of limitation. If it is so, there is bar to taking cognizance after the lapse of the period of limitation under Section 468 of Cr.P.C.
12. The learned Additional Central Government Standing Counsel for the respondent contended that the court may take cognizance 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 under Section 473 of Cr.P.C. and cited decisions in this regard, it is specifically averred in the complaint that the offence under Section 211(7) of Companies Act is a continuing offence within the meaning of Section 472 of Cr.P.C. and it is also averred that the offence in the complaint continued for 1105 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 under Section 473 of Cr.P.C. 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 under Section 473 of Cr.P.C. is devoid of merit and cannot be accepted.
13. Since the offence under Section 211(7) of Companies Act is not a continuing one, the learned Magistrate ought not to have taken cognizance of the offence in the present case after the expiry of the period of limitation in view of the bar under Section 468 of CrP.C. 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 me 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 S.T..R.No.2644 of 2000 on the file of Sub-Divisional Judicial Magistrate, Pondicherry, are quashed.