ORDER
1. The brief facts leading to these cases are that the respondent/complainant in all these cases lodged complaint before the learned Special Court for Economic Offences in Karnataka, at Bangalore, on the allegation that the petitioner-companies had violated certain provisions of law in not sending the share certificates duly transferred in his name, failed to send balance sheet and Memorandum of Articles, etc. and thereby committed offences punishable under Sections 39(2), 219(4), 113(2) of
the Companies Act (for short, ‘the Act’). The learned Magistrate has taken cognizance of the offences in all the cases and directed to issue summons to the petitioners herein. In some cases, the petitioners approached the Court and made applications under Section 245, Cr.P.C. to discharge the accused persons on the ground that the said Court has no territorial jurisdiction to try the cases as the registered offices of those companies are situated outside the Karnataka State. The learned Magistrate after hearing both the parties rejected the applications holding that the Court had territorial jurisdiction to try the offences. As against that order Criminal Petitions are filed. In other cases the petitioners have not approached the Court below. On the other hand they questioned the order passed by the learned Court issuing summons to them after taking cognizance of the offences directly in this case.
2. The learned Advocates appearing for the petitioner companies have specifically argued that the Special Court for Economic Offences at Bangalore, has no territorial jurisdiction and therefore directing issue of notices to the petitioners hereinafter taking cognizance on the complaint filed by the respondent is contrary to the provisions of law. Since the Court lacks territorial jurisdiction, the entire proceedings will have to be quashed on the ground that the offence is said to have been committed by the company only where the registered office is located. Admittedly, the registered offices of the petitioner companies are not located in Karnataka, muchless in Bangalore. On the other hand, the registered office is either at Bombay or Gujarat as per the addresses shown above. They further contended that cognizance taken by the Court which is not vested with the power is illegal and therefore, all these petitions deserve to be allowed.
3. Per contra, the respondent who is a shareholder and also a practising Advocate has strenuously argued that Special Court has jurisdiction as the respondent is a permanent resident of Bangalore and the letters requesting the company to transfer the shares and also to send Memorandum of Articles, balance sheets, etc., were sent from Bangalore, to the addressee at Bombay and Gujarat where the registered office of the companies are situated, have not been complied with, within the stipulated time and thereby the offences have been committed. It is not the posting of the letter or the transfer of shares, etc. which will decide the jurisdiction. On the other hand, where those articles were delivered is the place which determines the territorial jurisdiction of the Court. As the respondent received the delivery in Bangalore, the Special Court at Bangalore has to try the case. On these grounds he submitted that the argument of the learned Counsel for the petitioners are liable to be rejected.
4. It may be mentioned that the learned Counsel for the petitioners also raised the question regarding limitation. Further, they contended
there is absence of mens rea in not complying with the request of the respondent within the stipulated time and therefore, no offence is committed. However, these two questions depend on the finding of this Court on the territorial jurisdiction of the Court. If the Court lacks territorial jurisdiction, then the orders will have to be set aside and appropriate orders will have to be passed.
5. In view of the arguments the question that arises for consideration is whether the Special Court for Economic Offences having jurisdiction over Karnataka State established in Bangalore, has got territorial jurisdiction to try the cases against the petitioners whose registered offices are admittedly situated beyond the territory of Karnataka, notwithstanding the fact that the complainant is a permanent resident of Bangalore.
6. Since common question is raised in all these cases after having heard both sides, this order is passed. Retain a copy of this order in each file.
7. In support of his argument, the learned Counsel for the petitioners placed reliance on a decision reported in Hanuman Prasad Gupta v Hiralal, wherein their Lordships have held:
“A dividend once declared is a debt payable by the company to its registered shareholders.
Once a dividend warrant is posted to the registered address of the shareholder, dividend is deemed to have been paid within meaning of Section 205. The section makes the failure to post within the prescribed period and not the non-receipt of the warrant by the shareholder an offence. Prima facie both the obligations to post the dividend warrant and the failure to satisfy that obligation would occur at the place where the obligation is to be performed and that would be the registered office of the company and not the address at which the warrant is to be posted. Payment in cash or the posting of a cheque or a warrant are equivalent and the obligation to pay is discharged when either of them is done.
Where the power to pay dividend by posting a cheque or a warrant as provided in Section 205(5) is incorporated in the Articles of Association of the company, it constitutes a contract between a company and its members — (1915)1 Ch. 881 and 1938 Ch. 708, ref.
If under a contract, a promisee prescribes the manner in which the promise is to be performed, the promisor can perform the promise in the manner so prescribed. (See Section 50 of the Contract Act)
Once a mode of payment of dividend is agreed to, namely, by posting a cheque or a warrant, the place where such posting is to be done is the place of performance and also the place of payment, as such performance in the manner agreed to is equivalent to payment and results in the discharge of the obligation.
The common law rule that debtor must seek the creditor has no application — (1910)2 KB 509 and (1886)3 TLR 182, rel. on.
When the company posts the dividend warrant to the registered address of a shareholder, that being done at the shareholder’s request, the post office becomes the agent of the shareholder, and the loss of a dividend warrant during transit thereafter is the risk of the shareholder.
Since the obligation to post the warrant arose at the registered office of the company, failure to discharge that obligation also arose at the registered office of the company. Therefore, the alleged offence must be held to have taken place at the place where the company’s registered office is situate and not where the divident warrant, when posted, would be received — AIR 1966 SC 1466, (1846)175 ER 128 and AIR 1925 Cal. 613, ref., , reversed”.
This decision was cited before the Court below and the Court has held that the decision came to be rendered while dealing with Section 205(5) of the Act wherein the learned Trial Court differentiated holding that the said case before their Lordships was under Section 205 of the Act and their Lordships observed that once dividend warrant was posted at the registered address of the shareholder, dividend is deemed to have been paid. According to the Court below, under Section 205(5) of the Act, ‘personal delivery’ is conspicuous in its absence in this section but under Section 53 which governs the mode of procedure in respect of transfer of shares seeking Memorandum of Articles, etc., personal delivery is appearing in that section. Therefore, the learned Court has held that the Judgment of the Supreme Court is not applicable to this case, wherein the learned Court has held as follows:
“Hence on the basis of power of the company to pay the dividend by posting a cheque or a warrant provided in Section 205(5) the Hon’ble Supreme Court held that the place of commission of offence was at the place of posting dividend warrant. The mode of delivery referred to under Section 113 is mentioned in Section 53 namely personal service or service by post. By virtue of Section 205(5) the word ‘paid in cash’ was equated to ‘the word posting a cheque or a warrant’. But in Section 113 the word deliver is equated to personal service or service by post, but the word personal service is not equated to service by post as is done under Section 205(5). Hence, the offence under Section 113 can also be committed by not personally serving the share certificate. If really personal service was not contemplated and service only by post was contemplated, there was no necessity to use the words ‘either personally’ in Section 53 of the Act. Hence, it cannot be said that
Section 113 and Section 53 are similar to Sections 207 and 205. On this ground also the decision of the Hon’ble Supreme Court relied on by the accused is not applicable to the facts of the case. Hence from the above discussion, I hold that this Court has jurisdiction to try this case and I answer the above Point No. 1 in the negative and I proceed to pass the following order
ORDER
The prayer of the accused for dismissal of the complaint on the ground that this court has no jurisdiction to try this case is rejected”.
In the case before their Lordships question of the posting of dividend warrant as contemplated under Section 205(5) of the Act is involved. But the principle enunciated by their Lordships is squarely applicable to all the cases where the company is expected to comply with certain provisions of law. It is no doubt true that the respondent has not questioned the non-sending of dividend warrant to him in these cases. But his complaint in these cases is in regard to not transferring the shares within the stipulated time, not sending the Memorandum of Articles, the balance sheet, etc. In the case before their Lordships the complaint was filed at Meerut where the addressee was residing but the registered office was situated in Delhi. Under those circumstances, Supreme Court has held that the offence under Section 205 of the Act would occur at the place where the failure to discharge that obligation arises, namely, the failure to post the dividend warrant within 42 days. Therefore, the venue of the offence would be Delhi and not Meerut. It is further observed that the Court competent to try the offence would be that Court within whose jurisdiction 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 shareholderes that they have not received the warrant. That cannot be the intention of 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. Being of that view, their Lordships have held as quoted above.
8. In a case of this nature, the moment there is a failure on the part of the company to comply with the request of the shareholders within the stipulated time, the offence is deemed to have been committed. The said offence is committed at the registered office of the company. It is a different question if the company posts or sends the memorandum of article or balance sheet or transfer certificate within the stipulated time, and if an addressee does not receive it, may not amount to an offence. Under these cases, admittedly the request of the complainant was not carried out within the prescribed time. Therefore, the offences were committed and those offences were committed in the registered offices which are situated outside the territorial jurisdiction of Karnataka and particularly at the registered office of the company. Therefore, the place where the offence is committed is within the jurisdiction of such Court
where the registered office is situated has territorial jurisdiction to try the offence.
9. The respondent further has drawn my attention to the decisions reported in American Pipe Company v State of Uttar Pradesh, wherein it is held that jurisdiction of the Court in a case of acceptance of contract by correspondence would be the place where the acceptance had taken place. In this case the question of acceptance does not arise. On the other hand, only a delivery of articles required by the shareholder as stated above is the question involved. Rajasthan High Court in J.K. Synthetics Limited and Another v Income-tax Officer, Central Circle-XVIII, New Delhi and Others, has held that in a case of prosecution for the offences of supplying false information to the Income Tax Department, the offence is said to have been committed in a place where the false information is furnished. In that case, false estimate of advance tax was submitted at Kanpur and the criminal proceedings were initiated at Delhi. The Court has held that the Court within whose jurisdiction the false estimate was submitted only had the jurisdiction and the offence not dependent on assessment or penalty proceedings–the Court at Kanpur alone had jurisdiction and not the Delhi Court.
10. The Patna High Court in Upendra Kumar Joshi v Manik Lal Chatterjee and Others, held:
“Since Section 207 of the Companies Act, 1956, makes the failure by the company to post the dividend warrant to, and not the non-receipt thereof by, the shareholder an offence, prima facie, both the obligations to post the warrant and the failure to satisfy it would occur at the place where the obligation is to be performed, and, as that obligation arises at the registered office of the company and not at the address at which the warrant is to be delivered, the alleged offence must be held to have taken place at the place where the company’s registered office was situate and hence the court at the place and not the court where the dividend was to be received has jurisdiction to try the offence.
Where, therefore, the complainant, a shareholder of the accused-company, residing at Bhagalpur filed a complaint under Sections 207 and 630 against the company in the Bhagalpur court for failure to pay a dividend of Rs. 30, due to him as per a declaration in August, 1975, of a dividend for the company’s year ending March, 1975, within forty-two days after the declaration under Section 207, and the Magistrate dismissed the complaint, the High Court, on a revision application:
Held, dismissing the application, that the alleged offence must hold to have taken place at Calcutta where the company’s registered office was situate”.
Though it is a case in regard to posting a dividend warrant, it is clear from this decision also that the offence has already been committed at the registered office before the same was sent, in other words, the company has failed to perform its obligation to send the required particulars to the shareholder which has made the offence punishable under the Section. Therefore, under those circumstances, the offence was committed at the place of the registered office.
11. Their Lordships of the Supreme Court in Morgan Stanley Mutual Fund v Kartick Das, while considering the Sections 19 and 20 and Order 39, Rules 1, 3 and 5 — Constitution of India, Article 226, have held that venue restriction need against adventurism by disgruntled litigants seeking injunctions, damages, etc. against companies by filing suits far away from their registered offices-suits should normally be filed where registered office is situate and also must be filed well in time to enable issue of notice to the company before passing any interim order. Such facts must be considered before issuing ex parte injunctions. It is also held that as far as India is concerned the residence of the company is where the registered office is located. Normally, a case should be filed only where the registered office of the company is situate; There is an increasing tendency on the part of the litigants to indulge in speculative and vexatious litigation and adventurism which the fora seem readily to oblige. Such a tendency should be curbed. Though it is pertaining to civil case, yet the object and purpose observed by their Lordships can also be made applicable to criminal cases. In the light of this Judgment and also the finding of the Court below the learned Counsel for the petitioner has drawn my attention to Section 53 of the Act which reads:
“(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 or if he has no registered address in India, to the address, if any, within India supplied by him to the company for the giving of notice 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 documents, 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 until it is sent in the manner intimated by the member; and”
(other clauses are not necessary, hence omitted)
12. From a reading of this section, it is clear that two modes are prescribed for serving the document. They are either personally or by post. Personally is possible only if the addressee is residing within the
local area where he can collect it directly from the office or the company can send somebody and serve the same on the address. If it is not possible the other mode is to send it by post. In this case admittedly, the documents were sent to the respondent by post as requested by him and he received the same at Bangalore. As indicated earlier, the documents were posted after the due date. The offence is thus deemed to have been committed. Therefore, the cause of action arose only where the head office is situated. It is also necessary to refer to the commentary on service by post in Rammaiah’s “Guide to the Companies Act”, 14th Edition, at page 449, which reads:
“It is not stated at which post office or box the letter has to be posted. Presumably it has to be posted at or near the place of the registered office of the company. The provisions in the section will not be satisfied if the posting is made deliberately at any far off place due to delay in the delivery”.
13. In view of this, and taking into consideration the fact that if thousands of persons holding shares and residing in different parts of this vast country, were to file complaints in different courts where they are residing, against the company and directors for the offences of not sending the dividend warrants, transfer of share certificates or Articles of Association as requested by the members and other offences as contemplated in the Act, the representatives of the company and the Directors who would be accused before the Court will have to attend the Court in far off places spending money as well as time which will consequently affect their valuable service to the company. It may not be also possible for them to be present in various Courts simultaneously, resulting in issuance of warrants by the Courts leading to disastrous consequences besides leading to inconveniences and hardships to the Directors of the Company. Taking into consideration all these facts their Lordships of the Supreme Court also held that the cause of action arises for the shareholders to file the complaint before the court having jurisdiction over the place where the registered office is located. The learned Counsel for the petitioners further submitted that the respondent himself has lodged a large number of cases against these companies for various offences in the Court below. This fact is not denied by the respondent. For the foregoing reasons, I hold that the Special Court for Economic Offences having jurisdiction over Karnataka State in Bangalore does not have territorial jurisdiction to try the cases against the companies and its Directors where the registered office is situated beyond the territory of Karnataka State, notwithstanding the fact that the complainant is a permanent resident of Karnataka State. On the other hand, the Court/Courts within whose jurisdiction the registered office of the company is situated, will have territorial jurisdiction to try the case falling under the Companies Act.
14. The learned Counsel appearing for the petitioners also contended that these petitions are barred by time and there was no mens rea for committing these offences on the part of the petitioners, etc. These questions need not be gone into when this Court has held herein above that the Court below has no territorial jurisdiction to try the offences. Therefore, this question is left open for the Court which has territorial jurisdiction to try the cases and decide.
15. Having come to this conclusion, the next question that arises for consideration is as to whether the complaints are to be dismissed. It is clearly stipulated under Section 201, Cr. P.C. which reads:
“If the complaint is made to a Magistrate who is not competent to take cognizance of the offence, he shall.-
(a) if the complaint is in writing, return it for presentation to the proper Court with an endorsement to that effect;
(b) if the complaint is not in writing, direct the complainant to the proper Court”.
In view of this the Magistrate will have to return the complaints to complainant. In the result therefore, I proceed to pass the following:
ORDER
All these petitions are allowed and the impugned orders are set aside. The learned Magistrate is directed to return all the complaints to the complainant/respondent with necessary endorsements as provided under Section 201(1), Cr. P.C. for presentation to the proper Court.