State of Andhra Pradesh & Anr. v. Andhra Provincial Potteries Ltd. & Ors.

ALAGJRJSWAMI, J.-This is an appeal agains"t the judgment of the Full Bench of the Andhra Pradesh High Court reported in A.I.R. (1970) A.P. 70. It arises out of a complaint filed against the 1st res­ pondent company and its directors for failure to file with the Registrar of Companies on or before 30-10-1967 the balance sheet and profit and loss account of the company as required under section 220( 1) of the Companies Act, 1956, which is punishable under sub-section (3) of that section. Admittedl,y no general body meeting had been held and, therefore, the balance sheet and profit and loss account had not been laid before a general body meeting nor could it be so laid. The Full Bench speaking through Jaganmohan Reddy, C.J., as our learned brother then was, held that if no balance sheet is laid before a general body, there can be no question of that balance sheet not be­ ing adopted nor of complying with the requirements of section 220 and though wilful omission to call a general body meeting and to lay the balance sheet and profit and loss account before it may expose the person responsible to punishm6nt under other provisions of the Act, it omainly does not make him liable under the provisions of section 134(4) of the Companies Act, 1913 or ~ection 220 of the Comoanies Act, 1956. Jn this the Bench was taking a view contrary to that of most of the High Courts after the decision of this Court in The State oj Hombay v. Bandhan Ram Bhandani & Ors.(1 ) In that case this Court ii) [1961) (1) S.C.R. 801. 412 SUPREME COURT REPORTS [ 1974] 1 s.c.R. had taken the view that a person charged with an offence cannot rely on his default as an answer to the char~ and so, if he was responsible for not calling the general meeting, he .-Cannot be heard to say in defence to the charges brought against him that because the general ineeting had not been called, the balance sheet and profit and loss account could not be laid before it. In that case the cfuecrors of a company were prosecuted under ss. 32(5) and 133(3) of the Com­ panies Act, 1913, for breaches of ss. 32 and 131 of that Acffor having knowingly and wilful]y authorised the failure to file the SUllllllll11Y of share capital for the year 1953 and being knowingly and wilfully parties to the failure to lay before the company in i:enerar meeting the balance sheet and profit and loss account as at March 31, 1953. The Bombay High Cowt, however, following its earlier decision in fmperatbr v. The Pioneer Clay and Industrial Works Ltd.(') had up­ held the acquittal of the directors by the Presidency Magistrate. Refer­ ring to the decision of the Bombay High Court in that case this Court pointed out that that decision turned on s. 134 of the Companies Act, 1913 the language of which was to a certain extent different from the language used in ss. 32 and 131 and refrained from going into the question whether the difference in language in section 134 on the one hand and ss. 32 and 131 on the other made any difference to the deci­ sion of the case. After referring to the decisions in Gibson v. Barton(") Edmonds v. Foster(•) and Park v. Lawton(') where it was held that a penon charged with an offence could not rely on his own default as an answer to the charge, and so, if the person charged was responsible for not calling the general meeting, he cannot be heard to say in defence to the charge that the general meeting had not been called, and that the oompany and its officers were bound to perform the condition precedent if they could do that, in order that they might pedorm their duty, this Court oonsidcred that as the correct view to take. As we have noticed, this Court was not dealing there with the pro­ visions of section 134 of 1913 Act which corresponds to section 220 of the 1956 Act. That question now directly arises for decision in this case. As we said earlier, most of the High Courts which have con­ sidered this question after the decision of this Court have proceeded on the basis that the decision necessarily led to the conclusion that even in a prosecution under s. 134 of the 1913 Act (corresponding to section 220 of the 1956 Act) the company and its directors could not rely upon their failure to call the general body meeting as a defence to the prose­ cution. Under this category fall the decisions in Dula/ Chandra Bhar v. State of West Bengal,(") and Gopa/ Khaitan v. Stale(") of the Calcutta High Court. Ramachandra & Sons (P) Ltd. v. State(') of the Allaha­ bad High Court, State v. T. C. Printers (P) Ltd. (8 ) of the Rajasthan (I) I.L.R. (194S) Ilom. S6; A.I.R. (2) [IS7S) L. R. 10 Q. II. 329. (4) [1911] I K. B. SSS. (6) (1969) 39 Company Cases ISO. t94S Ilombay 357. (3) (IS75) 4S Law J. Rep, M. C. 41. (S) (1962) 32 Company Cases 1143. (7) [1967) II Com I, J, 92 &(1966) 36 Company Cases 5S5, (S) A.I.R. (1963) Rajasthan 134. A. A.P. STATE v. A.P. POTTERll!S LTD. (Alagiriswami, I.) 413 High Court, India Nutriments Ltd. v. Registrar of Companies( 1') and P .S.N .S.A. Chettiar & Company v. Registrar of Companies( 2) of the Madras High Court. The Orissa High Court had taken a similar view in Registrar of Companies v. Misra (') but in a latter decision in Vulcan Industries (P) Ltd. v. Registrar of Companies, Orissa(4) it bas taken a contrary view and followed the decision of the Andhra Pradesh High Court in the judgment under appeal. That decision is also pend­ ing in appeal before this Court. The Patna High Court in State v. Lin­ kers Private Ltd.( 5 ) and the Kerala High Court in Registrar of Com­ panies v. Gopala Pillai & Ors. (6 ) have also taken a similar view. We may now refer to some of the earlier decisions on this point. The earliest decision' is the one in Debendra Nath Das Gupta v. Registrar of Join.I Stock Compaliies.(1 ) In that case the principle laid down in Park \t. Lawton( 8) was applied and it was held that it is not open to the petitioner to plead in answer to a charge under sections 134 his prior default in respect of the calling of the prescribed general meeting and of placing before the company at such meeting a duly prepared and audit· ed balance sheet. The decision in Ballav Dass v. Mohan Lal Sadhu( 9 ) did not refer to the wording of the section but mere! y stated that the provisions of section 134 were not. complied with. The same court in Bhagirath v. Emperor( 10 ) took the same view. In re Narasimha Rao ( 11 ) a learned Single Judge of the Madras High Court took the view that the same persons cannot be charged in respect of the same years with offences punishable both under ss. 131 and 134, Companies Act because s. 134 clearly contemplates •he sending of a copy of the balance-sheet only after it has been placed before the company at a general meeting under s. 131 am! that where in a case there i< no such placing of the balance-sheet before the company at a general meeting, the offence under s. 134 cannot be committed.1 In re Gangipati Appayva(1 2 ) a view contrary to the one taken earlier by a Judge of that High Court was taken. We may now set out the reasoning which weighed with the Andhra Pradesh High C0urt in the decision under appeal : "The reference to Section 210 by the use ot the word aforesaid" and the emphasis indicated by the words "were so laid" make the filing of .cop'es of those balance-sheets and the profit and loss accounts which are laid before the general body meeting an essential prerequisite. If no eeneral body meeting is held, it is obvious that no copies of the balance sheet (ll (1964) 34 Comp1ny Cases 160. (2) A.I. R. 1966 Madras 415, (3) A.I.R. 1969 Orissa 234. (4) I.L.R. 1972 Cuttack 373. (Sl o\.I.R. 1969 l'atna 445 & (1970) 40 C.C. 17. (6) 1961 K.L.J. 490. (7) l.L.R. 1918 Calcutta 486. (8) (1911] I K.B. 588 (9) (1934-35] 39 Calcutta Weekly (10) A.I.R. 1948 Calcutta 42. Notes 1152. (12) A.I.R. 1952 Madra. 800. (11) A.I.R. 1937 Madras 341. 414 SUPREME COURT RBPOllTS [ 1974] 1 s.c.a. aruj profit and loss account can be nlP.d even though the default may be wilful. Both under section 134 of the Old Comparue:i Act and Section 220 of the Act, the laying of the balance sheet and the profit and loss account before an annual general meeting is a condition precedent , to the requirement that copies of such documents so laid should be filed before the Registrar. The intention is made further clear by the provi­ sion under sub-section (2) of the respective sections of both the Acts that if the balance sheet is not adopted at the general meeting before which it is laid, a statement of that fact and of the reasons therefor have to be annexed \o the balance sheet and to the copies thereof required to be filed with the Registrar. If no balance sheet is laid before a general body, there can be no question of that balance sheet not being adopt­ ed nor of complying with the requirements of the Sub-section ( 2) of Se~tion 134 of the Old Companies Act or Section 220 of the Act as the case may be, while wilful omis<ion to call a general body meeting and omit to lay the ·balance sheet and profit and loss account before it may expose the person res­ ponsible to punishment under other provisions of the Act,· it certainly does not make him liable uncer aforesaid provisions. The punishment under these sections is for default in filing copies of the balance sheet or the profit and loss account which are laid before a general body and for not sending a statement of the fact thaqhe balance sheet was not adopted. It may be that copies of the balance sheet so laid before the general body may have been forwarded under sub-section (I) of Section 134 of the Old Companies Act or sub-section ( 1) of section 220 of the Act but nonetheless if the requirements of sub-section (2) of the respective sections have not been complied with even then, the persons concerned would be liable for punish­ ment for that default. In our view, these provisions unmistakably indicate, as we said earlier, that the holding of the annual general meeting and the laying before it of the balance sheet and the profit and loss account is a sine qua non for filing of the copies thereof before the Registrar. . If no general body meeting is held, the persons concerned cannot be said to have committed a default in complying with those provisions." Jn this state of difference of opinion among the various High Co\lrtS and the absence of a decision of this Court on section 134 this appeal has been filed. Though the respondent was not represented before this Court the learned Addi. Solicitor General who appeared for the State of And!Jra Pradesh and the learned Solicitor General who appeared for the Advocate General of Andhra Pradesh fairly placed before this Court all the decisions for and against, which we have already referred to, and also placed before us all the relevant considerations. It was t1rged before us that the principle accepted by this Court in The State of Bom­ bay v. Bandhan Ram Bhandani & Ors. (supra) that a company or its directors in a prosecution under section 3 2 and section 13 3 of the 1913 Act could not in defence to such prosecution rely upon their own -1 .B ~.P. STATE V. A.P. POTTERIES LTD. (A/agiriswami, !.) 415 failure to call the general body meeting, applies with equal force to a prosecution under section 134 of the Act. But it appears to us that there is a ve•y clear distinction between ss. 32 and 13~ on the one hand and s. 134 on the Qther. Section 32 relates to the preparation of a list of members of the co.mpany and of persons who have ceased to be mem­ bers as well as a summary, and also provides that it shall be completed within 21 days alter the day of the first or only ordinary general mt:eting in the year. It also provides that the company shall forthwith file with the registrar a copy of the list and summary, and any default in com­ plying with the requirements of the section is made punishable. Under section 131 the laying of a balance-sheet and profit and loss account be­ fore the company in the general meeting is made obligatory. Under section 133 the failure to comply with section 131 is made punishable. C But section 134 lays down that after balance-sheet and profit and loss account or' the income and expenditure account, as the case may be, have been laid before the company at the general meeting three copies thereof shall be filed with the registrar, and a failure to do so is made punishable under sub-section ( 4) of that section. The difference in language is very clear and pointed. The responsibility of sending three copies of the balance-sheet and profit and loss account or the income and ()' expenditure account, as the case may be, arises only alter they have been laid before the company at the general meeting. Without so laying c,opies could not be sent to the Registrar and even if they are sent it would not :ie a compliance with the provisions of the section. It is possible to conceive of the law providing that the balance-sheet and profit and loss account shall be sent to the .registrar even without the necessity of their being laid before the general body meeting of the E company. In that case any failure to do so would be punishable and the question whether a general body meeting had been held and the balance-sheet and profit and loss account have been laid before it will not arise. Therefore the condition precedent or the essential prerequi­ site of the balance-sheet and the profit and loss accour· being laid before the general meeting of the companv. not being fulfilled, the re- quirement of section 134 cannot be complied with. While the apneal to a question of principle might be attractive we cannot ignore tM clear words of the section. Where the words of the section are very clear it is F unnecessary to consider whether it embodies any princinle and wbeth~r that principle is consistent with the principle as embodied a certam other sections which are a;fferently worded. In interpreting a penal provision it is not permissible to give an extended meaning to the Phin words of the section on the ground that a principle recognised in respect a., of certain other provisions of law requires that this section should be "nterpreted is the same way. I\ '. We may also point out that in Park v. Lawton (supra) the principle laid in which has been adop•ed in this Court's decisfon in The State of Bombay v. Bandhan Ram Bhandani & Ors. (•upra) it is realised that there might be circumstances where the princiole laid down in that deci- sion will not apply. The court there observed : "If it were the case that everything required to be in<e£!ed in the list was dependent on the fact of the general meelt!1g having been held, it might perhaps have been contended with 416 SUPREME COURT REPORTS [ 1974] 1 S.C.R. some force that it is impossible to calculate a continuing penalty from a day which has never come into existence; but when one sees that s. 25 requires a number of most important matters to be included in the list of members which are entire- ly independent of the holding of a general meeting, this very much weakens the contention that no list need be compiled if, owing to the failure to hold a general meeting, it is impossible to say what day is the fourteenth day thereafter." _ This observation may provide no defence to a prosecution under sec­ tion 133 but it might well do so in a prosecution under section 134. This was what the learned Solicitor General was fair enough to point out with regard to the difficulty of working out the daily penalty under s. 162 after the thirtieth day mentioned in section 220(1) of the 1956 Act. He pointed out that where no meeting has been held it was not possible to calculate the period of 30 days specified in that section and it would not be possible to give effect to the provisions of that section. The Bombay High Court pointed out in Emperor v. l'ioneer Ciay & In­ dustrial Works(1) that the decision in Park v. Lawton( 2 ) is based on s. 3 6 (it is a mistake for s. 26) of the English Act, which in its scheme and terms is entirely different from the section with which they (the Bombay High Court) were concerned, and that the section in the English Act is a composite one which lays down various requirements which are to be complied with by the company under its first four sub­ clauses and sub-d. ( 5) is the penal sub-section which penalises the failure to comply with any of the requirements contained in any of the four preceding sub-sections. In our Act various stages have to be gone through before we reach the stage of a copy of the balance-sheet and the profit and loss account being filed with the Registrar and the failure to reach any one of the stages within the time prescribed is made penal by the Act. The court pointed out that this is not a case where an accused person relies on his default and pleads his innocence. What he says is, I may have committed an offence, but the offence that .I have committed is not the one with which I am charged. On the facts proved by the prosecution an offence is not disclosed under s. 134 ( 4) . A different offence might have been committed either under s. 76(2) or under s. 133(3). It is interesting to note that it was argued in Park v. Lawton (2 ) that the fact that s. 26 makes the offence a continuing one also shows r that the obligation to file the list is independent of the holding of a general meeting. The observations which we have extracted earlier will ff show that the subn\ission on behalf of the prosecution that provisions (I) J.R.L. [19481 Bern. 86 : A.I.R. 1948 Bern. 357. (2)[ 191 l] I K.B. ' •.. A.P. STATE v. A.P. POTTERIES LTD. (A.lagiriswami, J.) 417 of s. 26 show that the obligation to file the list is independent of the holding of the general meeting was accepted. But under section 134 of the 1913 Act the qbligation to send a copy of the balance-sheet and profit and loss account is dependent completely on its being laid !»­ fore a general meeting. It is clear, therefore, that on principle and authority it should be held that no offence was <'.Ommitted by the directors in this case under section 134. They might have been guilty of offences under ss. 76 and 133 but not under s. 134. We say nothing about s. 32 about which this Court has already laid down the law. The aJ)peal is dismissed. V.P.S. Appeal dismiaaad •. . ,