K.A. Mohamed Shafi, J.
1. This criminal miscellaneous case is filed by the accused in S.T. No. 80 of 1997 pending before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam, to quash the complaint filed by the Registrar of Companies.
2. The respondent-Registrar of Companies filed a complaint against the petitioners alleging offence punishable under Section 97(3) of the Companies Act on the ground that the petitioners herein failed to file Form No. 5 being the notice of increase of authorised share capital within 30 daysafter the passing of the resolution to increase the capital in terms of Section 97(1) of the Companies Act, with the prescribed fee and additional fee and therefore, they have committed the offence punishable under Section 97(3) of the Companies Act.
3. The petitioners who are the accused before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam, are the company, its chairman and managing director and its secretary, respectively. Though the first petitioner-company was incorporated as a private limited company in the year 1987 it was converted into a public limited company in the year 1992. Though the authorised share capital of the company was initially Rs. 5 crores divided into 5,000 equity shares of Rs. 100 each, subsequently the authorised share capital of the company was increased to Rs. 7 crores by the resolution adopted on April 30, 1993.
4. In the annual general meeting held on September 29, 1994, of the first petitioner a special resolution was adopted resolving to enhance the share capital of Rs. 7 crores to Rs. 32 crores and to make necessary alterations in the articles of association of the company. The resolution was passed under Section 97 of the Companies Act and the petitioners filed Form No. 23 as required under Section 192 of the Act before the respondent, the Registrar of Companies intimating about the resolution adopted by the company to increase the authorised share capital.
5. The petitioners did not file the notice in Form No. 5 along with the fee prescribed to be paid amounting to Rs. 7,50,000 either within 30 days of the passing of the resolution or subsequently to record the increase and to make necessary alterations in the memorandum and articles of association of the company. Therefore, the respondent sent a show-cause notice to the petitioners and dissatisfied with the reply sent by the petitioners, the respondent has filed annexure D complaint before the Additional Chief Judicial Magistrate's Court (Economic Offences), Ernakulam against the petitioners.
6. The petitioners have contended that though the petitioners had adopted a resolution in the annual general meeting held on September 29, 1994, resolving to enhance the authorised share capital from Rs. 7 crores to Rs. 32 crores, subsequently due to various reasons including financial constraints of the company and general recession in the trade it was decided that the first petitioner need not increase its share capital and it was resolved in the ninth annual general meeting held on September 23, 1996, to reduce the share capital of the company to Rs. 7 crores. Therefore, according to the petitioners, the resolution passed on September 29, 1994, was cancelled by the resolution dated September 23, 1996 and a copy of that resolution dated September 23, 1996, was filed before the respondent. Therefore, according to the petitioners, the authorised share capital of the company continued to be Rs. 7 crores as it originally stood. Therefore,according to them, they have not violated the provisions of Section 97(3) of the Companies Act as alleged by the respondent.
7. Though various contentions are raised by the petitioners in the criminal miscellaneous case when it came up for hearing counsel for the petitioners mainly urged two contentions. The first contention is that since the petitioners have revoked the earlier resolution to enhance the share capital by the subsequent resolution, there is no violation of Section 97(2) of the Companies Act punishable under Section 97(3) of the Act. The fact that the petitioners passed resolution dated September 29, 1994, to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores and the petitioners had filed Form No. 23 before the Registrar of Companies in respect of the resolution to increase the authorised share capital from Rs. 7 crores to Rs. 32 crores is admitted. It is also admitted that in the balance sheets as on March 31, 1995 and March 31, 1996, the authorised share capital of the company was stated as Rs. 32 crores. The fact that the notice in Form No. 5 along with the prescribed fee which is liable to be filed before the respondent within 30 days of adopting the resolution dated September 29, 1994, is not filed is also not in dispute. But the contention of the petitioner is that since the share capital was not actually increased from Rs. 7 crores to Rs. 32 crores and the resolution enhancing the share capital was subsequently rescinded by adopting another resolution in the annual general meeting held on September 23, 1996, there was no necessity to file Form No. 5 along with the prescribed fee without any purpose and causing huge monetary loss to the company. This contention of the petitioner is not sustainable. Admittedly the resolution to enhance the share capital was adopted in the annual general meeting held on September 29, 1994, and that resolution was cancelled by resolution dated September 23, 1996, by resolving to reduce the authorised share capital from Rs. 32 crores to Rs. 7 crores. If in fact, the petitioners had adopted a resolution to increase the share capital and immediately within a short time had decided either to rescind that resolution or to reduce the share capital and intimated that fact to the respondent, there would have been some force in the contention raised by the petitioners. But in view of the fact that the petitioners adopted the resolution to enhance the share capital on September 29, 1994, and after more than two years and mentioning in the balance sheets as on March 31, 1995 and March 31, 1996, that the share capital of the company is Rs. 32 crores, decided to reduce the share capital by the resolution dated September 23, 1996, the contention of the petitioners that since the share capital was not in fact enhanced from Rs. 7 crores to Rs. 32 crores, filing of Form No. 5 notice and payment of the fee amounting to Rs. 7.5 lakhs causing heavy loss to the company, cannot be countenanced since the petitioners are liable to file notice in Form No. 5 before the Registrar intimating the increase of share capital along with the prescribed feewithin 30 days after the passing of the resolution increasing authorised share capital. Therefore, the subsequent cancellation of the resolution to increase the share capital or adoption of the resolution to reduce the share capital will not absolve the petitioners from their liability to file Form No. 5 notice along with the prescribed fee before the Registrar of Companies within 30 days of adoption of the resolution to increase the share capital. Therefore, the contention raised by the petitioners is of no substance.
8. The next contention raised by the petitioners is that the complaint is barred by limitation. Section 97(3) of the Companies Act imposes a punishment of fine which may extend to Rs. 50 for every day during which the default continued and no imprisonment is provided under the section. The counsel for the petitioners submitted that under Section 468 of the Criminal Procedure Code the period of limitation in cases where only punishment of fine is prescribed is six months from the date of occurrence. Therefore, according to the petitioners the above complaint filed by the respondent dated March 51, 1997, alleging the offence punishable under Section 97(3) of the Companies Act is hopelessly barred by limitation. Counsel for the petitioners vehemently argued that Section 97(3) of the Companies Act contemplates a single default and it does not contemplate a continuing default and, therefore, limitation runs from the 30th day of the adoption of the resolution dated September 29, 1994, to increase the authorised share capital and therefore, the prosecution launched against the petitioners is barred by time. In support of this argument the learned counsel for the petitioners relied upon the decisions of the various High Courts including the decisions in National Cotton Mills v. Assistant Registrar of Companies [1984] 56 Comp Cas 222 (Cal); Shivalik Ice Factory and Cold Storage Pvt. Ltd. v. Registrar of Companies [1988] 64 Comp Cas 113 (P & H) and Mehra (M. K.) v. Registrar of Companies [1991] 71 Comp Cas 669 (Delhi).
9. The decisions relied upon by counsel for the petitioners lay down that the default committed under Section 220 of the Companies Act in not filing the balance sheet before the Registrar. The punishment imposed for the default under Section 220(3) is as provided under Section 162 of the Companies Act. The punishment provided under Section 162(1) and Section 97(3) of the Companies Act is similar which stipulates a fine extending up to Rs. 50 for every day for which the default continues. Therefore, counsel for the petitioners argued that the above decisions though rendered considering the provisions of Section 220 of the Companies Act, are applicable to the facts of this case coming within the ambit of Section 97 of the Act.
10. But this argument advanced by counsel for the petitioners relying upon the aforesaid decisions and other decisions of the various High Courts cannot be accepted or followed by this court since the principles enunciated in those decisions are in conflict with the judgment of this court in Rani Joseph v. Registrar of Companies [2000] 103 Comp Cas 928 (Ker) wherein a Division Bench after considering the various decisions of various High Courts including the decisions relied upon by counsel for the petitioners found that those decisions cannot be followed in view of the decisions of the Supreme Court. In para. 18 of the judgment the Division Bench observed as follows (page 20) :
'We have carefully gone through the judgments referred to above. In view of the authoritative pronouncement of the Supreme Court in State of Bihar v. Deokaran Nenshi, AIR 1973 SC 908 and in Bhagirath Kanoria v. State of Madhya Pradesh, AIR 1984 SC 1688 we cannot agree with the view expressed by the High Courts of Calcutta, Karnataka, Delhi and Punjab and Haryana. The only possible conclusion which we can legitimately arrive at is that the offences which are the subject-matter of the complaint for violation of the provisions of Section 159 and 220 of the Act are continuing in nature and until and unless the legal requirements contained in the provisions mentioned above are complied with the company and the personnel in charge of the company are liable to be prosecuted and the complaints are not liable to be quashed on the ground of limitation. Fresh period of limitation starts on each day until the requirements of the provisions are satisfied. We can take only this interpretation bearing in mind the social object of the legislation which is intended to be achieved.'
11. From the above judgment of the Division Bench of this court, it is clear that the default under Section 220 of the Companies Act is a continuing default and not a single default as contended by the petitioners. Since the provisions of Section 97 are also identical to that of the provisions of Section 220 of the Act, the principles laid down by the Division Bench of this Court in the aforesaid decision are applicable to the facts of this case coming under Section 97 of the Companies Act. Therefore, the default contemplated under Section 97 of the Companies Act being a continuing default arising on each day until the requirements of the provisions are satisfied, the above complaint filed by the respondent against the petitioners is within time and not barred by limitation. Therefore, this contention of the petitioners is not sustainable.
12. Counsel for the petitioners submitted that Section 94 of the Companies Act deals with increase and reduction of share capital and the first petitioner-company has passed a resolution to increase the share capital as contemplated under Section 94(1)(a) of the Act to enhance the share capital on September 29, 1994, and subsequently the company adopted the resolution dated Septembet 23, 1996, to reduce the share capital as per Section 94(1)(e) of the Act. He argued that there is no provision under the Companies Act to rescind or cancel the resolution already passed underSection 94(1)(a) enhancing the share capital and Section 94(1)(e) only provides for reduction of share capital. Therefore, according to him the subsequent resolution passed by the company reducing the share capital to Rs. 7 crores tantamounts to cancellation of the previous resolution enhancing the share capital and, therefore, it will be very harsh if the company is directed to pay Rs. 7.5 lakhs for nothing as fee provided under the Act for enhancement of share capital from Rs. 7 crores to Rs. 32 crores which never came into existence.
13. The petitioners are bound by the provisions of the Companies Act and the rules framed thereunder while dealing with the affairs of the company. The fact that enforcement of any of the provisions of the Companies Act against the company will be harsh, is not a matter for consideration by this court in the above petition filed by the petitioners under Section 482 of the Criminal Procedure Code to quash the criminal proceedings launched against them for non-compliance of the provisions of the Companies Act. Whether the petitioners are liable for the penalty as contemplated under Section 97(3) of the Act or whether there are any extenuating' or mitigating circumstances by which the petitioners can be absolved from the liability has to be considered by the Magistrate's court.
14. In view of what is stated above, absolutely no ground is made out by the petitioners to quash the criminal proceedings launched against the petitioners by invoking the provisions of Section 482 of the Criminal Procedure Code, and hence the criminal miscellaneous case is dismissed.