In Re: Vikrant Tyres Ltd. and anr. - Court Judgment

Excerpt:
1. an application under section 621a of the companies act, 1956 (hereinafter referred to as "the act"), has been filed by vikrant tyres limited and the secretary of the company for compounding the offence of non-complying with the provisions of section 113 of the act in regard to delivery of 5 lakhs -- 19 per cent, redeemable non-convertible secured debentures of rs. 100 each aggregating to rs. 500 lakhs to the unit trust of india, bombay, within the time granted by the company law board.2. the facts of the case are that the company allotted at its board meeting held on january 13, 1992, the said debentures and as per provisions of section 113 of the act, the certificates of debenture should have been delivered within a period of three months after allotment by april 12, 1992. as the company was unable to comply with this requirement, it preferred a petition as per provisions of section 113(3) of the act before this bench for extension of time up to january 12, 1993. the time sought for by the company was granted by an order of this bench dated october 15, 1993. in the order itself it was pointed out that even though the time sought for by the company was granted, yet it was noticed from the records that stamp duty cancellation by the concerned authority was done only on june 28, 1993. on the basis of this observation, the registrar of companies, karnataka, bangalore, had initiated the prosecution proceedings under section 113(2) of the act against the petitioners for delay in delivery beyond the period granted by the company law board. the petitioners have hence preferred these applications for compounding as the registrar of companies, karnataka, has initiated prosecution proceedings against the applicants.3. the matter was taken up for hearing today. shri k. parameswaran, advocate for the applicants, while admitting the delay in delivery of these debentures, argued that the provisions of section 113(1) should be read along with the provisions of section 133. according to section 133(1) of the act, the certificate of registration under section 1.32 has to be endorsed on every debenture certificate. as the debentures were secured debentures, a certificate of registration under section 132 has to be obtained before the certificates can be delivered. he argued that the time limit of three months under section 113 after the allotment would arise in normal cases as is explicit from the provisions of section 113(1) itself which states "unless prohibited by any provision of law". in the present case, as per section 133 which is a part of the act itself there is a prohibition from delivering a secured debenture without endorsing thereon the certificate of registration under section 132. the company, in spite of its best efforts, in view of a large number of procedural formalities required to get the registration, could not register the charge before the time granted by the company law board. therefore, the stipulation of three months from the date of allotment or the extension of time granted by the company law board cannot be strictly applied in the present case.he also argued that the provisions of law have to be harmoniously constructed and if such construction is done then it would be amply, clear that without complying with the provisions of section 133 which is a statutory requirement, the company could not have delivered the debentures and any time limit has to be construed only after such compliance. the company had, within a week's time after registering the charge, delivered the debentures to the allottee and, therefore, the applicants should be deemed to have not violated the provisions of section 113(1).4. i have considered the argument of learned counsel. as per provision of section 113, debenture certificates have to be delivered within a period of three months from the date of allotment. however, section 113(3) vests with the company law board discretion to extend the period up to a maximum period of nine months from the due date if it is satisfied that it is not possible for a company to deliver the certificates within the stipulated period. it is essential to look, at this point, as to the reasons advanced by the company at the time of seeking extension of nine months. as already indicated, this bench extended the time for delivery of the debenture certificates only on the ground that a lot of formalities have to be complied with for registering the charges with the registrar of companies. in other words the extension of time granted was for the purpose of complying with the provisions of section 133. now, to plead again that the delay in creating charges, whatever may be the reason, should be taken into consideration for applying the provisions of section 113(1) does not seem to be, according to me, tenable. no doubt, the various procedural formalities which have delayed the registration of charges could be taken as mitigating factors but the offence itself cannot be deemed to have not been committed. these procedural factors were taken into consideration by me at the time of granting the extension and the company should have complied with the provisions of section 113(1) within the extended period which it has not been able to do so.5. accordingly, considering the facts and circumstances of the case, i hereby order that the offence of non-complying with the provision of section 113 of the act be compounded by payment of a composition amount of rs. 5,000 by the company and rs. 100 by the other applicant (total composition amount rs. 5,100).6. the applicants shall lodge with the bench officer, company law board, southern region bench, madras, demand drafts for the above amounts within 20 days from the date of this order drawn in favour of the pay and accounts officer, department of company affairs, madras.after lodgment of the composition amount the bench officer shall advise the registrar of companies, karnataka, bangalore, about the composition of the offences, so that he can intimate the concerned trial court in terms of section 621a(4)(d) of the act. a copy of the order be sent to the registrar of companies, karnataka, bangalore, for necessary action in terms of this.

Judgment:
1. An application under Section 621A of the Companies Act, 1956 (hereinafter referred to as "the Act"), has been filed by Vikrant Tyres Limited and the secretary of the company for compounding the offence of non-complying with the provisions of Section 113 of the Act in regard to delivery of 5 lakhs -- 19 per cent, redeemable non-convertible secured debentures of Rs. 100 each aggregating to Rs. 500 lakhs to the Unit Trust of India, Bombay, within the time granted by the Company Law Board.

2. The facts of the case are that the company allotted at its board meeting held on January 13, 1992, the said debentures and as per provisions of Section 113 of the Act, the certificates of debenture should have been delivered within a period of three months after allotment by April 12, 1992. As the company was unable to comply with this requirement, it preferred a petition as per provisions of Section 113(3) of the Act before this Bench for extension of time up to January 12, 1993. The time sought for by the company was granted by an order of this Bench dated October 15, 1993. In the order itself it was pointed out that even though the time sought for by the company was granted, yet it was noticed from the records that stamp duty cancellation by the concerned authority was done only on June 28, 1993. On the basis of this observation, the Registrar of Companies, Karnataka, Bangalore, had initiated the prosecution proceedings under Section 113(2) of the Act against the petitioners for delay in delivery beyond the period granted by the Company Law Board. The petitioners have hence preferred these applications for compounding as the Registrar of Companies, Karnataka, has initiated prosecution proceedings against the applicants.

3. The matter was taken up for hearing today. Shri K. Parameswaran, advocate for the applicants, while admitting the delay in delivery of these debentures, argued that the provisions of Section 113(1) should be read along with the provisions of Section 133. According to Section 133(1) of the Act, the certificate of registration under Section 1.32 has to be endorsed on every debenture certificate. As the debentures were secured debentures, a certificate of registration under Section 132 has to be obtained before the certificates can be delivered. He argued that the time limit of three months under Section 113 after the allotment would arise in normal cases as is explicit from the provisions of Section 113(1) itself which states "unless prohibited by any provision of law". In the present case, as per Section 133 which is a part of the Act itself there is a prohibition from delivering a secured debenture without endorsing thereon the certificate of registration under Section 132. The company, in spite of its best efforts, in view of a large number of procedural formalities required to get the registration, could not register the charge before the time granted by the Company Law Board. Therefore, the stipulation of three months from the date of allotment or the extension of time granted by the Company Law Board cannot be strictly applied in the present case.

He also argued that the provisions of law have to be harmoniously constructed and if such construction is done then it would be amply, clear that without complying with the provisions of Section 133 which is a statutory requirement, the company could not have delivered the debentures and any time limit has to be construed only after such compliance. The company had, within a week's time after registering the charge, delivered the debentures to the allottee and, therefore, the applicants should be deemed to have not violated the provisions of Section 113(1).

4. I have considered the argument of learned counsel. As per provision of Section 113, debenture certificates have to be delivered within a period of three months from the date of allotment. However, Section 113(3) vests with the Company Law Board discretion to extend the period up to a maximum period of nine months from the due date if it is satisfied that it is not possible for a company to deliver the certificates within the stipulated period. It is essential to look, at this point, as to the reasons advanced by the company at the time of seeking extension of nine months. As already indicated, this Bench extended the time for delivery of the debenture certificates only on the ground that a lot of formalities have to be complied with for registering the charges with the Registrar of Companies. In other words the extension of time granted was for the purpose of complying with the provisions of Section 133. Now, to plead again that the delay in creating charges, whatever may be the reason, should be taken into consideration for applying the provisions of Section 113(1) does not seem to be, according to me, tenable. No doubt, the various procedural formalities which have delayed the registration of charges could be taken as mitigating factors but the offence itself cannot be deemed to have not been committed. These procedural factors were taken into consideration by me at the time of granting the extension and the company should have complied with the provisions of Section 113(1) within the extended period which it has not been able to do so.

5. Accordingly, considering the facts and circumstances of the case, I hereby order that the offence of non-complying with the provision of Section 113 of the Act be compounded by payment of a composition amount of Rs. 5,000 by the company and Rs. 100 by the other applicant (total composition amount Rs. 5,100).

6. The applicants shall lodge with the Bench Officer, Company Law Board, Southern Region Bench, Madras, demand drafts for the above amounts within 20 days from the date of this order drawn in favour of the Pay and Accounts Officer, Department of Company Affairs, Madras.

After lodgment of the composition amount the Bench Officer shall advise the Registrar of Companies, Karnataka, Bangalore, about the composition of the offences, so that he can intimate the concerned trial court in terms of Section 621A(4)(d) of the Act. A copy of the order be sent to the Registrar of Companies, Karnataka, Bangalore, for necessary action in terms of this.