1998 (9) TMI 478 - HC - Companies Law

Summary

Issues Involved:
1. Quashing of complaint filed by the registrar of companies against the accused for non-compliance with the Companies Act, 1956.
2. Interpretation of section 97(3) regarding failure to file Form No. 5 for increase of authorized share capital within the prescribed time frame.
3. Argument on whether subsequent resolution to reduce share capital absolves the accused from liability.
4. Determination of the limitation period for filing a complaint under section 97(3).

Issue 1: Quashing of Complaint:
The accused filed a case seeking to quash a complaint by the registrar of companies for alleged non-compliance with the Companies Act, 1956. The complaint was based on the accused's failure to file Form No. 5 for an increase in authorized share capital within the stipulated time frame. The accused contended that subsequent events, including a resolution to reduce share capital, should absolve them from liability. However, the court dismissed the petition, stating that the matter of liability and penalty under the Act is to be determined by the Magistrate's Court, and the petitioners failed to establish grounds to quash the criminal proceedings.

Issue 2: Interpretation of Section 97(3):
The accused argued that since they had rescinded the resolution to increase share capital through a subsequent resolution, they should not be held liable under section 97(3) for failing to file Form No. 5. The court rejected this argument, emphasizing that the obligation to file the notice along with the prescribed fee within 30 days of passing the resolution remains irrespective of subsequent resolutions. The court held that the subsequent cancellation of the resolution does not absolve the accused from their initial filing obligations.

Issue 3: Subsequent Resolution and Liability:
The accused claimed that the subsequent resolution to reduce share capital effectively canceled the previous resolution to increase share capital. They argued that it would be unjust to impose a fee for an increase that never materialized. The court, however, maintained that compliance with the Act is mandatory, and the consequences of non-compliance are to be determined by the appropriate legal process. The court clarified that the Act does not provide for rescinding a resolution to increase share capital.

Issue 4: Limitation Period for Complaint:
The accused contended that the complaint was time-barred under section 97(3) due to the limitation period for cases involving only fines. They argued that the limitation runs from the 30th day of adopting the resolution to increase share capital. However, the court disagreed, citing precedent that offenses under the Act are considered continuing defaults until compliance is met. As such, the complaint was deemed to be within the limitation period, and the argument on limitation was dismissed.

In conclusion, the court upheld the validity of the complaint filed by the registrar of companies against the accused for non-compliance with the Companies Act, 1956. The judgment emphasized the mandatory nature of compliance with the Act's provisions, rejected arguments regarding subsequent resolutions absolving liability, and clarified the continuing default nature of offenses under the Act. The court ruled that the matter of liability and penalty is to be determined through legal proceedings and dismissed the petition to quash the criminal proceedings.