STATE OF KERALA Vs. KRISHNAN NAMBIAR

JUDGEMENT

(1.) IN all these revision cases the points raised are the same and the parties are also the same. The respondents in all these cases are four of the directors of an incorporated company known as "The Food and Farm Co. Ltd." which had its headquarters at Cannanore. The Assistant Registrar of Joint Stock Companies at Tellichery prosecuted the company and its directors in four cases for alleged offences under the Companies Act. These cases were Summary Trial Cases Nos. 394/1955, 395/1955, 396/1955 and 397/1955 on the file of the Additional First Class Magistrate's (Judical) Court, Kozhikode. In Summary Trial Case No. 396/1955 the charge against the several accused was that on account of their failure to comply with the direction contained in sub -section (1) of section 76 of the Companies Act, they were guilty of an offence punishable under sub -section (2) of the same section. In all the other three cases the charge was that the company and its directors had failed to comply with the directions contained in sub -section (1) of Section 131 of the Companies Act and had thus become guilty of an offence punishable under sub -section (3) of section 133 of the Act. Sub -section (1) of section 131 states that the directors of every company shall at some date not later than 18 months after the incorporation of the company and subsequently once at least in every calendar year, lay before the company in general meeting a balance sheet and profit and loss account. The prosecution in Summary Case No. 394/1955 was for the failure on the part of the directors of the company to comply with this provision in the year 1952. The prosecution in Summary Case No. 395 was for a similar default in the year 1951 and the prosecution in Summary Case No. 397 was for a similar default in the year 1953. Such defaults are made punishable under sub -section (3) of section 133. That sub -section states "if any default is made in laying before the company or in issuing a balance sheet and profit and loss account or income and expenditure account as required by section 131, or if any balance sheet and profit and loss account or income and expenditure account is issued circulated or published which does not comply with the requirements laid down by and under section 131, section 132, section 132 (a) and this section, the company and every officer of the company who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to Rs. 500/ - ". As a result of the trial of the three cases just now mentioned, the learned Magistrate found four directors who figured as accused 1, 2, 6 and 7 guilty under sub -section (3) of section 133 and sentenced each of them to pay a fine of one rupee. The complaint in the other case viz., Summary Case No. 396/1955, was about the non -compliance of the direction contained in sub -section (1) of section 76. That sub -section states that "a general meeting of every company shall be held within 18 months from the date of its incorporation and thereafter once at least in every calendar year and not more than 15 months of the holding of the last preceding general meeting". Subsection (2) of the same section states that "if default is made in holding a meeting in accordance with the provisions of this section, the company and every director or manager of the company who is knowingly or wilfully a party to the default, shall be liable to a fine not exceeding Rs. 500/ - ". The prosecution in Summary Trial 396/1955 was for the failure to hold the meeting as required by section 76 for the year 1953. In this case also the learned Magistrate found the accused guilty of the charge against them and sentenced each of them to pay a fine of one rupee. It is against the nominal sentences awarded in the above four cases that revision case Nos. 250 to 253 of 1956 have been filed on behalf of the State. The point raised is that the fine imposed is manifestly inadequate and that the sentence should be enhanced. If the convictions against the accused in these cases were to stand, there can be no doubt that the sentence awarded is grossly inadequate and even ridiculous. In justification of the award of such a sentence, the Magistrate has stated: "I consider that in the circumstances of the case, a nominal sentence of fine should suffice, the offence being only technical". The view of the Magistrate is clearly erroneous. It is in the interest of the general public and particularly to safeguard the interest of the share -holders of a company that specific provisions have been made in the Companies Act casting certain duties on the officers of the company. Wilful default in the discharge of these duties has also been made punishable. It will not be correct to say that an offence of that nature is only a technical offence. In the present case the offences consist in the default to comply with the directions contained in sections 76 and 133 of the Companies Act and the maximum sentence that could be awarded under sub -section (2) of section 76 and under sub -section (3) of section 133 is a fine of Rs. 500/ -. This is a clear indication that the legislature considered the offences under these sections to be real offences deserving substantial punishment. No doubt the legislature has only fixed the maximum of the sentence that could be awarded for such offences, the question of the adequacy of the sentence to be awarded in a particular case being left to the discretion of the court. Such discretion has to be judicially exercised. The court must be guided by a sense of proportion in fixing the quantum of fine in any particular case. It must bear some reasonable proportion to the upper limit sanctioned by the statute. To disregard that limit altogether and to award only a nominal sentence would have the result of reducing the prosecution itself to a mockery and thus defeating the very object of such penal provisions. In the present case the learned Magistrate had obviously lost sight of all these aspects when he awarded the ridiculous sentence of one rupee to each of the accused for the offence for which the maximum sentence fixed is Rs. 500/ -. It follows therefore that the sentence will have to be substantially enhanced in case the conviction is sustainable.

(2.) IN resisting the move for an enhancement of the sentence awarded to the respondents in these cases as per the orders of the learned Magistrate, it is contended on their behalf that the conviction itself is unsustainable on the evidence on record. To take up such a stand, is clearly within their right by virtue of the provisions contained in sub -section (6) of section 439 of the Code of Criminal Procedure. The sub -section runs as follows:

(3.) P .W. 1 is the solitary witness examined on behalf of the prosecution in all these four cases. He has no doubt asserted that so far as the respondents' company is concerned there has been default in respect of the matter referred to in sections 76 and 133 of the Companies Act. He has also stated that the respondents were directors of the company during the relevant period. The witness has admitted that his information regarding these matters are those gathered from the records and that he has no direct knowledge as to how the affairs of the company were being carried on. This witness has not been able to speak to any fact or circumstance which would lead to a legitimate inference that the respondents were knowingly and wilfully parties to the default complained of. Thus there is a total absence of evidence to prove that essential ingredient of the offence for which the respondents are sought to be made liable. The respondents are therefore right in their contention that the evidence adduced by the prosecution in each of these four cases is not sufficient to sustain the conviction recorded against them. The conviction has only to be quashed and hence no question of enhancement of sentence can arise in these cases. The result is that the conviction recorded against the respondents in each of the four cases and the sentences awarded to the respondents by the learned Magistrate are quashed and the respondents are acquitted of the offences charged against them. Consequently all the four revision cases are dismissed.