H.V. JAVA RAM vs INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD. on 15 December, 1999

(3) ..................

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(5)

113.

Limitation

of

time

for

issue

of

certificates.(1) "[Every company, unless prohibited by any

provision of law or of any order of any court, tribunal or

other authority, shall, within three months after the

allotment of any of its shares, debentures or debenture

stock, and within two months after the application for the

registration of the transfer of any such .shares, debentures

or

debenture stock, deliver, in accordance with

the

procedure laid down in section 53, the certificates of all

shares, debentures and certificates of ^debenture stocks

allotted or transferred;

Provided....

.....

]

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(2) If default is made in complying with sub-section

(1), the company, and every officer of the company who is in

default, shall be punishable with fine which may extend to

five hundred rupees for every day during which the default

continues.

Section 113 infer aha requires that within three

months after the allotment of any shares and within two

months after the application for the registration of the

transfer of any such shares, every company shall deliver.

in accordance with the procedure laid down insection 53.,

the certificates of all shares allotted or transferred.

Sub-section (2) provides punishment if default is made in

complying with sub-section (1). Reading Sections 113

Procedure laid down in Section 53. A document is to

be served cither personally or sending it by post at

registered

address within India.

Subsection

(2)

specifically mentions that where a document is sent by post,

such service thereof shall be demed to be effected by

properly addressing prepay ing and posting the lelter

containing the document. Hence, once there is a statutory

mode of delivering the document

by post and deeming

provision of such delivery, the place where such posting is

done is the place of performance of statutoryy duty and the

same stands discharged as soon as the document is posted.

Hence the cause of action for default of not sending the

share certificates within stipulated time would arise at the

place where the registered office of the company is situated

as from that place the share certificates can be posted and

are usually posted. If the addressee is available at the

same locality where the registered oJiice of the company is

situated, it is;

reasonable to think that service of

documents may be effected by personally delivering to him.

But if the addressee is residing at a. distant place it is

unreasonable to expect the company to depute somebody to

travel upto that distance to personally deliver it to him.

The only usual mode which any company would then adopt is to

send it to him by post. For such default, as contemplated

under Section 113(1), there is no question of any cause of

action arising at the place where compainant was to receive

postal

delivery. What is punishable under sub-section (2) of

Section 113 is non- delivery, in accordance with the

provision laid down under Section 53, of the certificates of

shares within prescribed time. if the documents are posted

within stipulated time, there would be compliance of Section

113 and that there would not be any offence.

In H.P.

Gupta V. Hiralal (1970(1) SCC 437), the

court considered a similar provision of Section 207 of the

Companies Act, which provides for payment of dividend within

42-days of its declaration by a company and its non payment

wilhin stiplulated period is punishable.

Section inter

(ilia provides that where dividend is declared by the

company but has not been paid, or warrant in respect of

thereof has not been posted within 42-days From the date of

its dacia ration, to any shareholder enticed to the payment

of dividend., then it would be an. offence punishable under

Section 207. In that case. Court also considered Section

205(5)(b), which is similar to Section 53, which inter alia

provides that any dividend payable may be paid by cash or a

cheque or a warrant sent by post directed to the registered

address of the shareholder entitled to the payment of the

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dividend.

The Court held that when the company posts the

dividend

warrant

at the

registered address of

the

shareholder, the post office becomes the agent of the

shareholder and the loss of a dividend warrant during The

transit thereafter is at the risk of the shareholder.

The

Court further held that the place where the dividend warrant

would be posted is the place where the company lias its

registered office and the offence under Section 207 of the

Act would also occur at the place where the failure to

discharge that obligation arises, namely, the failure to

post the dividend warrant within 42-days. In the facts of

that case, the Court observed thus: The venue of the offence, therefore, would be Delhi

and not Meerut. and the Court competent to try the offence

would be that Court within whose jurisdiction the offence

takes place. i.e.. Delhi. This should be so both in law

and common-sense. for. If held otherwise, the directors of

companies can be prosecuted at hundreds of places on an

allegation by shareholders that they have not received the

warrant.

That cannot be the intention of the Legislature

when it enacted Section 207 and made failure to pay or post

a dividend warrant within 42 days from the declaration of

the dividend an offence.

Same would be the position for the offence punishable

under Section 113 of the Act. Cause of action for failure

to deliver the share certificates or documents within

prescribed time would arise where the registered office of

the company is situated.

However, learned counsel for the appellant relied upon

the

decision

of Rajasthan

High Court

in

Ranbaxy’

Laboratories Ltd, v. Smt. Indra Kala {(1997) 24 CLA 203

(Raj.)}. In the said case complaint was filed before

the Judicial Magistrate at Jaipur in Rajasthan for the

offences punishable under Section 113 of the Act against the

directors and officers of the company alleging that the

complainant had purchased 200 shares of the Company and had

duly sent such shares to the head office of the company for

registration of the transfer in its books, but despite

repeated requests, reminders and efforts made by her, the

Company did not register the transfer of the shares in her

name.

Registered office of the company was at Delhi.

The

High Court negatived the contention of the company that

Judicial Magistrate at Jaipur did not have jurisdiction to

deal with the case by holding thus: "Company collects money from the public at large by

selling its shares and transactions of sale and purchase are

governed

by

the provisions of

the

Companies

Act.

Registration of the transferred shares is one of the duties

of the company in the course of conducting its business

according to the provisions of law. Therefore, the interest

of the members of the public transacting such business

cannot be allowed to be defeated on the plea that relief to

the aggrieved persons can be granted only at the place where

the office of the company is located."

In our view, it appears that the attention of the

learned Judge was not drawn to the decision rendered by this

Court in H.P. Gupta v. Hiralal {1970(1) SCC 437} and also

to Section 113 of the Act, which inter aUa provides that

company shall deliver the documents,, such as. certificates

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of

shares, debentures and

certificates of debenture

stocks allotted or transferred in accordance with the

procedure laid down in Section 53. Section 53 proscribes

the mode of delivery inter alia by sending the document by

post at registered address and sub-section (2) is the

deeming provision for delivery of .such letter. In Upendra

Kumar Joshi v.

Manik Lal Chatterjee and others, {1982

(vol.52) Company Cases 177 (Patna)}. the Patna High Court

has followed the decision rendered by tills Court in the

case of H.P. Gupta (Supra) and has rightly arrived at the

conclusion that the cause of action would arise at the place

where registered office of the company is situated.

In the result, the aforesaid appeals are dismissed.

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