These are four connected revisions arising from prosecutions under the Indian Companies Act, 1913.
The revision petitioners in Crl. R.C No. 772 of 1956 were prosecuted for not filing within 21 days after the date of the first or only ordinary general meeting in the year 1952, a complete list of members and summary under S. 32, Cl. (3) of the Indian Companies Act. The revision petitioners in Crl. R.C No. 773 of 1956 were prosecuted for not filing within 21 days after the date of the first or only general meeting in the year 1953 a complete list of members and summary under S. 132, Cl. (3) of the Indian Companies Act. The revision petitioners in Crl. R.C No. 774 of 1956 were prosecuted for not laying the balance sheet and profit and loss account for the year 1952 at a general body meeting held during the year 1953 as required by S. 131(1) of the Indian Companies Act. The revision petitioners in Crl. R.C No. 175 of, 1956 were prosecuted for not laying the balance sheet and profit and loss account for the year 1953 at a general body meeting held during the calendar year 1954 as required by S. 131(1) of the Indian Companies Act.
The facts leading to the institution of these prosecutions are as follows: The Arcot Citizen Bank Ltd., was registered as a public limited company under the Indian Companies Act on 2nd November 1935. It has a registered office in Nos. 48 to 51 Bazar Street, Arcot. Sri A.E Chandrasekhara Nayagar, the second revision petitioner, was the supervising director and the other petitioners were the directors of this Lank. On 18th May 1955 the Registrar of Companies appointed by the Central Government assumed charge of the companies in the State of Madras. A list of members and summary made upto 22nd July 1952 which should have been submitted within 21 days after the date of the First Ordinary General Body Meeting held on that date, was not furnished. An incomplete list was received on 30th August 1952 by the Assistant Registrar of Joint Stock Companies, Vellore, along with a covering letter, Ex. P. 2, signed by accused 2 as the supervising director of the said bank. This was returned for rectification and complete furnishing of information, as required under law. But in spite of several reminders a completed correct list was not submitted and there was no compliance with S. 32 of the Indian Companies Act.
On 21st October 1953, the First Ordinary General Body Meeting for the year 1953 was held. A list of members and summary made upto 21st October 1953, which should have been submitted within 21 days after the date of the said meeting was not filed in spite of several reminders. A balance sheet and profit and loss account for the year ending 31st December 1952 was not laid before the meeting as required by the Indian Companies Act. On 30th December 1954 there was a general body meeting of the bank at Arcot and in that meeting a balance sheet and profit and loss account for the year ending 31st December 1953 was not laid as required by the Companies Act.
The plea of the accused persons in all these cases was nothing more than an argument drawn from misery. In the case of the bank, which is accused 1, it was urged that a correct and complete return could not be resubmitted as a number of accounts and registers of the bank were filed in Civil and criminal proceedings arising out of embezzlement cases, and auditors could not therefore be appointed for preparation of the balance sheet and profit and loss account in time. In the case of the Director accused, the plea was that they had not knowingly or willingly committed default. The ordinary directors blamed the supervising director and stated that he was in charge of the entire day to day administration of the company.
The learned Sub Divisional Magistrate did not accept the pleas of the accused and convicted them as charged and sentenced them to pay fines. The convicted persons have preferred these revision cases.
The plea put forward viz, that the lists and summaries could not be furnished and the balance sheets and profit and loss accounts could not be prepared on account of the accounts and registers of the company being filed in Civil and Criminal Proceedings arising out of embezzlement cases, was effectively repelled by the learned Sub Divisional Magistrate. According to the defence the defalcation was effected somewhere in August 1952 and it should have taken place sometime before the accounts and registers were filed in Courts. It is not as if all the registers and records were seized and taken away. But even if the records and registers were in the custody of the Court, it was the duty of the supervising director to either apply for the return of such of the registers as are required for compiling this statement or if the Courts refused to return the registers to make an application for the inspection of the accounts and registers for the said purpose. In fact the preparation of the list of A class shareholder members alone was filed on 30th August 1952, after 21 days and this shows that all the registers and records could not have been in the custody of the Court. The Registrar's office also sent several reminders. But the bank, the supervising director, and the directors remained callously indifferent to these reminders. The learned Sub Divisional Magistrate therefore rightly refused to accept this plea as exonerating each of these revision petitioners from the discharge of their plain duties.
It is now argued, therefore, that though this could be said of the Bank and the supervising directors, this could not be said of the other directors in regard to whom it must be further shown that they knowingly and wilfully defaulted as contemplated by the provisions of the India Companies Act.
The fundamental principle of English Criminal Jurisprudence, to use a maxim which has been familiar to English lawyers for nearly 800 years is, actus non facit reum nisi mens sit rea. An act does not make a man guilty without a guilty intention to do the guilty act which is made penal by the statute or common law. But there is generally no room for the application of this doctrine in the Indian Penal Statutes as their terms are precise and contain within themselves the precise and particular elements that go to make up the offences referred to in those Statutes. So, in the Indian Penal Statutes, where the doctrine of mens rea is intended to come into operation and a guilty man is deemed essential for the proof of an offence, the Statute itself uses the words like “knowingly”, “willingly”, “fraudulently”, “negligently”, and so on.
Such knowledge can always be brought home by adducing Circumstantial evidence— in fact as pointed out by Dr. Kenny at page 396 of his outline of Criminal Law (14th Edn.) mens rea must necessarily be proved by Circumstantial evidence alone (except where the accused actually confesses and what is more in India sticks to it and which is highly problematical).
It may also be useful to recall that, in establishing such guilty knowledge, actual or direct knowledge is not absolutely essential, there being no doubt that a person who deliberately shuts his eye to an obvious means of knowledge is equally liable.
Less certainty is felt in regard to negligence when used in the sense of blameful inadvertence. Thus interpreted negligence describes the state of mind of a person who ought to have known, and is obviously not so reprehensible as the state of mind of a person who wilfully shuts his eyes to the obvious. Hitherto, strong objection has been voiced to basing criminal liability upon mere inadvertence. But where the phrase mens rea is used to denote a state of mind, it is possible to argue that the only state of mind which is pertinent is the positive form known as advertence, i.e, realisation of fore-sight of consequences, in which even the ambit of mens rea is restricted to intention And subjective recklessness. Conversely, it is possible to argue that although inadvertence involves the negative form of absence of realisation or foresight of consequences, it too can justifiably be termed a state of mind and therefore, as forming, in certain conditions, part of the doctrine of mens rea; To those who would deny the validity of this conclusion it may come as a surprise as pointed by Professor Edwards on his valuable monograph mens rea in statutory offences (English Studies in Criminal Science Series Vol. VIII, p. 205 and foll.) to realise that there exists a wide range of judicial dicta [Kearne v. Carton (1); Croasdil v. Rateliffe (2); Bosby v. Davies (3)], in which the view is expressed that if a statutory offence is based upon proof of knowledge such crimes can be committed negligently. I respectfully agree with Professor Edward's conclusion at page 206 that so far as this particular field of criminal liability is concerned that negligence or blameful inadvertence or failure to supervise may properly be designated as mens rea. Therefore, we must look to the qualifying words used in the statutes like “maliciously”, “wilfully” and “knowingly” which show that liability of a guilty mind should be based in the form of actual knowledge or connivance or the absence of any such qualifying words making out a case of absolute prohibition, where the doing of the act prohibited could itself furnish the mens rea, or qualifying wards like “permitting” “suffering” “causing” and “allowing” constituting the intermediate theory of liability based upon blameful inadvertence. Of course the acceptance of negligence as a sufficient degree of mens rea would be restricted to those statutory offences in which the legislature intends to use the criminal law, as a means of securing the maintenance of certain standards of behaviour in such matters as Road Traffic, Food and Drugs, Weights and Measures, licensing and Public Health.
To sum up, in regard to the proof of mens rea in the large class of penal Acts the State as well as Central Acts, which are really not criminal but which are prohibited by the levy of a penalty in the interests of the public, unless qualifying words are used, the prosecution in the language of Dr. Kenny, need only prove the prohibited act and then must the defendant bring himself within the statutory defence (Ibid, p. 48). The absence of qualifying words connotes that the offence is intended to be one of absolute prohibition. On the other hand, if qualifying words like “knowingly”, “wilfully”, “fraudulently” add “negligently” are used, the prosecution must bring home to the offender either by direct or Circumstantial evidence the precise find particular elements connoted by these terms, i.e, showing liability of a guilty mind based in the form of actual knowledge or connivance. Where the offence is intended to be dependent upon a blame worthy mind in the form of knowledge of the facts constituting the offence the term wilfully is used to denote this requirement. It denotes the necessity for proving that the accused had a guilty mind. If qualifying words like “permitting”, “suffering”, “causing” or “allowing” are used, it would be enough if the evidence makes out blameful inadcertence on the part of the offender; i.e, first the accused must be shown under this third group to have had guilty knowledge that the forbidden event is happening. Secondly, that the accused with such knowledge and being in a position to prevent the event happening does nothing about it.
Bearing these principles in mind, if we examine the facts of this case, we find that the prosecution has brought home to these revision petitioners by Circumstantial evidence knowing and wilful non-compliance. The revision petitioners knew what they had to do and deliberately refrained from complying with those obligations and that too in spite of repeated reminders from the Registrar on pretexts which cannot bear scrutiny. This knowing and wilful default on the part of the revision petitioners cannot be better put than in the words of the Calcutta High Court in Bhagirath v. Emperor (4):
“If directors, who are responsible for the management of a company and who presumably know the duties imposed upon them by law, make no attempt to see that those duties are carried out there is justification for holding, in my opinion, that they have wilfully and knowingly permitted the company to fail to carry out those duties. The suggestion that these various directors were mere figureheads not taking any active part in the control of the company is in my opinion not worth of serious consideration. They were directors, they attended meetings throughout the period with which we are concerned and they were responsible for the management of the company.
But these provisions of the Companies Act have been deliberately enacted to protect shareholders and in some cases to protect the general public and thes impose a definite duty upon directors. It is necessary that those duties should be properly carried out and it is necessary, in my opinion, that when directors fail to do so, the penalties provided for in the Act should be imposed and the directors should be substantially penalised.”
The convictions are correct and they are confirmed. Having regard to the extenuating Circumstances pressed by Mr. Srirangachariar, the fines and default sentences are halved and the excess fines, if collected, will be refunded.
V.C.S