- (1.) THESE are two appeals, one No. 34 of 1957 by Sri L. N. Sharma, Manager of the Rajasthan Agriculture Live Stock & General Insurance Company. Limited, Jaipur and the other No. 35 of 1957 by Shah Kistoormal, Director of the said company against an order of the learned District Judge Jaipur City acting as a court under the Indian Companies Act in the matter of winding up in the Rajasthan Agriculture Live Stock and General Insurance Company dated 3rd May, 1957 by which he imposed a fine of Rs. 50/- per day on each of the appellants till statement of affairs of the company were filed by them.
(2.) THESE two cases came up for hearing before one of us sitting as a Single Judge and have been referred to a Division Bench as an important point was involved in them. The point for determination is whether the court in the matter of winding up proceedings of a company had jurisdiction to impose fine under sec 454 (5) of the Indian Companies Act of 1956. Though the lower court has purported to act under the Indian Companies Act of 1956, this case as it arose before the new Companies Act came into force is governed by the Indian Companies Act of 1913 as amended by the Act of 1956. The order of the lower court therefore though it purports to be one u/s 454 should be construed to be one under sec. 77 (A) of the Indian Companies Act of 1913. It is contended on behalf of the appellants that the court if it desired to punish the appellants should have prosecuted them in a criminal court. It is urged that the court below had no jurisdiction to punish the appellants by imposing fines on them. The question relates to the jurisdiction of the court. In support of this contention a Full Bench decision of Allahabad High Court in Harishchandra vs. Kavindra Narain Sinha (1) has been referred to. That was a case regarding imposition of a fine under sec. 85 of the Indian Companies Act of 1913 and it was held that the act punishable by that section was an offence within the meaning of sec. 278 and the court acting under the Indian Companies Act could not be considered to possess the jurisdiction to impose a penalty under sec. 5 of the Indian Companies Act. The only course open to the court, it was held, was to prosecute the defaulter in a criminal court. Mr. Garg on behalf on the General Assurance Society, Ltd. , a company which is a creditor company, has urged that the court below was competent to impose fines on the appellants. He has cited a decision of Allahabad High Court in State vs. Padma Kant Malviya (2 ). We may observe that the case referred to by the learned counsel is not one under the Indian Companies Act. That case related to contempt of court proceedings and it was held that contempt of court could not be regarded as an offence within the meaning of sec. 5 of the Indian Oaths Act and also of the Contempt of Court Act. The decision refers to the powers of Courts of Record for punishing the cases of contempts, and for this reason an act of contempt has not been held to be an offence. The same reasoning cannot be available in a case of contravention of the specific provisions of the Indian Companies Act. The said decision therefore is not helpful in the present case. Sec. 177 (A) sub-clause 5 provides as follows - "if any person without reasonable excuse knowingly and wilfully makes default in complying with the requirements of this sec. he shall be liable to a fine not exceeding Rs. 100/- for every day during which the default continues. " The contention of the respondents is that as the words 'penalty' or 'punishable' have not been used in sec, 177 (A) (5), the liability of fine should not be regarded as a criminal liability. In support of this argument the learned counsel has referred to sec. 122 of the Act which provides for a fine on conviction as distinguished from a mere fine mentioned in 177 (A ). We have considered the several provisions of the Indian Companies Act regarding imposition of a fine and we find the words at some places are 'on conviction to fine' and at others 'liable to a fine or punishable with a fine'. We may refer to sec. 238 of the Indian Companies Act of 1913 which provides for a penally of imprisonment for a term which may extend to seven years and the words used are "he shall be liable to imprisonment for a term which may extend to 7 years and shall also be liable to fine. " A similar language has been used in sec. 236 of the Act. The contention of the learned counsel if true would make the penalty under sec. 238 a civil liability and not a criminal one. If the Legislature intended by use of the world 'liability' to denote a civil liability only the language of secs. 236 and 238 would not have been what it is. The logic of the argument of the learned counsel falls to the ground when the language of secs. 236 and 238 is examined with this angle of vision. It may be noted that a fine is a pecuniary penalty and it cannot be regarded as anything otherwise than a punishment. Since there appears no provision in the Indian Companies Act to authorise the court in winding up proceedings to impose a penalty under sec. 177 (A) (5), it is difficult to hold that the court has jurisdiction to impose a fine itself without prosecuting the defaulter in a competent court. We may refer to section 278 (1) of the Indian Companies Act, 1913 which provides as follows: - "no court inferior to that of Presidency Magistrate or a Magistrate of the First Class shall try any offence against this Act. " The word "offence" has not been defined in the Act itself but it means an act or omission made punishable by any law for the time being in force. Contravention of the provisions of sec. 177 (A) amounts to an offence according to the definition of the term noted above. The court acting under the Indian Companies Act cannot be considered to be a criminal court as contemplated by sec. 378 of the Act. It cannot, therefore, be accepted that the court had jurisdiction to punish defaulters for contravention of the provisions of sec. 177 (A) of the Act. In case the court wanted to get the appellants punished the only course open was to prosecute them in a competent criminal court. We are supported by the Full Bench decision of the Allahabad High Court in Harish-chcmdra vs. Kavindranarain Sinha (1), referred to above. Mr. Garg has tried to distinguish that decision by saying that it does not relate to winding up proceedings. It may be pointed out that the case cannot be distinguished on account of the case being of winding up proceedings. The language of secs. 85 and 177 (A) (5) is similar in this behalf and there is little to distinguish two sections in this respect. In view of our decision on the above point, we need not examine the other points raised in these appeals. We allow both the appeals and set aside the fines imposed by the lower court. Fines, if paid, shall be refunded. .;