de Silva a. The Registrar of Companies
1955Present: de Silva J.
M. M. It. DE SILVA et al., Appellants, and THE REGISTRAR OF'COMPANIES, RespondentS. C. 382-384—M. C„ Colombo, 45,393a.
Company l*nv—-.4nnual general meeting—Failure to hold it—Clutrye against director.-,Jor failure to furnish annual return to Registrar of Companies—Inferenceof guilt—“ Knowingly and wilfully —Burden of. proof—CompaniesOrdinance A’o. 51 of 1938, as. 106 (f), 108 (1) and (4), 110, 346.
The directors of a company were charged under section 108 (4) road withsoction i.40 of the Companies Ordinance with having failed to forward to thoRegistrar of Companies the annual return for a certain year as required bvsoction 108 (1). The accused pleaded that no general meeting was held duringthe rolevaht year and that It was, therefore, impossible to furnish the return.They did not, however, establish that the failure to hold the general meetingwas not duo to any default on their part.
Held, that the failure to hold the general meeting was due to the default ofthe accused themselves and that they were not entitled, therefore, to rely ontheir own dofault as an answer to the charge.
Held further, that, the burden was on the accused, as directors, to establishthat no blame could be attached to them for failing to carry out the statutoryduties cast on thorn.
DE SILVA J.—de Silva v. The Registrar of Companies'
XTi PPEAX.S from a judgment of the Magistrate’s Court, Colombo.
//. W. Jayewardene, Q.C., with K. Sivdittbramaniam, for the 1staccused appellant.
Q. D. Welcome, for the 2nd accused appellant.
W. P. N. de Silva, for the 6th accused appellant.
A. E. Keuneman, Crown Counsel, for the Attorney-General.
Cur. adv. vult.
-June 20, 1955. de Selva J.—
The three appellants along with three, others who were all described asDirectors of “ The Golden Dawn Night Club ”, being a Company having.a share capital, were charged under section 108 (4) read with section346 of the Companies Ordinance No. 61 of 1938 (hereinafter referred toas the Ordinance) with having failed to forward to the Registrar ofCompanies the annual return for the year 1952 as required by section108 (1) of that Ordinance. The oh^rge against the 4th and 5th accusedwas withdrawn at a very early Btage of the proceedings. The learnedMagistrate acquitted the 3rd accused as the latter established to thesatisfaction of the Court that he had resigned from the Board of Directorsof the Company in October 1952. The three appellants were convictedof the charge and the learned Magistrate imposed a default fine of Rs. 25for every day from 1.2.1953 on each of the 1st and 6th accused while the2nd accused was ordered to pay a default fine of Rs. 5 a day from thesame date.
Section 110 (1) of the Ordinance: enaots that a general meeting of every•Company shall be held once, at the least, in every calendar year and afailure to do so is made punishable under section 110 (2). Every Directoror Manager who is knowingly a party to such default is guilty of anoffence. Section 106 (1) provides that an annual return be forwardedto the Registrar of Companies, containing, inter alia, the particulars set-out in that section. According to section 108 (1) the annual returnmust be completed within twenty-eight days after the first or only generalmeeting in the year and the company must .forthwith forward to theRegistrar of. Companies an authenticated copy of such return. Theannual return should also include a copy of the balance sheet togetherwith the copy of the Auditor’s report on it. Sul>-section 4 of this sectionenacts that on failure to comply with the provisions of this section oreither of the two preceding sections “ the Company and every officerof the Company who is- in default shall be guilty of an offence and shallbe liable to a default fine”. Section 346 (1) deals with the nature of thedefault fine that is to be imposed while sub-seotion 2 of that sectionstates that the expression “ officer-who. is in default” means “any-director, manager, secretary or other officer of the Company, whoknowingly and wilfully authorizes or permits the default, refusal orcontravention mentioned in . the .enactment ”.
That no annual return for the year 1952 was sent is conceded by theappellants. The annual return has to be completed within twenty-eight
DE SILVA J.—de Silva v. The Registrar oj Companies521
days after the general meeting in that year. It is also admitted that no-general meeting was held during the year 1952. The last date on whiohthe general meeting oould have been held during that year was the 31stof December 1952. Therefore the last day for completing the annualreturn was the 28th of January 1963. The learned Magistrate allowedthree days for the purpose of forwarding the return to the Registrar ofCompanies. Accordingly he held that the default had taken place on-
2.1953. His finding on this point cannot be questioned.
At the trial the appellants sought to prove that they had ceased to bedirectors prior to the date of default. The learned Magistrate, however,rejected that contention giving reasons which, if I may say so, are veryconvincing.
It was also contended on behalf of the appellants that they cannotbe convicted of failing to send an annual return as contemplated bysection 108 (1) because it was impossible to forward such a return as noannual general meeting was held during the year 1952. This argumentis based on the ground that section 108 (1) provides that the annualreturn is to be completed within 28 days of the holding of the generalmeeting. The Counsel for the appellants, therefore, submitted that itwas impossible to furnish the return as no general meeting was held.In support of this contention Mr. Jayawardene relied on Dorte v. SouthAfrican Super-Aeration, Ltd.1 In that oase the Company was chargedbefore the Aldermen of the City of London for failing to send the annualreturn. The Company pleaded that it was impossible to furnish thereturn as no general meeting was held during the relevant year. TheAldermen held that the duty oast on the Company to furnish an annualreturn was impossible of performance as no general meeting was heldand dismissed the summons. In appeal a Bench of three judges one ofwhom was Lord Alverstone C.J. without calling on the Counsel for theCompany affirmed the decision of the Aldermen and dismissed theappeal. As the arguments and the judgment in that case have notbeen reported it is not possible to say what the grounds of that decisionwere. In a subsequent case Park v. Lawton and another 2 a contraryview was taken. Lord Alverstone C.J. was also one of the judgoswho decided that case. In that case two directors of a Company werecharged before the Justices of Hertfordshire for failing to send an annual'return. They were acquitted by the Justices on the ground that asno annua] general meeting wae held it was impossible to furnish theannual return. In appeal the acquittal was set side and the accused wasconvicted. In that case Lord Alverstone C.J. said “ the cases ofGibson v. Burton 3 and Edmonds v. Foster 4 are clear authorities that aperson charged with an offence under section 26 is not entitled by wayof defence to plead the impossibility of complying with Section 26 byreason of no general meeting having been held, at any rate if the personcharged was also a party to the default in holding the meeting ; in otherwords, a person charged with an offence cannot rely on his own defaultas an answer to the charge In the present case too the appellants areseeking to avail themselves of their own default to establish their innocence.It is true that in Park v. Lawton the accused had been convicted already
1 20 Times Law Reports 425.a(1874-1875) 10 Q.B.D. 329.
1 (1911) 1 K. B. D. 588.*(1875) 44 L. J. M. O. 41.
. 022DE SILVA J.—de Silva v. The Registrar of Companies
for failing to hold the annual general‘meeting. In the present case.although the appellants were not charged for failing to hold the generalI meeting it is clear on the evidence led that the failure to hold the general’ meeting in 1952 was due to the default of the appellants themselves.
' I am unable to agree with the submission made by Mr. Jayawardenethat the Registrar <Tf Companies is not entitled to maintain the presentcharge because the appellants were not charged with failing to hold ageneral meeting. It is not sufficient in answer to the present charge forthe appellants to say that they were unable to comply with the provisions- of section 108 (1) because no general meeting was held. They have to
proceed further and establish to the satisfaction of the Court that thefailure to hold the general meeting was not due to any default on theirpart. It is true that the appellants were confronted with certain diffi-culties in the matter of holding a general meeting but one cannot saythat those difficulties were insurmountable. Those difficulties however .must be taken into consideration in passing sentence.
Mr. Jayawardene also argued that there was no evidence that theappellants had “ knowingly ” and “ wilfully ” permitted the default.
' The appellants were directors of the Company during the whole of therolevant period. The directors were responsible for the conduct of thebusiness of tho Company. The holding of a general meeting and thefurnishing of the annual report are important matters which have to bo. attended to by a Company. The directors being the persons who aref entrusted with tho transaction of all business relating to the CompanyI must be held prima facie responsible for any default on the part of theCompany. The burden is on the directors to establish that no blamecould be attached to them for failing to carry out the statutory dutiescast on them. In this case the appellants have failed to discharge thatburden. Therefore the convictions must be affirmed.
Tho fines imposed on the appellants are far too severe. Tho registered• office of the Company was at No. 161 Turret Road, Colombo. The busi-ness of the Company was also transacted, there. These premises hadbeen taken on lease by the Company. Mr. Jayawardene submitted thatthe most valuable asset of the Company was this lease. On a writ issuedby the District Judge, Colombo, the Company was ejected from thesepremises on 20.12.1952. The first aoouBed.appellant has stated that hohad decided to hold the annual general .meeting before the end of Decem-ber, 1952, and that he failed to hold that meeting as the Companywas ejected from these premises. His evidence on this point appearsto bo true. Even in the previous years the . annual general meetingwas held at the end of December. It is also,quite possible, as stated bythe 1st accused, that when the Company-was thrown out of the premisessome of the papers relating to its business were either lost or got mis-placed. In these circumstances it is sufficient if only a nominal fine isimposed on the appellants. I set aside the default fines imposed on themby tho Magistrate and substitute therefor a default fine of 25 cents a dayfrom 1.2.1953 on each of them. Subject to this variation the appeals.aro dismissed.
M. M. R. DE SILVA et al ,Appellant, and THE REGISTRAR OF COMPANIES, Respondent
de Silva a. The Registrar of Companies