Holding

The cause of action for default in delivering share certificates under Section 113 arises at the place where the company's registered office is situated, conferring jurisdiction on courts having territorial jurisdiction over that location.

Summary

The appellant, H.V. Jayaram, purchased shares of Industrial Credit and Investment Corporation of India Ltd. and alleged that the company failed to deliver the share certificates within the time limits prescribed by Section 113(1) of the Companies Act, 1956. He filed a criminal complaint under Section 113(2) before the Special Court for Economic Offences in Bangalore. The trial court dismissed applications for discharge on the ground of lack of territorial jurisdiction, and the Karnataka High Court held that the cause of action arose only at the place where the company's registered office is situated, not where the complainant resides. On appeal, the Supreme Court examined Sections 53 and 113 of the Companies Act, noting that when a document is sent by post, service is deemed effected at the place of posting, i.e., the company's registered office, and therefore the offence and the jurisdiction lie there. The Court affirmed that the cause of action for non‑delivery of share certificates arises at the registered office of the company and dismissed the appeals.

Issues considered

Whether a complaint for an offence punishable under Section 113(2) of the Companies Act, 1956 can be filed only where the company's registered office is situated or also where the complainant resides.

Legislation cited

Code of Criminal Procedure, 1973s. 201
Companies Act, 1956s. 113(1), s. 113(2), s. 205(5)(b), s. 207, s. 53

Subjects

Companies ActSection 113share certificatesjurisdictioncause of actionservice of documentsregistered officecriminal complaintterritorial jurisdictionSection 53Section 205Section 207

Judgment

A H.V. JAYARAM
v.
THE INDUSTRIAL CREDIT AND INVESTMENT CORPN.
OF INDIA LTD. AND ORS. ETC.

DECEMBER 15, 1999
B
[K.T. THOMAS AND M.B. SHAH, JJ.]

Companies Act, 1956 :

C Sections 53 and I I 3 (2)-Failure to deliver share certificates within
the statutory time limit-Summons issued on the criminal complaint filed by
the appellant-Applications seeking discharge rejected by the trial court on
the ground of lack of territorial jurisdiction-High Court held cause of
action arose at the place where the registered office of the respondent
D company is situated-On appeal, Held: Where documents sent by post, service
deemed to be effected by properly addressing, prepaying and posting the
letter-Cause of action would arise at the place where the registered office
of the company is situated-Posting of certificates within the stipulated time
amounts to compliance of Section I I 3. ·

Sections 205(5) (b) and 207-Dividend warrant addressed to the -
E
registered address of the shareholder-Post Office becomes the agent of the
shareholder-Loss of dividend warrant is at the risk of the shareholder-
Offence of not posting dividend warrant within 42 days would occur at the
/
registered office of the company.

F The appellant was a purchaser of shares of the respondent company.
As the respondent company failed to deliver shares to the appellant within
the time limit stipulated under Section 113 (2) of the Companies Act, 1956,
the appellant lodged criminal cases before the Special Court for Economic
Offences at Bangalore. Respondents' applications for discharge were rejected
by the trial court on the ground of lack of territorial jurisdiction which was
G challenged before the High Court. In view of the fact that documents were
sent to the respondent by post, as requested by himself, the High Court held
that the cause of action would arise only where the head office of the respondent
company is situated. Hence the present appeals.

The appellant contented that being a purchaser of shares and a resident
H 336
HV. JAYARAM1•. INDUSTRIAL CREDIT AND INVESTMENTCORPN.OFINDIALTD. 337

of Bangalore, he was entitled to receive the share certificates at Bangalore A
and therefore, the cause of action would also arise at Bangalore.

Dismissing the appeals, this Court

HELD 1.1. Section 113 of the Companies Act, 1956 inter alia requires
that within three months after the allotment of any shares and within two B
months after the application for registration of the transfer of any such
shares, every company shall deliver, in accordance with the procedure laid
down in Section 53 of the Companies Act, 1956, the certificates of all the
shares allotted or transferred. Sub-section (2) provides punishment if default
is made in complying with Sub-section (1). Reading Sections 113 and 53
together, share certificates are to be delivered in accordance with the C
procedure laid down in Section 53. A document is to be served either
personally or by sending it by post at registered address within India. Sub-
section (2) specifically mentions that where a document is sent by post, such
service thereto shall be d£emed to be effected by properly addressing, prepaying
and posting the letter containing the document. Hen.ce, once there is a statutory D .
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 statutory 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 E
be posted and are usually posted. If the addressee is available in the same
locality where the registered office of the company is situated, it is reasonable
to think that service of document 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 F
then adopt is to send to him by post For such default, as contemplated under
Section 113 (1) of the Act, there is no question of any cause of action arising
at the place where complainant was to receive postal delivery. Non-delivery
of share certificates within the prescribed time limit in accordance with the
provisions laid down under Section 53 of the Act is punishable under Section G
., 113(2) of the Act. So, if the documents are posted within stipulated time,
there would be compliance of Section 113 and there would not be any offence.
[341-C, D, E, F, G, H; 342-A)

1.2. Section 205 (5) (b) of the Act, which is similar to Section 53, inter
alia provides that any dividend payable may be paid by cash or a cheque or H
338 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A a warrant sent by post directed to the registered address of the shareholder
entitled to the payment of the dividend. 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 place where the
dividend warrant would be posted is the place where the company has its ,,..,._
B 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. Same would be the
position for the offence punishable under Section 113 of the Act. Cause of
action for failure tQ deliver the share certificates or documents within
C prescribed time would arise where the registered office of the company is
situated. 1342-C, D, G J

HP. Gupta v. Hiralal, (1970] 1 SCC 437, relied on.

Ranbaxy laboratories limited v. Smt. Indra Kala, (1994) 24 CLA 203
D (Raj.), distinguished.

Upendra Kumar Joshi v. Manik Lal Chatterjee and Ors., (1982) 52
Com Cas 177 (Patna), affirmed.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal Nos.
1353-57 of 1999.
E
WITH

Criminal Appeal Nos. 1358-62of1999.

From the Judgment and Order dated 28.7.98 of the Kamataka High Court
F in Cr!. P. Nos. 240, 1485, 1548, 1848-1849 of 1996.

N.L. Ganapathi and Abhijit Sengupta for the Appellant.

Ashok H. Desai, R. Sasiprabhu and Ms. Anjali Chandurkar with for the
Respondents Nos. 2, 3, 7, 8 and 9.

G Dalip Kumar Malhotra and Rajesh Malhotra for the Respondent No. I.

Parijat Sinha for the Responents Nos. 5-6.

R. Santhana Krishnan and D. Mahesh Babu for Respondents Nos. I, 5,
7, 12, in Cr!. A. Nos. 1358-62/99.

The Judgment of the Court was delivered by
r
H
H.V.JAY ARAM 1•. INDUSTRIAL CREDIT AND INVESTMENTCORPN. OF INDIA LTD. [SHAH, J.) 339

SHAH, J. Leave granted. A
The only question involved in these appeals is whether the complaint
for the offence punishable under Section 113 (2) of the Companies Act, 1956
could be filed only where the registered office of the company is situated or
where the complainant is residing.
B
The appellant had lodged criminal cases before the Special Court for
economic offences in Karnataka at Bangalore on the allegation that the
respondent companies had committed offences punishable under Section
113(2) of the Companies Act. Criminal Petition Nos. 240, 1485, 1548, 1848 and
1849 of 1996 before the High Court of Karnataka at Bangalore challenged the
order passed by ·the trial court rejecting applications for the discharge on the C
ground that the Magistrate had no territorial jurisdiction to try the alleged
offences. In some cases, companies straightway approached the High Court
questioning the order passed by the learned Magistrate issuing summons to
them after taking cognizance of the offence: It was pointed out that admittedly
the registered offices of the respondent companies are not located in the State D
of Karnataka but are located either at Bombay or at Gujarat. As against this,
the appellant who is a practising advocate contended that he was a permanent
resident of Bangalore and letters requesting the company to transfer the
shares and to send memorandum, articles of association, balance sheets etc.,
were sent from Bangalore to the registered offices of the companies and,
therefore, cause of action also arose at Bangalore. The High Court after E
considering the various decisions relied upon by the learned counsel for the
parties arrived at the conclusion that under the provision of Section 53 of the
Companies Act two modes are prescribed for serving the documents, one to
serve personally and the other by post. As the documents were sent to the
respondent by post, as requested by him, the cause of action would arise F
only where the head office is situated. The Court, therefore, arrived at the
conclusion that having regard to Section 201 of the Cr.P.C., the Magistrate is
required to return the complaint for presentation before the proper court with
an endorsement to that effect.

The learned counsel appearing on behalf of the appellant (complainant) G
strenuously contended that the order passed by the High Court is, on the
face of it, erroneous because admittedly the appellant is residing at Bangalore.
Being purchaser of the shares, he was entitled to get the share certificates
at Bangalore and. therefore, cause of action would arise at Bangalore also. For
this purpose, he relied upon the decision rendered by Rajasthan High Court
in Ranbaxy Laboratories ltd v. Smt. Indra Kala. (1997) 24 CLA 203 (Raj.). H
340 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A As against this, learned senior counsel, Mr. Desai submitted that the
order passed by the High Court is in accordance with the provision of Section
113 read with Section 53 of the Companies Act. He referred to the decision
rendered by the Patna High Court in Upendra Kumar Joshi v. Manik Lal
Chatterjee and Others, (1982) Vol. 52 Company Cases 177 (Patna). He submitted
B that the litigation is frivolous and it should be discouraged.

For appreciating the contention raised by the learned counsel for the
parties, we would refer to the relevant parts of Sections 53 and 113 'Of the
Companies Act, which are as under:

"53. Service ofdocuments on members ofcompany.-(/) A document
c may be served by a company on any member thereof either personally,
or by sending it by post to him to his registered address, if any,
within India supplied by him to the company for the giving of notices
to him.

(2) Where a document is ·sent by post-
D
(a) service thereof shall be deemed to be effected by properly
addressing, prepaying and posting a letter containing the document,
provided that where a member has intimated to the company in advance
that documents should be sent to him under a certificate of posting
or by registered post with or without acknowledgement due and has
E
deposited with the company a sum sufficient to defray the expenses
of doing so, service of the document shall not be deemed to be
effected unless it is sent in the manner intimated by the member; and
(Emphasis added)

(b) ......... .
F
(3) .. :...... .

(4) ··········
(5) ......... .
G
113. limitation oftime for issue ofcertificates. -(I }--[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
H transfer of' any such shares, debentures or debenture stock, deliver,
H.V. JAY ARAM 1·. INDUSTRIAL CREDIT AND INVESTMENTCORPN. OF INDIA LTD. [SHAH,J.J34 l

in accordance with the procedure laid down in section 53, the certificates A
of all shares, debentures and certificates of debenture stocks allotted
or transferred;

Provided .......... ]

(2) If default is made in complying with sub-section (I), the company, B
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.

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

Section 113 inter alia requires that within three months after the allotment
c
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 in Section 53, the certificates of all shares
allotted or transferred. Sub-section (2) provides punishment if default is made
in complying with sub-section (I). Reading Sections 113 and 53 together, D
share certificates are to be delivered in accordance with the procedure laid
down in Section 53. A document is to be served either personally or by
sending it by post at registered address within India. Sub- section (2)
specifically mentions that where a document is sent by post, such service
thereof shall be deemed to be effected by properly addressing, prepaying and E
posting the letter 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 statutory 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 F
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 office 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 G
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( I), there is no question of any cause of action arising at
the place where complainant was to receive postal delivery. What is punishable
under sub-section (2) of Section 113 is non- delivery, in accordance with the H
342 SUPREME COURT REPORTS [1999] SUPP. 5 S.C.R.

A provision laid down under Section 53, of the certificates of shares within
prescribed time. So, 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
B payment of dividend within 42-days of its declaration by a company and its
non payment within stipulated period is punishable. Section inter a/ia 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 declaration, to any shareholder entitled to the payment of dividend,
C 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 dividend. The Court held that when the
company posts the dividend warrant at the registered address of the
D 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 has its registered office and
the offence under Section 207 of the Act would also occur at the place where
E 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
F Court within whose jurisdiction the offence takes place, i.e., Delhi.
This should be so both in law and° common-sense, for, 1.fheld 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
G
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
H the company is situated. •
H.V.JAYARAM1•.INDUSTRIALCREDITANDINVESTMENTCORPN.OFINDIALTD.[SHAH,J.]J43

However, learned counsel for the appellant relied upon the decision of A
Rajasthan High Court in Ranhaxy 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
B
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: - C
"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 Jaw. Therefore, the interest of the D
members of the public transacting such business cannot be allowed
to be defeated on the plea that relief to the aggrieved pers9ns 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. Hira/al, (1970] E
I SCC 43 7 and also to Section 113 of the Act, which inter alia provides that
company shall deliver the documents, such as, certificates of shares,
debentures and certificates of debenture stocks allotted or transferred in
accordance with the procedure laid down in SecHon 53. Section 53 prescribes
the mode of delivery inter alia by sending the document by post at registered F
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 this 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. G
In the result, the aforesaid appeals are dismissed.

RCK. Appeals dismissed.