Cumarasamy V. De Mel, R.A. Et Al.,

1950 Present : Nagalingam J.

CUMARASAMY, Appellant, and R. A. DE MEL, et al., Respondents

 S. C. 979-M. C. Colombo, 6,503 A

Companies Ordinance, No. 51 of 1938-Section 111, subsections 1 and 9-Statutory meeting-Duty of Directors to hold such meeting-" Knowingly and wilfully "- Burden of proof.

Where a Company has failed to hold, within the prescribed period, the statutory meeting required by section 111 (1) of the Companies Ordinance, the Directors of the Company are prima facie guilty of the default or can be said to have knowingly and wilfully permitted the default, within the meaning of section 111 (9).

APPEAL from a judgment of the Magistrate's Court, Colombo.

T. S. Fernando, Crown Counsel, with A. Mahendrarajah, Crown Counsel, for the complainant appellant.

No appearance for the accused respondents.

Cur. adv. vult.

November 29, 1950. NAGALINGAM J.-

This is an appeal by the complainant with leave of the Attorney-General obtained from a verdict of acquittal entered against the respondents by the learned Magistrate of Colombo in regard to a charge preferred against them under section 111 (9) of the Companies Ordinance, No. 51 of 1938. This is not the type of case that comes up before a Magistrate's Court and it is therefore not surprising that the order of the learned Magistrate is challenged on the ground that errors both of fact and law have been committed by the learned Magistrate.

The charge against the respondents is correctly framed in terms of section 111 of the Companies Ordinance. I propose to draw attention to the terms of the charge as it is not quite clear whether the Magistrate has correctly appreciated the essentials of the offence with which the accused were charged. Section 111 (1) requires that a Company should within a period of not less than one month nor more than three months from the date on which the Company is entitled to commence business hold the statutory meeting. Sub-section 9 proceeds to enact that in the event of any default in complying with the provisions of this section every director of the Company who is guilty of the default, to focus attention on one limb at the moment, shall be guilty of an offence.

The view taken by the Magistrate that where the Company is in default it is the Company that should be prosecuted may be a sound piece of logical reasoning but it is not supported by the provisions of the section which looks at the problem from a larger and a practical standpoint- the sub-section, it will be noted, does not, enact that the Company should be made liable. Between the date of the incorporation of a Company and the date of the holding of the statutory meeting, the shareholders are not brought together nor are they apprised in regard to the various matters affecting the Company such as what part of the capital has been subscribed, whether the shares taken have been fully or partly paid or the nature of the consideration for the shares allotted, and in fact the shareholders are in entire ignorance of what has been done in respect of these matters. To punish the Company as such at this stage would be to punish even shareholders for whose protection the requirement that the statutory meeting should be held has been enacted and who themselves are powerless to have the meeting held, for prior to the statutory meeting being held the directors must forward a report to every member (sub-section 2) and also a copy of it to the Registrar (sub-section 5). Unless, therefore, the directors forward this report themselves first, no statutory meeting can be held and the shareholders would be punished for a default which they can in no way prevent.

Under Article 64 of Table A in the First Schedule to the Companies Ordinance (the Company has adopted the article substantially) provision is made for the appointment of the first directors and the appointment, it is of importance to note, is made not by

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