P L D 1959 (W (PLP)

QADEERUDDIN AHMAD, J.‑The applicants are the Directors of the I. H. A. Limited, which was incorporated and registered in Pakistan. They have admitted their default in complying with the provisions of sections 77 and 134 of the Companies Act, 1913, but have applied for relief under section 281 (2) of the Act on the ground that the defaults were made due to inadvertence and oversight. The Registrar of Joint Stock Companies has opposed their application and pointed out that the applicants had to file the Statutory Report under section 77 by the 10th of September, 1954, and the summary of share capital and balance‑sheet under section 134 by the 3rd of July 1955. They failed to file these returns, and therefore, he wrote to them on the 6th of September 1956 to submit the returns under section

134. It appears from para. 3 of his objections that nothing was written to the applicants regarding the Statutory Report and, therefore, I presume that it had been submitted before his letter. For about five months after the letter of the Registrar, no action was taken by the applicants. On the, 19th of February 1957, they submitted the present application to this Court and prayed to be excused for their defaults. After eight months of the present application they filed the summary of share capital with the Registrar, but omitted to file a copy of the balance‑sheet. The Registrar's contention, therefore, is that the defaults of the applicants were wilful.

2. Dr. Mahmud, who appeared for the applicants, has contended that tire failure of the applicants to comply with the provisions of law was due to mere inadvertence. He has further argued that under section 281 (1) of the Act, the Court should see whether the defaults were honest and reasonable. According to him, the applicants forgot to file the returns with the Registrar but within a reasonable time after the Registrar reminded them of the omission they took steps to move the Court under section 281 of the Act. As against this, Mr. Kaikobad for the registrar has contended that the Directors are presumed to be aware of their legal duties and, therefore, if they commit a default, they do so knowingly and willfully. In support of this proposition he has relied on the case of Bhagirath Chandra Das and others v. Emperor (A I R 1948 Cal. 42). He laid emphasis on the applicants' omission to file the returns even after the, Registrar's letter and contended that this omission was a proof f their willfulness.

3. Lodge, J. has held in Bhagirath Chandra Das's case that where the Directors make no attempt to see that their duties are carried out, then there is justification for holding that they have wilfully and knowingly permitted the company to fail to carry out legal duties. But his observations are not fully applicable to the facts of the present case, because the applicants did take steps after receiving the letter from the Registrar to explain their mistake by making the present application. It is reasonable to conclude that their default commenced with their forgetfulness, and if it was so then it is possible that they were not able to think of their omission and rectify it until they were reminded of it. I am, therefore, inclined to agree with Dr. Mahmud that their failure to file the returns up to the date of the letter of the Registrar is excusable.

4. After the letter of the Registrar, they took about five months to submit the present application. Dr. Mahmud has explained that applicant No. 1 being a foreigner did not know how to proceed about it, and therefore, this much time was wasted. This is not a good excuse but can be an honest one in the present case. I am, therefore, inclined to take lenient view of the default up to the date on which the present application was made, namely, the 19th of February 1957. The applicants submitted this application but did not at the same time file the required returns with the Registrar. They filed the summary of share capital on the 14th of October 1957. It is admitted that since then all returns have been filed. Dr. Mahmud has, therefore, taken the stand that the applicants did not make any default willfully or dishonestly. Their intention could not be to infringe the law and their conduct shows that they have respected it by complying with it. The question, therefore, is whether their omission to file the summary of share capital after the Registrar's letter up to the 14th of October 1957 and their omission to file the balance sheet along with it is excusable or not. Mr. Kaikobad for the Registrar has contended, that the applicants' counsel has tried to take advantage of the date on which the Registrar sent a reminder to the applicants and has tried to gain sympathy of the' Court and to obtain relief for all defaults on the main ground that there was no default until that date. According to him no advantage should be given to the defaulters if the Registrar sends a reminder late or does not send it at all, because it is not the duty of the Registrar that reminders should be sent to defaulters. I do not agree with this argument because under section 281 of the Act the defaulters, to whom it applies, can come to the Court and ask to be relieved of the consequences of their defaults at any time after they have, reason to apprehend that any claim will or might be made against them. If and so long as they do not have such apprehen sion, they need not come to the Court. In other words, section 281 of the Act attaches significance to the enforcement of the Companies Act by the State. It is true that the Registrar owes no duty to the defaulters to write reminders to them, but he is duty bound to keep an eye on the compliance with the law by the companies and the officers of the companies. If there was no Registrar at all or if a Registrar was not performing his legal duties, then there would be no apprehension to the defaulters that any claim will or might be made against them and it would be unnecessary for them to apply to the Court for obtaining relief. There is thus a connection between the duties of the Registrar and the applications which are made for obtaining relief under section 281 of the Act.

5. Moreover, the punishment prescribed under sections 77 and 134 of the Act is a fine for every day during which the default continues, which means that the question of punishment is directly related to the action of the Registrar. If the delay of the Registrar in taking action against the defaulters had no connection with the punishment then Mr. Kaikobad might have been on a sound footing, but as the law stands it is proper that the inaction of the Registrar should be taken into con sideration.

6. I do not say that in every case the Registrar should commence the prosecution of the defaulters as soon as a default is committed because with reference to a number of defaults he has first to satisfy himself reasonably that they were committed knowingly and wilfully. Moreover, under section 281 of the Act the Court has to see whether the defaulters to whom this section applies have acted honestly and reasonably. Besides, punishment has not been prescribed by the law out of vindictiveness but with the intention that the law should be observed. It is, therefore, proper in relation to those defaults in which knowledge, wilfulness, honesty and reasonableness are relevant considerations that those who are entrusted with the duty of enforcing the law should give an opportunity to the defaulters to explain and rectify their mistakes and after giving the opportunity to watch whether they react honestly and reasonably or not.

7. In the present case, I am inclined to think that the failure of the applicants in not filing the summary of share capital up to the 14th of October 1957 after making the present applica tion on the 19th of February 1957 was not dishonest. They probably thought, though mistakenly, as suggested by Dr. Mahmud, that the submission of the present application was itself sufficient. Their default in not filing the balance sheet along with the summary of share capital is less excusable than the delay made by them in filing the summary of share capital because there is no explanation of this omission. I do not know when it was filed, because Mr. Kaikobad was not in a position to inform me of the date. I was not inclined to excuse this omission from the 14th of October 1957 onwards, but I was told at the bar that the balance sheet was filed after a short time and the interval between the 14th of October 1957 and the date on which it was filed may not be long. I would, therefore, not take a serious view of the omission and feel inclined in these circumstances to excuse it also.

8. The conclusion is that the application is accepted and the applicants are relieved of their liabilities under sections 77 and 134 of the Companies Act, 1913. K. B. A. Application accepted.