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The State Vs. the Akal Transport Company Private Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany;Criminal
CourtPunjab and Haryana High Court
Decided On
Case NumberCriminal Appeal No. 810 of 1957
Judge
Reported inAIR1959P& H22; 1959CriLJ79
ActsCompanies Act, 1956 - Sections 303(2), 314 and 652
AppellantThe State
RespondentThe Akal Transport Company Private Ltd.
Appellant Advocate S. Kartar Singh Chawla, Asst. Adv.-General
Respondent Advocate Y.P. Gandhi, Adv.
DispositionAppeal allowed
Excerpt:
.....article 227 of the constitution. - and shall also be liable to refund to the company any remuneration received, or the monetary equivalent of any perquisites or advantage enjoyed by him, in respect of such office or place of profit. 7. it would seem that before the new act came into force there was nothing illegal in the holding of offices of profit in the company by directors themselves or their relations and the obvious intention of the new provisions contained in section 314 of the act was to stamp out this practice, which quite evidently is liable to abuse, and no doubt has been abused in the past, and may well. produce a slate of affairs not in the best interests of the members of the company as a whole......or manager of such a private company shall hold any office or place of profit, except that of managing director, managing agent, secretaries and treasurers, manager, legal or technical adviser, banker, or trustee for the holders of debentures of the companv,-- (a) under the company; or (b) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place is paid over to the company or its holding company. (2) if any office or place of profit under the company or a subsidiary thereof is held in contravention of the provisions of sub-section (1), the director concerned shall be deemed to have vacated his office as director with effect from the first day on which the contravention occurs; and shall also be liable to refund.....
Judgment:

D. Falshaw, J.

1. This is an appeal by the State against the order of the Additional District Magistrate, Julludur, acquitting the accused, the Akal Transport Company Private Limited, which was summoned through its Manager, Kishori Lal, in a complaint filed by the Registrar of Joint Stock Companies, Punjab, under Section 303(2) of the Companies Act, 1956.

2. The allegations in the complaint are that in spite of the fact that no special resolution has been adopted by the Company under Section 314(1) of the Companies Act, nine Directors of the Company named in the margin were either holding office of profit under the Company, or else relations of theirs were employed in the Company, and therefore the said directors must be deemed to have vacated their offices as Directors with effect from the 1st of April 1956 when the Act came into force, and no return in the prescribed form showing the changes in the Board of Directors had been filed in the office of the Registrar within Fourteen days of the change, or in fact apparently up to the time when the complaint was filed in June 1957.

It was further mentioned that special resolution for confirmation of the appointment of the relatives of the Directors concerned had twice been rejected by the shareholders of the Company in meetings held on 21st May 1956 and the 27th of March 1957.

3. Two preliminary objections were raised on behalf of the accused Company, the first being that the complaint was liable to be dismissed under Section 247, Criminal Procedure Code, because the Registrar who was the complainant was not attending the Court in person on each hearing and secondly because the Directors of the Company, who were inoffice when the Act came into force on the 1st of April 1956, wore saved by the provisions of section 652 of the Act.

4. The first of these objections as overruled by the learned Magistrate on the ground that section 247 gave him a discretion to dispense with the personal attendance of the complainant and he ordered that the personal attendance was not necessary in a case of this kind, but he accepted the second objection and acquitted the accuted.

5. The relevant provisions of the Companies Act are as follows:

'Section 314(1): Except with the previous consent of the company accorded by a special resolution, no director of a company, no partner or relative of such a director, no firm in which such a director or relative is a partner, no private company of which such a director is a director or member, and no director, managing agent, secretaries and treasurers, or manager of such a private company shall hold any office or place of profit, except that of managing director, managing agent, secretaries and treasurers, manager, legal or technical adviser, banker, or trustee for the holders of debentures of the companv,--

(a) under the company; or

(b) under any subsidiary of the company, unless the remuneration received from such subsidiary in respect of such office or place is paid over to the company or its holding company.

(2) If any office or place of profit under the company or a subsidiary thereof is held in contravention of the provisions of Sub-section (1), the director concerned shall be deemed to have vacated his office as director with effect from the first day on which the contravention occurs; and shall also be liable to refund to the company any remuneration received, or the monetary equivalent of any perquisites or advantage enjoyed by him, in respect of such office or place of profit.'

Section 303(1) Every company shall keep at its registered office a register of its directors, managing director, managing agent, secretaries and treasurers, manager and secretary, containing with respect to each of them the following particulars, that is to say;

(2) The company shall, within the periods respectively mentioned in this sub-section, send to the Registrar a return in the prescribed form containing the particulars specified in the said register and a notification in the prescribed form of any change among its directors, managing directors, managing agents, secretaries and treasurers, managers or secretaries or in any of the particulars contained in the register, specifying the date of the change. The period within which the said return is to be sent shall be a period of twenty-eight days from the appointment of the first directors of the company and the period witliin which the said notification of a change is to be sent shall be twenty-eight days from the happening thereof.

(3) If default is mode in complying with Sub-Section (1) or (2), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees for every day during which the default continues.'

Section 652 which was held by the learned Magistrate to save the defendant company reads-

'652. Any person appointed to any office under or by virtue of any previous companies law shall be deemed to have been appointed to that office under or by virtue of this Act.'

6. The question is therefore whether in the case of a company which was already in existence on the 1st of April, 1956, when the old Act of 1913 was superseded by the new Companies Act, and in which offices of profit in or under the company were held by directors themselves or by relations of theirs, Section 652 will dispense with the necessity for having the holding of these offices of profit by directors or their relations approved by a statutory majority of the members of the company by means or a special resolution as provided in Section -314, immediately or as soon as possible after the coming into force of the new Act.

7. It would seem that before the new Act came into force there was nothing illegal in the holding of offices of profit in the Company by Directors themselves or their relations and the obvious intention of the new provisions contained in Section 314 of the Act was to stamp out this practice, which quite evidently is liable to abuse, and no doubt has been abused in the past, and may well. produce a slate of affairs not in the best interests of the members of the Company as a whole.

I do not think that it could possibly have been the intention of the Legislature to allow this state of affairs tc continue where it existed in companies already working when the new Act came into force. In the circumstances I consider that the only effect of Section 652 is that it is not generally necessary for companies which were functioning before the new Act came into force to re-elect their Board of directors or other officials and that the, existing directors and officials could ordinarily continue in office as before, but on the coming into force of the new Act it immediately became necessary for those companies in which offices of profit were held by directors or their relations to have this state of affairs ratified by the acceptance of a special resolution by a meeting of the company.

I thus consider that the accused Company in the present case was wrongly acquitted in the preliminary stages on the strength of the provisions of Section 652 of the Act and therefore the appeal of the State must be accepted and the order of acquittal set aside.

8. This is not, however, to be taken as expressing any opinion as to whether any offence has or has not been committed by the accused Company in this case, in which the true facts still remain to be established by evidence, and the law applicable to the facts as found still remains to be determined. I would accordingly accept the appeal and order that the trial of the accused Company should proceed according to law.

S.S. Dulat, J.

9. I agree.


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