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Sri Krishna Parshad and ors. Vs. Registrar of Companies - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberC.P. No. 88 of 1977
Judge
Reported in[1978]48CompCas397(Delhi)
ActsCompanies Act, 1956 - Sections 633(1) and 633(2)
AppellantSri Krishna Parshad and ors.
RespondentRegistrar of Companies
Appellant Advocate Mohan Behari Lal, Adv
Respondent Advocate S. Jain, Adv.
DispositionPetition dismissed
Cases ReferredG.D. Bhargava v. Registrar of Companies
Excerpt:
.....and if the apprehended proceedings existed then it would be proper to approach the trial court for grant of relief under section 633(1) of the companies act, 1956 - - obviously, the two sections have to be read as being anticipatory in the case of the high court's jurisdiction and to be exercised as a defense in the case of an actual trial in respect of the offence complained of. ..6. the opening words of the section clearly indicate that, (a) the officer concerned must have an apprehension that a proceeding will or might be brought. as indicated above i am in perfect agreement with this conclusion. i may also indicate that the other court covered by section 633(1) need not necessarily be a criminal court because there may very well be a civil proceeding, criminal proceeding or even..........clarify the legal position and to avoid unnecessary legal proceedings.3. the power of the court to grant relief in respect of defaults of directors is set out in section 633, under sub-section (1) of this section the court hearing a case in respect of alleged negligence, default, breach of duty,misfeasance, etc , can relieve the director or other officer of the company if it finds that such negligence, default, breach of duty, misfeasance, breach of trust or other default has resulted, in spite of the officer of the company acting honestly and reasonably having regard to all the circumstances of the case. thus, if a proceeding of whatsoever nature it might be, has been initiated against a director or other officer of the company concerning defaults committed by that officer in the.....
Judgment:

D.K. Kapur, J.

1. Notice of this petition under Section 633(2) of the Companies Act, 1956, was issued to the Registrar of Companies. No reply has been filed but objection has been taken orally that this court has no jurisdiction on account of the fact that a complaint had been filed before a Magistrate having jurisdiction even before the present petition is filed in this court. I may mention that the petitioners are directors of M/s. Western U. P. Electric Power & Supply Co. Ltd. and the defaults in respect of which this petition has been moved for relief are in respect of holding the annual general meeting for the period ending 31st March, 1976, and for other consequential defaults. It is unnecessary to deal with the nature of the default in this petition because the sole question for consideration on the petition is whether this court has jurisdiction to deal with this petition even after a complaint has been filed before a Magistrate in respect of the defaults concerning which relief is sought.

2. The objection raised is not at all a new one. It has been dealt with by me in several previous cases but unfortunately they cannot be traced out readily. I am not even aware if they had been reported. It has become necessary in view of the nature of the objection and the arguments addressed before me to deal with this matter in some more detail so as to clarify the legal position and to avoid unnecessary legal proceedings.

3. The power of the court to grant relief in respect of defaults of directors is set out in Section 633, Under Sub-section (1) of this Section the court hearing a case in respect of alleged negligence, default, breach of duty,misfeasance, etc , can relieve the director or other officer of the company if it finds that such negligence, default, breach of duty, misfeasance, breach of trust or other default has resulted, in spite of the officer of the company acting honestly and reasonably having regard to all the circumstances of the case. Thus, if a proceeding of whatsoever nature it might be, has been initiated against a director or other officer of the company concerning defaults committed by that officer in the exercise of his duty, he has as one of the defenses open to him, a right to say that he was acting honestly and reasonably and the default is the result of other circumstances. In such a case the court dealing with the matter can grant relief to the officer concerned.

4. In addition to this power of the court to grant relief there is another power which has been granted to the High Court under Sub-section (2) of this section. This section is to the effect that if a director anticipates that a proceeding might be brought against him or will be brought against him, he can apply to the High Court and say that he was acting reasonably and honestly in the circumstances of the case and he should be relieved of that default. In such a case, the High Court has the same power to grant relief as a court would have if the proceedings in respect of the default were actually being tried.

5. The point at issue before me is whether the power of the High Court is concurrent with the power of the Magistrate trying an offence under the Companies Act or whether it is non-simultaneous. Obviously, the two sections have to be read as being anticipatory in the case of the High Court's jurisdiction and to be exercised as a defense in the case of an actual trial in respect of the offence complained of. This meaning is brought out by a reference to the language actually used in Section 633(2) which I now proceed to reproduce. The section reads :

' Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default.........'

6. The opening words of the section clearly indicate that, (a) the officer concerned must have an apprehension that a proceeding will or might be brought. The anticipation or apprehension is about the possibility of a proceeding being brought. If such an apprehension fructified into an actual bringing about of the proceedings then it is no longer an apprehension but becomes an actuality. When an actual proceeding is brought then there is no apprehension any more and hence recourse has to be had to the power of the trial court to grant similar relief under Section 633(1). The mistake made in interpreting the section as appears from the contentions of the counsel for the petitioner is that he submits that the High Court's power is the same as that of the Magistrate.

7. Undoubtedly, the power of the High Court is the same as that of the Magistrate. There is no doubt on this because the subsequent words in Sub-section (2) of Section 633 show that the power is the same. However, the power though it is the same can only be exercised when an apprehension exists which has not yet been transformed into an actuality. The learned counsel has referred to G.D. Bhargava v. Registrar of Companies [1970] 40 C C 664 (All) and P.C. Pothen, Liquidator of the Commonwealth Bank Ltd. (In Liquidation), [1966] 1 Ker 1 in which both courts have held that the powers of the High Court are the same as that of the Magistrate. As indicated above I am in perfect agreement with this conclusion. In fact, this is what the section states. These two cases do not deal with what the power of the High Court is after a proceeding has been actually initiated in a criminal court. I may also indicate that the other court covered by Section 633(1) need not necessarily be a criminal court because there may very well be a civil proceeding, criminal proceeding or even revenue proceeding in respect of which Section 633(1) may apply. In all such cases if a proceeding is anticipated, the officer concerned can move the High Court at an early stage and get relief in a suitable case. This has the great advantage of avoiding that other proceeding if the High Court grants relief. If that other proceeding has commenced then the officer concerned has no other course open but to apply to the relevant court under Section 633(1) to say that whatever negligence, default, breach of trust, misfeasance breach of duty or any other default complained of there may be, he, in fact, acted reasonably and honestly keeping in view the circumstances of the case. The court can then grant relief. Thus, the section as it were, operates in two stages. The High Court can grant anticipatory relief and if a case is actually initiated, only the court before which the complaint or trial is going on can grant relief. The preliminary objection has, thereforee, to be accepted. I accordingly dismiss the petition. No costs.


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