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Dharam Pal Gupta and anr. Vs. Registrar of Companies and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtRajasthan High Court
Decided On
Case NumberS.B. Company Misc. Petition No. 1 of 1984
Judge
Reported in1985(1)WLN444
AppellantDharam Pal Gupta and anr.
RespondentRegistrar of Companies and anr.
DispositionPetition dismissed
Cases ReferredKrishna Prasad v. Registrar of Companies (supra
Excerpt:
.....where the criminal prosecution has been lunched after the filing of such petition under sub-section (2) of section 633. the object of sub-section (2) of section 633 is to provide a forum to deal with cases where the proceedings are not pending in any court and the proceedings are anticipated or apprehended......are apprehended and since in the present case on 23rd november, 1983, when these petitions were filed, no prosecution had been instituted against the petitioners this petition was validly filed under sub-section (2) of section 633 of the act and the jurisdiction of this court to deal with this petition cannot be taken away by the subsequent institution of the complaint against the petitioners.7. in sanatan ganguly v. state and ors. (supra) the provision of subsection (1) of section 633 have been considered by the calcutta high court and it has been observed that an application under sub-section (1) of section 633 has to be disposed of on the basis of evidence adduced during the trial including the evidence that may be adduced by the accused who has filed the application under section.....
Judgment:

S.C. Agrawal, J.

1. This petition has been filed under Section 633(2) of the Companies Act, 1956 (here in after referred to as the 'Act',). The petitioners as will as the non-petitioner No. 2 were the Directors of Auto Electricals (India) Pvt. Ltd. a Company registered under the Ac' and non-petitioner No. 2 was it's Managing Director. The case of the petitioners is that the non-petitioner No. 2 did not call the Annual General Meeting of the Company and did not place the balance sheet and profits and loss accounts before the Annual General meeting as required under Section 210 of the Act. The petitioners apprehending that they would be prosecuted under Sections 159, 166, 210 & 220 of the Act, in respect of negligence, default, breach of duty, misfeasance or breach of trust, moved this petition on 23rd November, 1983 where in they have submitted that they have acted honestly and reasonably to comply with the formalities under Sections 159, 165, 210 & 220 of the Act and that they were not able to comply with the said formalities on account of the failure of non-petitioner No. 2 to comply with all the requirements of those Sections The petitioners have prayed that they may be relieved from being prosecuted under the aforesaid Sections

2. A notice was issued to the non-petitioners and in response to the same the replies have been filed by both the non-petitioners. In the reply filed on behalf of the Registrar of Companies, non-petitioner No. 1, an objection has been raised with regard to the maintainability of the petition on the ground that the petitioners are already being prosecuted and the cases are pending against them for trial before the Chief Judicial Magistrate (Economic Offences) Jaipur and that in view of the pending prosecution this petition cannot be maintained. In the said reply it has also been disputed that the petitioners have acted honestly and reasonably. In the reply that has been filed on behalf of non-petitioner No. 2 it has been stated that the said non-petitioner had submitted his resignation from the office of Managing Director on 20th October, 1982. In the said reply the said non-petitioner has also stated that he was responsible only for planning and execution of technical work of the company and it was not his duty to call the annual general meeting of the Company and that the said meeting could be called by any one of the petitioners.

3. Before I deal with the submissions that have been urged by the learned Counsel for the parties it would be appropriate to refer to Section 633 of the Act which reads as under:

(1) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the Court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit:

Provided that in a criminal proceeding under this sub-section, the Court shall have no power to grant relief from any civil liability which may attach to an officer in respect of such negligence, default, breach of duty misfeasance or breach of trust.

(2) Whether any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust he may apply to the High Court for relief and the High Court on such application shall have the same power to relieve him as it would have had if it had been a Court before which a proceeding against that officer for negligence, default, breach of duty, misfeasance or breach of trust had been brought under Sub-section (1).

(3) No Court shall grant any relief to any officer under subSection (1) or Sub-section (2) unless it has, by notice served in the manner specified by it, required the Registrar and such other person, if any, as it thinks necessary, to show cause why such relief should not be granted.

4. It may be mentioned that even though in the replies that have been filed on behalf of the non-petitioners the exact date on which the prosecution was instituted against the petitioners has not been mentioned but Shri Kuhad, the learned Counsel for non-petitioner No. 2, has stated at the bar that the said prosecution was instituted by filing a complaint in the Court of Chief Judicial Magistrate (Economic Offence) Jaipur, on 7th January, 1984 i.e., after the filing of this petition in this Court.

5. The submissions of learned Counsel for the non-petitioners is that the provisions of Sub-section (2) of Section 633 can be invoked only in those cases where no prosecution has been instituted and in cases where no prosecution has been instituted then the remedy under Sub-section (1) of Section 633 of the Act is the only remedy which is available and since in the present case, the prosecution has already been instituted against the petitioners, the petitioners should approach the Chief Judicial Magistrate (Economic Offences) Jaipur for seeking appropriate relief Under Sub-Section (1) of Section 633 of the Act. In support of the aforesaid submission reliance has been placed on the decision of the Delhi High Court in Shri Krishna Prasad v. Registrar of Companies, Delhi & Haryana (1978) 48 Company Cases 397 and the decision of the Calcutta High Court in Sanatan Ganguly v. State and Others (1984) 56 Company Cases 93.

6. Shri Singhvi, the learned Counsel for the petitioners, has on the other hand submitted that the jurisdiction of this Court under Sub-section (2) of Section 633 can be invoked in a case where on the date of the filing of the petition proceedings have not been instituted and are apprehended and since in the present case on 23rd November, 1983, when these petitions were filed, no prosecution had been instituted against the petitioners this petition was validly filed under Sub-section (2) of Section 633 of the Act and the jurisdiction of this Court to deal with this petition cannot be taken away by the subsequent institution of the complaint against the petitioners.

7. In Sanatan Ganguly v. State and Ors. (supra) the provision of subSection (1) of Section 633 have been considered by the Calcutta High Court and it has been observed that an application under Sub-section (1) of Section 633 has to be disposed of on the basis of evidence adduced during the trial including the evidence that may be adduced by the accused who has filed the application Under Section 633(1) of the Act and that this is all the more necessary as under the Code of Criminal Procedure, the Court's finding as to whether an offence has been committed or not has to be based on evidence to be adduced through examination of witnesses except where provision has been expressly made in the Code to produce such evidence through affidavit, namely, Sections 295 and 296 of the Code.

8. In Krishna Prasad v. Registrar of Companies (supra) the ambit and scope of the provisions contained Sub-sections (1) & (2) of Section 633 of the Act were considered by the Delhi High Court and the question which arose for consideration before the Court was whether the power of the High Court is concurrent with the power of the Magistrate trying an offence under the Act or whether it is to be exercised simultaneously. The High Court has laid down 'Obviously, the two sections have to be read as being anticipatory in the case of High Court's jurisdiction and to be exercised as a defence in the case of an actual trial in respect of the offence complained of'. After referring to the language used in Sub-section (2) of Section 633, the High Court has observed:

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 has fructified into an actual bringing about of the proceedings then it is no longer an apprehension but becomes an actuality. When actual proceeding is brought then there is no apprehension any more and hence recourse has to be had to the power of 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.

The High Court has further observed:

In all such cases if a proceeding is anticipated, the officer concerned can move the High Court at any 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 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 if a case is actually initiated, only the court before which the complaint or trial is going on can grant relief.

9. Shri Singhvi has submitted that the aforementioned observations in Krishna Prasad v. Registrar of Companies (supra) are confined to those cases only in which criminal prosecution was launched before the High Court was moved under Sub-section (2) of Section 633 and the said observations have no application to cases where the Criminal Prosecution as been launched after the filing of the petition under Sub-section (2) of Section 633. I am unable to agree.

In my view, the aforesaid observations cover both the types of cases i.e. a case where Criminal Prosecution has been launched and is pending on the date of filing a petition under Sub-section (2) of Section 633 as well a case where the Criminal Prosecution has been lunched after the filing of such petition under Sub-section (2) of Section 633. The object of Sub-section (2) of Section 633 is to provide a forum to deal with cases where the proceedings are not pending in any Court and the proceedings are anticipated or apprehended. Once the proceedings have been instituted the court in which the proceedings have instituted would be proper forum to deal with the matters covered by Section 633. This is more so because for the purpose of deciding application Under Sub-Sections (1) and (2) of Section 633 it is necessary to record evidence and in cases where the proceedings have already been instituted. The Court in which the proceedings are pending will necessarily record the evidence in order to decide the case on merits. If it is held that the petition filed under Sub-section (2) of Section 633 is maintainable even after the institution of the proceedings, the result would be that the same evidence would have to be recorded in the High Court in the petition under Sub-section (2) of Section 633 This would lead to multiplicity of proceedings. A construction which leads to such a consequence must be avoided. In my opinion, therefore, a petition filed under Sub-section (2) of Section 633 of the Act ceases to be maintainable after the institution of the proceedings which are apprehended or anticipated and thereafter the matter can be only be considered under Sub-section (2) of Section 633 by the Court in which the proceedings are pending.

10. In the circumstances it must be held that the petition filed by the petitioner under Sub-section (2) of Section 633 cannot be maintained in view of the institution of the proceedings against the petitioners in the Court of Judicial Magistrate (Economic Offences) Jaipur. The petition is, therefore, dismissed and (he interim orders passed by this Court shall stand vacated automatically. No order as to costs.


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