1981 (2) TMI 190 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application under section 633 of the Companies Act, 1956.
2. Validity of the criminal proceedings initiated under section 295 of the Companies Act, 1956.
3. Effect of the repayment of the loan and resignation of the director.
4. Impact of the ad interim injunction on the criminal proceedings.
5. Compliance with principles of natural justice in condoning delay under section 473 of the Cr. PC.

Detailed Analysis:

1. Maintainability of the Application under Section 633 of the Companies Act, 1956:
The court examined whether the application under section 633 was maintainable after the complaint was filed and cognizance taken by the Metropolitan Magistrate. It was noted that under sub-section (2) of section 633, the court has jurisdiction to relieve defaulting officers and directors from the consequences of default if the court is satisfied with the facts and circumstances. The court concluded that the application was maintainable as the offence had been remedied by the repayment of the loan and resignation of the director.

2. Validity of the Criminal Proceedings Initiated under Section 295 of the Companies Act, 1956:
The court scrutinized whether the filing of the complaint and the application for condonation of delay under section 473 of the Cr. PC constituted the initiation of criminal proceedings. The court referred to various sections of the Criminal Procedure Code, including section 2(d) defining "complaint" and section 190 regarding the conditions requisite for initiation of proceedings. It was determined that cognizance of the offence was not taken until the delay was condoned on 4th November 1980, and the proceedings initiated before this date were not valid.

3. Effect of the Repayment of the Loan and Resignation of the Director:
The court acknowledged that the contravention of section 295 was remedied by the repayment of the loan and the resignation of the director. It was held that the offence was no longer continuing and had been made good. Consequently, the court decided to relieve the petitioners from the consequences of the default.

4. Impact of the Ad Interim Injunction on the Criminal Proceedings:
The court considered the effect of the ad interim injunction granted on 2nd July 1980, which restrained the respondent from commencing any prosecution against the petitioners. It was noted that the criminal complaint was filed during the period when the injunction was in force. The court held that the proceedings initiated in violation of the injunction order were null and void, and any action taken during this period was of no effect.

5. Compliance with Principles of Natural Justice in Condoning Delay under Section 473 of the Cr. PC:
The court examined whether the principles of natural justice were followed in condoning the delay under section 473 of the Cr. PC. It was highlighted that the accused were not given notice before the delay was condoned, which violated the principles of natural justice. The court referred to the decision in Krishna Sanghi v. State of Madhya Pradesh, emphasizing that the accused must be heard before condoning the delay. The court concluded that the order condoning the delay was vitiated and without jurisdiction.

Conclusion:
The court confirmed the ad interim order and relieved the petitioners from the consequences of the alleged default under section 295 of the Companies Act. The criminal proceedings initiated were declared null and void due to the violation of the injunction order and the principles of natural justice. The court made no order as to costs.