1981 (4) TMI 230 - HC - Companies Law

Summary

Issues:
1. Whether permission under section 446 of the Companies Act, 1956 is required for launching prosecutions against respondents for alleged violations.
2. Interpretation of sections 58B and 58C of the Reserve Bank of India Act, 1934 regarding penalties and deeming fiction for company offenses.
3. Whether the company can be prosecuted under section 58C(1) considering the mandatory corporal punishment of imprisonment.
4. Application of the Full Bench decision of the Delhi High Court in a similar context.

Analysis:
1. The petitioner, a Deputy Chief Officer of the Reserve Bank of India, sought permission under section 446 of the Companies Act, 1956 to prosecute respondents for alleged violations of the Miscellaneous Non-Banking Companies (Reserve Bank) Directions, 1973. The court considered the necessity of such permission based on a previous decision and concluded that permission was required as the company was sought to be prosecuted for violations under section 58C(1) of the Reserve Bank of India Act, 1934.

2. Sections 58B and 58C of the Reserve Bank of India Act, 1934 were crucial in determining liability for contraventions or defaults. Section 58B provided for penalties, including imprisonment and fines, for contraventions. Section 58C(1) established a deeming fiction where both the company and its responsible persons could be deemed guilty of an offense. The court emphasized that for prosecution, it was essential that the company had committed the violation, as the liability extended to directors and officers only if the company had violated the restrictions.

3. The court addressed the issue of whether the company could be prosecuted under section 58C(1) considering the mandatory corporal punishment of imprisonment. Referring to a Full Bench decision of the Delhi High Court, the court noted that in cases where the offense was committed by the company, the court could impose a sentence of fine instead of imprisonment to effectively carry out the statutory sentence. However, the court decided not to delve into the larger question at that time.

4. In light of the uncontroversial contents of the affidavit supporting the summons and the absence of any response from the respondents, the court granted leave under section 446 of the Companies Act, 1956 for the petitioner to continue the prosecution against the directors and the company. The summons was disposed of accordingly.