1989 (8) TMI 294 - HC - Companies Law

Issues Involved:
1. Maintainability of the petition under section 633(2) of the Companies Act, 1956.
2. Scope of section 633(2) of the Companies Act regarding relief from liabilities under other statutes.
3. Interpretation of section 633(2) in the context of criminal and civil liabilities.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition under Section 633(2) of the Companies Act, 1956:
The petitioners, directors and a manager of a company, filed a petition under section 633(2) of the Companies Act, 1956, seeking relief from criminal and civil liabilities arising from defaults under the Provident Funds Act and the Employees' State Insurance Act. The respondents raised a preliminary objection, arguing that section 633(2) does not extend to breaches of statutes other than the Companies Act. The court accepted this preliminary objection, stating that the jurisdiction under section 633(2) is restricted to defaults under the Companies Act.

2. Scope of Section 633(2) of the Companies Act Regarding Relief from Liabilities Under Other Statutes:
The petitioners argued that the expression "any proceeding" in section 633(2) is broad enough to include proceedings under statutes other than the Companies Act. However, the court disagreed, emphasizing that the context and placement of section 633 indicate that it is intended to cover only proceedings related to breaches of duties prescribed under the Companies Act. The court referenced sections 621, 622, and 524 of the Companies Act, which deal with offences under the Act, to support its interpretation that section 633(2) is confined to the Companies Act.

3. Interpretation of Section 633(2) in the Context of Criminal and Civil Liabilities:
The court examined the legislative intent behind section 633(2) and concluded that it was designed to provide relief only for breaches of duties related to the Companies Act. The court cited the Court of Appeal's decision in Customs and Excise Commissioners v. Hedon Alpha Ltd., which held that similar provisions in the UK Companies Act were limited to breaches of duties to the company or criminal proceedings under the Companies Act. The court also considered the Delhi High Court's decision in Beejay Engineers P. Ltd., which had a broader interpretation of section 633(2), but ultimately found it unconvincing. The court noted that the Delhi High Court had not adequately examined the context and placement of section 633.

The court further referenced section 14AC of the Provident Funds Act and section 86 of the Employees' State Insurance Act, which specify that prosecutions under these Acts require the sanction of specific authorities and are not within the purview of the Registrar of Companies or shareholders. This reinforced the court's view that section 633(2) does not apply to liabilities arising from other statutes.

Conclusion:
The court upheld the preliminary objection, ruling that the petitioners could not be relieved of civil and criminal liabilities under the Provident Funds Act and Employees' State Insurance Act by resorting to section 633(2) of the Companies Act. Consequently, the petition was dismissed with costs.

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