1990 (9) TMI 265 - HC - Companies Law

Officer who is in default Meaning of, Public deposits, Powers of court to grant relief in certain cases

Issues Involved:
1. Jurisdiction of the High Court under section 633(2) of the Companies Act, 1956.
2. Nature of the offence under rule 11 of the Companies (Acceptance of Deposits) Rules, 1975.
3. Applicability of the limitation period for filing complaints.
4. Determination of "officer in default" under section 5 of the Companies Act, 1956.
5. Exemption from filing returns under rule 10 of the Companies (Acceptance of Deposits) Rules, 1975.

Detailed Analysis:

1. Jurisdiction of the High Court under section 633(2) of the Companies Act, 1956:
The primary issue was whether the High Court has jurisdiction to relieve the petitioners from liability under section 633(2) of the Companies Act, 1956, given that criminal complaints were already pending before the Chief Metropolitan Magistrate, Delhi. The court held that under section 633(2), the High Court can grant anticipatory relief if the officer apprehends that a proceeding might be brought against them. However, once proceedings are initiated, the officer must seek relief from the relevant court under section 633(1). This view aligns with the precedent set in Sri Krishna Parshad v. Registrar of Companies [1978] 48 Comp. Cas. 397 (Delhi).

2. Nature of the offence under rule 11 of the Companies (Acceptance of Deposits) Rules, 1975:
The court examined whether the offence under rule 11 is a continuing one. Rule 11 stipulates a fine for contravention, with an additional fine for each day the contravention continues. The court, referencing CWT v. Suresh Seth [1981] 129 ITR 328 (SC) and Assistant Registrar of Companies v. R. Narayanaswamy [1985] 57 Comp. Cas. 787 (Mad), concluded that the default under rule 11 is not a continuing offence. The additional daily fine is merely a multiplier for determining the penalty, not an indication of a continuing offence.

3. Applicability of the limitation period for filing complaints:
The court addressed whether the complaints were time-barred. Under sections 467 to 473 of the Criminal Procedure Code, the limitation period for offences punishable with a fine is six months. The respondent did not file any application under section 473 for condonation of delay. The court held that cognizance of the offence could not be taken unless the delay was condoned by the Magistrate, which had not occurred. Therefore, the complaints were deemed time-barred.

4. Determination of "officer in default" under section 5 of the Companies Act, 1956:
The petitioners argued they were not "officers in default" as defined under section 5 of the Act. They contended they were not involved in the day-to-day management or in passing resolutions for borrowings. The court agreed, noting the lack of evidence showing the petitioners' involvement in any resolutions or management activities. The court also considered the personal circumstances of the petitioners, such as age, health, and residence, further supporting their non-involvement.

5. Exemption from filing returns under rule 10 of the Companies (Acceptance of Deposits) Rules, 1975:
The petitioners claimed exemption from filing returns under rule 10, citing a Department of Company Affairs Circular that exempted private limited companies from filing nil returns if the deposits were from directors, their relatives, or shareholders. The court reviewed the circular and found that the company was indeed exempt from filing the returns.

Conclusion:
The court relieved the petitioners from the alleged liabilities for non-filing of returns under rule 10 of the Companies (Acceptance of Deposits) Rules, 1975, read with section 58A of the Companies Act, 1956. The complaints filed under rule 11 were also dismissed, as the petitioners were not "officers in default" and the complaints were time-barred. The petition was disposed of with no order as to costs.

← Previous Next →