1991 (11) TMI 193 - SC - Companies Law

Scope of section 633 of the Companies Act, 1956 Whether the learned single judge was right in granting relief under section 633 of the Act in respect of offences committed under the Employees' Provident Funds and Miscellaneous Provisions Act of 1952? Held that - Appeal dismissed. In the case of a company falling under the Explanation to section 14A of the Provident Funds Act which does not come within the purview of the Companies Act, the liability of the persons would be governed only by section 14A(1) and (2) of the Provident Funds Act. They will not be entitled to any relief under section 633. The benefit available under a social welfare legislation, namely, the Employees' Provident Funds Act cannot be defeated in this manner. We may also add that if the interpretation suggested by the appellants is accepted, it would cover not only the existing laws but all legislations to be enacted in future.

Issues Involved:
1. Scope of Section 633 of the Companies Act, 1956.
2. Applicability of Section 633 to offences under other laws, specifically the Employees' Provident Funds and Miscellaneous Provisions Act, 1952.
3. Interpretation of the term "any proceeding" under Section 633.
4. Comparison with similar provisions under English law.

Issue-wise Detailed Analysis:

1. Scope of Section 633 of the Companies Act, 1956:
The primary issue in this case is the interpretation of Section 633 of the Companies Act, 1956. The appellants argued that Section 633 is very wide in its amplitude and should not be restricted to proceedings arising solely under the Companies Act. They contended that the provision should also apply to liabilities arising under other statutes. The court, however, concluded that Section 633 of the Act has no application in respect of any liability under any other Act. The judgment emphasized that the relief under Section 633 is confined to proceedings against officers of a company for negligence, default, breach of duty, misfeasance, or breach of trust under the Companies Act itself.

2. Applicability of Section 633 to Offences under Other Laws:
The appellants sought relief from liabilities under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, arguing that Section 633 should protect them from prosecution for non-payment or delayed payment of provident fund dues. The court rejected this argument, stating that extending Section 633 to cover offences under other laws would undermine the purpose of welfare legislations. The court highlighted that each statute has its own provisions for penalties and enforcement, and Section 633 cannot be used to bypass these statutory requirements.

3. Interpretation of the Term "Any Proceeding" under Section 633:
The appellants argued that the term "any proceeding" in Section 633 should be interpreted broadly to include proceedings under other statutes. The court disagreed, stating that the term must be construed in the context of the Companies Act. The judgment pointed out that the expression "any proceeding" cannot be read out of context and treated in isolation. It must be construed in the light of the penal provisions of the Companies Act. The court emphasized that if Parliament intended Section 633 to have a wider coverage, it would have specifically provided for it.

4. Comparison with Similar Provisions under English Law:
The judgment also referred to similar provisions in English law, specifically Section 448 of the Companies Act, 1948, and Section 727 of the Companies Act, 1985. The court noted that under English law, the relief provided by these sections is restricted to proceedings for negligence, default, breach of duty, or breach of trust against officers of a company in relation to their duties under the Companies Act. The court cited the case of Customs and Excise Commissioners v. Hedon Alpha Ltd., where it was held that Section 448 did not apply to claims by third parties for civil liability. The court concluded that the interpretation of Section 633 should be consistent with this approach, limiting its application to proceedings under the Companies Act.

Conclusion:
The court dismissed the appeal, holding that Section 633 of the Companies Act, 1956, does not extend to liabilities under other statutes, including the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The judgment emphasized that the relief under Section 633 is confined to proceedings arising out of the Companies Act. The other appeals and the special leave petition where the same questions arose were also dismissed. The court ordered no costs in view of the facts and circumstances of the case.

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