2008 (1) TMI 607 - HC - Companies Law

Power of courts to grant relief - show cause notices - petitioners have sought excuse in respect of any offence, if committed, by the petitioners, by invoking the provisions contained in section 633(2) of the Companies Act Held that - Ad interim relief granted earlier directing the Registrar of Companies to stay his hands is required to be confirmed till the final disposal of these petitions. Looking to the nature of offences alleged against the petitioners and explanation tendered by them in their replies, the Court is of the prima facie view that the petitioners have taken all due care and caution in complying with the provisions of the Act and even if there may be minor lapses, those are required to be condoned. For such minor lapses and defaults of technical nature to prosecute the Company s highest ranking Officers is not just and proper. To prosecute a person is of a serious consequence. If there is no basic foundation, the person cannot be compelled to pass through the gamut of such turmoils. If at the initial stage, the Court is prima facie satisfied that the prosecution may not ultimately sustain, the Court would certainly show its indulgence so as to meet with the ends of justice or to prevent the abuse of the process of law. The Court, therefore, restrains the Registrar of Companies from launching prosecution for the alleged offences and further restrains him from proceeding further pursuant to the impugned notices challenged in all these petitions. The Court is of the view that all the three essential ingredients which the Court should take into consideration while granting interim relief i.e., prima facie case, balance of convenience and irreparable loss or injury are present in this case and hence, such relief cannot be denied to the petitioners.

Issues Involved:
1. Challenge against the show-cause notice dated 28-11-2007.
2. Invocation of Section 633(2) of the Companies Act, 1956.
3. Preliminary objections regarding maintainability of petitions and ad interim relief.
4. Alleged violations of various sections of the Companies Act, 1956.
5. Discretionary power of the Court under Section 633(2).
6. Relevance of past judicial precedents.
7. Consideration of merits and explanation provided by the petitioners.

Issue-Wise Detailed Analysis:

1. Challenge against the show-cause notice dated 28-11-2007:
The petitioners challenged the show-cause notices issued by the Registrar of Companies, Gujarat, alleging violations of various sections of the Companies Act, 1956. They sought relief under Section 633(2), fearing prosecution for these alleged violations.

2. Invocation of Section 633(2) of the Companies Act, 1956:
The petitioners argued that they acted honestly, reasonably, and diligently, and thus should be excused from any criminal liability under Section 633(2). They believed the Regional Director had dropped the matter after they provided adequate replies to earlier queries.

3. Preliminary objections regarding maintainability of petitions and ad interim relief:
The respondent raised preliminary objections, arguing that under Section 633(3), no relief should be granted without notice to the Registrar. They contended that the ex parte ad interim relief granted by the Court was against statutory provisions and should be vacated.

4. Alleged violations of various sections of the Companies Act, 1956:
The judgment detailed specific allegations and the petitioners' replies:
- Section 303(1): Allegation of incomplete Register of Directors; petitioners claimed compliance.
- Section 211(4): Allegation of non-disclosure of licensed and installed capacity; petitioners argued the irrelevance of such details in their industry.
- Section 301(1): Allegation of unrecorded transactions involving directors; petitioners claimed all relevant contracts were duly recorded.
- Section 211(1): Allegation of non-disclosure of balances in non-scheduled banks; petitioners cited material insignificance.
- Section 212(1): Allegation of non-enclosure of documents with the balance sheet; petitioners cited exemptions.
- Section 372A(5): Allegation of non-compliance in investment register; petitioners claimed computerized records compliance.
- Section 193(1): Allegation of unnumbered minutes; petitioners provided evidence of compliance.
- Section 217(2A): Allegation of non-disclosure of employee particulars; petitioners provided the required information.
- Section 297(1): Allegation of transactions without Central Government approval; petitioners cited subsidiaries' status.
- Section 308(2): Allegation of non-notification of share transactions by directors; petitioners claimed proper maintenance of records.
- Section 301(3): Reiterated allegation under Section 211(4).
- Section 220(1): Allegation of delayed balance sheet filing; petitioners cited marginal delays and additional fees paid.
- Section 147(1)(a): Allegation of non-display of company name at Pune office; petitioners claimed compliance.
- Section 192(1) & 4(c): Allegation of delayed filing of Form No. 23; petitioners acknowledged delay and payment of additional fees.
- Section 217(1)(e): Allegation of non-disclosure of energy conservation and technology absorption particulars; petitioners argued non-applicability.

5. Discretionary power of the Court under Section 633(2):
The Court found it had ample power to grant ad interim relief without issuing notice to the Registrar, emphasizing the need to prevent unnecessary prosecution and multiplicity of litigation. The Court stressed the importance of considering whether the officers acted honestly and reasonably.

6. Relevance of past judicial precedents:
The Court referred to various precedents, including:
- Rabindra Chamaria v. Registrar of Companies: Highlighted the mandatory nature of notice to the Registrar.
- M. Meyyappan v. Registrar of Companies: Supported relief under Section 633(2) for honest and diligent actions.
- Hafez Rustom Dalal v. Registrar of Companies: Emphasized the Court's power to entertain applications under Section 633(2).
- Chandra Kumar Dhanuka v. Registrar of Companies: Affirmed the High Court's power to grant relief under Section 633(2) even if no default was admitted.

7. Consideration of merits and explanation provided by the petitioners:
The Court was convinced by the petitioners' explanations, noting that the alleged violations were minor and technical. It emphasized that prosecuting high-ranking officers for such minor lapses was not just and proper. The Court granted ad interim relief, restraining the Registrar from proceeding with prosecution, and confirmed this relief until the final disposal of the petitions. The Court highlighted the importance of preventing abuse of the process of law and ensuring justice.

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