2008 (1) TMI 624 - HC - Companies Law

Relief under section 633(2) of the Companies Act, 1956 - Held that - It is true, that relief under section 633(2) of the Companies Act, 1956, is discretionary. No person can claim to be excused from liability as of right. We are, however, of the view that in the facts and circumstances of this case, discretion should have been exercised to excuse the Appellants from liability in respect of the sixth show-cause notice too. We are of the considered opinion that the learned Single Judge erred in not giving the same relief to the appellants with regard to the sixth show-cause notice. Consequently, the appeal is treated as on the day s list and allowed, however, subject to payment of costs of ₹ 5,000 as has been imposed by the learned Single Judge. The application is accordingly disposed of

Issues Involved:
1. Liability for contravention of sections 211(1), (2), and 628 of the Companies Act, 1956.
2. Liability for contravention of section 299(1) of the Companies Act, 1956.
3. Time-barred penal action under sections 211(1), (2), and 299(1) of the Companies Act, 1956.
4. Validity and sufficiency of show-cause notices.
5. Relief under section 633(2) of the Companies Act, 1956.

Detailed Analysis:

1. Liability for contravention of sections 211(1), (2), and 628 of the Companies Act, 1956:
The appellants were not excused from liability for contravention of sections 211(1), (2), and 628 as alleged in a show-cause notice dated 5-5-2005. The allegations included suppression of production figures and making misleading statements in the audited accounts. However, the court noted that there was no specific allegation of making false statements knowingly or suppressing material facts knowingly, which are necessary ingredients for an offense under section 628. The authorities did not proceed with penal action under section 628, indicating a lack of dishonest intent.

2. Liability for contravention of section 299(1) of the Companies Act, 1956:
The appellants were absolved of all liabilities for violation of section 299(1) as alleged in five other show-cause notices dated 5-5-2003. The learned Single Judge found that the transgression of section 299(1) was attributable to a mistake rather than any dishonest intention, given that the appellant-company was a private company with shares held by a few related or acquainted individuals.

3. Time-barred penal action under sections 211(1), (2), and 299(1) of the Companies Act, 1956:
Penal action for contravention of section 211(1) and (2) became time-barred upon the expiry of one year from the date of inspection. Similarly, cognizance of an offense under section 299(1) becomes time-barred upon expiry of six months from the date of the offense or from the date of knowledge of the offense. The court observed that the allegations in the sixth show-cause notice did not constitute the ingredients of an offense under section 628, and penal action under section 211(7) had also become time-barred.

4. Validity and sufficiency of show-cause notices:
The show-cause notices lacked specific allegations necessary to constitute an offense under section 628. The court emphasized that a notice to show cause against proposed penal action must be specific and unambiguous, stating the exact offense. The absence of specific allegations of dishonest intent in the show-cause notices gave rise to a presumption of innocence.

5. Relief under section 633(2) of the Companies Act, 1956:
The appellants sought relief under section 633(2) to be excused from liability under sections 211(1), (2), 299(1), and 628. The learned Single Judge excused the appellants for the first five show-cause notices pertaining to section 299(1) but not for the sixth notice involving sections 211(1), (2), and 628. The court held that relief under section 633(2) is discretionary and should be exercised if the time for filing a complaint has become time-barred under section 468 of the Code of Criminal Procedure, 1973. The court concluded that discretion should have been exercised to excuse the appellants from liability regarding the sixth show-cause notice as well.

Conclusion:
The appeal was allowed, and the appellants were excused from liability for the sixth show-cause notice, subject to payment of costs of Rs. 5,000 as imposed by the learned Single Judge. The application was disposed of, and any undertakings given in the appeal were discharged.

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