2008 (5) TMI 430 - HC - Companies Law

Condonation of delay in filing and refiling the appeal - Excuse from the liability of alleged default deeked - Held that - No infirmity in the reasoning of the learned Single Judge. It is well-settled that the Court s power to relieve the accused of an offence is exercised only when the Court is satisfied that though technically the person may be liable in respect of negligence, default, breach of duty, misfeasance or breach of trust, yet he acted honestly and reasonably. In the facts of the present case it is not possible to conclude that the directors have acted honestly and reasonably. Recourse to section 633 is thus clearly not permissible. The appeal has no merit and is dismissed.

Summary

Issues:
1. Condonation of delay in filing and refiling the appeal.
2. Violation of provisions of the Companies Act, 1956 regarding receipt of share application money.
3. Excusing the appellants from liability for the alleged default under sections 628 and 629A of the Companies Act, 1956.

Condonation of Delay:
The judgment addressed the applications filed by the appellants for condonation of delay in filing and refiling the appeal. The delay was condoned based on the reasons stated in the applications, and the applications were disposed of accordingly.

Violation of Companies Act:
The case involved directors of a company who received significant amounts from various parties without proper authorization. It was noted that the managing director and whole-time director were not authorized to receive application money for share allotment as per the Companies Act and the company's articles of association. A show-cause notice was issued under section 628 of the Companies Act, leading to a conclusion that the company had violated the provisions. The competent authority directed prosecution under section 629A against every officer in default.

Excusing Liability:
The appellants sought to be excused from liability for the alleged default under sections 628 and 629A. They argued that the share application money received was used for share allotment and that unsecured loans were temporary, based on oral agreements. However, the Single Judge rejected these arguments, stating that the petitioners failed to show they acted in good faith or had justifiable reasons to escape liability. The Court emphasized that relief from liability is granted only when the accused acted honestly and reasonably, which was not established in this case. Consequently, the appeal was dismissed as the directors were found to have not acted honestly and reasonably, rendering section 633 inapplicable.