2015 (4) TMI 24 - HC - Companies Law

Application under Section 633(2) of the Companies Act to grant relief - Notice issued to company under section 209(1), 209(3)(b), 217(3), 292(1)(e) and 297 of the 1956 Act - Another notice issued under Section 295 & 299 of the Companies Act - Held that - Section 295 of the Companies Act specifically foists a duty on the Directors not to grant loan without taking necessary steps, while Section 299 of the Companies Act makes it mandatory on the Directors to disclose his interest. There is no doubt that on basis of the first and second set of show-cause notice instruction to launch prosecution has been issued. Even on receipt of the communication dated 20th February 2009 the basis of the instructions has not been sought for by the applicants herein. In the affidavit filed by the Central Government it has been stated that permission has been sought to withdraw the prosecutions directed. For violation of Sections 295 and Section 299 of the 1956 Act the Central Government can impose either a fine or direct imprisonment of six months. Section 299 also postulates imposition of fine, therefore, the period of limitation would not exceed one year. As the show-cause has not been issued within one year of the offence, if any nor has any application been filed under Section 190 of the Code of Criminal Procedure within the time specified above entitles the petitioners to being excused under Section 633(2) of the 1956 Act for show-cause notices dated 2nd February, 2009 and 13th February, 2009. By the letter dated 20th February, 2009 the petitioners have been informed that instructions have been given to launch prosecution pursuant to the show-cause notices issued under Section 209(1), 209(3)(b), 217(3), and 292(1)(e) of the 1956 Act. That the said letter has been received by the petitioners is an admitted fact but in spite of receipt no copy of letter dated 2nd December, 2008 has been sought by the petitioners, therefore, in respect of the said communication dated 20th February, 2009 the petitioner is not entitled to any order. - Application disposed of.

Summary

Issues:
1. Interpretation of Sections 209(3)(b), 217(3), 297, 209(1), and 292(1)(e) of the 1956 Act.
2. Compliance with show cause notices and extensions sought.
3. Validity of show cause notices issued under Sections 295 and 299 of the Companies Act, 1956.
4. Consideration of replies given by the company to show cause notices.
5. Application of Section 633(2) of the 1956 Act for excusal.

Analysis:

1. The petitioner filed an application under Section 633(2) of the 1956 Act, challenging show cause notices issued under various sections. The petitioner argued that the show cause notices were issued without proper consideration of replies and extensions sought for responding. The Central Government contended that the company, being a listed entity, must comply with the provisions of the 1956 Act. The court examined the allegations and legal provisions to determine the validity of the notices issued.

2. The Central Government issued multiple sets of show cause notices under different sections of the 1956 Act, including Sections 209(1), 209(3)(b), 217(3), 292(1)(e), 297, 295, and 299. The petitioner raised concerns regarding the non-consideration of their replies and the alleged lack of proper application of mind by the authorities in directing prosecution. The court analyzed each set of notices and the corresponding responses to evaluate the legality of the actions taken by the Central Government.

3. Specific issues arose regarding the show cause notices issued under Section 295 and 299 of the Companies Act, 1956, related to loans and disclosures by directors. The petitioner contended that the notices were defective and sought relief under Section 633(2) of the 1956 Act. The court delved into the provisions of the Acts cited and previous legal precedents to determine the applicability of penalties and the validity of the notices issued.

4. The court examined the timeline of events, including responses to show cause notices and subsequent actions taken by the authorities. The petitioner highlighted discrepancies in the consideration of their replies and the decisions made by the Central Government. Legal arguments were presented regarding the necessity of proper evaluation before directing prosecution and the impact of non-compliance with procedural requirements on the validity of the notices issued.

5. The application of Section 633(2) of the 1956 Act for seeking excusal from the show cause notices formed a crucial aspect of the case. The petitioner and the Central Government presented contrasting views on the applicability of this provision based on the company's status and the nature of the alleged violations. The court scrutinized the arguments put forth by both parties to determine the merit of invoking Section 633(2) in the given circumstances.

In conclusion, the judgment involved a detailed analysis of the legal provisions, factual circumstances, and procedural aspects surrounding the issuance of show cause notices under various sections of the Acts. The court's decision hinged on the interpretation of relevant laws, consideration of responses provided by the petitioner, and the application of statutory provisions governing penalties and compliance.