1958 (8) TMI 29 - HC - Companies Law

Summary

Issues:
- Allegations of directors holding offices of profit without special resolution under Companies Act, 1956
- Preliminary objections raised by accused company
- Interpretation of Sections 314, 303, and 652 of the Companies Act, 1956

Analysis:
The judgment involves an appeal by the State against the acquittal of the accused company under the Companies Act, 1956. The complaint alleged that nine directors of the company were holding offices of profit without the adoption of a special resolution as required under Section 314(1) of the Act. It was further claimed that despite rejection of special resolutions confirming the appointments of directors' relatives, no return was filed with the Registrar of Joint Stock Companies. Two preliminary objections were raised by the accused company: first, regarding the personal attendance of the complainant under Section 247 of the Criminal Procedure Code, and second, invoking the saving provision of Section 652 of the Act for directors in office before the Act came into force.

The Magistrate overruled the first objection, citing discretion under Section 247, but accepted the second objection and acquitted the accused company. The judgment delves into the provisions of the Companies Act, particularly Sections 314 and 303, which regulate the holding of offices of profit by directors and the filing of returns with the Registrar. Section 652, relied upon by the Magistrate to save the defendant company, deems appointments under previous laws to continue under the new Act. However, the court interpreted that Section 652 does not absolve companies from complying with the new Act's requirements, especially regarding the approval of offices of profit by directors through special resolutions.

The judgment emphasizes that the intention of the new provisions in Section 314 was to prevent the abuse of holding offices of profit by directors or their relatives. It concludes that Section 652 does not exempt existing companies from ratifying such appointments through special resolutions. The court held that the accused company was wrongly acquitted based on Section 652 and ordered the trial to proceed. The judgment clarifies that the decision does not determine the guilt of the accused but necessitates a proper trial based on established facts and applicable laws. Both judges, Falshaw and Dulat, concurred on setting aside the acquittal and directing the trial to continue in accordance with the law.