1963 (3) TMI 17 - HC - Companies Law

Balance sheet Default in filing copies of and Ascertainment of directors retiring by rotation and filling up vacancies

Summary

Issues:
Determining whether the appellants ceased to be directors of the company and were not liable to submit annual returns or balance-sheets.

Analysis:
The appellants, accused Nos. 2 and 3, were directors of a firm convicted under the Companies Act for failure to submit annual return and balance-sheet. The main issue in the appeals was whether the appellants had ceased to be directors and were not obligated to submit the required documents. The company's articles of association provided for the retirement of directors by rotation, similar to the provisions in the Companies Act for public companies. The last annual general meeting was held in 1995, leading the appellants to argue that they could not have continued as directors after 1958.

The Companies Act's provisions on director appointments and retirement by rotation apply to public companies or private companies subsidiary to a public company, not directly to private companies. However, private companies can adopt these provisions in their articles, as done in this case. Previous court decisions established that directors who fail to call annual meetings as required by law cannot claim to continue in their positions after the specified period. Additionally, acts by individuals who have ceased to be directors are invalid, as seen in a specific legal case cited.

The lower court relied on a Supreme Court decision stating that a person charged with an offense cannot use their default as a defense. However, in this case, the appellants had ceased to be directors by the end of the financial year 1958 based on the company's articles of association. There was no evidence suggesting the appellants had a duty to call a meeting for director appointments. Considering these factors, the court upheld the appellants' argument that they were not directors for the relevant financial year and overturned their convictions, ordering any fines collected to be refunded.

In conclusion, the court found in favor of the appellants, ruling that they had ceased to be directors and were not liable for failing to submit the annual return and balance-sheet. The convictions were set aside, and any fines collected were ordered to be refunded to the appellants.