1966 (4) TMI 51 - HC - Companies Law

Managing director - Approval of Government for appointment, Penalty where no specific penalty is provided elsewhere in the act

Summary

Issues:
Violation of section 269(2) of the Companies Act - Contravention by acting as managing director without Central Government approval.

Analysis:
The judgment pertains to an appeal against an order of acquittal passed by the Sessions Judge in a case involving an alleged contravention of section 269(2) of the Companies Act. The complainant accused the respondent of acting as a managing director without the necessary approval from the Central Government, following his reappointment by the shareholders. The Magistrate initially found the accused guilty and imposed a fine, but the Sessions Judge acquitted the accused, leading to the current appeal.

The primary issue revolved around the interpretation of section 269(2) of the Companies Act, which mandates Central Government approval for the reappointment of a managing director in certain circumstances. The complainant argued that there was an implied prohibition against acting as a managing director before approval, but the court disagreed. The court held that the section only affects the effectiveness of reappointment, not the act of functioning as a managing director. Without a specific statutory prohibition, the accused could not be deemed to have committed an offense under this section.

Furthermore, the complainant contended that the accused could be penalized under section 629A of the Act, even without a direct prohibition in section 269(2). However, the court rejected this argument, emphasizing that section 629A applies only in cases of contraventions with specified penalties. Since section 269(2) lacks a clear direction or prohibition, section 629A does not apply, and the accused cannot be penalized under it.

The judgment also highlighted the requirement for the company in question to be a public company or a private company subsidiary of a public company for section 269(2) to be applicable. However, even if this condition was met, the court found that no case was established against the accused, leading to his rightful acquittal by the Sessions Judge. Ultimately, the appeal was dismissed, affirming the acquittal of the accused.

In conclusion, the court upheld the acquittal of the accused, emphasizing that the alleged contravention of section 269(2) did not constitute an offense due to the absence of a specific statutory prohibition against acting as a managing director without Central Government approval. The judgment provides a detailed analysis of the legal provisions and clarifies the scope of liability under the Companies Act in such circumstances.