1976 (1) TMI 118 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction under Section 391(6) of the Companies Act, 1956.
2. Scope of the term "proceedings" under Section 391(6).
3. Applicability of Section 391(6) to criminal proceedings.
4. Validity of ex parte orders and their modification.
5. Aggrieved party's right to vacate or vary ex parte orders.
6. Delay in taking out the present summons.
7. Specificity and adequacy of information provided by the company.

Issue-wise Detailed Analysis:

1. Jurisdiction under Section 391(6) of the Companies Act, 1956:
The State of Tamil Nadu sought to vacate the ex parte orders dated 11th October 1974, and as modified on 14th October 1974, obtained by Uma Investments Private Ltd. under Section 391(6) of the Companies Act, 1956. The orders stayed the commencement or continuation of all civil and criminal proceedings against the company and its officers. The court examined whether the orders were within its jurisdiction under Section 391(6).

2. Scope of the term "proceedings" under Section 391(6):
The main controversy centered on the interpretation of the term "proceedings" in Section 391(6). Mr. Khambatta argued that the term does not include criminal proceedings, while Mr. Mehta contended that it encompasses both civil and criminal proceedings. The court noted that the language of Section 391(6) is clear and unambiguous, focusing on the term "proceedings."

3. Applicability of Section 391(6) to criminal proceedings:
The court held that criminal proceedings could not be stayed under Section 391(6). It reasoned that if the legislature intended to include criminal proceedings, it would have explicitly stated so. The court emphasized that Section 391 is meant for civil liabilities and pecuniary claims, not for freezing criminal proceedings. The court stated, "Criminal proceedings cannot be held over or avoided or criminal process evaded by resorting to a scheme of compromise or arrangement under section 391."

4. Validity of ex parte orders and their modification:
The company obtained ex parte orders under Rule 71 of the Companies (Court) Rules, 1959, which allowed for such orders. The court modified the initial order on 14th October 1974, to exempt certain expenses from the undertaking given by the company. The State argued that these orders should not cover criminal proceedings.

5. Aggrieved party's right to vacate or vary ex parte orders:
Mr. Mehta argued that only an aggrieved person could move the court to vacate or vary the ex parte orders under Rule 72. The court acknowledged that the State could seek variation to the extent it is affected by the stay on criminal proceedings, stating, "The State cannot be said to be a person aggrieved by the suits filed by others against the company."

6. Delay in taking out the present summons:
The State's application to vacate the ex parte orders was delayed. The court noted that there is no fixed time for vacating or varying ex parte orders under Rules 71 and 72. The delay was not deemed gross or glaring enough to refuse the application. The court emphasized the importance of justice and the need to lift the stay on criminal proceedings.

7. Specificity and adequacy of information provided by the company:
The court found that the company failed to provide full information and particulars of the civil and criminal cases pending against it. The schedule provided by the company was incomplete and lacked proper particulars. The court stated, "It seems that for some ulterior motive, the full particulars have been kept back from the court."

Conclusion:
The court partially vacated the ex parte orders, allowing the State of Tamil Nadu to commence or continue criminal proceedings against the company and its officers. The company was directed to transmit this order to all relevant courts and parties within 15 days. The court emphasized that Section 391(6) does not cover criminal proceedings and that the stay on such proceedings must be lifted to ensure justice and proper administration of law. The company was also ordered to pay the costs of the judge's summons to the applicants.