1978 (6) TMI 119 - HC - Companies Law

Summary

Issues:
Alleged violation of section 293A of the Companies Act based on expenditure for political advertisements.

Analysis:
The judgment revolves around a complaint filed against the petitioners alleging a violation of section 293A of the Companies Act due to expenditure on political advertisements. The complaint was based on the petitioner-company's payment of Rs. 1,52,000 for advertisements in the All India Congress Committee Souvenirs. The complainant argued that this expenditure constituted a contribution to a political party, contravening section 293A.

The petitioners challenged the complaint, asserting that the complainant lacked locus standi as he was not a registered shareholder at the time of the resolution for the advertisements. Additionally, they argued that payment for advertisements did not amount to a contribution to a political party under section 293A. The State supported the petitioners' arguments.

The court examined the definition of "contribution" under section 293A, emphasizing that it involves giving money or aid without consideration. It concluded that payment for advertisements, aimed at promoting the petitioner company's products, did not qualify as a contribution. The court highlighted that the complainant's own statements confirmed the nature of the expenditure as being for advertisements, not a political contribution.

Ultimately, the court found that the allegations did not establish a prima facie case under section 293A. Continuing the proceedings would amount to an abuse of court process and unnecessary harassment of the petitioners. Consequently, the court quashed the proceedings against the petitioners and others, ruling in favor of the petitioners based on the lack of a prima facie case under section 293A.

The judgment concluded by quashing the proceedings in the lower court, Case No. C/3650 of 1977, and making the rule absolute. Both judges, P.C. Borooah and S.C. Majumdar, concurred with the decision to quash the proceedings based on the lack of a prima facie case under section 293A of the Companies Act.