1978 (12) TMI 132 - HC - Companies Law

Summary

Issues:
Challenge to legality of proceeding under section 210(5) of the Companies Act, 1956 based on delayed submission of balance-sheet and profit and loss account at the annual general meeting.

Analysis:
The petitioners, directors of a company, challenged the legality of a proceeding under section 210(5) of the Companies Act, 1956, initiated against them for delayed submission of financial documents at an annual general meeting. The complaint alleged a violation of section 210(3)(b) of the Act due to the accounts being placed at the adjourned annual general meeting after a significant delay. The company had called the annual general meeting on a specific date but adjourned it to a later date when the accounts were ready. The petitioners argued that their actions were in compliance with a circular issued by the Company Law Board, allowing adjournment of meetings for laying of accounts.

In a similar case, where directors were prosecuted for a similar offense, the court accepted the validity of the circular issued by the Company Law Board, which allowed for adjournment of annual general meetings for laying of accounts. The court quashed the proceedings against the directors, emphasizing the importance of following the circular in such matters. The court held that if a company acts in accordance with the circular, it precludes the Assistant Registrar of Companies from initiating prosecution. The court also noted that an adjourned annual general meeting should be considered a continuation of the original meeting, not a new one, further supporting the quashing of the prosecution in the present case.

Consequently, the court ruled in favor of the petitioners, quashing the proceedings against them and others involved in the case. The court emphasized that adherence to the circular issued by the Company Law Board was crucial in determining the legality of actions taken by the company and its directors. The judgment highlighted the significance of following established guidelines and circulars in corporate governance matters to avoid unnecessary legal actions and prosecutions.

Judge A.N. Banerjee concurred with the judgment delivered by Judge P.C. Barooah, supporting the decision to quash the proceedings against the petitioners. The judgment underlines the importance of consistency in legal interpretation and application of statutory provisions and circulars to ensure fair treatment and adherence to established norms in corporate law matters.