1979 (8) TMI 158 - HC - Companies Law

Summary

Issues Involved:
1. Effectiveness of Directors' Resignation
2. Applicability of Section 454(2)(a) of the Companies Act, 1956
3. Interpretation of Section 454(2) and its Clauses
4. Inability to Submit Statement of Affairs

Issue-wise Detailed Analysis:

1. Effectiveness of Directors' Resignation:
The appellants argued that their resignation, submitted on 10th September 1966, became operative and effective from that date. They contended that neither Section 283 of the Companies Act, 1956, nor Section 86-I of the Indian Companies Act, 1913, covered cases of voluntary resignation by directors. They argued that under common law, it is the right of a person to resign from an office they hold, and it is not dependent upon statutory law unless specifically provided for. The learned company judge, however, held that there was no proof that the resignation of the appellants was ever accepted by the company and deemed Article 94(f) of the company's articles of association, which allowed resignation by notice in writing, ultra vires Section 283 of the Companies Act, 1956.

2. Applicability of Section 454(2)(a) of the Companies Act, 1956:
The learned company judge held that the appellants fell under the category of "officers of the company" as per Section 454(2)(a) and were thus liable to submit the statement of affairs. The appellants argued that the expression "have been officers of the company" should be read with clause (b) of the same section, implying that the words "any time within one year before the relevant date" should control clause (a) as well. They contended that even under this sub-section, they were not liable to submit the statement of affairs of the company.

3. Interpretation of Section 454(2) and its Clauses:
The court examined Section 454, particularly sub-sections (1) and (2), which mandate the submission of a statement of affairs by directors and other officers of the company. The court rejected the appellants' argument that the phrase "at any time within one year before the relevant date" should be imported into clause (a) from clause (b). The court held that Parliament intentionally categorized different classes of persons under distinct clauses and did not impose the one-year restriction on clause (a). Therefore, even past directors could be called upon to submit the statement of affairs.

4. Inability to Submit Statement of Affairs:
The appellants contended that they were not in a position to file the statement of affairs due to their lack of involvement with the company since their resignation in 1966 and the fact that the company's records were under the secretary's control. The court noted that this aspect was not considered in the impugned order and that the appellants' inability to submit the statement might not have been urged before the learned company judge. The court emphasized that while the appellants could be called upon to submit the statement, their actual ability to do so needed consideration.

Conclusion:
The appeal was partly allowed, and the case was remanded to the learned company judge for reconsideration of the appellants' ability to submit the statement of affairs. The court did not find it necessary to address the other submissions advanced by the appellants, given the need for further consideration of their inability to comply with the order. There was no order as to costs.