1979 (12) TMI 123 - HC - Companies Law

Summary

Issues:
Violation of section 210 of the Companies Act, 1956 - Non-compliance with requirements of laying the balance-sheet and profit and loss account at the annual general meeting.

Analysis:
The judgment dealt with petitions filed under section 633(2) of the Companies Act, 1956, raising a common issue regarding the threat of prosecution faced by the directors of an Indian company for alleged contravention of section 210. The company was formed to take over the Indian business of a foreign company, and a scheme was devised for this purpose. The annual general meeting was called, but the balance-sheet and profit and loss account were not laid before it, leading to the threat of prosecution by the Registrar of Companies for non-compliance. The directors believed that the financial position could only be accurately reflected after the scheme's approval, which would alter the assets and liabilities position retrospectively. The Registrar argued that the directors did not fulfill their duty by adjourning the meeting for presenting the accounts later, considering it a circumvention of statutory requirements. The court had to determine whether the directors should be relieved of criminal liability under section 210(5) if a violation had occurred.

The Registrar contended that the statutory provisions of section 210 must be strictly followed and that adjourning the meeting for presenting accounts at a later stage was not compliant with the law. The court considered the argument that an adjourned meeting is a continuation of the original meeting and that placing the accounts before the adjourned meeting should suffice for compliance with section 210(1). Reference was made to English Company Law provisions, highlighting the distinction between compliance with a company's articles and statutory requirements, especially when non-compliance is penalized. The court also noted a previous judgment where the adjournment of an annual general meeting for laying accounts at a later date was considered acceptable.

The court further analyzed a circular issued by the Company Law Board, stating that companies could adjourn annual general meetings if the accounts were not ready, providing some leeway in such situations. It was argued that the directors acted honestly and reasonably by following the advice in the circular, even if it was not legally correct. The court emphasized the need to determine whether relief should be granted under section 633(2) if the directors acted honestly and reasonably, even if a violation of section 210(1) occurred. The judgment clarified that relief under section 633(2) applies only to officers and not the company itself, ultimately granting relief to the directors from criminal liability under section 210, subject to certain conditions.

In conclusion, the judgment delved into the intricacies of compliance with section 210 of the Companies Act, 1956, balancing the strict statutory requirements with the directors' honest and reasonable actions. It highlighted the importance of considering all circumstances of the case before granting relief from criminal liability under the Act, ultimately providing relief to the directors based on their reliance on the advice in the circular issued by the Company Law Board.