1980 (1) TMI 155 - HC - Companies Law

Summary

Issues:
Interpretation of section 269(2) of the Companies Act, 1956 in relation to the offence under section 629A of the Act.

Detailed Analysis:
The judgment by the High Court of Calcutta involved a petition against an order dropping proceedings under section 269(2) of the Companies Act, 1956, initiated by the petitioner against two accused parties for an offence under section 629A of the Act. The complaint alleged that the accused parties failed to obtain Central Government approval for the re-appointment of a whole-time director, contravening section 269(2) of the Act.

The primary issue was whether section 269(2) of the Companies Act, 1956, creates an offence punishable under section 629A of the Act. Section 269(2) mandates that the re-appointment of a managing or whole-time director in certain circumstances shall not take effect without Central Government approval. The petitioner argued that this implied a prohibition against allowing such a person to act as a director without approval, leading to a contravention of the provision.

The court considered the nature of statutory provisions in the Act and distinguished between provisions that issue specific directions or prohibitions and those that are declaratory. It noted that section 269(2) did not contain any explicit prohibition or direction against acting under a re-appointment without approval, unlike other sections in the Act that clearly outlined prohibitions. The court emphasized that for an act to be considered an offence, there must be a specified statutory prohibition, which was lacking in section 269(2).

The court referred to precedents, including the case of Sales-Matic Ltd. and Raghunath Swarup, which held that declaratory provisions like section 269(2) do not create offences unless there is a specified prohibition. It concluded that section 269(2) is declaratory in nature and does not create an offence, aligning with the view that contraventions can only arise when there is a direction or prohibition in the statutory provision.

Ultimately, the court held that as section 269(2) did not create an offence, the question of it being a continuing offence or the application of the bar of limitation did not arise. Consequently, the petition was dismissed, and the rule was discharged, affirming the decision to drop the proceedings under section 269(2) of the Companies Act, 1956.