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TMI Blog1959 (8) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a technical breach of section 149 of the Companies Act and were on that account liable to be prosecuted and fined under sub-section (6) of that section. Apprehending such a prosecution they have made the present application under section 633 of the Companies Act of 1956, praying that they may be relieved in respect of the breach of the provisions of section 149(1) of the Act. Notice was issued to the Registrar of Companies. He has not filed any counter-affidavit, but on his behalf the learned junior standing counsel has appeared and has raised the point that the application is not maintainable under section 633 of the Companies Act and this court has therefore no jurisdiction to grant relief to the applicants as claimed by them. For the purpose of this application therefore we may assume without deciding that, 1.the applicants have in borrowing the sum of Rs. 20,00,000 before the issue of the certificate of commencement committed a breach of sub-section (1) of section 149 of the Companies Act, and 2.their allegation that they have acted honestly and reasonably in that connection is correct. The objection raised on behalf of the Registrar is based on the terms of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 633 have been initiated the court in which they are pending will be the only court which will have jurisdiction to give relief for the acts and omissions complained of. It is, however, contended that before any proceedings are initiated relief can be claimed from this court under sub-section (2) of section 633 and that the provisions of that sub-section are wide enough to enable this court to relieve the applicants not only against an apprehended claim but also against a possible prosecution. Reliance in support of this contention is placed on In re Barry and Staines' Linoleum Ltd. [1934] 4 Comp. Cas. 196 , In re, Gilt Edge Safety Glass Ltd. [1940] 10 Comp. Cas. 244 , In re Orissa Jute and Cotton Mills Ltd. [1956] 26 Comp. Cas. 218 , and In re Filmistan Private Ltd. [1959] 29 Comp. Cas. 34 The reply of the learned counsel for the Registrar is that section 633 provides for proceedings in respect of negligence, default, breach of duty, misfeasance or breach of trust committed by an officer of a company. In respect of some of these acts and omissions there are provisions in the Companies Act which make the guilty officers liable to be prosecuted and fined. Insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st wait till the proceedings are started and then claim relief from the court which is seized of the proceedings. He cannot claim relief in advance. In respect of civil proceedings, however, he can either claim relief under sub-section (2) of section 633 before the proceedings are started or wait till the proceedings have been initiated and claim relief from the court in which they are pending. In the present case the applicants do not suggest that they apprehend any claim to be made against them for the breach which they have committed of sub-section (1) of section 149 of the Companies Act. They do not suggest that there is any danger of the company or its shareholders claiming any amount from them or making any attempt to enforce any civil liability which they may have incurred on account of the breach. There is therefore no question of granting any relief in respect of any apprehended claim. The only thing they are afraid of is that they may be prosecuted under section 149(6) of the Companies Act and be punished with fine which may extend to Rs. 500 for every day for which the contravention continues. It is this possible prosecution against which they want to be relieved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2) of the section it should have used the word "claim" there. Learned counsel for the applicants referred to the case of Thangia v. Hanuman Bank Ltd. [1958] 27 Comp. Cas. 270 Under the Banking Companies (Amendment) Act all claims by or against a bank in liquidation have to be considered by the High Court which orders the winding up. The question that therefore arose in that case was whether actions in tort were also "claims" which could be considered by the High Court alone. In that connection the meaning of the word "claim" was considered in paragraph 17 of that judgment. It was conceded that the word was a word of very extensive signification embracing every specie of legal demand. Keeping in view the fact that the word signified "a right of demand or supposed right; a calling of another to pay something due or supposed to be due as a claim for wages or services", it was held that the word "claim" was comprehensive enough to embrace actions founded on torts as well as actions founded on contracts. This case does not therefore support the contention that the word "claim" could include proceedings for criminal prosecution also. In Barry Staines Linoleum L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section (2), gives power to the court to grant relief in cases where application is made for it by a director who, although no proceedings such as are described in sub-section (1) are being taken against him, apprehends that a claim may be made against him under that sub-section." He proceeded to make a distinction between proceedings before the court of summary jurisdiction for a fine or penalty and proceedings either by a company to recover moneys due to the company as a going concern from one of its officers or by a liquidator or shareholder for misfeasance. He noted that in the former kind of proceedings the company or its shareholders were not intended to have any say and the concern was mainly of the exchequer. In the latter kind of proceedings, however, the company or the liquidator or the shareholders were the persons mainly concerned. Under sub-section (1) of section 372 he relieved the director who was the petitioner before him wholly from his liability to the fine which could be imposed upon him under section 141 of the Act but refused to grant relief under section 372, sub-section (2), for civil liabilities because he did not have before him the opinion of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give relief in respect of proceedings which have already been commenced. Sub-section (2) , on the other hand, which is the sub-section which was added by this Act, was in my judgment intended to meet the case of proceedings which have not been commenced, but which will or may be commenced, and gives this court jurisdiction to grant relief from prospective liability." The prosecution under section 141 had already been commenced in that case and the learned judge was therefore not dealing with a case in which relief under sub-section (2) of section 372 was being claimed against a possible prosecution. If therefore he intended to lay down that relief against a possible prosecution could also be granted under sub-section (2) of the section the observation was obviously an obiter. In any case the distinction between "claim" and "liability" was not before the learned judge when he made the observation. In the case of In the matter of Orissa Jute and Cotton Mills Ltd. [1956] 26 Comp. Cas. 218 , the directors of a company had committed breaches of sections 72, 76, 32, 133 and 134 of the Indian Companies Act, 1913, and the Registrar had filed a complaint against them before a Magi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, held that sub-section (1) of section 633 did not apply because under that sub-section the court hearing the case, meaning the court in which the proceedings were pending, was the only court which could grant relief. No proceedings having been initiated and no proceedings being pending no relief could be granted under that sub-section. He was, however, of opinion that sub-section (2) of section 633 was wide enough and empowered the High Court to grant relief in respect of a possible prosecution also. It was urged before him that sub-section (2) of section 633 applied to claims only and the word "claim" did not include a prosecution. He conceded the force of the contention but based the opinion he was taking on the ground that the words used in subsection (2) of section 633 were : " .the court ..shall have the same power to relieve him as it would have had under this section if it had been a court before which proceedings against that person for negligence .had been brought." These words, in his view, meant that if proceedings had already commenced relief could be granted by the court in which it was pending. If, however, the prosecution had not commenced and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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