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TMI Blog1965 (12) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... pacity he was generally looking after the conduct of the liquidation of the company. The High Court of Lahore passed a supervision order under section 221 of the Act but petitioner No. 1 continued to function as liquidators of the company. Before the partition of the country in August, 1947, the registered office of the company was shifted to East Punjab. The records of the company, however, could not be brought from Lahore initially but later on some of them were retrieved and brought to Delhi between 1948 and 1949. On account of the transfer of the registered office to East Punjab the various returns under the Act were filed from time to time with the Registrar of Companies, East Punjab. The returns which were filed with the Registrar have been -set out in paragraph 6 of the petition. They were filed from 8th July, 1950, to 5th July, 1961, on which date the final statement of account up to 30th January, 1961, was submitted. The assets of the company were sold to Okara Electric Supply Company Limited, through its managing director, Shri R.L. Oberoi (since deceased), for a sum of ₹ 1,00,000 and the balance of the banking account of the company in 1947, with the Punjab Nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fessional services rendered and other expenses, the petitioners incurred a total expenditure of ₹ 11,282 in this connection. It has further been stated in the petition that after deducting the sum of ₹ 11,282 the balance of ₹ 18,718 was paid to the Custodian at Bombay by cheque in full and final settlement. The negotiations in this connection lasted for about a year and certain letters were exchanged between the parties. In the return filed by the petitioners with the Registrar of Companies, Punjab, under section 244 of the Act for the year ending 30th September, 1949, in Form No. 58 it was stated: Custodian, Enemy Property, Bombay 30,000. . In other words, ₹ 30,000 were shown to have been paid to the Custodian, Bombay, as against ₹ 18,718 paid to him by cheque and/ ₹ 11,282 spent on his account on the expenses. The petitioners maintained that that statement was correct and that the opinion of leading firms of, chartered accountants also supported the position taken by them. It was further alleged that one Ram Saran Khanna, who was an employee of petitioner No. 1 and was its liquidation assistant looking after various liquidations entruste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d provisions. Certain other directions were sought in the petition but they are no longer pressed and need not be stated. It may be mentioned that an affidavit was filed by petitioner No. 2 affirming the correctness of the contents of the various paragraphs of the petition. On 18th August, 1964, this court directed a notice to be issued to the Registrar of Companies and to Dayavrat for 18th September, 1964. Dayavrat filed a reply dated 17th September, 1964, through Shri T.R. Bhasin, advocate. In this reply it was pointed out, inter alia , that no petition was competent under section 518 of the Companies Act, 1956 (sections 633 and 518 of the new Act were also mentioned in the petition) since the company had been wound up and dissolved in 1961. The other objection raised was that a liquidator could not be called an officer of the company and could not claim the benefit of the provisions under which relief had been claimed. It was asserted that the information which had been lodged by the answering respondent was motivated by public spirit in the interest of weeding out corruption since an offence of criminal breach of trust had been committed in respect of public funds. It was stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ran Khanna further volunteered to give fuller details in respect of the said allegations contained in the aforesaid complaint received from M/s. Bennett Coleman Co. Ltd. by the Central Government. In paragraph 10 he proceeded to say: ..I am informed that Shri S. D. Aggarwal, a Senior Accounts Officer of the Department of Revenue and Company Law (Company Law Division), who is also an Inspector appointed by the Central Government to investigate into the affairs of Sahu-Jain Companies had in the course of the search under section 240A of the Companies Act, 1956, seized from the residence of Shri S.P. Jain at Calcutta some papers containing information concerning Shri S.P. Jain's connection with the complaints against Shri S. P. Chopra. It may be added, however, that Shri Kamlani filed another affidavit dated 4th January, 1965, saying that the Government of India had since obtained the opinion of the Attorney-General in the matter and according to that opinion he was admitting that a liquidator was an officer of the company and was entitled to seek relief under the relevant provisions and further that relief could be granted even after the dissolution of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the police investigation showed that the petitioner had misappropriated ₹ 11,282 and that he was prohibited from paying any amount to Kh. Nazir Ahmad or his junior by section 5 of the Foreign Exchange Regulation Act, 1947. Paragraph 7 of this affidavit deserves to be reproduced: Para. No. 14 as stated is not admitted. The petitioner by his letter dated March 1, 1950, sent to the Custodian of Enemy Property, Bombay a cheque for ₹ 18,718 being 55% of his claim. The Custodian accepted this amount in full and final settlement as the petitioner has according to his said letter declared a dividend of 55% and the Custodian had no occasion to doubt the honesty of the petitioner-liquidator. It was never brought to the notice of the Custodian that the petitioner had spent any money out of the moneys purported to be paid to him and thus the question of Custodian raising any objection to the expenses did not arise. In paragraph 9 it was stated that the petitioner had acted mala fide in showing payment of ₹ 30,000 to the Custodian, Bombay, but in fact ₹ 18,718 had been paid. The allegation that Shanti Prasad Jain got information with ulterior motives from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian confirmed the composition which was agreed to in July/August, 1949, at ₹ 18,718. Accordingly, a draft was prepared by Shri Krishnaswamy and Shri K.N. Taneja and that letter was formally addressed by the liquidators' office to the Custodian on 1st March, 1950. In paragraph 16 it was stated: In view of the attitude taken up by the Custodian authorities at Bombay, it was possible that the Pakistan authorities would claim, as was done in numerous other cases of joint stock companies, that this company was still a Pakistani company and that the transfer of funds from Lahore to Delhi was unauthorised and should be reversed. Such action would have greatly damaged the interests of the general body of the creditors of the company which S. P. Chopra Co. as liquidators were in duty bound to safeguard. In view of these facts it became necessary to handle this delicate matter with utmost care and a leading advocate at Lahore was engaged for the purpose. It is also a well known fact that Pakistani advocates working for Indian clients at that time were charging very high remuneration and Indian clients had no other alternative but to accept such demands. In paragraph 17 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded the last order on 15th October, 1965, the police has started investigation and statements of two persons have been recorded. The statement of the informant was recorded on 21st October, 1965, and of the Manager, Grindlays Bank Ltd., Simla, on 26th October, 1965. It is, however, admitted that between the period 25th May, 1965, and 21st October, 1965, the police made no investigation whatsoever. The reason why it became essential to peruse the letter mentioned in paragraph 7 of the affidavit filed by Mr. Titus was that if in that letter what had been stated in the affidavit had been written the whole explanation of the petitioners furnished in the affidavits of petitioner No. 2 would have been found to be wrong and incorrect and that factor would have been of decisive importance in this case. The material part of that letter, which was addressed to the Custodian of Enemy Property, Bombay, may be reproduced: .... Your claim with the company has been compromised for a sum of ₹ 18,718 being 55% of ₹ 32,332-11-0 plusRs. l,700 and odd to cover interest, costs, etc. The cheque for the same is enclosed herewith, on receipt of which please give us your full and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the petitioners that the statements on oath in the affidavits of the petitioner No. 2 ought to be accepted and that even if there was some technical mistake in not mentioning the details of the amounts paid and expended on account of getting the clearance for payment to the Custodian, Enemy Property, Bombay, the petitioners should be absolved from liability in exercise of the powers conferred by the relevant provisions of the Act to save them from further unnecessary harassment. I have given anxious consideration to the matters which call for determination in this case and it appears to me that while deciding whether the explanation of the petitioners and the statement of facts relevant to the amount of ₹ 11,282 which is alleged to have been secreted away or misappropriated, the following facts must be prominently kept in view: ( a )The Registrar of Companies, who was the proper person for taking action against the petitioners in respect of any alleged false or wrong statements in Form No. 58 (exhibit C/3), has completely supported the case of the petitioners through his counsel, Dewan Chetan Das, Deputy Advocate- General. ( b )No complaint whatsoever was fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f not showing the two items separately of which ₹ 30,000 were the total, the petitioners deserve to get such relief as may be open to them under the relevant provisions of the Act because the default or negligence was only of a technical nature. The scope and ambit of section 281 of the Act has next to be decided. That section stood as follows: 281. (1) If in any proceeding for negligence, default, breach of duty or breach of trust against a person to whom this section applies, it appears to the court hearing the case that that person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as the court may think fit. (2)Where any person to whom this section applies has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings which had already been commenced and that with regard to the claim under section 372(2) the court would make an order granting the petitioners relief from future or apprehended claims in respect of a technical defect, the summary proceedings already commenced being expressly excepted from that order. The scope of section 231(2) came up for consideration before the Orissa Court in In the matter of Orissa Jute and Cotton Mills Ltd. [1956] 26 Comp. Cas. 218 After discussing the English cases, it was laid down that with regard to any criminal proceedings which were already pending, relief could be granted only by the court where they were pending under sub-section (1) and under sub-section (2) the court could relieve the petitioners from any apprehended liability for which proceedings could be taken in the future. In In re Tolaram Jalan In re Filmistan (P.) Ltd. [1959] 29 Comp. Cas. 34 ; AIR 1959 Bom. 245 it was held that the word claim occurring in sub-section (2) of section 633 of the Companies Act, 1956 (equivalent to section 281 of the Act), would also include proceedings such as penal proceedings under section 162, read with section 220 of the Act of 1956. Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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