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TMI Blog1970 (6) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... business has been continued ; and it is being carried on by the elder brother of the petitioner. The arrangement with the company for supply of goods on credit has also been continued ; and it is still in existence. The company was inspected in March, 1969, by the Inspection Directorate of the Company Law Board. The Registrar of Companies, by his letter, exhibit P-1, dated September 3, 1969, wrote to the company bringing to its notice certain irregularities discovered during the said inspection, and instructing it to take necessary steps to rectify them. Exhibit P-1 stated, among other things, that the petitioner had not disclosed to the board of directors of the company as required by section 299 of the Act his interest in a firm with which the company was having transaction, and that the petitioner had consequently ceased to be a director under section 283(1)( i ) from the date of occurrence of the contravention. Exhibit P-1 also required the company to notify immediately the cessation of directorship of the petitioner and to recover from him all remuneration drawn by him since the date of contravention. The company was further asked to take similar action against other directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declaration prayed for by him, namely, that he has not contravened the provisions of section 299(1). I shall read section 633 : "633. (1) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly ard reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the court may relieve him, either wholly or partly, from his liability on such terms as it may think fit: Provided that in a criminal proceeding under this sub-section, the court shall have no power to grant relief from any civil liability which may attach to an officer in respect of such negligence, default, breach of duty, misfeasance or breach of trust. (2) Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not necessary in an application under sub-section (2) that the applicant should confess or admit that he is guilty of any negligence, default, breach of duty, misfeasance or breach of trust, or that the court must find that he is. guilty of any of those things, before relief can be granted to him. Any officer of a company, who has reason to apprehend that any proceeding will or might be brought against him in respect of any such matter, may apply to the High Court under this sub-section for relief. All that is necessary is a reasonable apprehension of such a proceeding. In this case, the Registrar of Companies held that the petitioner has contravened section 299 of the Act, and directed the company to take steps to recover from the petitioner all remuneration drawn by him as director, since the date of the contravention. Hence the petitioner has reason to apprehend that proceedings may be taken against him in respect of his liabilities arising from the said contravention. The objection raised to the maintainability of this petition cannot, therefore, be sustained. The next question for consideration is what are the reliefs that the petitioner can be given in this case. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult." If I may say so, with respect, the above statement contains a very lucid exposition of the true scope of sub-section (2) of section 633. Reference may also be made to the following passage in the judgment of Shelat J. in In re Tolaram Jalan ( Filmistan Private Ltd., In re [1959] 29 Comp. Cas. 34, 36 ; AIR 1959 Bom. 245) : "Section 633 under which the relief is sought is identical with section 372 of the English Companies Act of 1929. Sub-section (1) of section 633 contemplates proceedings for negligence, default, breach of duty, misfeasance Dr. breach of trust against an officer of a company and gives power to the court hearing the case in certain circumstances to grant relief. Sub-section (2) gives power, on the other hand, to the High Court to grant relief against a prospective liability in respect of a claim that an officer of a company apprehends might be made against him in regard to negligence, default, breach of duty, misfeasance or breach of trust. Now, it is clear that whereas sub-section (1) refers to proceedings already commenced, subsection (2) contemplates a claim which is anticipated as one which might be made in future. Under sub-section (1) the impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a contention strenuously pressed by the petitioner's counsel that, on the facts of this case, the petitioner has not contravened section 299(1) of the Act. In order to appreciate the above contention, it is necessary to read sub-sections (1) and (2): "299. (1) Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the board of directors. (2)( a )In the case of a proposed contract or arrangement, the disclosure required to be made by a director under sub-section (1) shall be made at the meeting of the board at which the question of entering into the contract or arrangement is first taken into consideration, or if the director was not, at the date of that meeting, concerned or interested in the proposed contract or arrangement, at the first meeting of the board held after he becomes so concerned or interested; ( b )In the case of any other contract or arrangement, the required disclosure shall be made at the first meeting of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner is interested in an arrangement with the company. Clause ( b ) of sub-section (2) applies to him ; and he should have disclosed his interest in that arrangement at the first meeting of the board after he became a director, which was held on January 9, 1969. The petitioner has got a case that he has disclosed his interest in the said arrangement at the meetings of the board held on January 31, 1968, and April 7, 1969. The petitioner was re-elected as director in August, 1968; and, therefore, the alleged disclosure on January 31, 1968, is of no avail to him. The Registrar of Companies has stated in his affidavit that the disclosure said to have been made on April 7, 1969, does not satisfy the requirements of section 299. It is sufficient for me to say that this disclosure is also of no avail to the petitioner, as he suffered all the consequences of the contravention of section 299(1), when he failed to disclose his interest at the first meeting of the board held on January 9, 1969. On the facts of the case, I am satisfied that the petitioner acted honestly and reasonably, and that, having regard to all the circumstances, he ought to be fairly excused. The arrangement w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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