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TMI Blog1981 (10) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... in 1974 and the business of the company was, therefore, being looked after by the remaining two Directors. They too expired some time in 1980. The present Directors, it is contended, are fresh entrants and two of them, namely, S/Shri P. N. Handa and N. S. Grewal, have been appointed as Directors by virtue of their technical skill. However, the Registrar of Companies launched prosecution against the company and the present petitioners for committing default/breach of certain provisions of the Act. Apprehending that fresh prosecutions may be launched against them under the aforesaid Acts, they have prayed for relief against liability for breaches and defaults commited by the company under the aforesaid Act. Similar prayer has been made by the petitioners, S/Shri Bachan Singh, P.N. Handa, C.L. Mehta, A.L. Talwar, S.S. Sandhu, V.S. Grewal, H.S. Sidhu and D.J.S. Sandhu in Company Petition No. 13/81, who constitute the Board of Directors of the company M/s. Atlantic Engineering Services Private Ltd. As per averments in the said petition, out of the original Directors, S/Shri J.S. Grewal and B.S. Sandhu, died some time in 1980 while Shri Bachan Singh resigned from directorship in Octob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a company as envisaged in section 633 of the Act against the liability for negligence, default, breach of duty, etc ., of the provisions of Acts other than the Act, (2)whether, while exercising jurisdiction under section 633 of the Act, the court can justifiably draw any distinction amongst the directors who are on the Board purely by virtue of their technical skill or expertise or because they represent certain special interests and those who are in effective control of the management and affairs of the Company. Question No. 1: Section 633 is reproduced hereunder for ready reference : "(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 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, the Court may relieve him, either wholly or partly, from his liability on such terms as it may think fit : Provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and comprehensive enough to include all kinds of proceedings, i.e. , civil as well as criminal. There is nothing in the language or the context in which this section is laid to limit, restrict or confine its operation to a liability arising out of negligence, default, breach of duty, misfeasance or breach of trust under the Act alone. In our opinion, protection under this section will be equally available to an officer of a company against liability to be proceeded against for negligence, default, breach of duty, etc ., even under other Acts so long as it is with regard to the affairs and functioning of the company. The power under this section is manifestly a power to relieve from liability which in the context mean's relief from the consequences, namely, fines and penalties that flow from the negligence, default, breach of duty, misfeasance or breach of trust. Of course, the grant of relief is discretionary having regard to the considerations mentioned in the section itself. It is the cardinal rule of construction of statutes that the language used by the legislature must be construed in its natural and ordinary sense; if the words of the statute are themselves precise and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply Co. Ltd., In re ) [1966] 36 Comp. Cas. 144 (Punj.); 1 Comp. LJ 214, in which the petitioners were sought to be prosecuted under section 409, IPC, on the complaint of one Dayavrat. In that case, the petitioner, S. P. Chopra Co., was appointed voluntary liquidator of the Muktsar Electric Supply Co. Ltd. having its registered office at Lahore. In the return filed by the petitioners with the Registrar of Companies, Punjab, under section 244 of the Indian Companies Act, 1913, for the year ending 30th September, 1949, in Form No. 58, Rs. 30,000 were shown to have been paid to the Custodian, Enemy Property, Bombay, although Rs. 17,718 had, in fact, been paid to him by cheque and Rs. 11,282 were spent on this account towards expenses. Relief was sought against apprehended claims in respect of negligence, breach of duty, etc ., by the petitioners under section 281(2) of the Indian Companies Act, 1913. On an examination of various decided cases, A. K. Grover J. (as his Lordship then was) held (at p. 157 of 36 Comp. Cas.) that: "...the High Court can grant relief under sub-section (2) and that the scope of that sub-section is wide enough to cover criminal prosecution. The word 'cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we feel that H. L. Anand J., overstated the point in observing that: "...it is necessary to make a distinction between the directors who are on the board, purely by virtue of their technical skill or because they represent certain special interests and those who are in the effective control of the management and affairs of the company, whether or not they have any financial stakes in it, in determining if relief from liability arising out of the breaches and defaults of the company should be granted or not." (p. 88) (emphasis supplied) The criteria for granting relief having been explicitly laid down in the section itself, no other criteria can be imported into it. Surely, the language of the section does not warrant an interpretation drawing such a distinction. Indeed, Anand J. was fully conscious of this fact when he observed that (p. 89): "While there is a strong case for urgent legislative action, both in the matter of widening the frontiers of accountability of a company, both to its board of directors and to the members, as also in relieving the special category of directors from consequences of default and breaches of the company, judicial moderation is necessary i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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