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TMI Blog1984 (10) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... n no acts of negligence, breach of duty, etc., on their part and in the circumstances they should not be made to undergo the rigour of baseless prosecution. This petition was moved on April 7 1983. At the same time, the petitioners sent a letter to the Registrar that they had moved this petition and, as such, till its disposal, the prosecution be not started. The Registrar, however, commenced three criminal cases against the petitioners on April 13, 1983. One has been under section 209(5), the second under section 211 and the third under section 217 of the Companies Act. Notice of this petition under section 633(2) of the Companies Act was issued to the Registrar of Companies who appeared on May 26, 1983, and sought some time to file a reply. In the reply which was later filed, it was contended that the prosecutions had already been set in motion and, therefore, the provisions of section 633(1) of the Companies Act came into operation and the company court could not adjudicate upon the controversies raised in the petition. Section 633(1) in this regard provides that the only court which can entertain objections to the prosecution is the one hearing the criminal case. Confronted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd as referred to above. This circular though not of statutory nature, contains one of the policy decisions which the Company Law Board and the Central Government have formulated. Their operative and binding character qua the third parties may be quite doubtful. However, so far as the Registrar of Companies, who is an authority subordinate to the Company Law Board is concerned, the same did call for respect and adherence. It could not be that those directions were applied in the case of some of the companies and ignored with regard to others. When once the petitioners had moved the company court under sub-section (2) of section 633, he could have waited for the result of these proceedings or at the most required the court to expeditiously dispose of them instead of stealing a march over the petitioners and filing the complaints. Mr. K.S. Bindra, appearing from the side of the intervener, has vehemently contended that these circulars have no binding character and in any case they could not be considered to have any legitimacy after the coming into force of the new Code of Criminal Procedure, 1973. He has made reference to the new provisions of the law of limitation introduced and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortunately, the red tapism that has come to be in most of the government departments does delay the clearance of the dues. For this purpose, the petitioners could not be made criminally liable. Their conduct has been bona fide inasmuch as they have been pursuing the government departments for realisation of the amounts. The second amount due from the ex-employees was of Rs. 400 odd. There were stated to be 7 employees and the break-up was two minor amounts. Any institution of suits against them for those amounts would naturally have been penny wise and pound foolish. The prosecution sought to be launched under section 217 was thus entirely misplaced and, therefore, I have little hesitation in directing the Registrar not to initiate any such prosecution and in case, in spite of the pendency of the petition under section 633(2) and in violation of the circular of the Company Law Board, he has commenced any, the same should be dropped. The second prosecution is under section 209(5) of the Companies Act. The allegation under this was that during the course of inspection, it was noticed that the fixed assets register as required under section 209 had not been maintained properly by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit of the individual members. Be that as it may, nothing more need be said about this. The interest which was the subject-matter of this allegation had accrued to the club from various amounts deposited by the members for the acquisition of plots by them. It has been pointed out by the petitioners that the land is at present in the process of acquisition by the government and is also affected by the Ceiling Act. Some litigation in that regard is pending and, as such, it is not known if the deposits made by the members and interest accrued would have to be returned to them on the company losing the land. It is, as such, pleaded that interest-earning has not been treated as revenue income. One of the contentions raised by Mr. Bindra has been that the handling of the accounts of the company has been such that the management committee is defrauding the income-tax department and not showing substantial part of its income as such. I am afraid the company court cannot go into this aspect. It is for the income-tax authorities to look into the accounts and ensure that the income otherwise does not escape taxation. Whether the activity embarked upon by the club with regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are the subject-matter of the prosecution by the Registrar are two in number and they were utilised by Mr. Venkata Raman, treasurer and Mr. Chopra, Hon'y Secretary. They, of course, paid 50% of the cash towards those tickets from their pockets to the credit of club. It is, however, not shown that the travels undertaken by these officers were in any manner connected with the affairs of the club. Thus, the benefit which otherwise could have enured to the club for the display of advertisements by Air India prima facie appeared to have gone for the personal benefit of two office-bearers. I will not, therefore, like to interfere in the prosecution on this score. It is for the petitioners to set up their defence in accordance with the law. Another allegation is with regard to the misappropriation effected by staff members in the mineral water stock. About that a criminal case is already pending against them. That shows that the managing committee had been vigilant to take action against the defaulting officers when they noticed bungling on their part. The managing committee, therefore, cannot be made liable. Then there is the item of water cooler and bottle cooler. A plant was pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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