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TMI Blog2021 (12) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. The learned Senior Advocate appearing for the petitioners argues that no notice was given to the petitioners prior to such disqualification under Section 164(2)(b) of the Act. 3. Secondly, it is argued that the deposits could not have been termed as 'unpaid' within the purview of Section 74 of the Act. In this context, the learned Senior Advocate refers to Section 74(1)(b) of the Act and submits that the deposits were renewed from time to time, which is permitted under the said provision. Thus, there does not remain any question of any dues being unpaid. 4. That apart, it is argued by the petitioners, the Company was converted to a private limited company with effect from May 26, 2016. As such, it is argued that on the subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section, which deals with conversion of Companies already registered, shall not affect any debts, liabilities, obligations or contracts incurred or entered into by or on behalf of the Company before conversion and those will be inferred in the manner as if such registration had not been done. It is, thus, contended that the mere conversion of the Company into a Private Limited Company did not absolve either the Company or its Directors from the liabilities incurred previously in the capacity of a public Company. 10. It is next argued by the respondents that the discharge of the Company and the Full-Time Director in a criminal action is not conclusive and/or binding on this Court. 11. That apart, it is argued that the discharge took place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the context of the Income Tax Act, 1961. The Supreme Court held therein that the rule of reasonable construction must be applied while construing a statute and literal construction should be avoided if it defeats the manifest object and purpose of the Act. 15. The said judgment was rendered in the context that a proviso had been inserted to Section 43B of the Income Tax Act, 1961 and the Supreme Court clearly held that a proviso which is inserted to remedy the intended consequences and to make the provision workable, a proviso which supplies an obvious omission in the Section and is required to be read into the Section to give the Section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any question of the 2014 Rules having any retrospective effect, since the same was not merely clarificatory in nature as argued by the petitioners, even under the 1975 Rules, the petitioners were entitled to similar exemptions on which they were charged. 18. Section 18(3) of the Act clearly applies to the present case, since mere conversion of the Company into a Private Limited Company, in order to avoid previous defaults or otherwise, would not absolve the petitioners, as Directors, or the Company itself from the offences committed under Section 74 of the Act, in the event such defaults were actually proved and not exempted. 19. As regards the discharge of the Full-Time Director and the Company in a criminal action, not only did the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed in consultation with the Reserve Bank of India. 23. Sections 73 and 74 of the Act, on the other hand, prohibit acceptance of deposits from the public. Section 74, read in conjunction with Section 73, would have included the money taken by the Company unless, as discussed above, the exemptions were applicable to the withdrawals. 24. Hence, in view of the exemption under the 1975 Rules, more specifically Rules 2(b)(ix) and (xi) of the same, no liability within the contemplation of Sections 164 and 167 could have been imposed on the Company and/or the petitioners. 25. Since the petitioners were Joint Managing Directors of the Company, it would be unfair to indict the petitioners of an offence which was exempted within the contemplation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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