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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 ..... llow further time as considered reasonable to the Company to repay the deposit. In the event of renewal in compliance with the said sub-section, it could not be said that the Company or, for that matter the petitioners, were guilty of any offence within the ambit of Section 164(2)(b) of the Act. The term deposits , as defined in Section 2(31) of the Act, envisages the same to include any receipt of money by way of deposit or loan or in any other form by a Company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India - 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '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 subsequent date of disqualification, the Company could not have incurred any liability under Section 74. 5. It is next argued that the deposits were only accepted from the Promoters/Directors/Share-holders of the Company and not from the public in general, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on September 30, 2019, that is, after the decision of disqualification in respect of the petitioners was alleged by the Registrar of Companies (ROC). Hence, the discharge could not have any material bearing on the present case. 12. Upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject 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 reasonable interpretation can be given to the Section as a whole. Such argument does not hold good in the present context in view of the specific enumeration in Rule 1(2) of the 2014 Rules as regards the date of commencement of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 occur subsequent to the ROC complaint under Section 74(1)(b), the same was rendered in a different context, in which the standard of proof was beyond reasonable doubt , unlike in the present matter. 20. The responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the statute. 26. Hence, the disqualifications envisaged under Section 164 and Section 167 of the Act were not applicable to the petitioners and, as such, the decision disqualifying the petitioners' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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