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TMI Blog2013 (10) TMI 1580X X X X Extracts X X X X X X X X Extracts X X X X ..... he very same petitioners containing a similar prayer, with the only difference that the prayer in C.P. No. 296 of 2013 was for relieving the petitioners from the acts of default alleged by the third respondent Registrar of Companies in their letter dated 31.7.2013. 2. Both the main company petitions, C.P. Nos. 296 and 297 of 2013 came up for hearing, along with miscellaneous applications in Comp. A. Nos. 995 and 996 of 2013 for interim stay of criminal prosecution. 3. On 19.9.2013, I ordered notice in the main petitions and granted an interim stay of further proceedings before the criminal court. 4. After service of notice, the first respondent in the main company petition, namely, Vis-ram Financial Services, has come up with the above application in Comp. A. No. 1072 of 2013, seeking the dismissal of the main company petition, on the short ground that while Section 633(1) of the Companies Act empowers only the criminal Court which has taken cognizance of a complaint, to relieve the officers of a company, Section 633(2) empowers the High Court to relieve the officers of the company only in cases of apprehension of proceedings and not where a complaint had already been file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) or sub-section (2) unless it has, by notice served in the manner specified by it, required the Registrar and such other person, if any, as it thinks necessary, to show cause why such relief should not be granted. 8. From a plain reading of sub-section (1) and the proviso thereunder, sub-section (2) and sub-section (3) of Section 633, the following emerge: (i) The Court hearing a case of negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, can relieve such officer from criminal liability, if such officer is found to have acted honestly and reasonably, though he is liable in respect of such negligence, default and breach of duty, misfeasance or breach of trust. (ii) The relief granted by the Court can only be from criminal liability and not from civil liability. (iii) The High Court has the same power to relieve an officer of a company, on an application filed by him, if such officer has reason to apprehend that any proceeding will or might be brought against him in respondent of any negligence, default and breach of duty, misfeasance or breach of trust. For the said purpose, the High Court will be deemed to be a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to relieve the officers not only against an apprehended claim, but also against a possible prosecution, was rejected by the learned Judge. In the operative portion of the judgment, the learned Judge held that if proceedings have already been initiated, whether for enforcement of criminal or civil liability, relief can be granted only by the Court in which the proceedings are pending. 13. In Re: Muktsar Electric Supply Co. Ltd. in Liquidation v. State (High Court of Punjab Haryana); 1965 a learned Judge of the Punjab and Haryana High Court expressed a similar view. 14. In Auto Link Finance Private Ltd. v. Registrar of Companies (1971 (41) CC 63), a learned Judge of the Delhi High Court also held that the High Court is not possessed of jurisdiction to grant relief under sub-section (2), after the institution of criminal proceedings. 15. In Om Prakash Khaitan v. Keshariya Investments Ltd. (1978 (48) CC 85), another learned Judge of the Delhi High Court held that the High Court has no jurisdiction with regard to the criminal liability arising out of defaults and breaches which have already become the subject matter of prosecution. 16. In Sri Krishna Parshad v. Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings for negligence/default/breach of duty, misfeasance or breach of trust against an officer of the company, it would be a valid defence that he as acted honestly and reasonably and that having regard to all the circumstances of the case he should be excused from the liability. (b) Such exercise can be done even by this Court and person need not be relegated to the Court where the proceedings are filed. 22. The said decision of the Delhi High Court may not go to the rescue of the respondents, in view of the fact that the Court followed its earlier decision in P.S. Bedi. What actually happened in that case was that the application under Section 633 was filed even before the complaint was lodged by the Registrar of Companies, but it came up for hearing later. Therefore, the learned Judge did not go into the question as to whether a petition under Section 633 is maintainable, at the instance of an officer who had already received summons from the criminal Court or not. 23. Mr. Karthik Seshadri, learned counsel for the respondents also relied upon a decision of the Calcutta High Court in Srikumar Menon Others v. The Registrar of Companies (164 CC 182). Though the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer of the company), it appears to the court hearing the case that the officer or person is or may be liable but that he 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 in part, from his liability on such terms as it thinks fit. (2) If any such officer or person has reason to apprehend that a claim will or might be made against him in respect of negligence, default, breach of duty or breach of trust (a) he may apply to the court for relief, and (b) the court has the same power to relieve him as it would have had if it had been a court before which proceedings against him for negligence, default, breach of duty or breach of trust had been brought. (3) Where a case to which subsection (1) applies is being tried by a judge with a jury, the judge, after hearing the evidence, may, if he is satisfied that the defendant (in Scotland, the defender) ought in pursuance of that subsection to be relieved either in whole or in part from the liability sought to be enforced against him, withdraw the case fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 633(2) creates a deeming fiction, making the High court also a court before which a proceeding for negligence, breach of trust etc are brought. This is why, the scope of jurisdiction of the High court has come up again and again for consideration before various courts. 30. Having seen the definitions of the important expressions, let us now take a look at the penal provisions and the remedial provisions. The Act contains several penal provisions, which can be tabulated as follows for easy reference: Sl. No Section Subject matter 1 59(1) Fine upto Rs.50,000/- for issuing prospectus in contravention of Section 57 or 58. 2 62(1) Civil liability for payment of compensation to a person who suffers loss or damage due to an untrue statement contained in the prospectus. 3 63(1) Criminal liability for imprisonment upto 2 years or fine upto Rs.50,000/- or both, for a person who authorised the issue of a prospectus containing an untrue statement. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 77(4) criminal liability with fine extending upto Rs.10,000/-, for violating the restrictions imposed by Section 77 on the purchase of its own shares by a company. 17 79(4) criminal liability with fine upto Rs.500/- for failure to include in the prospectus, the particulars of discount. 18 80(6) criminal liability with fine extending upto Rs.10,000/-, for issuing redeemable preference shares otherwise than in accordance with Section 80. 19 80A(3) criminal liability with fine extending upto Rs.10,000/- per day for the company and with the imprisonment upto 3 years, for violation of the prescription in Section 80A regarding redemption of irredeemable preference shares. 20 89(3) criminal liability with fine extending upto Rs.10,000/-, for failure to apply to Court for appropriate directions for termination of disproportionately excessive voting rights. 21 97(3) crimina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate of debenture stock, without the endorsement. 32 137(3) criminal liability with fine extending upto Rs.500/- per day, for failure to give notice to the Registrar, of the appointment of a Receiver. 33 142 criminal liability with fine extending upto Rs.5,000/- per day or Rs.10,000/- per day, for failure to file with the Registrar, the particulars of any charge created by a company or the issue of debentures of a series. 34 143(2) criminal liability with fine extending upto Rs.5,000/-, for failure to keep a register of charges in the Registered Office. 35 144(3) criminal liability with fine extending upto Rs.500/-, with a further fine of Rs.200/- per day for the refusal period, for refusing an inspection of the register of charges and the copies of instruments creating charges. 36 146(4) criminal liability with fine extending upto Rs.500/- per day, for failure to have a Registered Office and to give a notice of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per day, for failure to file with the Registrar, an annual return and the certificates to be annexed thereto. 48 163(5) criminal liability with fine extending upto Rs.500/- per day, for refusal to allow an inspection of registers, indexes, returns and copies of certificates and documents. 49 165(9) criminal liability with fine extending upto Rs.5,000/-, for not holding a statutory meeting and not filing the statutory report with the Registrar. 50 168 criminal liability with fine extending upto Rs.5,000/- and further liability fine of Rs.2,500/- per day for continuing with default, in holding a meeting of the company in accordance with Section 166 or in complying with the directions issued under Section 167. 51 176(2) criminal liability with fine extending upto Rs.5,000/-, for failure to include a statement in the notice of meeting that proxies are allowed. 52 176(4) criminal liability with fine extending upto Rs.10,000/-, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 207 criminal liability with imprisonment for a term up to 3 years, and with fine extending upto Rs.1,000/- per day, for failure of the Director to distribute dividends within 30 days to the shareholders. 63 209(5) criminal liability with imprisonment for a term up to 6 months, or with fine extending upto Rs.10,000/-, or with both, for failure by the company to keep at its registered office proper books of account. 64 209A(8) criminal liability with fine extending upto Rs.50,000/-, and with imprisonment for a term up to 1 year, for failure of every Director, other officer or employee to produce books of account, other books and papers of the company for inspection. 65 210(5) (6) criminal liability with imprisonment for a term up to 6 months, or with fine extending upto Rs.10,000/-, or both for failure of the Director, or any person charged with such duty, to lay the balance sheet and profit of loss account before the company. 66 211(7) (8) criminal lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailure to publish statement in the Form in Table F. 74 224(4) criminal liability with fine extending upto Rs.5,000/-, for failure to give notice to the Central Government of the fact no auditors are appointed or re-appointed. 75 232 criminal liability with fine extending upto Rs.5,000/-, for noncompliance of the provisions contained in Sections 225 to 231 such as passing resolutions in appointment or removal, qualifications, powers and duties of the auditors, auditing of accounts of branch office, signing auditor's report, etc 76 233 criminal liability with fine extending upto Rs.10,000/-, if any person other than the auditor signs the report or authenticates the document which is not in conformity with the requirements under Section 227 and 229. 77 233A(5) criminal liability with fine extending upto Rs.5,000/-, for failure to furnish to the special auditor the information required for special audit. 78 233B (11) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 279 criminal liability with fine extending upto Rs.50,000/- in respect of each company, for acting as a director of more than fifteen companies. 87 283 criminal liability with fine extending up to Rs.5,000/- per day, if a person functions as a director when such office has become vacant on account of disqualifications. 88 286(2) criminal liability with fine extending upto Rs.1,000/-, for failure to give notice of meeting of the Board of Directors to every director. 89 292A (11) criminal liability with imprisonment for a term up to 1 year, or with fine extending upto Rs.50,000/-, or with both, for failure to comply with constitution of audit committee or to disclose the composition of committee in the annual report or to to record the reasons for not accepting the recommendations of the audit committee. 90 293A(5) criminal liability with imprisonment upto 3 years and fine in case of officer and fine of three times of the amount in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars relating to relinquishment of the office in the other body corporate within 21 days. 99 307 (7) (8) criminal liability with fine extending upto Rs.5,000/- in case of failure to produce the register at the commencement of annual general meeting and Rs.50,000/- with further fine of Rs.200/- per day in case of failure to keep register of directors shareholdings and debentures or for refusing inspection of the register. 100 308(3) criminal liability with imprisonment up to two years or with fine extending upto Rs.50,000/-, for failure to give notice in writing to the company about the disclosure of shareholdings or to read the notice at the meeting of the Board, if it is not given at a meeting. 101 314(2C) civil liability for holding an office of profit in contravention of 314 (1B), to refund the remuneration received 320(3) criminal liability with fine up to Rs.2,000/-, for failure of the Director or any person to take take reasonable steps to secure particulars of the payment proposed to be made by transferees o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the requirements of inter-corporate loans and investments or to maintain a register with particulars of such loans and investments. 109 383A (1A) criminal liability with fine extending upto Rs.500/- per day, for failure to have a whole-time secretary. 110 391(5) criminal liability with fine extending upto Rs.100/- per copy, for failure to annexe a copy of the order sanctioning any compromise or arrangement with every copy of the memorandum of company or with every copy of the instrument or defining the constitution of the company. 111 393(4) criminal liability with fine extending upto Rs.50,000/-, for failure to send statement setting forth the terms of the compromise or arrangement along with the notice to creditors calling for the meeting. 112 394(3) criminal liability with fine extending upto Rs.500/-, for failure to cause a certified copy of the order for filing with the Registrar for registration within 30 days of the order. 113 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, details of creditors or to submit within 21 days from the relevant date. 122 481(3) criminal liability with fine extending upto Rs.500/- per day, for failure of the Liquidator to forward the order of dissolution to the Registrar within 30 days of the order. 123 485(2) criminal liability with fine up to Rs.500/- per day, for failure to publish in the Official Gazette and in some newspapers, the resolution of voluntary winding up, within 14 days of the resolution. 124 488(3) criminal liability with imprisonment for a term up to 6 months or with fine extending upto Rs.50,000/- or with both, if a director makes a declaration that the company will be able to pay its debts in full within the period specified therein, without having reasonable grounds for such opinion. 125 493(3) criminal liability with fine extending upto Rs.1,000/- per day, for failure to give notice to the Registrar of the appointment of the liquidator, vacancy in the office of the liquidator and the names o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll a general meeting of the company or meeting of the creditors, after the dissolution of the company. 133 513(2) criminal liability with fine extending upto Rs.10,000/-, if any body corporate acts as liquidator of a company in a voluntary winding up. 134 514(b) criminal liability with fine extending upto Rs.10,000/-, if a person secures appointment as the liquidator or prevents others from securing appointment as liquidator, by giving or agreeing to give any gratification. 135 516(2) criminal liability with fine extending upto Rs.500/- per day, for failure of the liquidator to publish in the Official Gazette and to deliver to the Registrar for registration, of his appointment, within thirty days. 136 533 civil liability to the extent of mortgage or charge for any fraudulent preference made u/s 531 137 538(1) (2) criminal liability with imprisonment for a term up to 5 years or with fine or with both for not delivering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of liquidator to file a statement or to forward a copy of such statement to Central Government or State Government if they are members or refusing the creditor to inspect the statement and to receive a copy or extract therefrom. 146 559(2) criminal liability with fine extending upto Rs.500/- per day, for failure of any person, on whose application the dissolution was declared void, to file certified copy of the order with the Registrar. 147 598 criminal liability with fine extending upto Rs.10,000/- and in case of continuing offence, with an additional fine up to Rs.1,000/- per day, for failure of any foreign company to comply with the provisions relating to documents, return, balance sheet and profit and loss account to be delivered to Registrar, etc. 148 606 criminal liability with imprisonment for a term up to 6 months or with fine up to Rs.50,000/- or with both, if any person issues, circulates or distributes in India any prospectus or form for subscription of shares or debentures of a company outside India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminal liability with fine up to Rs.5,000/- and in case of continuing one, with further fine of Rs.500/- per day, for contravention of any rule made by the Central Government by notification in the Official Gazette, in addition to the powers under Section 641. 31. A careful perusal of all the penal provisions contained in the Companies Act, 1956 listed in the table contained in the preceding paragraph would show that there are different categories of offences, dealt with by the Act. These offences would broadly fall under the following categories, namely (a) failure to comply with the statutory requirements such as holding of meetings, maintenance of books, filing of returns, etc; (b) failure to discharge the obligations to the members (shareholders); (c) failure to discharge the obligations towards outsiders such as applicants for allotment of shares, debentures, etc; and (d) failure to comply with the obligations to the creditors. 32. Persons, who could be prosecuted for the above categories of offences are (i) the company, (ii) the promoters, (iii) the contributories, (iv) the directors or (v) managers or (vi) persons, who subscribed to certain statements or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son authorised by SEBI. But, the provisions of Section 621(1) would not apply to any action taken by the Official Liquidator in respect of any offence relating to matters included in Part VII and in respect of matters relating to winding up; (v) Under Section 622, no court inferior to that of a Presidency Magistrate or the Magistrate of a First Class shall try any offence against the Act; (vi) Under Section 623, an offence committed by a person within a presidency town and which is punishable only with fine, can be tried summarily by a Presidency Magistrate; (vii) Section 624 makes every offence against the Act non cognizable, irrespective of anything contained in the Code of Criminal Procedure. The Companies Act, 1956 contains a special provision under Section 625, for award of compensation in cases of frivolous or vexatious prosecution. This section supersedes the provisions of Section 250 of the Code of Criminal Procedure. 34. Apart from the above provisions, there are two interesting and important provisions in the Act. They are Sections 626 and 627. Under Section 626, the court imposing any fine under the Act can direct that the whole or any part thereof sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce the books of a company or to have those books inspected, if the Court has reason to believe that an officer has committed an offence in connection with the management of the company's affairs and that evidence of the commission of the offence is to be found in any books. If the power to prosecute any company or officer of the company had been vested only in the Court of a Magistrate of First Class, the power to inspect the books or to obtain evidence of the commission of the offence need not have been conferred upon the High Court. The Court of a Magistrate of First Class would have such powers under the Code of Criminal Procedure itself. 37. Yet another interesting provision in the Companies Act, 1956, is in section 621-A. This section confers power upon the Company Law Board and even the Regional Director, to compound any offence punishable under this Act, provided that the offence is not punishable with imprisonment only or with imprisonment and fine. This power can be exercised, both before and after the institution of prosecution in the court. This is notwithstanding anything contained in the Code of Criminal Procedure. Therefore, to say that a Regional Director or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies, which are not in winding up, but which file petitions under Sections 391 to 394 for sanctioning some kind of a scheme, also do come up with applications for relieving the officers from criminal liability, either actually pending or merely apprehended. This is despite the fact that no proceeding for negligence, default, etc., as contemplated by Section 633(1) is actually pending before the High Court. 43. It is only on account of the above factors that Section 633 makes a distinction between (i) cases where proceedings for negligence, default, etc., have already been initiated; and (ii) cases in which such proceedings are merely apprehended. The Courts before which, such proceedings are pending, could either be the Courts of Magistrates or the District Court/High Court, as the case may be. Therefore, Sub-Section (1) of Section 633 confers jurisdiction upon all these three courts in respect of matters that are actually pending. But, in respect of matters, which are apprehended, the intention behind Sub-Section (2) is to confer an exclusive jurisdiction upon the High Court. 44. Consequently, a proper reading of Section 633(1) and (2) would be to say that the disti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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