Company officer relief from liability requires evidentiary inquiry under criminal procedure, not decision on pleadings alone

Section 633(1) of the Companies Act, 1956 gives a discretionary power to relieve a company officer from liability only after the court is satisfied that the person is or may be liable, acted honestly and reasonably, and ought fairly to be excused. Because that determination depends on whether the offence or default was in fact committed, the inquiry cannot be confined to the pleadings and objections alone. In the absence of a special procedure under the Act or the Rules, the inquiry must follow the Code of Criminal Procedure, 1973 and be based on evidence, preferably alongside the criminal case.

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Issues: Whether an application for relief from liability under section 633(1) of the Companies Act, 1956, can be decided merely on the pleadings and objections, and whether the inquiry under that provision must be conducted in accordance with the Code of Criminal Procedure, 1973.

Analysis: Section 633(1) confers a special and discretionary power to relieve an officer of a company from liability only after the court finds that he is or may be liable and that he has acted honestly and reasonably and ought fairly to be excused. Such a determination necessarily requires an inquiry into whether the offence or default has been committed. In the absence of a special procedure in the Companies Act or the Rules, section 4(2) of the Code of Criminal Procedure, 1973 applies to offences under other laws, and the inquiry must therefore be conducted according to the Code. The court also observed that the proper course is to decide such an application along with the criminal case on the basis of evidence adduced at trial, rather than only on the averments in the application and the objections filed thereto.

Conclusion: The application under section 633(1) could not be validly disposed of only on pleadings and objections, and the inquiry had to follow the procedure under the Code of Criminal Procedure, 1973.

Ratio Decidendi: Where a statute confers relief from liability upon a finding that the accused has acted honestly and reasonably and ought fairly to be excused, the inquiry must be conducted on evidence in accordance with the applicable criminal procedure unless the statute itself prescribes a different mode.

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