Directors' relief for a sick company: HC granted protection from liability where revival efforts and BIFR proceedings continued.

Directors and ex-directors of a sick company pending before the BIFR were granted relief under section 633(2) of the Companies Act, 1956 because the company had remained closed for a long period, revival efforts were continuing, and the board had been reconstituted. The HC noted that the position was substantially the same as in the earlier order, that statutory duties could not practically be performed in the existing circumstances, and that public interest supported relief. The application was allowed, and the named directors and ex-directors were relieved from liability for negligence, default, breach of duty, misfeasance or breach of trust for two years.

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Issues: Whether the directors and ex-directors of a sick company, whose matter was pending before the Board for Industrial and Financial Reconstruction, were entitled to relief under section 633(2) of the Companies Act, 1956 from liability for negligence, default, breach of duty, misfeasance or breach of trust in respect of the affairs of the company.

Analysis: The application disclosed that the company had remained closed for a long period, efforts were continuing to revive it, and the existing board had been reconstituted. The Court noted that the position remained substantially the same as in the earlier order granting similar relief and that the statutory duties could not practically be discharged in the existing circumstances. In view of the company's sickness, the pendency before the Board for Industrial and Financial Reconstruction, and the public interest, the Court found it appropriate to grant relief.

Conclusion: The application under section 633(2) of the Companies Act, 1956 was allowed and the named directors and ex-directors were relieved from liability for negligence, default, breach of duty, misfeasance or breach of trust for a period of two years.

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