1977 (3) TMI 180 - HC - Indian Laws

Former Director Excused from Liability Under Section 633 of Companies Act for Company's Defaults Due to Honest Conduct

Om Prakash Khaitan Versus Shree Keshariya Investment Ltd and Ors.

The court granted relief to the petitioner, a former Director of a company, under Section 633 of the Companies Act, 1956, excusing him from liability for ... - Issues: Relief under Section 633 of the Companies Act, 1956 for liability arising from defaults and breaches committed by the Company.In this judgment, the petitioner, a Solicitor and Director of a company, sought relief under Section 633 of the Companies Act, 1956, from liability due to defaults and breaches by the company during his tenure. The petitioner argued that he ceased to be the Director before the defaults, was not actively involved in management, and provided proper advice to the board. The authorities opposed the application, asserting that being a Director made him liable for the company's actions, and honesty would not absolve him of liability. The Court noted that criminal liability was not under its jurisdiction and focused on whether the petitioner could be excused under Section 633(2) for the company's defaults. The section allows relief if the officer acted honestly and reasonably despite being technically guilty. The Court highlighted the distinction between directors with technical expertise and those in effective control, emphasizing the need to relieve certain directors from liability to encourage their association with companies. The judgment emphasized the limitations of directors' power and the necessity for legislative action to widen accountability. Ultimately, considering the petitioner's lack of involvement in management and absence of financial interest, the Court granted relief from liability for the company's breaches and defaults that led to apprehended proceedings.