Prospective relief for directors granted under Section 372(2) while pending magistrates' proceedings remain unaffected and costs awarded against directors.

Section 372(2) authorises courts to grant directors prospective relief where breaches are technical, honest and reasonable and where excusing conduct is fair; the petitioners, disqualified unintentionally by a court-approved capital reduction, were granted prospective relief because no loss occurred and the defect was remediable. By contrast Section 372(1) does not permit a court other than the forum hearing existing proceedings to affect those proceedings; ongoing magistrates' proceedings under the relevant summary jurisdiction provisions remain unaffected. Costs are awarded against the petitioners to the company and the Board of Trade.

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Issues: (i) Whether relief under Section 372(2) of the Companies Act, 1929 should be granted to directors to relieve them from prospective liability for acts committed while disqualified; (ii) Whether Section 372(1) empowers this Court to grant relief in respect of proceedings already commenced before a magistrate under Section 141 of the Companies Act, 1929.

Issue (i): Whether the petitioners should be relieved under Section 372(2) from any apprehended liability arising from their having acted as directors while unqualified.

Analysis: The statutory test permits relief where the applicant satisfies conditions of honesty and reasonableness and where, on consideration of all circumstances, it is fair to excuse the conduct. The petitioners became disqualified through the operation of a court-approved reduction of capital; the disqualification was unintentional and technical, caused by the change in nominal share value. There was no resulting loss to the company and the defect could have been readily remedied by transfer of shares by the parent company. The petitioners' conduct was found to be substantially honest and reasonable in context, and shareholder opposition alone did not preclude relief.

Conclusion: Relief under Section 372(2) is granted in favour of the petitioners relieving them from prospective liability.

Issue (ii): Whether this Court may grant relief under Section 372(1) affecting proceedings already instituted before the magistrate under Section 141(5) of the Companies Act, 1929.

Analysis: Section 372(1) confines relief in respect of already commenced proceedings to the court hearing those proceedings. The limitation period under Section 11 of the Summary Jurisdiction Act, 1848 was relevant to the magistrates' jurisdiction; thus, this Court does not have power under Section 372(1) to interfere with or determine the magistrate's ongoing proceedings.

Conclusion: No order is made under paragraph 1 of the prayer; the pending magistrates' proceedings are not affected by this Court's order.

Final Conclusion: The petitioners are granted prospective relief under Section 372(2) but no relief is granted in respect of the magistrates' proceedings under Section 141(5); costs are awarded against the petitioners to the company and the Board of Trade.

Ratio Decidendi: Section 372(2) permits the court to grant directors prospective relief for honest and reasonable technical breaches of duty where it is fair to excuse them, while Section 372(1) does not enable a court other than the forum hearing already commenced proceedings to grant relief affecting those proceedings.

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