Prospective relief for technical director disqualification granted, but pending proceedings could not be interfered with.
Section 372(1) of the Companies Act, 1929 was treated as confined to relief in the particular proceedings already pending, so it could not displace a summons already before another court and relief was refused. Section 372(2) was applied to prospective liability for acting while disqualified as directors, and relief was granted because the directors acted honestly and reasonably, were unaware of the technical disqualification, could easily have cured the defect, and caused no loss to the company. The result was partial relief only, with costs against the petitioners.
Issues: (i) Whether relief under Section 372(1) of the Companies Act, 1929 could be granted in respect of pending proceedings already commenced against the directors. (ii) Whether relief under Section 372(2) of the Companies Act, 1929 should be granted against prospective liability for acting while disqualified as directors.
Issue (i): Whether relief under Section 372(1) of the Companies Act, 1929 could be granted in respect of pending proceedings already commenced against the directors.
Analysis: The statutory language distinguished between proceedings already on foot and apprehended liability. Relief under Section 372(1) was treated as confined to the court hearing the particular case in which the proceedings were pending. The magistrate dealing with the Bow Street summons was therefore the proper forum for those proceedings, and an order in these petitions could not affect them. In view of Section 11 of the Summary Jurisdiction Act, 1848, no other proceedings could now be commenced, so paragraph 1 of the prayer could not be granted.
Conclusion: Relief under Section 372(1) was refused, and the petitioners did not obtain relief against the pending proceedings.
Issue (ii): Whether relief under Section 372(2) of the Companies Act, 1929 should be granted against prospective liability for acting while disqualified as directors.
Analysis: Section 372(2) was applied as the provision intended to meet prospective liability. The directors had acted honestly and reasonably, and their disqualification arose from an unintended technical consequence of the reduction of capital. The Court found that they were unaware that they had ceased to be qualified, that the defect could easily have been cured, and that no loss was caused to the company. The circumstances were treated as sufficient to excuse the default and justify the exercise of discretion in their favour.
Conclusion: Relief under Section 372(2) was granted, and the petitioners were relieved from prospective liability.
Final Conclusion: The petitions succeeded only to the extent of prospective relief from liability, while relief against the pending summons was refused, and costs were directed against the petitioners.
Ratio Decidendi: Section 372(1) does not authorise interference with proceedings already commenced in another forum, whereas Section 372(2) enables relief from prospective liability where the directors acted honestly and reasonably and the default was merely technical and fairly excusable.
TaxTMI 
AI Drafter ✕
TaxTMI 
