TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the complainant could be treated as a creditor of the company so as to bring the criminal proceedings within the scope of the stay order under section 153 of the Companies Act. (ii) Whether the proceedings concerned alleged entrustment of specific shares held in safe custody, or merely a claim arising out of the banking account, so that the applicability of the stay order depended on the true character of the complaint.
Issue (i): Whether the complainant could be treated as a creditor of the company so as to bring the criminal proceedings within the scope of the stay order under section 153 of the Companies Act.
Analysis: The stay power under section 153 extends only to proceedings relating to matters adjustable between the company and its creditors or members. A person is not a creditor merely because he may claim damages or complain of wrongful non-delivery of property kept with the company. On the allegations made, the complainant asserted a claim to specific shares said to have been purchased and held for him in safe custody, and such a person was not shown to be a debtor-creditor claimant in the sense required by section 153.
Conclusion: The complainant was not established as a creditor of the company on the present materials, and the proceedings were not automatically within the stay order on that footing.
Issue (ii): Whether the proceedings concerned alleged entrustment of specific shares held in safe custody, or merely a claim arising out of the banking account, so that the applicability of the stay order depended on the true character of the complaint.
Analysis: The complaint was capable of different factual characterisations. If specific shares had in fact been purchased, allotted, and entrusted to the complainant as his property for safe custody, the matter would fall outside the stay order and could proceed as a criminal breach of trust case. If, however, there had never been a legal entrustment of specific shares and the matter was only one of an account claim against the bank, the complainant would be in the position of a creditor and the stay order would apply. As the record did not yet finally establish which of these situations existed, further inquiry was necessary before the criminal case could be either stayed or allowed to proceed to final decision.
Conclusion: The matter required further determination on the question of legal entrustment, and the stay issue could not be finally disposed of at that stage.
Final Conclusion: The petitioner succeeded only to the extent that the Magistrate was directed to determine first whether there had been a legal entrustment of specific shares; depending on that finding, the prosecution would either proceed or remain stayed.
Ratio Decidendi: The protective stay under section 153 of the Companies Act applies only to proceedings between the company and persons who are truly creditors or members in the relevant capacity, and not to proceedings concerning specific property allegedly entrusted to the company unless the factual basis of a creditor relationship is first established.
TaxTMI 
