Relief from liability under the Companies Act extends to apprehended claims, but not to a pending prosecution before the criminal court.
Relief from liability under the Companies Act may be granted where defaults occurred in unavoidable circumstances and the officer acted honestly and reasonably; on the stated facts, the petitioners were excused from apprehended liability because the accounts were delayed after the accountant's death and the omissions were later rectified. That relief was confined to future or apprehended liability and could not affect a prosecution already pending before the Magistrate, because only the court seised of the criminal proceeding could deal with that pending case. The pending prosecution therefore remained untouched.
Issues: (i) whether the petitioners, having shown that their defaults occurred due to unavoidable circumstances, were entitled to relief from apprehended liability for negligence and default under the Companies Act; (ii) whether such relief could extend to a prosecution already pending before the Magistrate.
Issue (i): whether the petitioners, having shown that their defaults occurred due to unavoidable circumstances, were entitled to relief from apprehended liability for negligence and default under the Companies Act.
Analysis: The application was treated as one under the provision corresponding to section 633 of the Companies Act, 1956, and the earlier provision in section 281 of the Indian Companies Act, 1913. The Court found that the defaults had occurred because the accountant died and the accounts could not be completed in time, and that the omissions were later made good. On those facts, the petitioners had acted in circumstances that justified excusing them from future or apprehended liability.
Conclusion: The petitioners were entitled to be relieved from apprehended liability.
Issue (ii): whether such relief could extend to a prosecution already pending before the Magistrate.
Analysis: The relief contemplated by the statute was held to be confined, for a pending proceeding, to the court before which that proceeding was already seised of the matter. A court approached after institution of prosecution could not by its own order displace the jurisdiction of the criminal court. Relief under the application could therefore operate only prospectively and could not prejudice the pending criminal case.
Conclusion: The petitioners were not entitled to relief from the pending prosecution.
Final Conclusion: Relief was granted only in respect of future or apprehended liability, while the prosecution already pending before the Magistrate was left untouched.
Ratio Decidendi: Relief from liability under the Companies Act may be granted for apprehended or future claims where the officer acted honestly and reasonably, but once prosecution is pending, only the court seised of that proceeding can grant relief for that proceeding.
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AI Drafter ✕
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