Relief under section 281(2): court may grant prospective protection against apprehended criminal prosecution where conduct was honest and omissions technical.

Petitioners' explanation that Rs. 30,000 comprised a cheque payment to the Custodian of Enemy Property and related professional expenses was accepted on the available evidence and treated as a technical accounting omission, entitling them to relief. The court held that the power under section 281(2) extends to grant prospective relief against apprehended criminal prosecution, including after corporate dissolution, where the applicants acted honestly and reasonably and, having regard to all circumstances, ought fairly to be excused; relief was granted to the petitioners on that basis.

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Issues: (i) Whether the explanation offered for showing Rs. 30,000 as paid to the Custodian of Enemy Property, Bombay (being Rs. 18,718 paid and Rs. 11,282 as expenses) should be accepted and the petitioners relieved from liability; (ii) Whether the court has power under section 281(2) of the Indian Companies Act, 1913 to grant relief against apprehended criminal prosecution, including after dissolution of the company.

Issue (i): Whether the petitioners' explanation regarding the accounting and payment of Rs. 30,000 to the Custodian of Enemy Property, Bombay is satisfactory and warrants relief.

Analysis: The evidential record available to the court included the letter of 1st March, 1950, the Form No. 58 return and affidavits by the petitioners and the Registrar. The Registrar supported the petitioners' position. The police investigation had produced no material to rebut the petitioners' sworn explanation, many primary records and witnesses were unavailable or destroyed, and the police challan was withdrawn and no effective further investigation had been carried out until prompted by the court. The petitioners explained that Rs. 18,718 was paid by cheque to the Custodian and Rs. 11,282 represented legitimate professional and related expenses incurred in obtaining necessary clearances; the Form No. 58 aggregated these amounts as Rs. 30,000. The court found no reliable contradictory material to create reasonable doubt about these facts and treated any omission to segregate the items in the return as technical in nature.

Conclusion: The explanation is accepted and the petitioners are entitled to relief in respect of the matters concerning the showing of Rs. 30,000. This conclusion is in favour of the petitioner.

Issue (ii): Whether the court can grant relief under section 281(2) of the Indian Companies Act, 1913 against apprehended criminal prosecution, including after the company has been dissolved.

Analysis: Section 281(2) confers on the court the power to relieve persons who apprehend claims for negligence, default, breach of duty or breach of trust, on terms the court thinks fit. Precedents from English authorities and Indian High Court decisions interpreting equivalent provisions indicate that subsection (2) covers apprehended criminal prosecutions as well as civil claims. The dissolution of a company does not automatically absolve a liquidator from responsibilities, and no principled authority was cited to limit relief under subsection (2) merely because the company was dissolved. Applying these principles, the court examined whether the petitioners had acted honestly and reasonably and whether, having regard to the circumstances, they ought fairly to be excused; having accepted the petitioners' explanation on facts, the statutory power to grant relief was engaged.

Conclusion: The court has jurisdiction under section 281(2) to grant relief against apprehended criminal prosecution and, having accepted the petitioners' explanation and found any default to be technical, relief is granted. This conclusion is in favour of the petitioner.

Final Conclusion: The petition is allowed and the petitioners are relieved under section 281(2) of the Indian Companies Act, 1913 from any apprehended liability arising from the matters complained of, the relief being granted on the basis that the petitioners acted honestly and reasonably and any omission was technical.

Ratio Decidendi: Where a person entitled to apply under section 281(2) of the Indian Companies Act, 1913 reasonably apprehends claims including criminal prosecution, the court may grant prospective relief if it is satisfied that the person acted honestly and reasonably and, having regard to all circumstances, ought fairly to be excused; technical omissions in accounting may justify relief when there is no reliable contrary material.

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