1960 (10) TMI 38

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....ayapeta Electricity and Water Supply Corporation Ltd., Jaggayapet, (hereinafter called the company). The first respondent to this appeal, Rama Rao was appointed as the official liquidator and O.P. No. 168 of 1949 was transferred to the lower court for further proceedings. The appellant was the promoter and the managing agent of the company. On January 4, 1956, respondents Nos. 2 and 3 who are the shareholders, made the application to the lower court, which has given rise to the appeal, under sections 179, 237(1) and 238A of the Act. Fourteen distinct offences punishable under sections 407, 477A, Indian Penal Code, and 238A of the Act were set out in clauses (a) to (n) of paragraph 3 of the application. The prayer was to grant sanction for t....

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....l proceedings on the ground that in the absence of a prior direction judicially given by the company court under section 237(1) of the Act, the prosecution launched against them was ab initio void. The learned judges held that clause (a) of section 179 merely refers to empowering the liquidator for acting in the name and on behalf of the company in respect of the legal proceedings. They further held that sections 179 and 237(1) were merely intended for the control of the company court over the liquidator in the discharge of his functions under the Act and have no bearing on the validity of proceedings instituted by the liquidator in other courts. Discussing section 237(1), Chakravartti C.J. observed: "The Act undoubtedly lays down the pow....

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....ontrol) Order, 1943. It has no bearing on the construction of sections 179 and 237 (1) of the Act. In Subramania Iyer v . Podanur Bank Ltd. [1917] 17 Comp. Cas. 71 , 75, the District Judge's sanction under section 237(1) to prosecute the directors and the secretary of the Podanur Bank Ltd. was objected to by two shareholders on the ground that it was an unnecessary expenditure to the company. Wadsworth J. who spoke for the division bench quoted with approval the principle laid down by Buckley J. in In re London and Globe Finance Corporation Ltd, [1903] 1 Ch. 728, that the question to be answered is whether an honest and upright citizen would think that his duty to the State required him to prosecute. Dealing with the criticism that the Dis....