TaxTMI 
TaxTMI 
1991 (11) TMI 193
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....-out in the jute mill on June 2, 1982. By a notification dated October 26, 1983, the Government of West Bengal declared the said jute mill as a relief undertaking under the provisions of the West Bengal Relief Undertakings (Special Provisions) Act, 1972. However, on November 24, 1983, the lock-out was lifted. Thereafter the mill resumed its manufacturing operations between January 16, 1984, and April 8, 1984. There was a strike in the jute industry throughout West Bengal. Between March 7, 1985, and August 3, 1985, there was a lock-out due to labour unrest. As a result of all these the company defaulted in the payment of the provident fund dues. On January 28, 1986, a petition was moved on behalf of the appellants under section 633 of the Companies Act, 1956 (hereinafter referred to as "the Act") for being relieved of liability for delayed payment as well as non-payment of the provident fund dues and other ancillary dues. On August 21, 1986, a consent order was passed by the learned single judge allowing the outstanding provident fund dues to be paid in monthly instalments of Rs. 50,000 commencing from April, 1986, until the entire liability is paid off. Since this course was acc....
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....if he is not an employee of a body corporate covered by the Companies Act though he is an employee of a company within the meaning of the Explanation to section 14A. Besides if the contention that proceedings would include proceedings under other Acts also is accepted, all the statutory provisions made for the welfare of weaker sections of the community stand modified automatically to the extent specified in section 633 for all time to come, even for all future legislation. This would frustrate the object of welfare legislations". Accordingly, it was held that section 633 of the Act has no application in respect of any liability under any other Act. In the result, the order of the learned single judge was set aside and the application under section 633 was dismissed. We do not think it worthwhile to refer to certain preliminary objections raised before the Division Bench in relation to maintainability as that is not argued before us. It is against this judgment that the appeal by special leave has been preferred. An application was moved before the company court claiming relief under section 633 and the same was dismissed applying the judgment in Civil Appeal No. 286 of 1987.....
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....ection 633 would be rendered nugatory. The result of the Division Bench judgment of the Calcutta High Court referred to in the impugned judgment will be that these directors (the appellants) are exposed to prosecution ; certainly that could not have been the intention of the law maker. Mr. Kapil Sibal, learned counsel appearing for the appellants in Civil Appeal No. 3117, refers to section 2(11) of the Act and submits that the definition of "court" contemplates with respect to any matter relating to a company. The court having respective jurisdiction as provided under section 2(11) is with respect to any offence under the Act, the Court of the Magistrate of the first class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence. This section will show that where like the appellants they are not working directors, they cannot be subject to prosecution. That is where section 633 steps in and affords protection, even if it is a liability arising under any other Act, for instance, like delayed payment or non-payment of provident fund. In other respects, he adopts the arguments of Mr. Venugopal. Learned counsel for the Regional Provident Fund Co....
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....f prosecution and which came to be introduced by the Amending Act of 1989 also deals with companies. The Explanation under that section specifically states as to what would be a company or director for the purpose of that section. Hence it is submitted that no interference is called for. Having regard to the above arguments, the only point that arises for determination is as to the scope of section 633. The Companies Act was enacted in the year 1956. As the preamble itself says it is an Act to consolidate and amend a law relating to companies and certain other associations. As to the definition of company, it is found under section 3(1) which consists of the following : (i)company, (ii)existing company, (iii)private company, and (iv)public company. Section 644 of this Act reads as follows : "The enactments mentioned in Schedule XII are hereby repealed". Schedule XII that is referred to under the section refers to the previous Companies Act of 1913 also and certain other Acts by way of ordinance or amendments. Section 281 of the old Act of 1913 which talks of power of the court to grant relief in certain cases reads as under : "281. Power of court to....
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....nce, default, breach of duty, misfeasance or breach of trust. (2) Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the High Court for relief and the High Court on such application shall have the same power to relieve him as it would have had if it had been a court before which a proceeding against the officer for negligence, default, breach of duty, misfeasance or breach of trust had been brought under sub-section (1). (3) No court shall grant any relief to any officer under sub-section (1) or sub-section (2) unless it has, by notice served in the manner specified by it, required the Registrar and such other person, if any, as it thinks necessary, to show cause why such relief should not be granted". On a comparison of the two sections, two important features emerge to be noticed. The court under section 633 has no power to grant relief from any civil liability. Under sub-section (3) of section 281, only four categories of persons were entitled to seek relief while under section 633 it will be an officer of the compan....
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....f a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him either wholly or partly, from his liability on such terms as it thinks fit. (2) If any such officer or person as abovementioned has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the court for relief ; and the court on the application has the same power to relieve him as under this section it would have had if it had been a court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought. (3) Where a case to which sub-section (1) applies is being tried by a judge wit....
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....ition. The application is made to the court having jurisdiction to wind up the company. In cases in the High Court of Justice the proceedings are assigned to the Chancery Division. The petition and all affidavits, notices and other documents in the proceedings under it must be entitled in the matter of the company and in the matter of the Companies Act, 1985". Under the above provisions a director may be relieved against liability in respect of a transaction wholly ultra vires the company or against the penalties imposed by the Act where he has acted without obtaining or after ceasing to hold his qualification shares. The leading decision on section 448 is reported in Customs and Excise Commissioners v. Hedon Alpha Ltd. [1981] QB 818 ; [1981] 2 All ER 697 (CA). That related to the interpretation to be placed on section 448 of the Companies Act of 1948. In that case a director of a company was carrying on business as a bookmaker. The liability of the director for general betting duty was not paid by the company. The director was acting honestly and reasonably, and, therefore, was found not guilty of misconduct. Under these circumstances, the question arose whether the director....
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....ngs against, inter alia, a director for negligence, default, breach of duty or breach of trust, if a director who is or may be liable has in the opinion of the court acted honestly and reasonably, and if, having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the court may wholly or partly relieve him from his liability ; the court has a discretion in the matter, and may impose terms (section 448(1)). In spite of the wide words of the section it has been held that the section applies only to actions brought by or on behalf of the company against its directors for breach of duty and to penal proceedings for the enforcement of the Companies Act". The 5th edition of Pennington's Company Law, 1985, at pages 679 and 680, contains the following observations : "However, if a director is sued for breach of any of his duties, he may apply to the court for relief from liability, and if the court is satisfied that he acted honestly and reasonably, and that in all the circumstances he ought fairly to be excused, it may relieve him from liability, on such terms as it thinks fit. This provision is identically worde....
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....ly : Provided that nothing contained in this sub-section shall render any such person liable to any punishment, if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence. (2) Notwithstanding anything contained in sub-section (1), where an offence under this Act, the Scheme or the Family Pension Scheme or the Insurance Scheme has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of, any director or manager, secretary or other officer of the company, such director, manager, secretary or other officer shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly". The authority to take action under the Provident Funds Act as seen from section 14 is a Commissioner while the procedure so far as the Companies Act is concerned under section 621 is that on a complaint in writing of the Registrar or of a shareholder of a company or of an officer authorised by the Central Government in this behalf, action can be taken. As already not....