TaxTMI 
TaxTMI 
2009 (1) TMI 488
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....tering, etc., hardware, software, process control instrumentation and also to act as consul-tant and advisor on process control instrumentation and industrial automation and to render organisation development services, recruitment development, etc. 4. The company was incorporated in the year 1995 and the petitioner who was the first director is holding 13,750 equity shares of Rs. 10 each. According to the petitioner, the other director Mr. S. Venkataramanan with whom the petitioner jointly started the company was in fact, managing the company since the beginning. Due to some dispute which arose between them, all the books and papers of the company were kept in the registered office, which is the residence of the said Mr. S. Venkataramanan and, therefore, the petitioner had no access to the books, records and papers of the company. 5. It is stated that the petitioner has filed a petition under sections 397 and 398 of the Companies Act, 1956, against the said Mr. S. Venkataramanan before the Company Law Board, which was dismissed on 16-12-2002, against which the petitioner has filed appeal in C.M.A. No. 668 of 2003, which is pending before this Court. Therefore, according to th....
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....98-99 onwards, the offence continues attracting the penalty of Rs. 500 for everyday, during which the default continues. 10. Likewise, for non-convening of annual general meeting, under section 168 of the Act, even if the company has no managing director or a whole-time director, every director is liable for the offence. In the absence of any managing director or a whole-time director, since the company was having only two directors, viz., the petitioner and Mr. S. Venkataramanan, they are liable as per section 5 of the Act as "officer who is in default". In spite of show-cause notice, the petitioner has not filed any return or balance-sheet and, therefore, according to the respondent, the petitioner has no locus standi to claim relief under section 633 of the Act. The non-filing of balance sheet and annual returns is sufficient to prove that the petitioner has not acted honestly and reasonably. 11. The contention of learned counsel for the petitioner in support of the petition filed under section 633 of the Companies Act is that, as the petitioner has no access to the registered office of the company and all the books and papers of the company are at the premises of the regi....
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..... It is his submission that unless and until the continuous offence comes to an end, section 633 cannot be made applicable. He also submits that in the circumstances, the Company Law Board has dismissed the petition filed under section 397 of the Act from which it should be presumed that the petitioner was not having honest intention. He would further submit that the petitioner is an "officer who is in default" as per section 5 of the Companies Act and the petitioner as a director had the right to call for annual general meeting and also to approach the Government for convening such meetings, when the other director was not co-operating. He would rely upon the judgment in S.S. Sahni v. Registrar of Companies [1990] 69 Comp. Cas. 556 (Punj. & Har.), to substantiate his contention that want of account books is not a defence for non-convening the annual general meeting. 13. I have heard learned counsel for the petitioner and learned Central Government Standing Counsel appearing for the respondent. 14. The admitted fact in this case is that the statutory obligations which are imposed on the company under sections 159, 166 and 220 of the Act have not been complied with from 2001-0....
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....ct, after the balance-sheet and profit and loss account are laid before the company at an annual general meeting, three copies of the balance-sheet and profit and loss account signed by the managing director shall be filed with the Registrar. The non-compliance of the same would result in punishment of the company and every officer of the company who is in default, like the punishment provided under section 162 of the Act as stated above. Section 220 of the Act is as follows : "Three copies of balance-sheet, etc., to be filed with Registrar.-(1) After the balance sheet and the profit and loss account have been laid before a company at an annual general meeting as aforesaid, there shall be filed with the Registrar within thirty days from the date on which the balance-sheet and the profit and loss account were so laid, or where the annual general meeting of a company for any year has not been held, there shall be filed with the Registrar within thirty days from the latest day on or before which that meeting should have been held in accordance with the provisions of this Act,- (a )three copies of the balance-sheet and the profit and loss account, signed by the managing director,....
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....ime director or whole-time directors ; (c )the manager ; (d )the secretary ; (e )any person in accordance with whose directions or instructions the board of directors of the company is accustomed to act ; (f )any person charged by the board with the responsibility of complying with that provision : Provided that the person so charged has given his consent in this behalf to the board; (g )where any company does not have any of the officers specified in clauses (a) to (c ), any director or directors who may be specified by the board in this behalf or where no director is so specified, all the directors: Provided that where the board exercises any power under clause (f) or clause (g), it shall, within thirty days of the exercise of such powers, file with the Registrar a return in the prescribed form." 18. It is true that in the absence of any managing director or whole-time director or manager, etc., each of the director is termed as "officer who is in default". On the facts of the case, it is not in dispute that there has been default on the part of the company in its obligations under sections 159, 166 and 220 of the Companies Act by not filing returns, not c....
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....r 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." 20. Such relief can be claimed from the High Court by such officers under section 633(2) of the Act. Therefore, relieving an officer of a company under section 633 is only on the basis that such officer is in fact liable to be punished under the said provisions. In other words, the condition precedent for the exercise of powers by the Court under section 633 is that such officer is in fact in default having failed to perform the statutory obligations which are mandated on him. Therefore, the contention of the learned Central Government Standing Counsel that on the admitted fact of non-compliance of the provisions of the Act, the petitioner is not entitled to the relief under section 633 is not sustainable. 21. What has to be considered is that in respect of failure to perform the statutory obligations, the officer of the company has been honest and taking into consideration the overall circumstances, I am of the consi-dered opinion that the i....
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....khs. The said statement cannot be termed as acceptance of any misfeasance by the petitioner, by any stretch of imagination. Therefore, the contention of the learned Central Government Standing Counsel that the petitioner cannot be termed as honest within the meaning of section 633 of the Act is again liable to be rejected. But, on the other hand, in the company petition, the petitioner has categorically stated that all the books and account of the company were in the custody of Mr. S. Venkataramanan and he denied entry and access of the same to him, about which he has also written to the Income-tax Department on 30-11-2000, stating that he was helpless in filing income-tax returns. It is also stated that the registered office of the company happens to be the residence of the said Mr. S. Venkataramanan, which is not denied in the reply filed to the said petition. On the other hand, in the reply, it was the specific stand of the said Mr. S. Venkataramanan that he has not denied permission to inspect the books of account and he has only denied for removal of books of account from the premises. He has also stated that he was always prepared and ready to produce the books of account. Th....
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..... The claim and counter-claim of the parties in regard to removal of the stock and assets of the company, neither of the parties has substantiated the same, in the absence, of which we will not be able to adjudicate the issue. In regard to the other allegations that the first respondent has not complied with the statutory obligations and failed to call for annual general meeting and board meeting of the company, it may be observed that the company is already closed and is not functioning. The statutory authority will take appropriate steps for such non-compliance. On our overall assessment of the facts of this case, it is apparent that both the shareholders had decided to close down the business of the company by taking away the assets as seen from page 24 (annexure 5) of petition and page 44 (annexure VII) of counter of R1. This happened in September, 2000. However, this petition was filed only in March, 2002. There is no explanation for the delay in filing this petition. It is on record that the third respondent initiated proceedings before the Debts Recovery Tribunal in early 2001and this petition was filed thereafter in March, 2002, with a specific prayer to stop Debts Recovery....
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....at the exercise of powers under section 633 of the Companies Act is possible only after the continuing offence comes to an end and there is absolutely no such hindrance to the powers of the Court under section 633 of the Act. 29. One other ground of allegation made against the petitioner in respect of non-convening of annual general meetings, which is mandatory under section 166 of the Act for which penalty is imposed under section 168 of the Act, certainly stands on a different footing on the factual circumstances of the case. Under section 166 of the Act, convening of annual general meeting is a mandatory duty cast on every company. Under section 167 of the Companies Act, as amended by the Companies (Second Amendment) Act, 2002^1, the Central Government on the application of any of the members of a company can either call for or direct for a general meeting with such other further directions. The said power was with the Company Law Board before the said amendment under section 167 of the Act which after amendment stands as follows : "Power of Central Government to call annual general meeting.-(1) If default is made in holding an annual general meeting in accordance with sec....