1969 (4) TMI 53 - HC - Companies Law

Powers of court to grant relief in certain cases Savings of prosecutions instituted by liquidator or Court under section 237 of Act 7 of 1913

Summary

Issues Involved:
1. Applicability of the Indian Companies Act, 1913, post-enactment of the Indian Companies Act, 1956.
2. Validity of prosecution under the repealed Companies Act, 1913.
3. Applicability of Section 633 of the Companies Act, 1956, for relief from liability.

Detailed Analysis:

1. Applicability of the Indian Companies Act, 1913, post-enactment of the Indian Companies Act, 1956:
The prosecution was initiated under the Indian Companies Act, 1913, for offenses committed by the respondents. The key issue was whether the 1913 Act was still applicable after the 1956 Act came into force in Pondicherry on October 1, 1963. The court noted that the Indian Companies Act, 1913, was repealed and replaced by the Companies Act, 1956. The prosecution was launched under the provisions of the 1913 Act on August 6, 1966, long after the 1956 Act came into force, raising questions about the validity of such prosecution.

2. Validity of prosecution under the repealed Companies Act, 1913:
The court examined Section 648 of the Companies Act, 1956, which saves prosecutions instituted by a liquidator or ordered by the court under Section 237 of the Indian Companies Act, 1913, before the commencement of the 1956 Act. Since the prosecution in this case was not initiated before the 1956 Act came into force, it was not saved by Section 648. Additionally, the court considered the application of Section 6 of the General Clauses Act, 1897, which generally saves rights, privileges, obligations, or liabilities acquired under repealed enactments unless a different intention appears. The court found that the specific savings provisions in Sections 645 to 657 of the 1956 Act indicated a contrary intention, thereby not saving the prosecution under the 1913 Act. Consequently, the court ruled that the prosecution was unsustainable.

3. Applicability of Section 633 of the Companies Act, 1956, for relief from liability:
The trial court had acquitted the respondents, partly on the ground that they had no criminal intention, invoking Section 633 of the Companies Act, 1956. The High Court clarified that Section 633 provides relief from liability in cases of negligence, default, breach of duty, misfeasance, or breach of trust, provided the person acted honestly and reasonably. The absence of criminal intention is irrelevant under this provision. The section allows the court to relieve a person from liability if it finds that the person acted honestly and reasonably, considering all circumstances. However, this does not equate to an acquittal or discharge under the Criminal Procedure Code. The High Court found that the trial court's application of Section 633 was erroneous.

Conclusion:
The High Court dismissed the appeal, concluding that the prosecution under the Indian Companies Act, 1913, was unsustainable due to the enactment of the Companies Act, 1956, and the specific savings provisions indicating a contrary intention. Additionally, the trial court's reliance on Section 633 of the Companies Act, 1956, to acquit the respondents was found to be incorrect.