TMI Blog1952 (12) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of the securities wilfully misapplied by the said appellant on or before the 12th September, 1961. In default, he ordered that the appellant should undergo imprisonment for two years. The appellant was given time till the 12th September, 1951, to which date the matter stood adjourned. On the 14th September, 1951, the appellant having failed to comply with the order, dated the 29th August, 1951, the matter came up before the learned Judge on the 14th September, 1951. The respondent was ordered to undergo imprisonment as directed in the order dated 29th August, 1951, for a period of two years and that the necessary warrant should issue. This appeal is preferred against the said order. The earlier history of the application taken out by the official liquidators of the said Peerdan Joharmal Bank Ltd. in Thiruchirapalli, (in liquidation) under section 282A of the Indian Companies Act, for passing appropriate orders against the respondent, has been elaborately set out in the order passed by Krishnaswami Nayudu J. under appeal, and it is' therefore unnecessary to traverse the entire ground in this judgment. Suffice it to mention that the application of the liquidators in its final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Mr. Rajah Aiyar has urged on behalf of the appellant is that no leave has been obtained by the official liquidators for instituting proceedings against the appellant under section 282A of the Indian Companies Act, as required by section 179 of the said Act. Mr. Rajah Aiyar has invited our attention to the language of section 179 ( a ) of the Indian Companies Act which is to the following effect: "The official liquidator shall have power, with the sanction of the court, to do the following things: ( a ) to institute or defend any suit or prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company, etc." and contends that the sanction of the court for instituting criminal proceedings against the appellant was a condition precedent and that, inasmuch as no sanction was obtained by the official liquidators for the filing of the present application against the appellant, the proceedings against him are vitiated by this serious legal defect. He also drew our attention to the fact that the order of appointment given to the official liquidators also did not contain any power authorising the official liquidators to institute proceedings under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form as contained in various enactments such as the Civil Procedure Code, and the Criminal Procedure Code and certain other Acts where it has been provided that "no suit or proceedings shall lie or be taken without the previous sanction" of the court or the authority concerned (Vide sections 195 and 196 of the Criminal Procedure Code, section 92 of the Civil Procedure Code, section 70 of the Stamp Act, section 223 of the Local Boards Act and section 399 of the City Municipal Act). Far from being a prohibitory section, as is the case in other enactments, the section in the Indian Companies Act is an enabling one which says that the liquidators shall have power, with the sanction of the court, to institute criminal proceedings. We do not think that there is sufficient justification for us to import into the language of section 179 the words "previous sanction." If the words "previous sanction" were to be imported into this section, then the administration of the affairs of the company in liquidation under the various sub-clauses of this section would become well nigh impossible, for, it would then become necessary that the liquidators should run up to the court even for ordinary act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants prayed for appropriate orders under sections 238-A and 282-A. This notice of motion was filed under four sections, viz., sections 183,185, 238-A and 282-A of the Indian Companies Act, and under rule 9 of the Original Side Rules and under the Banking Companies Ordinance dated 23rd September, 1949. Paragraphs 21 and 22 of the affidavit filed in support of the notice of motion in Application No. 4572 of 1949 mention that the appellant had rendered himself liable to be dealt with under section 238-A and 282-A of the Indian Companies Act and that it was, therefore, just and necessary that the court should be pleased to summon Loomchand Sait, the appellant, and commit him for contempt of court and pass appropriate orders under sections 238-A and 282-A of the Indian Companies Act. It is, therefore, clear that the court was approached by the official liquidators not merely under section 238-A but also under section 282-A of the Indian Companies Act. While the order of Mack J. proceeded at the outset to state that he had treated the application substantially as one under Section 283-A for punishing Loomchand Sait for breach of his obligations under sub-sections (1) and (2) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings or on application, we do not think that there is anything wrong in the learned company Judge having accorded sanction in the course of the proceedings. In this view, it will be futile to contend that the official liquidators had not obtained sanction from the court for instituting criminal proceedings which have terminated in the conviction and sentence of the appellant. We think section 179 has been substantially complied with, there being no statutory prohibition against proceedings being instituted without the previous sanction of the court. Section 17 of the Presidency Towns Insolvency Act, we may state, has been interpreted to mean than sanction could be given even during the course of the proceedings. The learned official liquidators have invited Our attention to the decisions in Mrityunjay v. Provat Kumar, The Official Receiver, Coimbalore v. Kanga, Emperor v. Bishan Sahai Vidyarthi, Subramania Aiyar v. The Podanyr Bank Ltd., and Laduram Mathmul v. Nandalal Kami wherein the broad principle has been enunciated that the grant of leave is a matter between the court and the receiver or the official liquidators and that the sections requiring leave of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d only under section 282A as well as the other sections. There is, therefore, no question of the Judge taking action suo motu in this case. The complaint has been by the liquidators on behalf of the company for which they have been appointed official liquidators. Besides, an examination of the cause title of the application and the notice of motion that have been taken out by the liquidators clearly set out that the application are in the matter of the Indian Companies Act (VII of 1913) and in the matter of the Peerdan Joharmal Bank Ltd. in liquidation and the proceedings are stated to be between N. Krishnaswami Aiyangar, the petitioner and Peerdan Joharmal Bank Ltd., the respondent, and also between A. Balasubramaniam and C. S. Vidyasankaran, joint official liquidators, applicants and J. Lobmchand Sait, respondent. It is true, that the applicants in the said application and the notice of motion have not been described as the Peerdan Joharmall Bank Ltd. (in liquidation) by the joint official liquidators, Messrs. A. Balasubramaniam and C.S. Vidyasankaran. The question is as to whether by their inscribing their names as they have actually done instead of adopting the form which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such property in his possession wrongfully withholds it or wilfully applies it to purposes other than those expressed or directed in the articles and authorised by this Act, shall, on the complaint of the company or any creditor or contributory thereof, be punishable with fine not exceeding one thousand rupees and may be ordered by the court trying the offence to deliver up or refund within a time to be fixed by the court any such property improperly obtained or wrongfully withheld or wilfully misapplied or in default to suffer imprisonment for a period not exceeding two years." A reading of this section shows that what is provided for in the first instance is a fine not exceeding Rs. 1,000 to be imposed upon the director or other person found guilty and an order to be passed by the court directing the person complained of to deliver or refund the property improperly obtained or wrongfully withheld or wilfully misapplied by him; and in the second place, the section goes on to provide that, if the person against whom the fine and the order have been passed commits default, he may be ordered to suffer imprisonment for a period not exceeding two years. This default clause imposing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve or a disjunctive word. Whatever might be the comment on that aspect of the language contained in article 20(2), in this case, there can be no substance in the contention that the appellant has been prosecuted and punished twice over for the same offence; much less is it a case of the appellant being simply punished twice over for the same offence. In other words whether the word "and" occurring in the phrase "prosecution and punished" be simply taken as a conjunction or a disjunctive word, in our opinion, it cannot be contended with any force that the appellant in this case has been either prosecuted twice or punished twice for the same offence. Therefore, we are unable to agree with the argument of the learned counsel for the appellant that the punishment imposed on the appellant in this would amount to a double punishment for one and the same offence. The third point urged by the learned counsel for the appellant is that inasmuch as the present proceedings have been also taken under the Banking Companies Act and so far no rules having been framed by the court under the Banking Companies Act, as required by section 45G, of the said Act, the proceedings out of which this appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any person who has taken part in the formation or promotion of the banking company which is being wound up or any past or present director, manager or officer thereof. There is also a proviso to this section which is in the following terms: "Provided that the offence is one punishable under the Indian Companies Act, 1913, with imprisonment for a term which does not exceed two years, or with fine which does not exceed one thousand rupees." The second clause of this section 45-C sets forth details as to what the trying court should do if the case is tried summarily under sub-section (1) of the said section. To this clause also there is a further clause which says that nothing contained in sub-section (2) of section 262 of the Criminal Procedure Code, 1898, shall apply to any such trial. The third sub-clause of the section (Section 45-C) lays down thus: "All offences in relation to winding up alleged to have been committed by any person specified in sub-section (1), which are punishable under the Indian Companies Act, 1913, and which are not tried in the summary way under sub-section (1) shall, notwithstanding anything to the contrary contained in that Act or the Criminal Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the proper and competent court contemplated by the scheme of the Act would only be the High Court and not the Presidency Magistrate's Court, even if it is contended that the offence has been tri d in a summary way. In the alternative, the contention of the learned counsel for the appellant is that if the offence has not been tried in a summary way under sub-section (1) of section 46-C, then it should have been tried by a Judge other than the Judge for the time being dealing with the proceedings in winding up of the banking company. His point is that in the present case, the procedure that has been followed is that of a warrant case, i.e., where witnesses have been first examined and the appellant has been called upon to enter into his defence. In such an event, according to the learned counsel, the Judge who should have tried this offence should not be the Judge dealing with the winding up proceedings of the banking company but some other Judge. But, actually, in the present proceedings, the same Judge dealing with company matters has also been the Judge who tried the offence and imposed the punishment against the appellant. On this ground, the learned counsel for the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the offence for which he has been convicted. There was a further point raised by the learned counsel for the appellant that in this case no fraudulent intention has been proved on the part of the appellant as is required by section 282-A of the Indian Companies Act. When the case was remanded by the Appellate court it did observe that to render the appellant liable to the penalties imposed by section 282-A of the Indian Companies Act, there should be proof of fraudulent intention. The learned Chief Justice, who delivered the judgment of the appellate court, has referred to the decision in Barrett v. Markham, and also to the decision in Maiden v. Rodes, wherein it has been laid down that the person who is proceeded against for withholding or misapplying monies belonging to the company should be proved to have had a fraudulent intention in doing so. Of course, it has been observed by the learned Chief Justice in the said judgment that fraud cannot be directly proved but it could be inferred from the circumstances. In this case, the learned Judge, who has tried this appellant, has, in the last two paragraphs of his judgment found that the official liquidators have est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonably he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that the court may relieve him either wholly or partly, from his liability on such terms as the court may think fit. We do not think that, on the facts of this case, the learned counsel for the appellant have succeeded in establishing to our satisfaction that there is justification to invoke the aid of this section in favour of the appellant. The explanations given by the appellant for his conduct in respect of the properties belonging to the company do not enable us to come to the conclusion that he has acted honestly and reasonably. All the circumstances which have been placed before us go to prove only the contrary, namely, that the appellant has not acted in any bona fide manner, much less honestly or reasonably. Except the point that at a time when there was a run on the bank the appellant had tried to meet the situation there is nothing else which can be said to his credit. The facts reveal that in dealing with the properties of the bank, the appellant has tried not merely to help himself at the expense of the bank, but also to help all his near and dear relations with fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would like to have it. The resolution, in our opinion, is only a record by the company of what the appellant is said to have done and it does not appear to us to contain the approval by the board of directors of the conduct of the appellant in respect of the Government securities. In fact, the latter part of the resolution directs the appellant to rectify the position which resulted from his conduct. This the appellant has not chosen to do. In such circumstances, it cannot be said that the resolution of the board of directors affords any protection against the charge which he has been called upon to answer. Reliance in this connection has been placed on the decisions in Dovey v. Cory, Blyth's case, and In re Kingston Cotton Mill Co., and the learned counsel argues that the director must be deemed to have acted as a man of business in having disposed of the Government securities and if his conduct has been merely imprudent, he cannot be criminally liable, and he must be deemed to have resorted to honest, reasonable and bona fide payments with a view to save the credit of the bank. Such honest and reasonable conduct cannot be the subject of criminal charge under section 282- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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