TMI Blog1995 (1) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of the company. Since the interim order of stay did not specifically extend to the stay of conviction for the purpose of avoiding the disqualification under section 267, there is no substance in the appeal and the appeal is, therefore, dismissed. - CIVIL APPEAL NO. 5620 OF 1994 - - - Dated:- 19-1-1995 - A.M. AHMADI AND R.M. SAHAI AND K. JAYACHANDRA REDDY, JJ. JUDGMENT Ahmadi, CJI - This appeal arises from the order dated 8/9-6-1994, of the Division Bench of the Bombay High Court rendered in Appeal No. 1992 against an order dated 17-8-1992, passed by the learned single Judge making absolute the notice of motion No. 1593 of 1992 taken out by the appellant Rama Narang and the respondent Nos. 4 and 5, namely, Narang International Hotels (P.) Ltd. and Arvind Ghei. The two reliefs granted by the learned single Judge were to restrain respondent Nos. 1 and 2 from (a) acting upon, implementing, circulating, or taking any steps in furtherance: of any decision purported to have been taken at the Board meeting alleged to have been held on 13-7-1992, and from (b) obstructing or interfering with the petitioner's functioning as Chairman and Managing Director of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Appeal No. 17 of 1987, the Delhi High Court released the appellant on bail and directed stay of the operation of the impugned order. 5. The Bombay High Court by an order dated 6-12-1990, restrained the company for holding any Board meeting or general body meeting. Subse-quently, on 5-7-1991, the respondent No. 1 unconditionally withdrew the company petition with the permission of the company Judge. On 12-7-1991, Sanjay Narang nephew of the appellant, preferred petition No. 10 of 1991 before the Company Law Board under sections 397 and 398 chal-lenging the appellant's appointment as managing director of the company on the same ground as in the Company Petition No. 681 of 1990. During the pendency of the said petition before the Company Law Board (CLB), some family settlement was arrived at on 30-1-1992, between the members of the Narang family recognising, inter alia, that the appellant was validly appointed as the chairman and managing director of the company and was not disqualified to act as a managing director. Under the settlement, Ramesh Narang ceased to be a director. The petition before the CLB was disposed of in terms of the said settlement. 6. On 30-6-1992, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent No. 1, Ramesh Narang, to challenge the same in view of he having not pursued the earlier challenge. The learned single Judge also came to the conclusion on an appreciation of the evidence that the meeting of 13-7-1992, was not properly and validly convened and hence the entire proceedings were bad in law. The learned single Judge, therefore, granted the interim reliefs sought. 8. The matter was carried in appeal, Appeal No. 684 of 1992, before a Division Bench of the High Court by Ramesh Narang. The principal contention urged in the appeal was in respect of the capacity of the present appellant to be appointed as director and managing director of the company after his conviction on 22-12-1986. The factum of conviction and sentence as well as that the conviction was in respect of offences involving moral turpitude was not in dispute. The appointment of the appellant as director and managing director having been made in 1988 and 1990, were admittedly subsequent to the order of conviction recorded on 22-12-1986. It was, therefore, contended before the Division Bench on behalf of Ramesh Narang that the learned single Judge had fallen in error in holding that the appointment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disqualification incurred by a managing director. In the view of the Division Bench, the provisions of section 267 were mandatory in nature and it was not permissible to appoint or to continue any person as managing director of a company on his being convicted of an offence involving moral turpitude. Dealing with the argument that while the bar imposed by section 267 was absolute in nature and would have squarely applied in the case of the present appellant had it not been for the interim order passed by the Delhi High Court in appeal by which the impugned order of conviction and sentence came to be suspended. The Division Bench after referring to sub-section (1) of section 389 of the Code of Criminal Procedure, 1898, which, inter alia, provides that pending any appeal by a convicted person the Appellate Court may order that the execution of the sentence or order appealed against be suspended and that he be released on bail or on his own bond proceeded to observe under: The powers of the Appellate Court under section 389(1) of the Code cannot be construed with reference to the expression 'order' as suspending the order of conviction itself. The powers of the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatute the moment the order of conviction is recorded. With regard to the submission that by the withdrawal of the earlier petition, the grievances had come to an end on the filing of the consent terms, the Division Bench repelled the argument holding that the doctrine of estoppel could not be attracted to a case of violation of a statutory provision. The Division Bench, therefore, con-cluded that the view taken by the learned single Judge in this behalf was erroneous and consequently, the learned single Judge had committed an error in granting relief in terms of prayer (b) of the notice of motion. Accordingly, the appeal came to be partly allowed as stated hereinbefore. Being aggrieved by the said view taken by the Division Bench the appellant Rama Narang has preferred his appeal by special leave. 10. The above resume would show that the principal question which falls for our determination is whether the appellant is liable to be visited with the consequence of section 267 notwithstanding the interim order passed by the Delhi High Court while admitting the appellant's appeal against his conviction and sentence by the Additional Sessions Judge, Delhi. As we have said earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall not take effect for thirty days from the date of sentence and if an appeal is preferred during the pendency of appeal and till seven days after the disposal of the appeal. This benefit is not extended in the case of a managing director. The Act has, therefore, drawn a distinction between a director and a managing director; the provisions in the case of the latter are more stringent as compared to that of the former. And so it should be because it is the managing director who is personally responsible for the business of the company. The law considers it unwise to appoint or continue the appointment of a person guilty of an offence involving moral turpitude to be entrusted or continued to be entrusted with the affairs of any company as that would not be in the interests of the shareholders or for that matter even in public interest. As a matter of public policy, the law bars the entry of such a person as managing director of a company and insists that if he is already in position, he should forthwith be removed from that position. The purpose of section 267 is to protect the interest of the shareholders and to ensure that the management of the affairs of the company and its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f prosecution evidence. If, on the completion of the prosecution evidence and examination of the accused, the Judge considers that there is no evidence that the accused committed the offence with which he is charged, the Judge shall record an order of acquittal. If the Judge does not record an acquittal under section 232, the accused would have to be called upon to enter on his defence as required by section 233. After the evidence-in-defence is completed and the arguments heard as required by section 235, section 235 requires the Judge to give a judgment in the case. If the accused is convicted, sub-section (2) of section 235 requires that the Judge shall, unless he proceeds in accordance with the provisions of section 360, hear the accused on the question of sentence and then pass sentence on him according to law. It will thus be seen that under the Code after the conviction is recorded, section 235(2), inter alia, provides that the Judge shall hear the accused on the question of sentence and then pass sentence on him according to law. The trial, therefore, comes to an end only after the sentence is awarded to the convicted person. 13. Chapter XXVII of the Code of Criminal Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 384 provides for summary dismissal of appeal if the Appellate Court does not find sufficient ground to entertain the appeal. If, however, the appeal is not summarily dismissed, the Court must cause notice to issue as to the time and place at which such appeal will be heard. Section 389(1) empowers the Appellate Court to order that the execution of the sentence or order appealed against be suspended pending the appeal. What can be suspended under this provision is the execution of the sentence or the execution of the order. Does 'order' in section 389(1) empower the Appellate Court to order that the execution of the sentence or order appealed against be suspended pending the appeal. What can be suspended under this provision is the execution of the sentence or the execution of the order. Does 'order' in section 389(1) mean order of conviction or an order similar to the one under sections 357 or 360 of the Code? Obviously, the order referred to in section 389(1) must be an order capable of execution. An order of conviction by itself is not capable of execution under the Code. It is the order of sentence or an order awarding compensation or imposing fine or releas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not drawn? As we said earlier, the application seeking interim stay is wholly silent on this point. That is why we feel that this is a case in which the appellant indulged in an exercise of hide and seek in obtaining the interim stay without drawing the pointed attention of the Delhi High Court that stay of conviction was essential to avoid the disqualification under section 267. If such a precise request was made to the Court pointing out the consequences likely to fall on the continuance of the conviction order, the Court would have applied its mind to the specific question and if it thought that case was made out for grant of interim stay of the conviction order, with or without conditions attached thereto, it may have granted an order to that effect. There can be no doubt that the object of section 267 is wholesome and that is to ensure that the management of the company is not in soiled hands. As we have pointed out earlier, the managing director of a company holds a fiduciary position qua the company and its shareholders and, therefore, different considerations would flow if an order is sought from the Appellate Court for staying the operation of the disqualification that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Delhi High Court in the context of the averments made in the application seeking such an order. 18. Be that as it may, we have, on interpretation of the interim order passed by the Delhi High Court in the context of the averments made in applica-tion seeking such an order, come to the conclusion that the Delhi High Court while granting stay of the impugned judgment did not and could not have intended to stay the operation of the disqualification under section 267 consequent upon conviction. To that extent the interpretation put by the Bombay High Court on the interim stay is unassailable. We are afraid, the appellant did not approach the Delhi High Court with clean hands if the intention of obtaining the stay was to avoid the disqualification under section 267. That is why we have said that a litigant cannot play hide and seek with the Court and must approach the Court candidly and with clean hands. It would have been so if the intention of the appellant in obtaining the interim stay was to avoid the disqualification he was likely to incur by the thrust of section 267. If that was his intention he was clearly trying to hoodwink the Court by suppressing it instead of comi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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