TMI Blog2008 (1) TMI 607X X X X Extracts X X X X X X X X Extracts X X X X ..... t the prosecution may not ultimately sustain, the Court would certainly show its indulgence so as to meet with the ends of justice or to prevent the abuse of the process of law. The Court, therefore, restrains the Registrar of Companies from launching prosecution for the alleged offences and further restrains him from proceeding further pursuant to the impugned notices challenged in all these petitions. The Court is of the view that all the three essential ingredients which the Court should take into consideration while granting interim relief i.e., prima facie case, balance of convenience and irreparable loss or injury are present in this case and hence, such relief cannot be denied to the petitioners. - COMPANY PETITION NOS. 4 AND 18 OF 2008 - - - Dated:- 11-1-2008 - K.A. PUJ, J. S.N. Soparkar for the Petitioner. Harin P. Raval for the Respondent. JUDGMENT 1. Challenge made in this group of 15 petitions is against the purported show-cause notice dated 28-11-2007 issued by the respondent, i.e., Registrar of Companies, Gujarat to the Officers and/or Directors of Suzlon Energy Limited alleging violation of the provisions contained in different sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which show-cause notices were issued. 4. On 8-1-2008, after hearing learned Senior Counsel Mr. S.N. Soparkar for Nanavati Associates for the petitioners and after considering the facts stated and averments made in the petitions as well as after considering the nature of alleged offences and explanation tendered by the Company, the Court has issued notice making it returnable on 11-1-2008 and granted ad interim relief to the effect that if the respondent has not filed prosecution by this time, he must stay his hands till the returnable date. 5. Today, Mr. Harin Rawal, learned Assistant Solicitor General appears for the respondent and filed affidavit-in-reply. He raised preliminary issues against the maintainability of petitions and against granting of ad interim relief. The Court, therefore, considers the preliminary issue first before deciding the matter for admission as well as granting of interim relief on merits. 6. Mr. Rawal has submitted that under section 633(3) of the Act, 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 othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he administrators of Company affairs are appointed for the better carrying on of a Company and fulfilling statutory requirements and obligations including complying with various provisions of the Act. These powers are to be used very sparingly and Officer of a Company cannot come to the Court as a matter of right and pray that civil or criminal proceedings could not be instituted against them for their defaults. He has further submitted that this Court is not proper forum under this sub-section for determining whether there had been a default or not or whether a particular officer was an officer in default. For getting a relief under this sub-section, an Officer must prove that he has acted honestly and reasonably and that having regard to the facts and circumstances of the case, he ought fairly to be excused. Power to relieve is placed in the hands of this Court if the conscience of this Court is convinced that person has acted reasonably and honestly and such power being discretionary power can be exercised only when this Court is satisfied that the defaulting officer has acted honestly and reasonably. This satisfaction is not mere ritual and it is not to be met by mechanical ave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. The Court is not convinced with the submissions made by Mr. Rawal with regard to the preliminary objections. This Court has an ample power to grant ad interim relief and that too, without issuance of notice to the Registrar of Companies in a given case. The Court is not granting any final relief relieving the petitioners from any of the alleged offences which may be branded as any negligence, default, breach of duty, misfeasance or breach of trust. The Court has merely asked the respondent, Registrar of Companies to stay his hands till the returnable date. The time of three days was granted only with a view to see that on hearing the respondent, if the petitioners were not entitled to ad interim relief, the same would have been immediately vacated. The Court was not averse to granting time up to 14 days and if such a request were made, the Court would not have said no to it. The judgment of the Apex Court in the case of Rabindra Chamaria ( supra ) is altogether in a different context. In that case, there was violation of the provisions contained in the Employees Provident Fund Act and challenge was made against purported prosecution under that Act. It is in this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issuance of notice to the Registrar of Companies. 12. Even otherwise, the Court has ample power to grant such ad interim relief in view of rules 6 9 of the Rules. Rule 6 deals with practice and procedure of the Court and provisions of the Code would apply. Code means the Code of Civil Procedure, 1908 as defined in rule 2(4) of the Rules. Rule 6 says that save as provided by the Act or by these Rules, the practice and procedure of the Court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. Since the provisions of the Civil Procedure Code are applicable to the practice and procedure of the Court, by virtue of Order 39, rules 1 and 2 of Civil Procedure Code, the Court has ample power to grant ad interim relief prior to issuance of notice to the other side. Similarly, Rule 9 talks about inherent powers of the Court. It says that nothing in this rule shall be deemed to limit or otherwise affect the inherent powers of the Court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the Court. Considering the facts of the present case in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 15 days from the date of communication of such decision to the applicants. 14. Mr. Soparkar has also invited another order passed by this Court on 25-7-2002 in Company Application No. 213 of 2002 in the case of Ashwini Shekhar v. Registrar of Companies wherein notice was issued to the respondent making it returnable on 6-8-2002 and ad interim relief in terms of paragraph B of that application was granted. 15. Since the Court has overruled the preliminary objection raised by Mr. Rawal, Mr. Soparkar has addressed the Court on the merits of the matter. He has placed on record the brief synopsis of the allegations made by the respondent in the show-cause notices and the reply submitted by the petitioners. The same is as under : Sr. No. Section Comp. Peti. No. Allegations Petitioner s reply 1. 303(1) 4 of 2008 The Register of Directors does not include the names of the other com-panies in which the directorship is held by the Directors of the Company. The Register of Directors has been duly maintained and meets all the requirements of the said Act and all the information require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 301((1) 6 of 2008 The Company has entered into some transactions in which the Direc-tors are directly/ indirectly inter-ested and the same has not been en-tered in the Con-tract Re-gister. All contracts and arrangements to which section 297 or section 299 of the said Act applies have been duly entered in the Register of Contracts. The remaining con-tracts and arrangement to which section 297 or section 299 do not apply is not required to be en-tered in the Register of Contracts. 4. 211(1) 7 of 2008 As per the Balance sheet of 31st March 2006, the Company had bal-ances of Rs. 10 Lakhs in the Cur-rent Account with The balance lying with the non-scheduled Bank is disclosed in the balance sheet. The same is with the Bank in China. The quan-tum wise the amount of Rs. 10 Lakhs as compared to the scale and volume of financial Sr.No. Section CompPeti. No. Allegations Petitioner s reply non-scheduled Bank and the name of such Bank and Branch and Balance with them has not been dis-closed separately in the Balance sheet. transactions of the Company is insi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9. 297(1) 12 of 2008 The Company had entered into some transactions with various parties/ companies i.e., Suzlon Structures Pvt. Ltd. and Suzlon Generators Pvt. Ltd. in which Directors are inter-ested and for that no prior approval of the Central Gov-ernment was taken. The Companies i.e., Suzlon Struc-tures Pvt. Ltd. and Suzlon Gener-ators Pvt. Ltd. are the subsidiary-ies of the Company and there-fore as per definition of Public Company under section 3 (1) ( iv ) ( c ) of the said Act, the said two Companies being a subsidiary of Public Company will come un-der the definition of the Public Company and will be termed as Public Company. 10. 308(2) 13 of 2008 The Directors holding shares of the Company had not given notice for acquisition/disposal of the shares of the Company. The Company duly maintained the Register of Directors Shareholding and all the entries were duly entered in the said register. The Board had duly al-lotted the shares of the Company to the Directors and the Com-pany had notice of the said allot-ment. The Directors had not ac-quired or disposed off the shares from open market. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot filed Form No. 23 for appointment of the petitioner No. 1 as Managing Director of the Company within the stipulated time of 30 days from the date of such ap-pointment. There is no default of non-filing of the said Form No. 23. The said form had been filed belatedly but the additional fees had already been paid. Sr. No. Section Comp. Peti. No. Allegations Petitioner s reply 15. 217(1)( e) r.w companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988 18 of 2008 Particulars of conversation of energy and the technology ab-sorption have not been given in the Form Nos. A and B in the Directors re-port. The information is fully disclosed and furnished elaborately in the body of the Directors Report for the Balance Sheet dated 31st March, 2006 and by way of annexure to the Directors Report. Company does not fall in any of 21 classes of industry listed in the Schedule to the said Rules. Therefore, the format of Form A and B do not apply to the said Company. 16. In the above background of the matter, Mr. Soparkar has submitted that the Company and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of M. Meyyappan v. Registrar of Companies [2002] 112 Comp. Cas. 450 1 wherein it is held that under section 633(2) if any notice is received for negligence, breach of duty, miscompliance or breach of trust and any application is made before the High Court, the Court has the same power to decide as if it had been a Court before which a proceeding against the officer for negligence, default, breach of duty and breach of compliance has been brought under sub-section (1). The Court, therefore, took the view that the petition was maintainable. It is also held by the Court that since the petitioner had acted honestly and diligently and properly explained the delay of 24 days in submitting the cost report to the Company Law Board, the Registrar of Companies was to forbear from prosecuting the petitioner for the offence mentioned in the show-cause notice. 19. Mr. Soparkar has further relied on the decision of this Court in the case of Hafez Rustom Dalal v. Registrar of Companies [2005] 128 Com. Cas. 883 2 wherein it is held that the Registrar of Companies had not dealt in detail with the submissions made by the applicants or the company. It was merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners were relieved of all liabilities in respect of the 12 show-cause notices being the subject-matter of the said proceedings. 21. On the other hand, Mr. Rawal while opposing to confirm the ad interim relief or to grant any further relief in the matter has submitted that looking to the various offences committed by the Officers and/or Directors of the Company, it becomes obvious that the conduct of the petitioners is indifferent coupled with the fact that on many occasions, though in reply to the notice issued by the Registrar of Companies, it is asserted that there are no violations, but factually in the earlier replies or facts, during the course of investigations under section 209A have disclosed these violations which stand admitted. Such conduct disentitles the petitioners from putting forth a bald assertion in the petition supported by an affidavit that they are honest and reasonable. It does not lie in the mouth of the petitioners. Hence, they do not deserve to any relief to be granted by this Court. Mr. Rawal has further submitted that even if it is assumed that no loss or prejudice is suffered by reason of the various acts of the petitioners, the same alone is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehended prosecution, meaning thereby, it can only be applied to civil liability and not to criminal prosecution. There is no statutory intention which would manifestly contemplate inference of possible prosecution and the Legislature did not empower the Court to grant relief in anticipation of prosecution for granting declaration that the Officer concerned would not be liable to be prosecuted at all. He has, therefore, submitted that the petitioners should wait till the proceedings are started and then claim relief from the Court which is seized of the proceedings. Such relief cannot be claimed in advance. He has, therefore, submitted that the petitions at this stage are not maintainable and all these petitions deserve to be summarily dismissed. 22. In support of his submissions, Mr. Rawal relied on the decision of the Bombay High Court in the case of Trisure India Ltd., In re Jr. Richard Laurence Parish v. Registrar of Companies [1983] 54 Com. Cas. 197 wherein it is held that section 633 confers upon the Court somewhat exceptional power to excuse a petitioner from prosecution for and the liability of an act which has, under the Companies Act, penal consequences. The powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further pursuant to the impugned notices challenged in all these petitions. 25. While continuing and/or confirming the ad interim relief, the Court also takes note of the averments made in paragraph 13 of the Affidavit-in-reply wherein it is stated that the inspection has been ordered on the basis of the letter dated 6-6-2007 of the Regional Directorate. This letter of the Directorate mentions that there was element of doubt regarding proper utilization of the proceeds of the public issue in compliance of section 297 of the Act. Since the authority had not found anything adverse in this regard, impugned notices appeared to have been issued so as to see that the Company and/or its Officers be penalised on any count. The Court does not approve this approach of the respondent and, therefore, deems it absolutely just and proper to exercise its discretionary power by granting the above relief. The Court is of the view that all the three essential ingredients which the Court should take into consideration while granting interim relief i.e., prima facie case, balance of convenience and irreparable loss or injury are present in this case and hence, such relief cannot be denied to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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