9911796707
TMI Blog1997 (1) TMI 552X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 months). The 2nd petitioner being a lady was directed to pay a fine of ₹ 10,000.00 in the Case No. C-243 of 1992. The above said order was confirmed by the National Commission on 8.12.1995. (3) The petitioners floated two companies, one in 1987 called the Instant Growth Funds (Pvt.) Ltd and the other in 1989 called the I.G.F. Leasing (Pvt.). They were the two directors in each of these companies. Members of the public invested huge sums in these companies. It is revealed from the Bankers that Instant Growth Funds (P) Ltd received an amount of ₹ 50.18 lakhs, while I.G.F. Leasing (P) Ltd. received ₹ 45.57 lakhs. The 1st petitioner issued post-dated cheques for principal interest. Clause 2 of the agreement required that the loan - trust money be invested in hire purchase business in 30 days. Clause 3 stated that hire purchase agreement should be entered between the investor/Shareholder, hirers and company, and the original hire purchase agreement will be supplied to the investor/shareholder. These two clauses were not implemented. The claimant in Case No. 242, who is a housewife obtained decrees from the State Commission for ₹ 1 lakh in Case No. 242, ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on 9.5.1996 that the 1st petitioner must be present in Court on 16.5.1996. It was only thereafter that the 1st petitioner was arrested on 15.5.1996. (9) The learned counsel for the petitioners has raised the following questions before us :- "(1)Section 27 of the Act permitting penalties to be imposed by the Commission does not apply to a "Company" in view of the definition of "person" in Section 2(1)(m) and also because Section 27 refers to a "person" and not to a company and this is in contrast to Section 25 which refers to a company. (2) The principle of "lifting the veil" applies only if the concerned statute creates a penal liability against a company and permits action against those who are in charge of the affairs or in control of the actions of the company. (3) As the case of the petitioners is that they have no money to pay the decrees passed by the Commission the detention of the 1st petitioner in Jail is violative of Article 21 of the Constitution of India and in view of Jolly George Varghese Vs. Bank of Cochin . The liability of the petitioners is only upto the value of shares held by them. Any recovery of monies against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n "person" is defined in Section 2(9) of the Income Tax Act, 1922 as including "a Hindu undivided family and a local authority". The definition is inclusive and resort may appropriately be had to the General Clauses Act to ascertain the meaning of the expression "person". Clause (42) of Section 3 of the General Clauses Act defines a "person" as inclusive of any company, association or body of individuals whether incorporated or not and that inclusive definition in the General Clauses Act would also apply under the Income Tax Act. A firm is, therefore, a "person" within the meaning of the Income Tax Act, and a firm and an individual or a group of individuals may form an association of persons within the meaning of section 3 of the Indian Income Tax Act. Following the aforesaid precedent, we hold that "person" in Section 2(m) under the Act can be construed as cluding a "company" by resorting to Section 3(42) of the General Clauses Act even though definition in Section 2(m) of the Act is in inclusive definition and does not included a `Company'. (12) Further, as per the principle laid down in ÿMotipur Zami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in charge of or controlling the affairs of a company. Reference in this connection is made by the petitioners counsel to the specific provisions in section 141 of the Negotiable Instruments Act, section 10 of the Essential Commodities Act, 1955, Section 371 of the New Delhi Municipal Council Act, 1994 and other statutes. It is argued that there is no similar provision in the Act before us. (15) It is true that certain statutes contain specific provision for criminal prosecution of persons in charge or controlling companies. But, that in our opinion, makes no difference. For example, the Contempt of Courts Act, 1952 did not contain any provision like Sub-Clauses (4) or (5) of Section 12 of the new Contempt of Courts Act, 1971. The latter made specific provision for contempt action against persons in charge or the management or control of companies. Even though, in the 1952 Act, there was no specific provision, it was held by the Supreme Court in Aligarh Municipality v. E.T. Mazdoor Union that : "Acommand to a Corporation is in fact a command to those who are officially responsible for the conduct of its affairs. If they after being apprised of the order directed to the Corpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." (17) In Byford Leasing Ltd. V. Union of India a Division Bench of this Court held that under Section 27 of the Act, the Chairman and Managing Director of a company can be proceeded against, he being in charge of the management and control of the affairs of the company. We respectfully agree with this view. (18) The case in Surinder Nath Khosla Vs. Excise and Taxation Officer (1995) 4 Comp. Lj 343 (P&H) relied upon for the appellants deals with recovery of Sales Tax from the assets of the company and not from its Directors and merely deals like Section 25 of this Act with mode of recovery of money from a company and does not with a penal provision like Section 27 and is distinguishable. (19) Following the above principles of law, we hold that the State Commission and the National Commission were right in refusing to permit the two petitioners - the two sole directors of the two companies, being husband and wife to defend themselves under the cloak of corporate entity - and the Commissions were right in lifting the veil and identifying the petitioners as the persons who were responsible for committing the statutory offences referred to in Section 27 of the Act. Point 2 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l court and may also permit arrest under Section 51 and Order 25 Rule 37 as a mode of recovery. But under Section 25 no statutory offence is created; while under Section 27 a separate offence is created if Section 25 order is not implemented. We are, therefore unable to hold that Section 27 is either bad or that the order of punishment of simple imprisonment passed against the petitioner is violative of Article 21. Point 3 is held against the petitioners. (22) Point 4 : The contention is that the liability of the company or of the petitioner is to be restricted to the value of the shares held by them or has to be dealt with only during the winding up proceedings of the two companies is again untenable. It may be that the proceedings for recovery under Section 25 of the Act may on the facts, require the taking into account of the pendency of the winding up proceedings but the penal provisions under Section 27 of the act are in addition to the mode of recovery contemplated by Section 25 and, therefore, the pendency of winding up proceedings will not come in the way of the Commission passing orders under Section 27 of the Act. (23) Petitioners counsel also relied upon Nova Steel v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
