D. R. KHANNA, J ( 1 ) (ORAL ). The present case somewhatbrings out how clubs which are otherwise places of recreation-and relaxation get converted into hot-beds of group rivalaries. Whether they are the result of one group or the other, monopolising their holds over the entire affairs is difficult to say. In the present case there are circumstances pointing towardsthat, though exaggeration of insignificant matters is also thereby the other side. ( 2 ) THIS petition under Section 633 (2) of the Companiesact was moved by some members of the Managing Committeeof the Chelmsford Club in which they stated that there wereapprehensions that the Registrar of Companies was likely toprosecute them under various provisions of the Companies Actand, therefore, he should be restrained from doing so. It wasclaimed that there had been no acts of negligence, breach ofduty etc. on their part and in the circumstances they shouldnot be made to undergo the rigour of baseless prosecution. Thispetition was moved on 7-4-1983. At the same time the petitioners sent a letter to the Registrar that they had moved thispetition and as such till its disposal, the prosecution be notstarted. The Registrar, however, commenced three criminalcases against the petitioners on 13-4-1983. One has beenunder Section 209 (5), the second under Section 211 and thethird under Section 217 of the Companies Act. ( 3 ) NOTICE of this petition under Section 633 (2) of thecompanies Act was issued to the Registrar of Companies whoappeared on 26-5-1983 and sought some time to file a reply. In the reply which was later filed it was contended that theprosecutions had already been set into motion and, therefore,the provisions of Section 633 (1) of the Companies Act cameinto operation and the Company Court could not adjudicateupon the controversies raised in the petition. Section 633 (1)in this regard provides that the only court which can entertainobjections to the prosecution is the one hearing the criminal case. ( 4 ) CONFRONTED with this position, the petitioners made reference to Chapter XXXIV of the Clarifications and Circularson Company Law issued by the Company Law Board which provides that prosecution should not be started after applicationfor relief has been filed by any officer of the company undersection 633. ( 4 ) CONFRONTED with this position, the petitioners made reference to Chapter XXXIV of the Clarifications and Circularson Company Law issued by the Company Law Board which provides that prosecution should not be started after applicationfor relief has been filed by any officer of the company undersection 633. The petitioners, therefore, contend that theirright to get relief under sub-section (2) of Section 633 couldnot be frustrated by the unwarranted act of the Registrar inlaunching prosecutions in defiance of the instructions containedin the said circular. On merits the Registrar took a non-committal stand and had nothing to say on one side or the other. In the meanwhile one Mr. C. L. Madhok moved a petitionunder Section 633 (3) of the Companies Act for interventionand stated that he has been a member of the club for fairlylong and that there existed circumstances which necessitatedthe filing of the prosecutions against the petitioners and thatas such the company court should not at this belated stageintervene to quash them,. ( 5 ) I have heard the parties and given my due considerationto all the circumstances. So far as the provisions containedin Section 633 (1) of the Companies Act, they are quite explicit that once the prosecution has been started by filing of thecomplaint, the only court competent to entertain any objectionto the propriety thereof is the court hearing that case. Thisis also the view of different High Courts in the cases reportedas Tolaram Jalan and others, AIR 1959 Bombay 245 (1),orissa Jute and Cotton Mills Ltd. , and others, 1956 Orissa 205 (2), Sri Krishna Parshad and others v. Registrar of Companies, Delhi and Haryana 1978 Company Cases 397 (3) andill re Auto Link Financiers P. Ltd. , 1971 Company cases 63 (4 ). However, subsection (2) of Section 633 provides for situationswhere prosecutions have not been started and there are only reasons to apprehend that proceedings in that regardare likely to be brought. The question to be considered iswhen certain rights were available to the petitioners under sub-section (2) to get the matter of alleged negligence, and breachof duty etc. Determined from the Court, the same could be setat naught by the Registrar by moving the complaints undersub-section (1) in the meanwhile. This obviously was againstthe circular of the Company Law Board as referred to above. Determined from the Court, the same could be setat naught by the Registrar by moving the complaints undersub-section (1) in the meanwhile. This obviously was againstthe circular of the Company Law Board as referred to above. This circular though not of statutory nature, contains one ofthe policy decisions which the Company Law -Board and Central Government have formulated. Their operative and binding character qua the third parties may be quite doubtful. However, so far as the Registrar of the Companies who is a subordinate authority to the Company Law Board, the same didcall for respect and adherence. It could not be that thosedirections were. applied in the case of some of the companiesand ignored with regard to others. When once the petitionershad moved the Company Court under sub-section (2) ofsection 633, he could have waited for the result of these proceedings or at the most required the court to expeditiously dispose them of instead of taking a march over the petitioners. andfiling the complaints. ( 6 ) MR. K. S. Bindra, appearing from the side of the intervener has vehemently contended that these circulars have nobinding character and in any case they could no!- be consideredto have any legitimacy after the coming into force of the newcode of criminal procedure 1973. He has made reference tothe new provisions of law of limitation introduced and haspointed out that any delay in filing of the complaints by theregistrar would have resulted in the cases getting barred bytime and the person holding offices of the company who hadcommitted misfeasance and other illegal acts escaping due punishment. It is pointed out that the punishments awardableunder the complaints already lodged could be upto one yearfind the limitationfor commencing any such prosecution undersection 466 Criminal Procedure Code. is one year from the date of the occurrence or the knowledge of the complaint. However, Section ,470 (2) Criminal Procedure Code. gives protection to the complainants in suchcircumstances inasmuch as the time during which the institution of the prosecution lies stayed by any order has to be exeluded. From the side of the petitioners it has rather beenpointed out that in any case the period of limitation neverweighed with the Registrar as the complaints were filed on13-4-1984 while the show cause notices which the Registrarhad earlier issued to the petitioners were in February 1983. From the side of the petitioners it has rather beenpointed out that in any case the period of limitation neverweighed with the Registrar as the complaints were filed on13-4-1984 while the show cause notices which the Registrarhad earlier issued to the petitioners were in February 1983. By then the Registrar, it is contended had already known thealleged misfeasance, breach of duty etc. I would, not, howeverlike to dilate more on this aspect. ( 7 ) SINCE I have already observed that the rights availableto the petitioners to get their claim under section 633 (2) determined could not be affected by subsequent filing of the complaints under sub-section (i), I proceed to discuss the contentions raised by the petitioners as to how the so-called acts ofmis-feasance and breach of duty etc. have no basis. ( 8 ) THE petitioners have first made reference to the prosecution instituted under Section 217 of the Companies Act. Thenotice which was served upon the petitioners by the Assistantregistrar of Companies mentioned two acts of misfeasance. One was with respect to the non-realisation of the amounts dueon certain government investments and the other was failureto realise the amounts due from certain ex-employees, who hadon the service of the club. About the former, the amount wasrs. 3,500 and the petitioners have brought out that they hadbeen writing to the concerned government departments forclearance of the dues but they were not paid in spile of the bestefforts exerted in this regard. Those amounts were not lyingwith any private party and were in fact government securities. The amount was also not very high. Unfortunately the redtapism that has come to be in most of the government departments does delay the clearance of the dues. For this purposethe petitioners could not be made criminally liable. Their con- ,duct has been bona fide inasmuch as they have been pursuingwith the government departments for realisation of theamounts. ( 9 ) THE second amount due from ex-employees was ofrs. 400 and odd. There were stated to be 7 employees andthe break up was of two minor amounts. Any institution ofsuits against them for those amounts would naturally have beenpenny wise pound foolish. ( 9 ) THE second amount due from ex-employees was ofrs. 400 and odd. There were stated to be 7 employees andthe break up was of two minor amounts. Any institution ofsuits against them for those amounts would naturally have beenpenny wise pound foolish. The prosecution sought to be launched under Section 217 was thus entirely mis-placed and, therefore, I have little hesitation in directing the Registrar to notinitiate any such prosecution and in case inspite of the pendencyof the petition under Section 633 (2) and in violation of thecircular of the Company Law Board he has commenced any,the same should be dropped, ( 10 ) THE second prosecution is under Section 209 (5) of thecompanies Act: The allegation under this was that duringthe course of inspection, it was noticed that the fixed assetsregister as required under Section 209 had not been maintainedproperly by the company and the quantitative details in respectof the various assets acquired from time to time had not beenentered in the concerned register. The location of the fixedassets was also stated to have not been entered there. ( 11 ) THE petitioners have pointed out that no prescribedregister in any particular form has been laid under the Companies Act or Company Court Rules. Rather the club ,has infact maintained a few fixed assets register. In case some further details should have been incorporated in the same, a direction to this effect could have been issued by the Registrar instead of straightaway proceeding to launch the prosecution. Moreover the averments made in this notice were generalisedand vague. There was no specific mention of any particularitem. ( 12 ) IN any case as the matter came up for discussion duringarguments, it was fact that such register should contain thedates of acquisition of different assets and the places wherethey have been fixed so that their identify could be correlated. Mr. Ved Vyas, appearing on behalf of the petitioners as wellas the club stated that necessary steps in this direction will betaken forthwith. ( 13 ) THERE have been no specific instances of mis-appropriation or mis-feasance with regard to any item. In the circumstances the institution of prosecution would not be worth thesame. ( 14 ) LASTLY I come to the show cause notice which had beenissued under Section 211 of the Companies Act. The samebrought out a number of acts of misfeasance breach of duty,negligence etc. In the circumstances the institution of prosecution would not be worth thesame. ( 14 ) LASTLY I come to the show cause notice which had beenissued under Section 211 of the Companies Act. The samebrought out a number of acts of misfeasance breach of duty,negligence etc. The first of them was with regard to the interest earnings of Rs. 1,52 lacs and Rs. 2. 37 lacs during 1979and 1980 from fixed deposits. The background in this regardis that although the main object of the Chelmsford Club hasbeen recreation and sports, a country golf club was claimedto be started and for this purpose extensive agricultural landwas acquired near Qutab. Had the object been to start thegolf club it could besaid that this was an offshoot activity ofthe club. However, under the garb of this golf club the management started allotting one acre plots to different membersfor their personal farm houses etc. The club appeared to havefor this purpose started acting as lend coloniser for its member or a house building society. It is not shown that the objects and memorandumof the company permitted such coursefor the benefits of the individual members. Be that as it may,nothing more need be said about this. ( 15 ) THE interest which was the subject matter of this allegation had accrued to the club from various amounts deposited by the members for the acquisition of pints by them. It has been pointed out by the petitioners that the land is atpresent in the process of acquisition by the government and isalso affected by the Ceiling Act. Some litigation in that regard is pending and as such it is not known if the depositsmade by the members and interest accrued would have to bereturned to them on the company loosing the land. It is assuch that it is pleaded that interest earning has not been treated as revenue income. ( 16 ) ONE of the contentions raised by Mr. Bindra has beenthat the handling of the accounts of the company has been suchthat the management commitee is defrauding the income-tax department and not showing substantial part of its income assuch. I am afraid the company court cannot go into this aspect. It is for the income-tax authorities to look into the accounts and ensure that the income otherwise does not escapefrom taxation. I am afraid the company court cannot go into this aspect. It is for the income-tax authorities to look into the accounts and ensure that the income otherwise does not escapefrom taxation. ( 17 ) WHETHER the activity embarked noon by the club withregard to the acquisition of plots for the members was withinthe permissible limits of the objects and memorandum of thecompany and whether any misfeasance or breach of duty hadbeen committed by the petitioners or not, I will not express anyopinion. Let the prosecution have its course. ( 18 ) THERE is next the allegation that the club is realising13 months subscription from members instead of 12 monthsfor every year, but the excess subscription of one month isnot being shown as income but is credited in the member sreserve fund. This has been as a result of :i resolution of themanaging Committee and the position has continued for alarge number of years. In case the general body of the clubhad felt aggrieved by this resolution of the Managing Committee it could have reversed the same or given any directionin this regard. The fact remains that there has been no mis-appropriation or malafides involved in this I am, therefore,unable to sustain the prosecution on this score. ( 19 ) NEXT item is of excess realisations from the "tambola". In this connection there is also a resolution of the Financialsub Committee in the year 1970 and the realisations are beingcredited to the building reserve account. Again there is nothing to show that any malafide or mis-appropriation was involved. Whether this conduct on the part of the club violatesthe provisions of the Gambling Act as contended by Mr. Bindra is not for me in these proceedings tc comment upon. It is for the Administration or any other person feeling aggrieved to take action. as may be permissible under the law. Theregistrar has not to take action under that Act. ( 20 ) THERE are- some realisations made. by the Club fromdiwali Mela Bazars. It is an annual. feature and entertainment stalls and boothes are set up. After meeting the expenses. some surplus is left. This according to the club goes tothe employees dispensary fund. From that a dispensary forthe benefit of employees is being operated. The sanctiongiven by the Administration for such a bazar is also subjectto this conditions. No exception, therefore, can be taken tothe same. feature and entertainment stalls and boothes are set up. After meeting the expenses. some surplus is left. This according to the club goes tothe employees dispensary fund. From that a dispensary forthe benefit of employees is being operated. The sanctiongiven by the Administration for such a bazar is also subjectto this conditions. No exception, therefore, can be taken tothe same. ( 21 ) THERE is another item of complimentary Air Indiatickets. The circumstances in which these tickets are givenare that Air India gets some advertisement displayed. in theclub premises, and instead of paying for the same, two Airtickets are given to the club every year. The tickets whichare the subject matter of the prosecution by the Registrar aretwo in number and they were utilised by Mr. Venkata Ramantreasurer and Mr. Chopra, Hon y Secretary. They of course, paid50% of the cash towards those tickets from their pocket to the credit of the club. It is, however, not shown that the travels undertaken by these, office s were in any manner connectedwith the affairs of the club. Thus the benefit which. otherwisecould have enured to the club for the display of advertisementsby Air India prima-facie appeared to have gone for the personal benefit of two office hearers. I will not, therefore, liketo interfere in the prosecution on this score. It is for the petitioners to set up their defence in accordance with the law. ( 22 ) ANOTHER allegation is with reward to the mis-appropriation effected by staff members in the mineral water stock. About that a criminal case is already pending against. them. That shows that the Managing Committee had been vigilantto take actionagainst the defaulting officers when they noticedbungling on their part. The Managing Committee, therefore,cannot be made liable. ( 23 ) THEN there is the item of water cooler and bottle cooler. A plant was purchased in July 1979. According to the Registrar the amounts spent on them were shown as repairsto furniture and fixtures instead of showing them in capitalaccount. The relevant register was got produced from thepetitioners in court today, and the Register has now satisfiedthat it was the capital account which had been debited in thatregard. "the prosecution, therefore, would be mis-placed. ( 24 ) THE Registrar has also referred to the loss of Rs. 45,0001- suffered by the club in a fire in the green room. The relevant register was got produced from thepetitioners in court today, and the Register has now satisfiedthat it was the capital account which had been debited in thatregard. "the prosecution, therefore, would be mis-placed. ( 24 ) THE Registrar has also referred to the loss of Rs. 45,0001- suffered by the club in a fire in the green room. Itis alleged that the club had not shown the amount of loss in itsaccounts for the year 1980. The petitioners have, however,pointed out that in this very year repairs were carried out andaccounted and as such the question of the loss being shownin that year did not arise. In my view the explanation shouldbe accepted. ( 25 ) LASTLY there is a general allegation that the accountsof the company for the year 1975, 1979 and 1980 were nottrue and fair and did not reflect the affairs of the companyaccordingly. The allegations in this regard are vague. Hadany specific instance been brought out that would have beenconsidered. In case they have reference to the above irregularities, then opinion about them has already been expressed. ( 26 ) THE complaint under Section 211 of the Companiesact can, therefore, proceed subject to the observations madeabove. ( 27 ) ANOTHER circumstance to which the parties have madereference is that a suit was instituted against the company andits Managing Committee, which was partially decreed by J. DJain, J and a number of stricutures were passed with regard tothe affairs of the company. At present an appeal against thatjudgment is pending before a Division Bench of this Courtand some stay has been allowed. In my view the controversyraised in that litigation will receive adjudication in due course. The same could not effect the propriety of determining thispetition under Section 633 (2) of the Companies Act. It hasbeen as such that this order has been made.