A. P. Hussain Khan v. The Registrar of Companies, Madras
1999-11-30
P.S.KAILASAM
body1999
DigiLaw.ai
Order.- This petition is filed against the conviction and sentence imposed on the petitioner by the Fourth Presidency Magistrate, G.T., Madras. The lower Court found that the petitioner submitted certain records to the Registrar of Companies with some particulars knowing them to be false and sentenced him to imprisonment till the rising of the Court and a fine of Rs. 50 on each of the courts. The facts of the case relevant for the disposal of this petition may be stated as follows: The petitioner was appointed as Managing Director by a special resolution of the company on 10th June, 1956. He made an application to the Government of India for approval of his appointment as Managing Director under section 269 of the Companies Act in Form No. 25. The Government of India called on the petitioner to produce the audited accounts of the company. But the petitioner declined to produce them as, according to him, the documents called for need not be produced under section 269. There was protracted correspondence between the petitioner and the Government of India between 1957 and 1961 and no decision of the Government of India was communicated to the petitioner. During the pendency of this matter the petitioner submitted three returns Exhibit P-32, dated 31st December, 1957, the balance-sheet of the company, Exhibit P-33, dated 24th July, 1959, the Annual Return of the company and Exhibit P-34, dated 24th November, 1958, the Return of allotment of shares of the company. In all these documents, Exhibits P-32, P-33 and P-34, the petitioner signed his name as the Managing Director of the company. The petitioner was again re-elected for five years as Managing Director on 10th June, 1961. The petitioner applied for approval under section 269 of the amended Act and his appointment was approved by the Government in December, 1962. It is the contention of the prosecution that the petitioner is guilty under section 628 of the Companies Act in that he made statements in Exhibits P-32 to 34 that he was the Managing Director knowing them to be false. Section 269 was amended in the year 1960. As the petitioner was appointed as the Managing Director in 1956 we are concerned with section 269, as it stood before the amendment of 1960.
Section 269 was amended in the year 1960. As the petitioner was appointed as the Managing Director in 1956 we are concerned with section 269, as it stood before the amendment of 1960. Section 269 before amendment reads thus: “Appointment of managing or whole-time director to require Government approval-In the case of a public company or a private company which is a subsidiary of a public company, the appointment of a managing or whole-time director for the first time after the commencement of this Act in the case of an existing company, and after the expiry of three months from the date of its incorporation in the case of any other company, shall not have any effect unless approved by the Central Government; and shall become void, if, and in so far as it is disapproved by that Government.” The appointment of the petitioner as Managing Director was on 10th June, 1956, after the commencement of the Act. It was contended by Mr. Ramalingam, learned Counsel for the petitioner that section 269 was intended to cover only appointment of Managing Director for the first time after the commencement of the Act and not appointment of a particular person as a Managing Director after the commencement of the Act when the company had a Managing Director before the commencement of the Act. In other words, the submission of the learned Counsel is that the approval of the Government of India was necessary only in a case when the office of the Managing Director was created for the first time after the commencement of the Act and not to appointment of a particular person as a Managing Director. To support his argument, he relied on section 269 as amended. Instead of the words “the appointment of a managing or whole-time director for the first time after the commencement of this Act” the words “the appointment of a person for the first time as managing or whole-time director” were introduced by the new Act. Under the new section, therefore, the appointment of a person for the first time as Managing Director should have the approval of the Central Government, whereas the appointment of a Managing Director for the first time after the commencement of the Act alone needed approval of the Government.
Under the new section, therefore, the appointment of a person for the first time as Managing Director should have the approval of the Central Government, whereas the appointment of a Managing Director for the first time after the commencement of the Act alone needed approval of the Government. The ambiguity that is found in the old section 269 is removed so as to include the appointment of any person as Managing Director after the commencement of the Act. But section 269 as it stood before the amendment is capable of the interpretation put by the learned Counsel in that what was required was approval in the case of an appointment of a Managing Director as opposed to appointment of a person as Managing Director for the first time after the commencement of the Act. The learned Public Prosecutor referred to Form No. 25, rule 3 (i), where particulars about existing Managing Director, Managing Agent, Secretaries, and Treasurers were given. The form is one prescribed for an application under section 269 and the reference to the existing Managing Director supports the contention of the learned Public Prosecutor that section 269 was intended to attract cases of appointment of a person after the commencement of the Act. But this intention has not been made clear in section 269, before the amendment of 1960. In the absence of such clear intention, it cannot be held that section 269 is applicable to persons appointed as Managing Directors after the commencement of the Act as distinguished from the appointment of Managing Directors after the commencement of the Act. I therefore agree with the contention of the learned Counsel for the petitioner and hold that the petitioner was not bound to apply to the Central Government under section 269 for approval. If the appointment of the petitioner was not subject to approval by the Central Government, the information furnished by him in Exhibits P-32 to P-34, cannot be said to be false. There can therefore be no contravention of section 628 of the Companies Act. The petition is allowed and the conviction and sentence of the petitioner are set aside. Fine, if recovered, will be refunded to him. P.R.N. ------ Petition allowed; conviction and sentence set aside.