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Rajasthan High Court · body

2004 DIGILAW 1478 (RAJ)

Alim Ahuja v. Registrar of Companies

2004-10-08

S.K.KESHOTE

body2004
Judgment S.K. Keshote, J.-Petitioners filed this petition under Section 633(2) of the Companies Act, 1956 (for short, ‘the Act, 1956’) in the matter of notices dated 12th of July, 1999 of the respondent Registrar of Companies, Rajasthan, Jaipur. In the petition the petitioners prayed for grant of following relief ,- 1. To relieve the petitioners under Section 63 3(2) of the Companies Act from having to comply with the provisions and procedures of the said Act, and other relevant Acts. 2. Thepetitioners submit that not being directors with any functional responsibility, they cannot be ‘officers who are in default’ under Section 5 of the Companies Act, in any case. 3. To direct Registrar of Companies, Rajasthan, to desist from instituting or continuing proceedings under the Companies Act against the petitioners, with particular reference to the impugned notices Annexures 1 and 2. 4. To issue such order or directions as the Hon’ble Court may deem proper in their wisdom and experience in the special circumstances of this case, which the petitioners may have failed to mention but merit still. 5. Ad interim orders in terms of prayers 1 to 4. Above may also kindly be passed. 6. Such further order or orders be made and/or directions be given that the Hon’ble Court may deem fit and proper to restrain the non-petitioners from instituting any legal proceedings against the petitioners till the disposal of this petition.” 2. The facts of the case are that M/s. Fancy Stones (India) Limited came to be incorporated under the provisions of the Act, 1956 on October 29, 1979 with its registered office at C-72, Sarojini Marg, ‘C’ Scheme, Jaipur. The registered address of the Company changed a couple of times within the city of Jaipur, but ultimately it was the same as the place where manufacturing/processing of the company’s products was being done at Village Pasoond, near Rajasmand, District Udaipur in Rajasthan. Undisputedly the petitioners accepted the Directorship of the Company. The petitioners averred that though they were the Directors of the Company but main affairs thereof Were being dealt with by other Directors. Shri Ajay Sharma was the Executive Director of the Company. Besides two other Directors, Shri Ramesh Advani, Resident of Ranchi Club Compound, Ranchi, Bihar, was made the Executive Director after sometime, and Shri Ratan Banka, Resident of J.V. Colony, Andheri (East), Mumbai, was also a Director in the same Company. Shri Ajay Sharma was the Executive Director of the Company. Besides two other Directors, Shri Ramesh Advani, Resident of Ranchi Club Compound, Ranchi, Bihar, was made the Executive Director after sometime, and Shri Ratan Banka, Resident of J.V. Colony, Andheri (East), Mumbai, was also a Director in the same Company. There was one Director from the Rajasthan Industrial Investment Corporation (for short, ‘the RIICO’). It is stated that the management of the Company continued till 26th of March, 1988 and thereafter it was taken over by the RIICO. The petitioners have not produced any material on the record that the management of the company had been taken over by the RIICO after 26th of March, 1988. Otherwise also I have my own reservation whether the RIICO could have taken the management of the Company. The RIICO for non-payment of the dues or for some other default, may take possession of the Unit or other property of the Company but not the management of the Company. 3. TheCompany has made defaults in making the compliance of the provisions of Sections 159, 160, 210 and 220 of the Act, 1956 for the years 1988 to 1998 the respondent, the Registrar of Companies, Rajasthan, Jaipur, sent notices to the petitioners which were received by them on 15-7-1999. The petitioners were called upon to show cause as to why action should not be taken for their prosecution for contravention of Section 159/160/162/220 and as to why they should not be prosecuted under Section 2 10(5) of the Act, 1956 for the default in complying with the Section 210(3) of the Act, 1956. The petitioners on receipt of the notices aforestated, instead of showing cause to the respondent, had chosen to file this application under Section 633(2) of the Act, 1956. 4. The learned Counsel for the petitioner contended that the petitioners were not the active Directors of the Company and as being not connected with the management of the Company and are completely unaware of the operational aspects of the company’s business as well as other day-to-day business and as such they deserves to be granted the benefit of Section 633(2) of the Act, 1956. 5. 5. Learned Counsel for the petitioners next submitted that the Provident Fund Authorities had also issued notices to the petitioners for provident fund dues pending against the Company and had gone to the extent of issuing non-bailable warrants against them and this Court in S.B. Civil Writ Petition No. 4219/96 was pleased to stay the arrest of the petitioners. It has further been contended that the RIICO has taken all the records, processed and unprocessed stock in hand of the Company sometime in the first quarter of 1988. At a later stage, the same was handed over to some other party and the petitioners were not in a position to submit and make compliance of the provisions of the Act, 1956. The petitioners are just two out of five Directors and being old persons they may not be put to suffer this agony at the ends of the respondent. 6. It is unfortunate that none is present on behalf of the respondent. However, the respondent has filed reply to the petition. The facts disclosed in the reply are that, the petitioners were appointed Directors of the Company on 1st of October, 1982 and 19th of May, 1985 respectively. As per the last annual return dated 31st of October, 1986 available with the respondent the petitioners stand at Nos. 1 and 2 in the list of Directors of the Company. 7. I have given my thoughtful and anxious consideration to the contentions made by the learned Counsel for the petitioner. 8. The Provident Fund Authorities had issued notices to the petitioners. The writ petition has been filed by the petitioners. They admitted that the stay of their arrest has been stayed by the Court as they deposited the amount demanded by the provident fund department. The writ petition is not finally decided, thus, filing of the writ petition and stay of the arrest warrant of the petitioners in the matter of provident fund dues it hardly has any relevance to the matter in issue. 9. The petitioners have voluntarily accepted the Directorship of the Company. The writ petition is not finally decided, thus, filing of the writ petition and stay of the arrest warrant of the petitioners in the matter of provident fund dues it hardly has any relevance to the matter in issue. 9. The petitioners have voluntarily accepted the Directorship of the Company. The petitioners have not produced any document to show and establish that they were not concerned with the day-to-day management of the company and the business thereof The fact that they voluntarily accepted the Directorship of the Company, at the same time they cannot be permitted to go scot-free as regards to their liabilities, responsibilities and duties as Directors under the provisions ofthe Act, 1956. 10. The plea taken that the RIICO has taken over the management of the Company in the year 1988, it is suffice to say that leaving apart whether the RIICO could have taken over the management of the Company or not, the petitioners have failed to produce any evidence in support of their this plea and same cannot be accepted. That apart similarly for these reasons and grounds the plea taken that the RIICO has handed over the management of the Company to third party also cannot be accepted. They continued Directors of the Company as on day. 11. This plea taken also deserves outright rejection yet on another ground. The RIICO has taken over the management of the Company in the year 1988. In case what it is stated would have been correct the first and foremost step on the part of the petitioners would have been to resign from the office of the Directors of the Company. Undisputedly the petitioners have not resigned from the Directorship of the Company. The default in compliance of the provisions of the Act, 1956 pertains to the period from 1988 to 1998 and the fact that they have not resigned from the Directorship, reasonably it can be presumed and assumed that they voluntarily continued as Directors of the Company. Being the Directors of the Company, they cannot run away from their liability, obligation and duty to make the compliance of the provisions of the Act, 1956. The Board of Directors has never resolved to exempt them from their responsibility, obligation and duty as the Directors to comply with the provisions of the Act, 1956. 10.12. Being the Directors of the Company, they cannot run away from their liability, obligation and duty to make the compliance of the provisions of the Act, 1956. The Board of Directors has never resolved to exempt them from their responsibility, obligation and duty as the Directors to comply with the provisions of the Act, 1956. 10.12. It is also hardly of any substance and material that the petitioners are the senior citizens. They had accepted the Directorship of the Company voluntarily and presumed to have known of their responsibility, obligation, liability and duty under the provisions of the Act, 1956. 113. The respondent has given to them a show-cause notice. Rather than to approach to this Court at this stage they should have placed their cases for consideration before the respondent but that has not been done. That apart the notices have been given only for launching the prosecution against the petitioners and in their prosecution they can take all these defences and where they are able to prove the same the Court may not punish them for violation of the provisions of the Act, 1956. Thus, considering the matter from any angle and aspect I do not find it to be a fit case to grant any of the relief as prayed by the petitioners in the petition. 14. In the result, the petition fails and the same is dismissed.