1. This application under section 633(2) of the Companies Act, 1956, (hereinafter referred to as the Act), by three directors of Radha Govind Industries Ltd., Kosi Kalan, Mathura, sets out a history of the company concerned. It mentions that the chairman of the board of directors of the company, Rai Saheb Govind Das Bhargava, had died on June 19, 1965, and that his eldest son, G.D Bhargava, the first of the three applicants, was a patient of high blood pressure, who had also suffered a heart attack. It states that the relations between the sons of the deceased, Rai Saheb Govind Das Bhargava, became strained so that L.D Bhargava, I.A.S, demanded the return of the entire sum of money loaned by him to the company. A winding up application made by L.D Bhargava in this court, with the result that the money lent by him was paid back to him, as well as an investigation instituted by the Company Law Board, early in 1963, into the affairs of the company, are mentioned, presumably to show the hostility of L.D Bhargava to the applicants. I am unable to appreciate the bearing of this background on the merits of the application before me. If the object was to suggest that the Registrar of Companies or the police at Mathura have acted as a result of anything done by L.D Bhargava, the suggestion is totally unsupported by any assertion which could give rise to that inference. Moreover, an applicant for relief whether under either section 633(1), for which he can only apply to the court in which a proceeding mentioned there has been instituted or is pending, or, under section 633(2), against apprehended proceedings against him, must show his own honesty and reasonableness so as to establish that he “ought fairly to be excused”. Motives of other persons or authorities in taking action against him are not really relevant there at all.
2. Certain allegations against the applicants in a complaint made to the Superintendent of Police, Mathura, by means of a registered A.D letter, by the Registrar of Companies, are revealed by annexure I to a counter-affidavit filed by Rabhubir Sahai Bhatnagar, Station Officer of police station Kosi Kalan, district Mathura, and by annexure “D” to an affidavit of Shri P.R Mukhopadhyay, the present Registrar of Companies, filed on December 22, 1969. The Station Officer's counter-affidavit also discloses the contents of a first information report (annexure II) against the applicants lodged at the police station Kosi Kalan by Shri S.C Bharadwaj, who was formerly the Registrar of Companies, although its date is not mentioned. The counter-affidavits, together with the annexed documents mentioned above, indicate that the police has been investigating into certain alleged offences by the directors said to be punishable not only under the Companies Act but also under sections 420 and 471 of the Indian Penal Code. Therefore, the petitioners seek relief against possible apprehended proceedings against them.
3. The applicants state that the accounts of the company are duly audited every year and that the auditors' reports are given in a set form every year which is given in paragraph 5 of the petition. The accounts for the year ending March 31, 1965, are said to have been audited as usual but are admitted not to have been signed by the auditors, although the accounts of the Kosi Electric Supply Co., which is said to be the chief business of the company, were said to have been audited and signed by the auditors of the company as well as by the auditors sent by the Government. The auditors, it is alleged, kept postponing signing the audit reports “on one pretext or the other the unsigned balance sheet and a suppositious auditors' report was printed and placed before a general meeting of the shareholders of the company on September 30, 1965, and passed by a resolution (annexure “A” to the applicant's affidavit) in the following terms:
“Shri Rabhunath Das Bhargava proposed that the directors' report, the auditors' report and the audited balance sheet and the profit and loss account of the company for the year ended 31st March, 1965, be approved and adopted.
The motion was seconded by Shri Lalta Prasad Bhargava and was carried unanimously”.
4. G.D Bhargava, director and secretary of the company, even filed the printed copy of the balance sheet with the Registrar of Companies some time about November 29, 1965. The excuse is that he thought “that the auditors would sign and give their report as in the past”. In other words, although the balance sheet and the auditors' report had not been signed, they were printed as though signed and then passed and then filed before the Registrar presumably with the knowledge that the original documents had not been signed at all by the auditors. It is stated, in paragraph 9 of the application, that, as soon as Gokul Das Bhargava realised his mistake, he immediately informed the auditors and wrote to the Registrar of Companies with his explanation on September 19, 1966. The Registrar then served a notice dated October 14, 1966 (annexure “C” to the applicants' affidavit), asking him to show cause why action should not be taken against officers of the company under section 628 of the Act. On October 31, 1966, the auditors gave their version to the Registrar (annexure “E” to the affidavit in support of the application) showing that, although the company was fully apprised of the reasons for the refusal of the auditors to sign the report, yet, it filed the papers with the Registrar without obtaining the auditors' signatures. On November 12, 1966, G.D Bhargava gave an explanation (annexure “D” to the affidavit in support of the application) in answer to the show cause notice. Here, he expressed his regret for the mistake he had committed in submitting the balance sheet “thinking that the auditors would eventually sign the same”. It is asserted there that the general meeting of the company which considered the matter was aware of the whole position. The explanation ends with a request to excuse the “lapses this time and to condone the mistake”. Another letter, dated January 21, 1967 (annexure “F” to the affidavit in support of the application), tries to justify the stand of the directors on the differences between the company and the auditors about certain items of expenditure. It is said that another general meeting was held on April 28, 1967, after the auditors had given and signed their report and that it was approved and adopted. It was then stated that the applicants acted honestly and reasonably. A medical certificate was also filed to show that G.D Bhargava was a patient of high blood pressure and had a heart attack. The Registrar's interpretation of admitted facts differs from that of the applicants and the correctness and relevance of some of the assertions made on behalf on the applicants is also denied by the Registrar.
5. The question of law which arises is whether, upon the above-mentioned state of facts, this court can or should interfere under section 633(2) of the Act with an apprehended proceeding. The whole of the section 633 may usefully be set out here.
“633. Power of court to grant relief in certain cases.—(1) If in any proceeding for negligence, default, breach of duty, misfeasance or breach of trust against an officer of a company, it appears to the court hearing the case that he is or may be liable in respect of the negligence, default, breach of duty, misfeasance or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused, the court may relieve him, either wholly or partly, from his liability on such terms as it may think fit:
Provided that in a criminal proceeding under this sub-section, the court shall have no power to grant relief from any civil liability which may attach to an officer in respect of such negligence, default, breach of duty, misfeasance, or breach of trust.
(2) Where any such officer has reason to apprehend that any proceeding will or might be brought against him in respect of any negligence, default, breach of duty, misfeasance or breach of trust, he may apply to the High Court for relief and the High Court on such application shall have the same power to relieve him as it would have had if it had been a court before which a proceeding against that officer for negligence, default, breach of duty, misfeasance or breach of trust had been brought under sub-section (1).
(3) 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 other person, if any, as it thinks necessary, to show cause why such relief should not be granted.”
6. It is submitted on behalf of the Registrar of Companies and the Superintendent of Police, Mathura, that the provisions of section 633 are intended only for technical lapses and defaults but not for deliberate criminal or dishonest acts involving commission of fraud. It is contended that, in the instant case, not merely the provisions of sections 210 to 216 and 219 to 221 of the Act appear to have been violated, so that liabilities to penalties provided by sections 218 and 628 of the Act may have been incurred, but offences under the provisions of sections 420 and 471 of the Indian Penal Code are also alleged. It is urged that action either under section 633(1) or section 633(2) are confined to cases of negligence, default, breach of duty, misfeasance, or breach of trust, but this case goes beyond this list. It is pointed out that the power of this court to relieve an officer of a company under section 633(2) would be subject to the same conditions as that of a court before which a proceeding for negligence, default, breach of duty, misfeasance, or breach of trust had been brought. This means, it is submitted, that the applicants must show that they acted honestly and reasonably so that they ought fairly to be excused.
7. It does appear to me that, on the principle laid down in Gilt Edge Safety Glass Ltd., In re1, with regard to similar powers of courts in England, that the power to relieve under section 633 should only be exercised where the alleged offence is, on the face of it, either purely technical or due to causes over which the alleged offender had no reasonable means of control so that the violations of the law ought “fairly to be excused”.
8. So far as the investigation into alleged offences under section 420 or section 471 of the Indian Penal Code is concerned, I am afraid no direction can be issued under section 633(2) of the Act either to the Registrar of Companies or to the Superintendent of Police, Mathura, in respect of this investigation whether the allegations are well-founded or ill-founded. An alleged offence of using a forged document, known to the offender to be forged, as genuine, punishable under section 471 of the Indian Penal Code, falls entirely outside the ambit of section 633 of the Act. Similarly, an alleged offence punishable under section 420 of the Indian Penal Code is outside its purview. Where this is so, this court has no jurisdiction to interfere at all under section 633(2) of the Act even if an investigation or a prosecution for an alleged offence is mala fide or erroneous. A person who suffers any wrong or injury due to any malicious or baseless criminal proceeding or prosecution falling outside section 633 of the Act has other means of redress open to him under the law. Section 633 of the Act is restricted to cases mentioned therein.
9. Even where an alleged lapse or offence falls completely within the scope of section 633(2), the power of this court to interfere is obviously discretionary. The word “shall have power”, used with reference to the jurisdiction of this court under section 633(2), only invests this court with the jurisdiction to interfere, but it imposes no obligation upon it to do so. The discretionary power, which has to be exercised on judicially sound grounds, cannot reasonably be exercised at all where it is not possible, as it is not in the case before me, to extricate facts alleged to constitute lapses or offences falling within the purview of section 633 from those relied upon or offences falling outside its scope.
10. There is no doubt that this court has the same power to relieve under section 633(1) as a trial court in a proceeding to which section 633(1) could be applied. This means that the condition precedent to its exercise under both sub-sections of section 633 are the same. It follows that for applying either section 633(1) or section 633(2) three conditions must be satisfied: firstly, the alleged lapse or offence must be one of the kinds mentioned in section 633; and, secondly, the applicant must be shown to have acted “honestly and reasonably”; and, thirdly, the court should be able to conclude that “having regard to all the circumstances of the case……he ought fairly to be excused”. It is in the application of the second and third conditions that a court trying offences, after proceedings have been instituted, is in a more advantageous position than this court when it deals with an application under section 633(2) against an apprehended proceeding.
11. The trial court, where charges for offences falling both within and outside the purview of section 633 of the Act may have been joined, can take and examine detailed oral and documentary evidence so as to be able even to view them separately and to take appropriate action under section 633(1) with regard to some allegations or some particular officer or officers but this court cannot satisfactorily do so as it is not a court of trial for an alleged offence or offences when acting under section 633(2) of the Act. It can reasonably exercise its discretionary power to interfere under section 633(2) only on the strength of admitted or patent facts when it can come to definite conclusions, on the materials before it, with regard to the second and third conditions, set out above, even in those cases where alleged facts may constitute only lapses or offences mentioned in section 633 or are easily separable. In the case before me, it is not possible, on the material on record, to arrive at satisfactory conclusions with regard to the knowledge or complicity or honesty or reasonableness of the action of any one of the three of the applicants before me or with regard to the fairness of the claim of any of them to be excused for any lapse or offence. These matters can only be decided satisfactorily after a fuller probe into all the facts and circumstances alleged against each applicant separately. I, therefore, decline to interfere under section 633(2) of the Act with whatever may be apprehended or anticipated by the applicants who are, however, left free to apply under section 633(1) of the Act if and when a proceeding, if any, is instituted against any or all of them as a result of the investigations pending against them.
12. This application is dismissed with costs. The interim order is vacated.
13. Application dismissed.