IN RE: BEEJAY ENGINEERS PVT. LTD. Vs. STATE

JUDGEMENT

(1.) In Company Petition No. 12/81 the petitioners, S/Shri Satinder Sandhu, P. N. Handa, and N. S. Grewal constitute the Board of Directors of M/s. Bee Jay Engineers Pvt. Ltd., at present. They have moved an application under s. 633(2) of the Companies Act (for short "the Act") read with rr. 7 & 9 of the Companies (Court) Rules, 1959, for being relieved/excused from the proceedings which are likely to be launched against them in respect of the alleged contravention of the Employees' Provident Fund Act, Central Excise Act, State Insurance Act, Sales Tax Act and the I.T. Act with reference to tax deducted at source. It is, inter alia, contended by them that the original Board of Directors consisted of S/Shri J. S. Grewal, B. S. Sandhu, Mrs. B. K. Kaur and Mrs. A. K. Sandhu. However, both the ladies resigned from the Board of Directors some time in 1974 and the business of the company was, Therefore, being looked after by the remaining two Directors. They too expired some time in 1980. The present Directors, it is contended, are fresh entrants and two of them, namely, S/Shri P. N. Handa and N. S. Grewal, have been appointed as Directors by virtue of their technical skill. However, the Registrar of Companies launched prosecution against the company and the present petitioners for committing default/breach of certain provisions as the Act. Apprehending that fresh prosecutions may be launched against them under the aforesaid Acts, they have prayed for relief against liability for breaches and defaults committed by the company under the aforesaid Act.

(2.) Similar prayer has been made by the petitioners, S/Shri Bachan Singh, P. N. Handa, C. L. Mehta, A. L. Talwar, S. S. Sandhu, V. S. Grewal, H. S. Sidhu and D. J. S. Sandhu in Company Petition No. 13/81, who constitute the Board of Directors of the Company - M/s. Atlantic Engineering Services Private Ltd. As per averments in the said petition, out of the original Directors, S/Shri J. S. Grewal and B. S. Sandhu, died some time in 1980 while Shri Bachan Singh resigned from directorship in October, 1980. There upon, the present Board of Directors was constituted by co -opting four persons of professional competence and repute. In this case too, the company had to face prosecution launched by the Registrar of Companies under the Companies Act and they are apprehending further prosecution for contravention of the provisions of the above -mentioned Acts.

(3.) Reliance was placed by the learned counsel for the petitioners in both the cases on a decision of H. L. Anand J. in Om Parkash Khaitan v/s. Shree Keshariya Investments Ltd., [1978] 48 Comp Cas 85 in which under similar circumstances the learned judge had granted relief against prosecution of the applicant, Shri Om Parkash Khaitan, a solicitor, who was appointed as a Director, by virtue of his being its legal adviser, for defaults and breaches committed by the company in relation to its obligations under the Employees' Provident Funds Act, Sales Tax Act, Employees' State Insurances Act, Indian Textiles (Control) Order, Essential Commodities Act and the Companies Act. The learned judge had, inter alia, observed that it was unreasonable to fasten liability on the Directors for defaults and breaches of a company where such directors are either the nominee directors or are appointed by virtue of their special skill or expertise.