SALAAM M BAVAZIER Vs. MOHAMMAD AZGARUDDIN

JUDGEMENT

(1.) The principal question of law which is of some general importance that arises for consideration in these two revision cases is : Whether the conviction of a director or managing director of a company, incorporated under the Companies Act, 1956 (for short "the Act"), of any offence, regardless of its nature, in connection with the promotion, formation or management of a company could form the basis to restrain him from taking part in the management of the company by virtue of clause (a) of sub-section (1) of section 203 of the Act. It arises thus : The petitioner herein is the managing director of Kohinoor Cement Limited (for short "the company"). He was prosecuted on a complaint filed by the Assistant Inspector of Factories, Nalgonda, in S.T.C. No. 30 of 1994, for offences under section 7A read with sections 41 and 61, 21(1)(iv)(a) and 31 read with section 54 of the Factories Act, 1948, and S.T.C. No. 31 of 1994, for offences under section 47 read with sections 72 and 41 of the Factories act, 1948, on the file of the Judicial Magistrate of the First Class, Huzurnagar. On his plea of guilty, he was convicted and sentenced to pay a fine of Rs. 300 in default to suffer rigorous imprisonment for one month on each count (total fine Rs. 900) in S.T.C. No. 30 of 1994, and Rs. 300 in default to suffer rigorous imprisonment for one month on each count (total fine Rs. 600) in S.T.C. No. 31 of 1994, by separate orders dated 27/04/1994. Some time thereafter, the first respondent herein, a shareholder of the company, filed Crl. M.P. Nos. 1390 and 1391 of 1994, in S.T.C. Nos. 31 and 30 of 1994, respectively, under sections 203(1)(a) and 203(2)(a) of the Act for restraining the petitioner from acting as the managing director of the company, etc. Thereupon, the learned magistrate passed the impugned orders restraining the petitioner from acting as the managing director of, or taking part in any way either directly or indirectly in the promotion, formation or management of the company for a period of five years.

(2.) On the applicability of the provisions of section 203(1)(a) of the Act to the cases on hand, learned counsel appearing for the petitioner as well as the first respondent reiterate the respective submissions made before the learned magistrate. It is contended on behalf of the petitioner that conviction for an act of fraud is a sine qua non for invoking the provisions of section 203(1)(a) in view of the marginal note to the section. There is no element of fraud in the offences of which the petitioner was found guilty and, therefore, the impugned orders are liable to be set aside. In opposition, it is contended for the first respondent that the marginal note shall not be taken note of when the provisions of the section are clear and unambiguous. His learned counsel maintains that the provisions of section 203(1)(a) are clear and unambiguous and, therefore, reference to the marginal note to the section is unwarranted.

(3.) To have better appreciation of the above contentions, it is necessary to refer to the provisions of section 203(1) of the Act. It has two clauses - (a) and (b), with a common marginal note reading :