V RANGA RAO Vs. P JAYA PRASAD RAJA

JUDGEMENT

(1.) The petitioners in CRP No.5768 of 2003, filed this application, with a prayer to review the order, dated 19.7.2005, to the effect that the respondent No.1 herein, be restrained or disabled from participating in the meetings or management of the company, in view of the disqualification incurred by him. In relation to the composition of the Board of Directors and the administration of the affairs of M/s.Anupama Homes India Private Limited, the petitioners filed O.S.No.696 of 2003, in the Court of I Senior Civil Judge, City Civil Court, Hyderabad. Respondents 1 and 2 are directors, and others are associated with the affairs of the company. Two Interlocutory applications filed in the said suit gave rise to filing of three revisions before this court, viz CRP Nos.5768, 5792 and 6756 of 2003. Through a common order, dated 19.7.2005, this court disposed of the revisions, directing inter alia, that pending the disposal of the suit, the affairs of the company shall be run and conducted, with the participation of the petitioners 1 and 2 and respondents 1 and 2, as Directors, and that the day-to-day affairs shall be attended to, jointly by petitioner No.1 and respondent No.1. Certain other directions were also issued.

(2.) In this review petition, the petitioners contend that the 1st respondent incurred disqualification, from being continued as a director of the Company, in view of the conviction and sentence passed against him in C.C.Nos. 76 and 77 of 2003, by the Court of Special Judge for Economic Offences at Hyderabad. Placing reliance upon Section 274(1)(d) of the Companies Act, (for short "the Act"), the petitioners urge that the 1st respondent can no longer be continued as director of the company, and accordingly, they seek modification and review of the order in the CRP. The 1st respondent opposed the application, by stating that he had filed Crl.A.Nos.222 and 223 of 2006, in the Court of Metropolitan Sessions Judge, Hyderabad, against the orders in C.C.Nos.76 and 77 of 2003, and that the sentence of imprisonment was also suspended. He contends that he had got adequate protection under the Act, to continue as director. Sri S.Ravi, learned counsel for the petitioners, submits that Section 274(1)(d) of the Act. is clear in its purport and since the lst respondent was convicted for an offence, involving moral turpitude and was sentenced to undergo imprsonment for six months and was fined, he can no longer be continued as a director, nor associated with the management of the company. He submits that the application of the provision is not restricted to verification of qualification, when a person is inducted as a director, but also to those who upheld the office. By making reference to clause (f) of the said provision, he contends that no other interpretation would be inconsistent, with the object sought to be achieved.

(3.) Sri S.R.Ashok, learned Senior Counsel for the 1st respondent, on the other hand, submits that though it is a matter or record that the 1st respondent was sentenced to imprisonment in C.C.Nos.76 and 77 of 2003, the same does not entail in cessation of the office held by him, in view of the specific provision contained in sub-section (2) of Section 283 of the Act. He submits that when the Act itself maintains clear distinction between the two situations, covered by Sections 274 and 283 of the Act, the petitioners cannot insist on the 1st respondent being disqualified.