P VAMAN RAO Vs. SECRETARY TO GOVERNMENT

JUDGEMENT

(1.) The petitioner, a former company secretary of Sirsilk Limited (hereinafter referred to as "the company"), in which the Government of Andhra Pradesh is the major shareholder, filed this petition under section 633(2) of the Companies Act, 1956 (for short "the Act"), for relieving him from the default, if any, in not complying with section 233B of the Act. The company petition was admitted on 13/03/1996 and interim direction was granted not to launch prosecution as proposed in the show-cause notice issued by the second respondent. The petitioner states in his petition as follows : The company was carrying on business in manufacture of cotton textiles, chemicals and rayon. Due to numerous problems, a lock-out was declared by the company on 26/04/1985 and the company remained closed and did not reopen till 16/04/1994. The company approached the Board for Industrial and Financial Reconstruction (BIFR) and pursuant to the order passed by the appellate authority, a new management was constituted and a new managing director was appointed, and the lock-out was lifted on 16/04/1994. The Company Law Board issued earlier an order under section 233B of the Act in respect of cotton textiles and rayon manufactured by the company directing cost audit of the accounts of these two divisions. The company represented to the Company Law Board that it was under continuous closure on account of lock out and therefore it was impossible to get the cost audit done and requested not to insist on the cost audit. The Company Law Board wanted the company to file an affidavit which was filed accordingly sworn to by the directors of the company. Thereupon, the Company Law Board withdrew the demand of cost audit as far as cotton textiles and rayon divisions are concerned. The Company Law Board issued another order on 7/01/1991 requiring the company to get the cost audit done with respect to the chemical division, for the year ending on 31/03/1991 and for every alternate financial year. To this, the company replied on 30/01/1991 stating that the BIFR had already concluded by then that the operations of the company are not viable and that the BIFR is contemplating winding up of the company and accordingly sought exemption from appointment of cost audit. As required by the Company Law Board, an affidavit signed by the two directors seeking exemption from applicability of cost audit was filed. While so, the Director (Cost), Company Law Board, by his notice dated 17/04/1993 required the company to get the accounts for the period ending on 31/03/1994 cost audited in respect of chemicals. Meanwhile, the petitioner submitted his resignation to the board of directors on 23/12/1987. But the decision of the acceptance of his resignation was postponed by the board of directors, for one reason or the other, and the resignation was not accepted till 1994, when there was a change in the management of the company pursuant to the order of the AAIFR. The resignation was communicated to the Registrar of Companies in Form No.-3 2/02/1994. Thereafter, the petitioner received a notice from Registrar of Companies on 16/02/1996 wherein it is alleged that for the years ending on 31/03/1991, and 31/03/1993, the accounts were not cost audited which was in violation of the orders of the Company Law Board and the petitioner was directed to show cause why prosecution should not be launched for the alleged default. The petitioner submitted a reply on 29/02/1996 tracing out the fact of his functioning as company secretary of the company, the declaration of the company as a sick unit by the BIFR, his resignation as secretary and absence of production of any chemical by the company which was under lock-out during this period. Apprehending that the Registrar may proceed with prosecution for alleged violation of section 233B, the petitioner has filed this petition, saying that he would be seriously prejudiced, if prosecution is needlessly launched against him.

(2.) No counter has been filed by the Registrar of Companies in spite of sufficient time having been given.

(3.) Section 233B, so far as it is relevant, reads as follows :