Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | 274 283 Companies Act 1956-Ss.267 |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Dismissed |
Headnote | Companies Act, 1956-Ss.267, 274, 283-Managing Director-Appointment of after incurring disqualification-Effect of-Company appointing a person as Managing Director after he was convicted of offence involving moral turpitude-operation of judgment of Sessions Court stayed by appellate court under s. 389(1) Cr.P.C.--Fact that stay sought of disqualification incurred under s.267 because of conviction not mentioned in stay application-Held, company committed infraction. of mandatory provision of s.267-Operation of s.267 would take effect as soon as conviction is recorded by a competent court-Order of appellate court can not be extended to stay of conviction for avoiding disqualification under s.267.Code of Criminal Procedure 1973-Ss. 374. 389(1), 482-Suspension of sentence or order appealed-Held, appellate court can stay operation of order of conviction for the purpose of avoiding disqualification under s. 267 of Companies Act, if the precise purpose is brought to notice of the court-High Court under s. 482 can pass orders preventing irreparable damages to applicant.Practice and Procedure -Parties to approach· the court with clean hands-A person against whom an order of conviction is passed by trial court cannot suppress the precise purpose for which he seeks suspension of conviction and obtain a general order of stay and then claim that disqualification as a result of conviction has ceased to operate. The appellant and his sons, respondents no.1 and 2 had share holding in a deemed Public Limited Company. The appellant, who was the founder and largest shareholder of the Company was, by a resolution dated 25.6.1990, appointed as the Managing Director of the Company. Respondent no. 1 challenged the said appointment in a Company Petition before High Court of Bombay on the ground that the appellant having before convicted of an offence involving moral turpitude could not hold office of Managing Director in view of provisions of S. 267 of the Companies Act, 1956. It was not disputed that the appellant had been convicted of offences punishable under ss. 120-B and 420 l.P.C. and sentenced to rigorous imprisonment for two and a half years, by Additional Sessions Judge, Delhi on 22.12.1986 and on appeal, the High Court of Delhi released him on bail and directed stay of the operation of the order passed by Addl. Sessions Judge. However, respondent no. 1 unconditionally withdrew the said company petition.Subsequently, in a petition before the Company Law Board, the functioning of the appellant as the Managing Director was again questioned on the ground of his conviction. Respondent no. 1 claimed himself to be the Managing Director and purporting to act as such issued a notice convening a meeting of the Board of Directors on 13.7.1992. It was claimed that in the said meeting it was inter alia resolved that the appellant had ceased to be the Managing Director and Director of the Company by virtue of s.267 of the Companies Act. Thereupon, the appellant and respondents no. 4 and S filed a suit for declaration that the Board meeting held on 13.7.1992 was illegal and the decisions taken therein were null and void, and for a permanent injunction restraining respondents no.1 and 2 from implementing the decisions taken in the said meeting. A Single Judge of the High Court, while granting the interim reliefs sought, held that the appointment of the appellant as Managing Director was not void ab initio notwithstanding the provision of s.267 of the Companies Act and, that the meeting of 13.7.1992 was not properly and validly convened and, therefore, the entire proceedings were bad in law. On appeal, the Division Bench of the High Court held that provisions of s.267 of the Companies Act were mandatory in nature and it was not permissible to appoint or continue any person as Managing Director of a company on his being convicted of an offence involving moral turpitude. As regards the effect of the stay order granted by the High Court of Delhi in appeal filed by the appellant against his conviction, the Division Bench held that under s.389(1) of the Code of Criminal Procedure, 1973 the High Court of Delhi could only suspend the execution of the sentence; and it neither suspended the order of conviction nor did it have the power to do so even under s. 482 of the Code. Aggrieved, the appellant filed the appeal.On the questions : (1) whether the appellant was liable to be visited with the consequence of s.267 of the Companies Act notwithstanding the interim order passed by the Delhi High Court while admitting the appellant's appeal against his conviction and sentence; (2) whether the B interim order passed by the Delhi High Court had the effect of staying the operation of s.267 of the Companies Act; and (3) whether the scope of s.389(1) of the Code extends to conferring power on the appellate court to stay operation of the order of conviction. |
Judge | Honble Mr. Justice A.M. Ahmadi |
Neutral Citation | 1995 INSC 61 |
Petitioner | Rama Narang |
Respondent | Ramesh Narang And Ors. |
SCR | [1995] 1 S.C.R. 456 |
Judgement Date | 1995-01-19 |
Case Number | 5620 |
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