Case: Ramesh Narang Vs. Rama Narang

the Companies Act cannot be visited upon respondent No. 1. We are unable to find any merit in this submission for more than one reason. In the first instance, we do not read the order of Delhi High Court as suspending the order of conviction and, secondly, even assuming it to be so, in our judgment, the Delhi High Court had no power to suspend the order of conviction. In any event, while determining whether respondent No. 1 is disqualified to hold the post of Managing Director under Section 267 of the Companies Act, it is entirely immaterial what Delhi High Court contemplated while passing such order. The consequences flowing from the provisions of Section 267 of the Companies Act do not depend upon the passing of the order by Delhi High Court. The right of respondent No. 1 to hold the post of Managing Director comes to an end the moment the order of conviction is recorded. Mr. Cooper then urged that the appellant had earlier filed Company Petition No. 681 of 1990 in this Court to challenge the appointment of respondent No. 1 as Managing Director on the ground of conviction recorded by Additional Sessions Judge but subsequently that petition was withdrawn. Identical grievance made in petition No. 10 of 1991 filed before the Company Law board ended in consent terms filed by the parties and where the appellant accepted that respondent No. 1 can validly hold the post of Managing Director in spite of conviction. Mr. Cooper submitted that in view of the conduct of the appellant in filing consent terms before the company Law Board, it is not open for the appellant now to claim that respondent No. 1 ceases to be Managing Director because of conviction. The submission was countered by Mr. Sibal by urging that the doctrine of estoppel cannot be attracted when there is violation of the statutory provisions. The submission is correct and the respondent No. 1 cannot avoid the consequences of the provisions of Section 267 of the Companies Act merely because the parties had earlier filed consent terms. It is necessary to note that the provisions of the Companies Act are enacted by taking into consideration the public interest and not only the interest of the shareholders or the Directors of the company. It was also urged that the order passed by the learned Single Judge on notice of motion taken out by respondent Nos. 1 to 3 is at the interlocutory stage and should not be disturbed in appeal. We are unable to accede to the submission because even at the interlocutory stage the matter was extensively debated and the decision which affects not only the shareholders but the public at lage cannot be permitted to operate when found erroneous. ( 14 ) FINALLY, Mr. Cooper urged that respondent Nos. 1 to 3 had not specifically asked for any final relief in the suit in regard to the interim injunction sought against the appellant and respondent No. 5 restraining them from obstructing or interfering with the respondent No. 1s functioning as Chariman and Managing Director of the company. Mr. Cooper submitted that the issue as to whether the respondent No. 1 can function as Chariman and Managing Director does not arise on the strength of the averments made in the plaint and, consequently, it ws not necessary for the trial Judge to examine the same. The submission is obviously one of despertion and cannot be accepted. In the first instance, the pleadings in paragraph 22 of the plaint clearly indicate that respondent No. 1 was knen to secure a declaration that he is entitled to function as chariman and Managing Director of the company. Secondly, in case the issue does not arise on the basis averments in the plaint, then respondent No. 1 need not have sought interim relief of injunction restraining the appellant and respondent No. 5 from obstructing respondent No. 1 in functioning as Chariman and Managing Director of the company. The mere persual of prayer (e)of the plaint and prayer (b) of the notice of motion leaves no manner of doubt that respondent no. 1 was very keen to secure a declaration of his status to function as Managing Director of the company. It also cannot be overlooked that it is futile for respondent No. 1 now to claim that the issue as to whether respondent No. 1 is entitled to function as Managing Director does not arise when the respondent No. 1 argued the matter extensively before the learned Single Judge and the learned Single Judge framed specific point for determination on this aspect. A persual of the prayers in the plaint leaves no manner of doubt that respondent No. 1 was keen to secure a declaration of his legal status as Chairman and Managing Director of the company and, therefore, it is too late in the day now to claim that the learned Single Judge should not have examined the issue. Mr. Cooper also urged that prayer (e) in the plaint should be read as seeking an injunction restraining the appellant from obstructing or interfering with the funcntion of respondent No. 1 as Chairman and Managing Director of the company in pursuance of the resolution alleged to have been passed on July 13, 1992. Again, the submission is one of desperation because such is not the object of making the prayer in the plaint nor in the notice and such a relief was already covered by prayer (d) of the plaint and prayer (a) of the notice of motion. In our judgment, the respondent No. 1 now cannot avoid the consequences of the decision which was invited in the trial Court. In our judgment, the learned Single Judge was in error in granting relief in terms of prayers (b) of the notice of motion. As the relief granted in the terms of prayer (a) of the notice of motion is not challenged by the appellant as mentioned hereinabove, the same need not be disturbed.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]( 8 ) THE principal contention in this appeal, and which was also vehemently argued before the learned Single Judge, was in respect of capacity of respondent no. 1 to be appointed as Director and Managing Director of the company after recording of conviction by Additional Sessions judge,are unable to find any merit in the contention. The Appellate Court exercising powers under(1) of Section 389 of the code is not concerned with the consequences which may flow from the order of conviction in regard to the provisions of some other statute. The Appellate Court which entertains appeal against the order of conviction is entitled to suspend the execution of the sentence or the orders which flow as a consequence of the judgment either of conviction or acquittal and such a Criminal Appellate Court is not concerned with the consequences in respect of some other statutes which are visited upon the person who is convicted by a Criminal Court. The submission of Mr. Cooper that the order of conviction will have automatic impact with reference to some other statutes is devoid of any merit because the legislature has taken sufficient precaution in respect of those other statutes to protect a person who has preferred an appeal against the order of conviction. As mentioned hereinabove, as regards the recording of order of conviction against a Director, the conviction will not automatically disqualify the Director of a company from holding the post, in case where appeal is preferred within stipulated period of limitation or where the Central Government exempts such person or the company from disqualification. Section 8 of the Representation of the People Act, 1951, provides that the disqualification shall not take effect until three months have elapsed from the date of conviction or, if an appeal or revision application against the order of conviction is preferred, then until that appeal or application is disposed of by the Court. Section 11 of the representation of the People Act confers power upon the Election Commission to remove any disqualification or reduce the period of such disqualification. It is, therefore, obvious that whenever the Legislature thought it fit, statutory provisions were made to lessen the rigour of the consequences of recording of conviction. The Legislature, in its wisdom, did not make any such provision under Section 267 of the Companies Act when conviction in recorded against a person who is Managing Director. In our judgment, it is not permissible for the Appellate Court which entertains the appeal against the order of conviction to suspend the order of conviction and the only power available under Section 389 (1) of the Code of Criminal Procedure is to suspend the execution of the sentence of the order and which expression does not includeany event, it is not for the Criminal Appellate Court hearing an appeal to decide what are the ends of justice in respect of enforcement of provisions of some other statutes. The powers of the appellate Court flow from the provisions of the Code and we are not prepared to accept the contention that the Appellate Court hearing the criminal appeal should pass orders to avoid consequences flowing from the provisions of statutes like Companies Act or Representation of the People Act. Such other statutes have taken care of the consequences which flow from the order of conviction recorded by the Criminal Court. In our judgment, the provisions of Section 482, of the Code of Criminal Procedure are not at all attracted to claim that order of conviction can be suspended by an order of thethe case before the division Bench, the accused were convicted under the provisions of Anti Corruption Act by the special Court and the accused had preferred appeals. The appeal was admitted and the Single judge not only granted bail but suspended the operation of the judgment with the result that the accused claimed reinstatement into service and succeeded in that claim. Application was then filed on behalf of the prosecution for revocation order of suspension of conviction and reliance was placed on the decision of a Single Judge to the effect that there is no power to suspend the order of conviction. The application was referred to the Division Bench and the Division Bench held that the two expressions "judgment" and "order" under the Code of Criminal Procedure have to be understood in the context in which they are employed. An order of conviction is a part of the judgment and the same is followed by a sentence. The Division Bench further held that the code has nowhere defined the expressions "judgment" or "order" and once it is accepted that a convicted person in his appeal challenges the judgment as such, pronounced against him by a criminal Court, it is axiomatic that he can ask for suspension of execution of the sentence, if there is a sentence. It was further held that the accused can as well ask for suspension of the operation of the conviction which is a part of the judgment, if that become necessary in a given case. The Division Bench then observed that conviction is only a declaration declaring that the accused person is convicted of the offence or offences proved against him and the same can be set aside only by the Appellate Court. The Division Bench held that the Code provides for suspension of the rigour of the judgment passed by the trial Court pending disposal of thethe first instance, we do not read the order of Delhi High Court as suspending the order of conviction and, secondly, even assuming it to be so, in our judgment, the Delhi High Court had no power to suspend the order of conviction. In any event, while determining whether respondent No. 1 is disqualified to hold the post of Managing Director under Section 267 of the Companies Act, it is entirely immaterial what Delhi High Court contemplated while passing such order. The consequences flowing from the provisions of Section 267 of the Companies Act do not depend upon the passing of the order by Delhi High Court. The right of respondent No. 1 to hold the post of Managing Director comes to an end the moment the order of conviction is recorded. Mr. Cooper then urged that the appellant had earlier filed Company Petition No. 681 of 1990 in this Court to challenge the appointment of respondent No. 1 as Managing Director on the ground of conviction recorded by Additional Sessions Judge but subsequently that petition was withdrawn. Identical grievance made in petition No. 10 of 1991 filed before the Company Law board ended in consent terms filed by the parties and where the appellant accepted that respondent No. 1 can validly hold the post of Managing Director in spite of4 ) FINALLY, Mr. Cooper urged that respondent Nos. 1 to 3 had not specifically asked for any final relief in the suit in regard to the interim injunction sought against the appellant and respondent No. 5 restraining them from obstructing or interfering with the respondent No. 1s functioning as Chariman and Managing Director of the company. Mr. Cooper submitted that the issue as to whether the respondent No. 1 can function as Chariman and Managing Director does not arise on the strength of the averments made in the plaint and, consequently, it ws not necessary for the trial Judge to examine the same.