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PETITIONER: RABINDRA CHAMRIA AND ORS., ETC., ETC.

       Vs.

RESPONDENT: REGISTRAR OF COMPANIESWEST BENGAL AND ORS., ETC., ETC.

DATE OF JUDGMENT19/11/1991

BENCH: MOHAN, S. (J) BENCH: MOHAN, S. (J) MISRA, RANGNATH (CJ) KULDIP SINGH (J)

CITATION:  1992 AIR  398            1991 SCR  Supl. (2) 338  1992 SCC  Supl.  (2)  10 JT 1991 (4)   487  1991 SCALE  (2)1021

ACT: Companies Act, 1956.     Section  633---Scope of--Power of Court to grant  relief from liability for default, negligence etc.--Whether  relief could  be granted for liability under  Employees’  Provident Funds  and  Miscellaneous Funds Act,  1952  Expression  "any proceeding "---Meaning of. Employees’Provident Funds and Miscellaneous Provisions  Act, 1952.     Sections  14 and 14-A--Default in payment  of  provident Fund clues-Relief from liability--Grant of---Section 633  of Companies Act, 195&’Applicability of Industrial Disputes Act, 1947.     Section 32--Offence by a Company---Relief from  liabili- ty--Section 633 of Companies Act, 1956--Applicability o17

HEADNOTE:     The  appellants  in Civil Appeal No.3012  of  1990  were Directors of a Company, which was owning a Jute mill. Due to lock  out and strike in the Jute industry, the  Company  de- faulted  in  the payment of the provident  fund  dues.   The appellants  applied under Section 633 of the Companies  Act, 1956 for being relieved of liability for delayed as well  as non-payment of the provident fund and other ancillary  dues. A  Single  Judge of the High Court passed a  consent  order, allowing  the outstanding provident fund dues to be paid  in monthly  instalments  of  Rs.50,000 each  until  the  entire liability  was paid oH.  As the Provident  Fund  authorities accepted this course, summons were not served on the  Regis- trar  of  Companies, since what was sought to  be  recovered were the dues under the Provident Fund Act. The Single Judge also granted an injunction restraining the respondents  from initiating any criminal procccdings against 339 the  appellants  or any of them for non-payment  or  delayed payment of the provident fund.     On  appeal by the Regional Provident Fund  Commissioner, the  Division Bench held that any proceeding referred to  in section 633 of the Act would mean only under the  provisions of the Act, and that section 633 of the Act had no  applica-

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tion in respect of any liability under any other Act.  Hence the appeal.     Applications  claiming  relief under  section  633  were dismissed  in  the connected cases also,  resulting  in  the appeals, and Special Leave Petition, being filed before this Court.     On behalf of the appellants in Civil Appeal No. 3012  of 1990, it was contended that section 633 was very wide in its amplitude  and  there was no justification to  restrict  its application to only proceedings arising under the Act,  that when proceedings were taken in relation to breach of  trust, which  was  an offence under Indian Penal Code,  against  an officer of a company, it would be opentn him to plead before the  concerned  Magistrate that he had  acted  honestly  and reasonably, and if the Court came to the conclusion that  he should  fairly be excused it would relieve him;  that  under sub-section (2), it was an anticipatory action, and the High Court   also exercised a similar power as it was  exercising power under subsection (1), and if it was restricted only in respect  of any liability under the Companies Act, then  the protection  extended  under section 633 was last,  and  that similarly, under section 32 of the Industrial Disputes  Act, which  dealt with offences by Companies under that  Act  the burden  was  upon  the person concerned to  prove  that  the offences  were  committed without his knowledge  or  consent and,  but  for  that proof, the statute  deemed  him  to  be guilty;  therefore, if protection was not  afforded  against such a sweeping provision, the entire purpose of Section 633 would be rendered nugatory.     On  behalf  of the appellants in one  of  the  connected appeals  it  was contended that the  definition  of  "Court" contemplated with respect to any matter relating to a compa- ny,  and  that the Court having respective  jurisdiction  as provided under Section 2(11) was with respect to any offence under the Act, the Court of a first class Magistrate or,  as the case may be, a Presidency Magistrate having jurisdiction to try such offence, that this section would show that where like  the appellants they were not working  directors,  they could  not  be  subject to prosecution and  that  was  where Section  633 stepped in and afforded protection, even if  it were a liability arising 340 under  any other Act, for instance, like delayed payment  or nonpayment of provident fund.     On  behalf of the respondent - Regional  Provident  Fund Commissioner it was contended that any proceeding  occurring under  Section  633 could not relate to a  proceeding  other than one arising out of Companies Act, that each one of  the other  Acts not only defined penalty but also laid down  the penalty,  and therefore, merely because the appellants  were officers of the company, it could not mean that section  633 could  be availed of; otherwise, the consequences  would  be disastrous  and the penal provision of all other Acts  would be  rendered ineffective, that Section 14 of the  Employees’ Provident Funds and Miscellaneous Provisions Act, 1952  laid down the penalty for the offences of companies and was dealt with  in Section 14-A, and the explanation to the said  sec- tion also talked of as to what a company would mean for  the purpose  of the section, and, therefore, where an  elaborate procedure was contemplated under those sections for recovery of  the  dues  and the Provident Fund Act,  being  a  social welfare legislation, that could not be rendered illusory  by extending  the  benefit under Section 633 of  the  Companies Act; similarly, Section 86 of the Employees’ State Insurance Act,  providing for prosecution also dealt  with  Companies,

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and, the explanation under that Section specifically  stated as to what would be a Company or Director for the purpose of that section and hence, no interference was called for. Dismissing the cases, this Court,     HELD: 1.1 Under Section 633 of the Companies Act,  1956, relief cannot be extended in respect of any liability  under any Act other than the Companies Act. [354 C]     1.2  The  expression ’any  proceeding’  occurring  under Section  633  cannot be read out of context and  treated  in isolation.  It must be construed in the light of  the  penal provisions.  Otherwise, the penal clauses under the  various other  Acts would be rendered ineffective by application  of Section  633. Again, if Parliament intended Section  633  to have  a coverage wider than the Act, it would have  specifi- cally  provided  for  it. Moreover, it is a  sound  rule  of construction  to  confine  the provisions of  a  statute  to itself. [349 D-E]     1.3 While referring to any proceeding under  sub-section (2)  of Section 633 the Parliament intended to  restrict  it only  to the proceeding arising out of negligence,  default, breach of trust, misfeasance or breach of duty in respect of dutics prescribed under the provi- 341 sions  of  the Companies Act. Further,  examining  the  sub- section  with reference to the context and the placement  of the sub-section, the only conclusion that is possible is the proceedings for which relief under this sub-section could be claimed or the proceedings against the officer of a  company for  breach  of the provisions of the  Companies  Act.  Sub- section  (2) cannot apply to proceedings instituted  against the officer of the company to enforce the liability  arising out of violation of provisions of other statutes. [349 F-G]     1.4  Sub-section (3) requires notice to be given to  the Registrar  of  Companies. This indicates that  powers  under sub-section (2) must be restricted in respect of proceedings arising out of the violation of the Companies Act 1349 H]     1.5 Merely because section 32 of the Industrial Disputes Act  contains a stringent provision, it cannot be held  that Section  633 of the Companies Act could be invoked  for  of- fences under Section 32 of the Industrial Disputes Act. 1354 D]     Customs  and Exicise Comrs. v. Hedon Alpha LId.,  (1981) QB 818(1981) 2 ALL ER 697 CA. referred to. Halsbury’s    Laws    of    England,    (Fourth     Edition) 7(1)  Companies,  para 652; Pennington’s  Company  law.  4th Edn.,  1979,  P.548, 23rd Edn. 1982, Vol. I p. 881  and  5th Edn. 1985 p.679-680, referred to.     2.1  The  authority to take action under  the  Provident Fund  Act as seen from Section 14 of the said Act is a  Com- missioner while the procedure so far as the Companies Act is concerned, under Section 621 it is on a complaint in writing of the Registrar or of a shareholder of a company, or of  an officer authorised by the Central Government in this  behalf that action can be taken.     Since  ii is mandatory for the Court to givc  notice  to the Registrar of Companies or such other person, if any,  as it  thinks necessary. as required under sub-section  (3)  of Section 633, if Section 633 is interpreted so as to  include proceedings under Acts other than the Companies Act it  will be open to the Court to give such relief under this  Section without  giving notice to the authority competent to  prose- cute in respect of liabilities under the other laws or  upon giving  notice  to other concerned and  not  the  Registrar. Thus,  the  mandatory  requirement of  sub-section  (3)  can easily  be bye-passed. Further, if relief under Section  633

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is extended, officers who would be deemed to have  committed the offence under Section 14-A of the 342 Provident  Fund  Act, because sub-section  (1)  states  that every  person who was responsible to the company as well  as the company shall be deemed to be guilty of the offence  and liable for such offence would get the benefit and escape the rigour of Scction 14-A. The explanation also makes it  abun- dantly clear that all companies covered by the Companies Act would be companies within the meaning of explanation. On the contrary,  those companies failing under the explanation  to Section 14-A would not be companies under the Companies Act. [355 C-F]       2.2  Thus in the case of a company falling  under  the explanation to Section 14-A of the Provident Fund Act  which does  not come within the purview of the Companies Act,  the liability  of the persons would be governed only by  section 14A(1) and (2) of the Provi dent Fund Act. They will not  be entitled to any relief under Section 633. The benefit avail- able under a social welfare legislation, namely, the Employ- ees’  Provident Fund Act cannot be defeated in this  manner. 1355 G-HI

JUDGMENT:         CIVIL APPELLATE JURISDICTION: Civil Appeal No.  3012 of 1990.       From  the  Judgment and Order dated 13.3.1900  of  the Calcutta High Court  in Appeal No. 266 of 1987         WITH       Civil Appeal Nos. 3117.3118, and 3738 of 1990 and  SLP No. 8081 of 1990.         K.K. Venugopal. Dr. Shankar Ghosh, Kapil Sibal, Ajay K.  Jain, Pramod Dayal, Vivek Gambhir, Surinder  Kamail  and S.K. Gambhir for   the Appellants. Aruneshwar Gupta and Ms. Sushma Suri for the Respondents. The Judgment of the Court was delivered by      S. MGHAN, J. All these matters can be dealt with  under a  common judgment since the question which arises for  con- sideration  is  the  scope of Section 633 of  the  Companies Act, 1956.       It is enough if we refer to the facts in Civil  Appeal No. 3012 of 1990. The short facts are as follows:        Eastern Manufacturing Company Ltd. ("The Company"  in short)  is    the owner of a jute mill in West  Bengal.  The appellants were appointed 343 Directors between 10.4.1981 and 15.6.1984. There was a  lock out  in’the Jute Mill on 2.6.1982. By a  notification  dated 26.10.  1983,  Government of West Bengal declared  the  said jute  mill as a relief undertaking under the  provisions  of West  Bengal  Relief Undertaking (Special  Provisions)  Act, 1972.  However,  on 24.11. 1983, the lock  out  was  lifted. Thereafter  the  mill resumed  its  manufacturing  operation between  16.1.1984 and 8.4.1984. There was a strike  in  the Jute  Industry throughout West Bengal. Between 7.3.1985  and 3.8.1985  there  was a lock out due to labour unrest.  As  a result of all these the company defaulted in the payment  of the provident fund dues. On 28.1. 1986, a petition was moved on behalf of the appellants under Section 633 of the  Compa- nies  Act, 1956 (hereinafter referred to as ’the  Act’)  for being  relieved  of liability for delayed as  well  as  non- payment of the provident fund dues and other ancillary dues. On  21.8.  1986 a consent order was passed  by  the  learned

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Single Judge allowing the outstanding provident fund dues to be paid in monthly instalments of Rs. 50,000 commencing from April, 1986, until the entire liability is paid off.     Since  this  course was accepted by the  provident  fund authorities it was not considered necessary to serve summons on the Registrar of Companies because what was sought to  be recovered were the dues under the Provident Fund Act. It was further ordered concerning Prayer-B that an injunction shall issue restraining the respondents from initiating any crimi- nal  proceedings against the appellants or any of  them  for non-payment or delayed payment of the provident fund.     Aggrieved by this order, the first respondent before us, namely,  the  Regional  Provident  Fund  Commissioner  filed appeal  No. 286 of 1987. The Division Bench which heard  the matter  rendered  its impugned judgment on 13.3.  1990.  The sole point which came up for determination was, whether  the learned  Single  Judge was right in  granting  relief  under Section  633  of the Act in respect  of  offences  committed under the Employees Provident Fund and Miscellaneous  Provi- sions Act of 1952 (hereinafter referred to as "The Provident Fund Act").     It  was  argued  on behalf of the  appellants  that  the relief under Section 633 of the Act could be granted only in respect  of offences committed under the Companies  Act  and not  in respect of offences under any other law. It is  also submitted that in respect of violations of the provisions of the Act, it is the Registrar of Companies or any one  autho- rised  on his behalf who could initiate criminal  cases.  On the  contrary,  in respect of offences committed  under  the Provident  Fund  Act the appropriate authority  to  initiate such action would be the Regional Provident Fund Commission- er. On an elaborate consideration with reference to  decided cases, it 344    was  held that any proceeding referred to in Section  633 of the Act would mean only under the provisions of the Act.       Reference  was also made to Section 14A of the  Provi- dent Fund Act inserted by Amending Act 37 of 1953 and it was concluded:                       "If  the contention that  Section  633               applies in respect of liabilities arising also               under the provisions of any Act other than the               said Act, is accepted, then and in that case a               peculiar situation will arise, a person who is               otherwise liable in view of the provisions  of               Section 14-A would be entitled to relief under               Section 633 if he is employed by or  connected               with  a  company   which is  covered  both  by               Provident Fund Act and the Companies Act but a               person  shall  .not  be so  entitled  to  such               relief  if  he is not an employee  of  a  body               corporate covered by the Companies Act  though               he  is  an employee of a  company  within  the               meaning of explanation to Section 14A. Besides               if that  contention that all proceedings would               include  proceedings under other Act also  all               the statutory provisions made for the  welfare               of  weaker  sections of  the  community  stand               modified         automatically to  the  extent               sepecified  in  Section 633 for  all  time  to               come,  even for all future  legislation.  This               would frustrate the object of welfare legisla-               tions." Accordingly  it was held that Section 633 of the Act has  no application in respect of any liability under any other Act.

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In the result, the order of the learned Single Judge was set aside  and the application under Section 633 was  dismissed. We  do not think worthwhile to refer to certain  preliminary objections  raised  by  the Division Bench  in  relation  to maintainability  as  that  is not argued before  us.  It  is against  this judgment that the appeal by special leave  has been preferred.       An  application  was moved before  the  Company  Court claiming relief under Section 633 and the same was dismissed applying  judgment of Civil Appeal No 286 of  1987.  Similar application  was  dismissed by the learned Single  Judge  by order dated 24.4.1988 in Civil Appeal Nos. 3117    & 3118 of 1990. In Civil Appeal No. 3738 of 1990  Company Petition  No. 312 of 1989 for relief under Section  633  too was dismissed.       In  Special Leave Petition No. 8081 of 1990  also  the Company Petition for similar relief has been dismissed.        Mr.  Venugopal,  learned Counsel for  the  appellants urged  that  Section 633 is very wide in its  amplitude  and there is no justification to 345 restrict  its application to only proceedings arising  under the Act. He draws our attention to Sections 420 and 423  and submits  that  when  proceedings are taken  in  relation  to breach  of  trust, for instance, which is an  offence  under Indian Penal Code, against an officer of a company it  would be  open  to him to go before the concerned  Magistrate  and plead  a defence that he has acted honestly and  reasonably. In  such  a case should the Court come to  a  conclusion  he ought fairly to be excused. the Court will relieve him.     While  this is the submission as far as sub-section  (1) is  concerned, under sub-section (2) it is maintained to  be an  anticipatory  action. The High Court  also  exercises  a similar  power as that Court is exercising power under  sub- section  (1). Otherwise if it is restricted only in  respect of any liability under the Companies Act then the protection extended under Section 633 is lost.     Under the Companies Act of 1913 the corresponding provi- sion  was Section 281. Though certain categories of  persons were  catalogued under sub-section (3) of the said  section, presently Section 633 has employed the words "an officer  of a company’ the object is to see the Directors or a  Director who rarely takes part in the affairs of the Company are  not unduly  harassed  for offences which may arise  under  other acts, of which these Directors may not have any knowledge at all.     He also draws our attention to Section 32 of the  Indus- trial  Disputes  Act, which talks of offences  by  Companies under  the said Act. That is a sweeping provision where  the burden  is upon the person concerned to prove that  the  of- fences  were committed without his knowledge or consent  and but  for that proof, the statute deems him to be guilty.  If under Section 633 the protection is not so afforded  against such a provision like Section 32 of the Industrial  Disputes Act the entire purpose of Section 633 is rendered  nugatory. The  result of the Division Bench .judgment of the  Calcutta High Court referred to in the impugned judgment will be that these directors (the appellants) are exposed to prosecution; certainly that could not have been the intention of the  law maker.     Mr.  Kapil  Sibal,  learned counsel  appearing  for  the appellants in Civil Appeal No. 3117 refers to Section  2(11) of  the  Act  and submits that the  definitions  of  "Court" contemplates with respect to any matter relating to a compa- ny.  The  Court having respective jurisdiction  as  provided

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under Section 2(11) is with respect to any offence under the Act, the Court of a Magistrate of the First class or, as the case may be, a Presidency Magistrate, having jurisdiction to try such offence. 346     This  section will show that where like  the  appellants they  are not working directors, they cannot be  subject  to prosecution. That is where Section 633 steps in and  affords protection,  even  if it is a liability  arising  under  any other Act, for instance, like delayed payment or non-payment of  provident fund. In other respects, he adopts  the  argu- ments of Mr. Venugopal.     Learned counsel for the Regional Provident Fund  Commis- sioner  would urge that any proceeding occurring under  Sec- tion 633 cannot relate to a proceeding other than one  aris- ing out of Companies Act. If the arguments of the appellants are  accepted it would amount to treating Section 633  as  a panacea  for all the ills for offences committed in  respect of various other enactments. It might even include not  only the  existing  enactments but enactments which  are  yet  to come. Insofar as each one of the other Acts not only defines penalty  but  also lays down the penalty;  therefore  merely because the appellants are officers of the company it cannot mean  Section 633 could be availed of. This provision is  in pari materia with Section 448 of the English Companies  Act, 1948, However, as on today Companies Act of 1985 has  incor- porated  a similar provision under Section 727 In a  leading case  reported in 1981 (2) All Eng. Law Reportes 697,  (Cus- toms  and Excise Commissioners v. Hedon Alpha Ltd.  &  Ors), the  scone  of Section 448 of the 1948 Act came up for  con- sideration.  It was held that   although Section 448 (1)  of the  1948  Act  was expressed in wide terms,  in’  its  true construction  the  only proceeding for  which  relief  under Section  448  could be claimed were  proceedings  against  a director by, on behalf of or for the benefit of his  company for  the breach of his duty to the company as a director  or penal proceedings against a director for breach of the  1948 Act.  It was this line of reasoning which found favour  with the Division Bench of the Calcutta High Court which view  is commended for acceptance by this Court. Otherwise the conse- quences will be disastrous. The penal provision of all other Acts  would  be rendered ineffective by  the  interpretation pressed for an acceptance. The further submision of  learned counsel  is  if one looks at Section 14  of  the  Employees’ Provident Funds and Miscellaneous Provisions Act, 1952  that lays down the penalty for offences of companies and is dealt with  in Section 14-A. The explanation to the  said  Section also  talks of as to what a company would mean for the  pur- pose  of this Section. Therefore, where an elaborate  proce- dure  is conternplated under those sections for recovery  of these dues and the provident Fund Act being a social welfare legislation  that cannot be rendered illusory  by  extending the benefit under Section 633 of the Companies Act. Similar- ly under Employees State Insurance Act, Section 86 talks  of prosecution  which came to be introduced by Amending Act  of 1989  also deals with Companies. The explanation under  that Section specifically states as 347 to  what would be a company or Director lot the  purpose  of that  section. Hence it is submitted that no mterference  is called for.     Having  regard to the above arguments, the  only’  point that arises for determination is as to the scope of  Section 633.     The  Companies Act was enacted in the year 1956. As  the

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Preamble itself says it is an Act to cossolidate and amend a law relating to companies and certain other associations. As to  definition  of  Company,  it  is  found  under   Section 3(1)which consists of the               (i)  Company               (ii) Existing Company               (iii) Private Cornpany               (iv) Public Company               Section 664 of this Act reads as follow’s:               The  enactments mentioned in Schedule XII  are               hereby repealed".     Schedule  XII  that  is referred to  under  the  Section refers to previous Companies Act of 1913 also under  certain other Acts by way of ordinance or amendments.     Section 281 office old Act of 1913 which talks of  power of  the  Court to ,,rant relief in certain  cases  reads  as under:               "281:  Power of Court to grant relief in  cer-               tain  cases:  (1) if in  any  proceedings  tot               negligence, defaul breach of duty or breach of               trust  against a person to whom  this  Section               applies,  it appears to the Court hearing  the               case  that that person is or may be liable  in               respect  of the negligence, defaut  breach  of               duty or breach of trust, but that he has acted               honestly  and  reasonably,  and  that   having               regard  to all the circumstances of the  case,               including  (hose connected with  his  appoint-               ment,  he ought fairly to be excused  for  the               negligence, default, breach of duty or  breach               of  trust, that Court may relieve  him  either               wholly  or partly, from his liability on  such               terms as the Court may think               fit.               (2)  Where  any person to  whom  this  section               applies has reason to apprehend that any claim               will or might be made against him m respect of               any  negligence,  default breach  of  duty  or               breach               348               of  trust,  he  may apply to  the  Court   for               relief. and the Court on any such  application               shall  have the same power to relieve  him  as               under this Section it would have had if it had               been a Court before which proceedings  against               that person for negligence, default, breach of               duty or breach of trust had been brought.                        (3) The persons to whom this  section               applies are the following:-                       (a) directors of a company;                       (b) managers and managing agents of  a               company;                       (c)  officers of a company;                       (d)  persons employed by a company  as               auditors whether they                            are  or are not officers  of  the               company?’       With this background of law, we will go on to  Section 633 of the Companies Act, 1956. It reads thus:          633:  Power  of Court to grant  relief  in  certain cases:          (1)  If  any proceeding  for  negligence,  default, breach  of duty, misfeasance or breach of trust  against  an officer  of  a company,it appears to the Court  hearing  the case  that  he is or may beliable in respect of  the  negli-

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gence,  default,  breach of duty, misfeasance or  breach  of trust,  but that he has acted honestly and  reasonably,  and that  having  regard to all the circumstances of  the  case, including  those  connected with his appointment,  he  ought fairly   to   be  excused,  the  Court  may   relieve   him, either wholly or partly, from his liability on such terms as it may think fit: Provided  that  in  a criminal proceeding  under  this  sub- section, the Court shall have no power to grant relief  from any  civil liability which may attach to an officer  in  re- spect  of such negligence, default, breach of duty.  misfea- sance of breach of trust.          (2) Where any such officer has reason to  apprehend that any proceeding will or might be brought against him  in respect of any negligence, default. breach of duty,  misfea- sance or breach of trust, he may apply to the High Court for relief and the High Court on such application shall have the same  power  to relieve him as it would have had if  it  had been a Court before which a proceeding against that  officer for  negligence,  default, breach of  duty,  misfeasance  or breach of trust had been brought under  sub-section(1). 349 (3)  No  Court shall grant any relief to any  officer  under subsection  (1) or sub-section (2) unless it has, by  notice served in the manner specified by it, required the Registrar and  such other person, if any, as it thinks  necessary,  to show cause why such relief should not be granted".  On a comparison of the two sections two important  features emerge  to  be noticed. The Court under Section 633  has  no power  to grant relief from any civil liability. Under  sub- section  (3) of Section 281 only four categories of  persons were entitled to seek relief while under Section 633 it will be an officer of the Company.     Under the Companies Act of 1956 (similarly under the Old Act  of 1913) various duties and liabilities have  been  im- posed;  equally offences have been created for the  non-per- formance  of  such duties. These offences  are  offences  in relation to the performance of certain duties under the Act. the  various offences are mentioned under Sections  59,  62, 63,  68,  142, 162, 207, 218,272, 374,420,423,538 to  545  & 606.     The expression ’any proceeding’ occurring under  Section 633 cannot be read out of context and treated in  isolation. It  must be construed in the light of the penal  provisions. Otherwise  what will happen is the penal clauses  under  the various other Acts would be rendered ineffective by applica- tion  of Section 633. Again, if parliament intended  Section 633  to  have a coverage wider than the Act, it  would  have specifically  provided for it as, otherwise, it is  a  sound rule of Construction to confine the provisions of a  statute to itself.     We are also of the view while referring to any  proceed- ing  under  sub-section (2) the Parliament intended  to  re- strict it only to the proceeding arising out of  negligence, default,  breach of trust, misfeasance or breach of duty  in respect of the duties prescribed under the provisions of the Companies Act. Further examining the sub-section with refer- ence to the context and the placement of the sub-section the only  conclusion  that is possible is  the  proceedings  for which relief under this sub-section could be claimed or  the proceedings  against the officer of a company for breach  of the provisions of the Companies Act. Sub-section (2)  cannot apply  to proceedings instituted against the officer of  the company to enforce the liability arising out of violation of provisions  of other statutes. Reference could also be  made

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to  sub-section (3) where notice is required to be given  to the  Registrar of Companies. This is an indication that  the powers  under sub-section (2) must be restricted in  respect of proceedings arising out of the violation of the Companies Act. 350     We  will  now refer to the corresponding  provisions  in English  Law.  Section  448 of the Companies  Act,  1948  is replaced by Section 727 of the Companies Act, 1985.  Section 727 reads thus:               "727:  Power of Court to grant relief in  cer-               tian cases:               (1)  If  in  any  proceeding  for  negligence,               default,  breach  of duty or breach  of  trust               against  an officer of a company or  a  person               employed  by a company as auditor (whether  he               is  or  is not an officer of the  company)  it               appears  to  the court hearing the  case  that               that officer or person is or may be liable  in               respect of the negligence, default, breach  of               duty or breach of trust, but that he has acted               honestly  and  reasonably,  and  that   having               regard  to all the circumstances of  the  case               (including  those connected with his  appoint-               ment)  he ought fairly to be excused  for  the               negligence, default, breach of duty or  breach               of  trust, that court may relieve  him  either               wholly  or partly, form his liability on  such               terms as it thinks fit.               (2)  If any such officer or person  as  above-               mentioned  has  reason to apprehend  that  any               claim  will  or might be made against  him  in               respect of any negligence, default, breach  of               duty  or breach of trust, he may apply to  the               Court for relief; and the court on the  appli-               cation  has the same power to relieve  him  as               under this section it would have had if it had               been a court before which proceedings  against               that person for negligence, default, breach of               duty or breach of trust Had been brought.               (3)  Where  a case to  which  sub-section  (1)               applies is being tried by a Judge with a Jary,               the Judge, after hearing the evidence, may, if               he is satisfied that the defendant or defender               ought  in pursuance of that sub-section to  be               relieved  either in whole or in part from  the               liability  sought to be enforced  against  him               withdraw the case in whole or in part from the               Jury  and  forthwith  direct  judgment  to  be               entered  for the defendant or     defender  on               such  terms  as to costs or otherwise  as  the               Judge   may think proper".               Halsbury’s Laws of England (Fourth Edition)  7               (1) Companies, para 652 on this aspect  states               as follows:               "POWER OF COURT TO GIVE RELIEF AGAINST LIABIL-               ITY:               If in any procedings for negligence,  default,               breach  of duty or breach of trust against  an               officer of a company or a person               351               employed by the company as auditor (whether or               not  he  is  an officer of  the  company),  it               appears  to  the Court hearing the  case  that               that officer or person is or may be liable  in

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             respect of the negilgence, default, breach  of               duty or breach of trust, but that he has acted               honestly  and  reasonably,  and  that   having               regard to all the circumstances of the  cases,               including  those connected with  his  appoint-               ment,  he ought fairly to be excused  for  the               negligence, default, breach of duty or  breach               of  trust, that court may relieve him,  either               wholly  or partly, from his liability on  such               terms  as the court thinks fit. The  power  to               grant  relief applies to personal breaches  of               duty;  it does not extend to claims  by  third               parties.               Where  a  case within the above  provision  is               being tried by a judge with a jury, the judge,               after  hearing  the  evidence, may  if  he  is               satisfied  that the defendant ought to be  re-               lieved  either  in whole or in part  from  the               liability  sought to be enforced against  him,               withdraw the case in whole or in part from the               jury  and  forthwith  direct  judgment  to  be               entered for the defendant on such terms as  to               costs  or  otherwise as the  judge  may  think               proper.               If  any such officer or person has  reason  to               apprehend that any claim will or might be made               against  him  in respect  of  any  negligence,               default, breach to duty or breach of trust, he               may  apply to the court  for relief;  and  the               court  on  any such application has  the  same               power  to relieve him as it would have had  if               it  has been a court before which  proceedings               against  that person for negligence,  default,               breach  of  duty or breach of trust  had  been               brought.               The application to the court is made by way of               petition. The application is made to the court               having jurisdiction to wind up the company. In               cases  in the High Court of Justice the  .pro-               ceedings  are assigned to the  Chancery  Divi-               sion. The petition and all affidavits, notices               and  other documents in the proceedings  under               it  must  be  entitled in the  matter  of  the               company  in the matter of the  Companies  Act,               1985.               Under  the above provisions a director may  be               relieved  against  liability in respect  of  a               transaction wholly ultra rites the company  or               against the penalties imposed by the Act where               he has acted without obtaining or after  ceas-               ing to hold his qualification shares. 352     The  leading  decision  on Section 448  is  reported  in Customs and Excise Comrs. v. Hedon Alpha Ltd. (1981) QB 818, (1981) 2 All ER 697, CA. That related to the  interpretation to be placed on Section 448 of the Companies Act of 1948. In that  case a Director of a company was carrying on  business as  a bookmaker. The liability of the Director  for  general betting  duty was not paid by the company. The Director  was acting  honestly and reasonably, and, therefore,  was  found not  guilty  of misconduct. Under these  circumstances,  the question  arose whether the Director was entitled to  relief from claim for civil liability by a stranger to the company. Claim  to  recover  betting duty  would  amount  to  default against Director within the meaning Of Section 448. Stephen-

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son, LJ stated on this aspect as follows:               "Furthermore, the language of Section 448  was               apt  to describe the area in which  a  company               director  might be in breach of his duties  to               the  company, and the ambit and  concern,  the               context or matrix, of the section was  company               law and the relation of the officer or auditor               of  a company to the company and not to  third               persons.  The proceedings which qualified  for               the  statutory  relief  were  claims  made  by               companies,  or  on their behalf or  for  their               benefit  by,  e.g. liquidators, the  Board  of               Trade,  private  prosecutors  including  penal               proceedings for the enforcement of the  Compa-               nies Act, but not proceedings for the recovery               of debts or the enforcement of civil liability               to strangers."               Griffiths, LJ. was of the following view:               "In my judgment section 448 has no application               to the present claim. Although the section  is               expressed  in wide language it is in  my  view               clearly  intended to enable the court to  give               relief  to  a director who,  although  he  has               behaved reasonably and honestly, has neverthe-               less  failed in some way in the  discharge  of               his obligations to his company of their share-               holders or who has infringed one of the numer-               ous  provisions  in the  Companies  Acts  that               regulate the conduct of directors."     It  requires  to be stated that  though  Stephenson,  LJ referred to Palmer’s Company Law, he also made reference  to Pennington’s  Company  Law (4th Edn., 1979 P.  548).  It  is stated thus:               "Under  the statutory provision relief can  be               given  against any of the  criminal  penalties               imposed  by the Companies Act, 1948 and  1976,               but not, it would seem, against civil liabili-               ty to               353               anyone other than the company and so apparent-               ly  no relief may be given in the  rare  cases               where  a member or auditor of a company has  a               personal right to sue its directors."     We  will  now refer to Palmer’s Company Law.  23rd  Edn. 1982 Vol. 1 page 881. It is stated thus:               "Statutory relief (S.448),               Section  448 (which is referred to in  Section               205,  proviso (b) is a protective section  for               directors on lines similar to that accorded to               trustees. It provides that in any  proceedings               against.  inter  alia, a director  for  negli-               gence,  default, breach of duty or  breach  of               trust,  if a director who is or may be  liable               has in the opinion of the Court acted honestly               and  reasonably, and if having regard  to  all               the circumstances of the case, including those               connected  with  his  appointment,  he   ought               fairly to be excused, the Court may wholly  or               partly  relieve  him from his  liability;  the               court has a discretion in the matter, and  may               impose  terms (Section 448) (1). In  spite  of               the wide words of the section it has been held               that  the  section  applies  only  to  actions               brought by or on behalf of the company against               its directors for breach of duty and to  penal

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             proceedings  for the enforcement of  the  Com-               paines Act ."                   The  5th Edn. of Pennigton’s Company  Law,               1985 at page 679 and 680 contains the  follow-               ing observations:               "However, if a director is sued for breach  of               any  of his duties, he may apply to the  Court               for relief from liability, and if the Court is               satisfied that he acted honestly and  reasona-               bly,  and  that in all the  circtumstances  he               ought  fairly to be  excused, it  may  relieve               him from liability on such terms as it  thinks               fit.  This provision is identically worded  to               the provision in the Trustees Act, 1925  which               enables the court to relieve defaulting  trus-               tees, and the Courts, jurisdiction wilt proba-               bly be exercised in the same way as under that               Act.  The Court is reluctant to relieve  remu-               nerated  trustees and will only do so if  they               show that they have taken all reasonable steps               and  to make good their breach of  trust;  the               same  criterion  has been applied when  a  de-               faulting  liquidator  sought  relief,  and  it               would no doubt also be applied in the case  of               a  director. On the other hand, the court  can               give relief, even though the director has used               the company’s money for ultra vires  purposes,               and  even  though the  members  oppose  relief               being given.               354               Under  the statutory provision, relief can  be               given against any               of  the  criminal  penalties  imposed  by  the               Companies Act, 1985, but not against  criminal               liability under any other statute, or  against               civil  liability  to  anyone  other  than  the               company whether the liability arises by  stat-               ute or otherwise, and so apparently no  relief               may  be given in the rare cases when a  member               or creditor of a company has a personal  right               to  sue its directors. Reference was  made  to               the Court of Appeal decision."               (emphasis supplied)     Thus  we are clearly of the view that under Section  633 of  the  Act  relief cannot be extended in  respect  of  any liability under any Act other than the Act.     May  be  the Industrial Disputes Act  under  Section  32 contains a stringent provision but that is no answer to hold that  Section 633 of the companies Act could be invoked  for offences under Section 32 of the Industrial Disputes Act. We are dealing with a case arising under Employees Provident Fund  Act.  The total arrears dues for the Company  are  Rs. 1,77,22,000. Section 14 of the Employees Provident Fund  Act specifically  provides for penalties with reference to  con- travention of the provisions of the Act. Section 14A  speaks of  offences  by  the companies. We will  now  extract  that section-               "14-A :(1) If the person committing an offence               under  this  Act,  the Scheme  or  the  Family               Pension  Scheme or the Insurance Scheme  is  a               company,  every  person who at  the  time  the               offence  was committed was in charge  of,  and               was  responsible to, the company for the  con-               duct  of the business of the company. as  well               as  the company, shall be deemed to be  guilty

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             of  the  offence  and shall be  liable  to  be               proceeded against and punished accordingly:               Provided  that nothing contained in this  sub-               section shall render any such person liable to               any punishment, if he proves that the  offence               was commited without his knowledge or that  he               exercised  all  due diligence to  prevent  the               commission of such offence.               355               (2)  Notwithstanding  anything  contained   in               sub-section  (1), where an offence under  this               Act,  the Scheme or the Family Pension  Scheme               or the Insurance Scheme has been committed  by               a  company  and  it is proved  that  that  the               oiffence  has been committed with the  consent               or  connivance of, or is attributable to,  any               neglect on the part of, any director or manag-               er, secretary or other officer of the company,               such  director,  manager  secretary  or  other               officer  shall be deemed to be guilty of  that               offence  and shall be liable to  be  proceeded               against and punished accordingly ."     The  authority to take action trader Provident Fund  Act as  seen from Section 14 is a Commissioner while the  proce- dure so far as the Companies Act is concerned under  Section 621  is on a complaint in writing of the Registrar  or’of  a shareholder of a company or of an officer authorised by  the Central  Government in this behalf action can be  taken.  As already  noted  under sub-section (3) of  Section  633,  the Court has to give notice to the Registrar of Companies or on such  other person, if any, as it thinks  necessary  .There- fore,  giving  of  notice is mandatory. That  being  so,  if Section  633 is interpreted as to include proceedings  under Acts  other  than the Companies Act it will be open  to  the Court  to give such relief under Section 633 without  giving notice to the authority competent to prosecute in respect of liabilites  under  the other laws or upon giving  notice  to other  concerned and not the Registrar. Thus  the  mandatory requirement  of subsection (3) of Section 633 can easily  be bye-passed.  Then again under Section 14A of  the  Provident Fund  Act.  officers who are talked of  under  this  section would  be  deemed  to have cormmitted  the  offence  because subsection (1) states that every person who was  responsible to the company as well as the company shall be deemed to  be guilty  of the offence. If therefore, the relief under  Sec- tion  633  is  extended. such officers or  persons  who  are otherwise liable for such offence would get the benefit of Section 633 and escape the rigour of Section 14A. The expla- nation  arise makes it abundantly clear that  all  compaines covered  by the Companies Act would be companies within  the meaning  of  explanation. On the contrary,  those  companies falling  under the explanation to Section 14A would  not  be companies under the Companies Act. To put it in other words, a  company failing under the explanation to Section 14A   of the  Provident Fund Act which does not come within the  pur- view  of  the Companies Act, the liability  of  the  persons would  be  governed only by Section 14A (1) and (2)  of  the Provident Fund Act. They will not be entitled to any  relief under  Section  633. The benefit available  under  a  social welfare legislation namely the Employees Provident Fund  Act cannot  be defeated in this manner. We may also add  if  the interpretation suggested by the appellants 356  is accepted it would cover not only ,the existing. laws but all legislations to be enacted  in future.

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In  the  result we find no merit in this appeal  and  it  is dismissed. In  view  of the dismissal of appear No. 3012  of  1990  the other appeals and the special leave petition where the  same question arose, are so dismissed.      However, looking to the ’facts and circumstances of the case, there will be no order as to costs. Appeals dismissed. 357