JUDGMENT
M.P. Menon, J.
1. These petitions filed under section 633(2) of the companies act, 1956, raise a common question. Harrisons & crosfield (india) ltd., an indian company incorporated on november 1, 1977, is the first petitioner in c. P. No. 45. The 2nd petitioner is one of its directors. The petitioners in c.ps. Nos. 46 and 99 are two other directors of the company. They are threatened with prosecution for alleged contravention of section 210.
2. The indian company was formed with the object of taking over the indian business of harrisons & crosfield ltd., a foreign company. A scheme was drawn up for this purpose providing for the vesting of the assets and liabilities of the indian business of the latter, in the indian company, with effect from november 1, 1977. The scheme is pending approval before this court. In the meanwhile, the annual general meeting of the company (petitioner) had to be held within the time fixed under section 166 and such a meeting was, therefore, called on april 20, 1979. But the balance-sheet and profit and loss account for the period ended december 31, 1978, were not laid before it, as envisaged in section 210. The directors apparently thought that ” a true and fair view of the assets and liabilities position ” could be obtained only after the approval of the scheme. Therefore, the meeting was adjourned after transacting other business. But on september 15, 1979, the registrar of companies issued a notice threatening prosecution under section 210(5) for non-compliance with the requirements of sub-section (1). According to him, the balance-sheet and profit and loss account should have been laid at the meeting held on april 20, 1979, and three copies of the same should have been filed within 30 days, in accordance with section 220.
3. The petitioners’ case is that there has been no contravention of section 210(1), and that even assuming there be any, they had acted honestly and reasonably so that their neglect, default or breach of duty could be condoned under section 633(2). They were under the bona fide belief that the balance-sheet and profit and loss account could reflect the true financial position of the company only when the scheme was approved, as such approval would have the effect of substantially altering the assets and liabilities position, retrospectively from november 1, 1977.
4. The registrar, in his counter affidavit, states :–
“The provisions of section 210 of companies act, 1956, are distinct time bound provisions of law which cannot be duly discharged by the short cut process of holding an annual general meeting under section 166 of companies act and adjourning it to a future date for the purpose of laying accounts. It was the duty of directors to have laid the balance-sheet and profit and loss account for the 1st financial year which ended on december 31, 1978 in the meeting held on april 20, 1979. The scheme of amalga-
Mation will take effect only when it is approved by this hon’ble court. Since it was in the stage of consideration by the court, the question of incorporating the figures in the above balance-sheet on the basis of the scheme did not arise when the annual general meeting was held on april 20, 1979. The balance-sheet is to disclose the actual state of affairs of the company as on the last date of the financial year and not what it will be if the scheme is allowed at a future date.”
5. It is averred that the process of holding an annual general meeting and adjourning the same for the purpose of presenting the balance-sheet, etc., at a later stage is not compliance with the statutory requirement, but a circumvention thereof. The directors have not discharged the burden of proving that the meeting was adjourned ” for reasons which by standards of prudence were real ” ; the reasons are only a creation of their imagination.
6. Counsel for the petitioners contends that an adjourned meeting is a continuation of the meeting and that it is enough, for the purpose of section 210(1), if the balance-sheet and profit and loss account are placed before the adjourned annual general meeting. Reference is made to the ” practice notes ” at pages 417 and 614 of palmer’s company law (21st edn.) For the position that when the annual accounts are not available in time for the annual general meeting, the usual practice is to hold that meeting in time and then adjourn it to some future date for consideration of the accounts. But the provisions of section 148 of the english companies act (1948) are not identical with those of section 210 of our act. The requirement of section 148 is that the profit and loss account shall be laid ” before the company in general meeting ” once at least in a calendar year. There is no prescription that it should be laid at the annual general meeting, as in section 210 of our act. A company’s articles may provide that the consideration of the annual accounts is part of the ordinary business to be transacted at the annual general meeting; and in a case where it is so provided, the accounts should normally be laid before the annual general meeting itself, to be convened within the time limit specified by section 131 (of the english act). Where, however, the accounts are not ready within this time, the practice of adjourning the annual meeting after transacting all other business seems to have been recognised. But meeting the requirements of a company’s article is not the same thing as complying with a statutory requirement, particularly when the non-compliance is made penal.
7. In sudhir kumar seal v. Asst. Registrar of companies [1979] 49 comp cas 462 the calcutta high court observed (p. 463) :
” in case the annual accounts of a company are not ready for laying at the annual general meeting it is open to the company concerned to adjourn the said annual general meeting to a subsequent date by an appropriate resolution and the accounts may be laid at the adjourned annual general meeting.”
8. This view seems to have been taken solely on a concession made by counsel for the registrar, on the basis of circular no. 35/9/72-cl. Iii, dated february 2, 1974, issued by the company law board, the relevant part of which reads as follows :
” I am directed to say that it has come to the notice of this department that a company sent to a registrar of companies for filing under section 220 of the companies act, 1956, its balance-sheet and profit and loss account which had been laid before a general meeting and not an annual general meeting. In this context the question arose for consideration as to whether the registrar of companies could take the document on record in view of the clear provisions of sub-section (1) of section 210 read with sub-section (1) of section 220 of the act requiring the balance-sheet and profit and loss account to be laid before a company at an annual general meeting before sending it to the registrar for filing. The department has been advised that the balance-sheet and profit and loss account are required to be placed only at an annual general meeting and not any other general meeting. In case the annual accounts are not ready for laying at the appropriate annual general meeting, it is open for the company concerned to adjourn the said annual general meeting to a subsequent date when the annual accounts are expected to be ready for laying. This may be done by adopting a suitable resolution adjourning the said annual general meeting to a specified date, or to a date to be specified later on. I am to request you to advise the companies accordingly whenever they approach you for guidance in the matter. I am to enclose for your information a copy of the circular letter of even number and date addressed to all the chambers of commerce in this regard.”
9. In the present case, however, the registrar argues that neither a concession by counsel nor an interpretation by the company law board could be treated as having finally settled the scope of section 210 which it is for the court to delimit. There appears to be some force in this contention.
10. What is more important is not whether section 210(1) has been violated, but whether the petitioners should be relieved of the criminal liability under section 210(5), even if there has been a violation. Relief can be granted under section 633(2) if it is found that the petitioners have acted honestly and reasonably and that having regard to all the circumstances of the case, they ought fairly to be excused. Now, in the circular aforenoticed, the company law board has clearly indicated that where the annual accounts are not ready, ” it is open for the company concerned ” to adjourn the annual general meeting to a date when the accounts are expected to be ready. It may be, as the registrar’s representative submitted, that the
11. Circular was intended to bring out the distinction between an ordinary meeting and the annual meeting, in the context of section 210. But the circular certainly goes further and directs the registrars to advise all companies that it would be permissible to adopt the method of adjournment in cases where accounts are not ready. In my view, the directors herein were entitled to rely on the above advice, as honest and reasonable men, even if the same was not legally correct. They had only chosen to follow the path indicated by the board, a high authority in the hierarchy of company law administration, and for that they should not be penalised, if it is possible for this court to avert such a situation.
12. Section 633(2) empowers the high court to grant relief against apprehended actions for negligence, default, breach of duty, misfeasance or breach of trust. That the above terms are wide enough to cover an apprehended criminal prosecution for contravention of section 210, has been laid down by raman nayar j. (as he then was) in in re bank of deccan ltd. [1960] 30 comp cas 284 (ker). The section applies only to officers and not to the company itself, and the first petitioner in c. P. No. 45 is, therefore, not entitled to any relief. As regards the other three petitioners who are directors, i consider it proper, for the reasons stated above, that they be relieved of the criminal liability under section 210 on condition that the adjourned annual general meeting is called within two months from today and the profit and loss account and the balance-sheet for the period ended december 31, 1978, arc laid before it. Ordered accordingly.