Posted On by &filed under Bombay High Court, High Court.


Bombay High Court
Ramesh Narang vs Rama Narang And Others on 8 June, 1995
Author: Pendse
Bench: M Pendse, N Vyas


JUDGMENT

Pendse, J.

1. This appeal is preferred by original defendant No. 1 to challenge legality of order dated August 17, 1992 passed by learned Single Judge on Notice of Motion No. 1593 of 1992. By the impugned order, the learned Single Judge has restrained the appellant and respondent No. 5 from in any manner acting upon decisions purported to have been taken at the board meeting of respondent No. 2 company alleged to have been held on July 13, 1992. The Trial Judge also granted injunction restraining the appellant and respondent No. 3 from in any manner obstructing or interfering with functioning of respondent No. 1 as Chairman and Managing Director of respondent No. 2 company. The complaint in this appeal is in respect of grant of injunction restraining the appellant and respondent No. 5 from obstructing respondent No. 1 to function as Chairman and Managing Director of the company.

2. The facts which gave rise to the litigation, shorn of details, are not in dispute and are required to be briefly stated to appreciate the grievance of the appellant. Respondent No. 1 Rama Narang is a member of the Narang family which is in possession of several properties including holdings in several companies. The appellant and respondent No. 5 are sons of respondent No. 1 born from the first wife. Respondent No. 1 divorced his first wife and has contracted second marriage and that seems to have led to the disputes between the father and the two sons. Respondent No. 2 is a company which is a deemed public limited company under Section 43-A of the Companies Act and is engaged in the business of hoteliering and flight catering and owns several hotels at Bombay, Madras and Aurangabad. The shares of the company stand in the name of diverse family members of Narang family and a substantial number of shares are held by respondent no. 1. Respondent No. 1 was a Director of the company, so appointed at general meeting held on September 21, 1988. The company, prior to August 1, 1990, had only the business of running the flight kitchen at Delhi and is claimed to be a loss making unit. On June 7, 1990, this Court, in Company Petition No. 593 of 1989, amalgamated Narangs Hotels and Resorts Limited, another concern held by the family, into respondent No. 2 company and all the assets of the transferer company were taken over by respondent no. 2 company.

The scheme of amalgamation was sanctioned by this Court on August 7, 1990 and the appointed day was July 1, 1987. After amalgamation, respondent No. 1 was reappointed as Director of the company. On June 25, 1990, respondent no. 1 was appointed as Managing Director of the company. On the same date, the appellant was appointed as Joint Managing Director of the company while the second wife of respondent no. 1, i.e. Mrs. Mona Rama Narang, was appointed as a whole time Additional Director. On June 29, 1990, at the extraordinary general meeting of the company, the Articles of Association were amended and respondent no. 1 was appointed as Chairman and Director for life of the company.

3. On November 14, 1990, the appellant instituted Company Petition No. 681 of 1990 before the Company Judge in this Court in accordance with provisions of Sections 397 and 398 of the Companies Act, 1956. The appellant questioned the validity of the board meeting held on June 25, 1990 and in which the respondent no. 1 was also appointed as Managing Director of the company. The challenge was on the basis that respondent no. 1 was convicted of an offence involving moral turpitude and, therefore, could not hold the office of the Managing Director in accordance with provisions of Section 267 of the Companies Act. The relevant provision reads as under :

“267. No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of any person as its managing or whole-time director who –

(a) …..

(b) …..

(c) is, or has at any time been, convicted by a Court of an offence involving moral turpitude.”

The respondent no. 1 was tried before the Additional Sessions Judge, Delhi in Case No. 134 of 1985, State v. Ram Lal Narang and Others and was convicted on December 22, 1986 for having committed offences punishable under Sections 120B and Section 420 read with Section 114 of Indian Penal Code. The Additional Sessions Judge imposed punishment of rigorous imprisonment for three months for offence under Section 120B and punishment of rigorous imprisonment of 2 1/2 years and a fine of Rs. 5,000/- in respect of offences under Sections 420 and 114 of Indian Penal Code. The substantive sentences of imprisonment were directed to run concurrently and in default of payment of fine respondent no. 1 was directed to undergo further rigorous imprisonment for two months.

Respondent no. 1 preferred Criminal Appeal No. 17 of 1987 in the High Court of Delhi and the appeal was admitted by a learned Single Judge by order dated January 21, 1987. Respondent no. 1 – accused preferred Criminal Miscellaneous Petition No. 15 of 1987 seeking release on bail pending the disposal of the appeal. Respondent no. 1 also sought suspension of the operation of the impugned order. The learned Judge directed respondent no. 1 to be released on bail on furnishing a personal bond in the sum of Rs. 10,000/- with one surety in the like amount. The learned Judge also directed that the operation of the impugned order shall be stayed.

4. In Company Petition No. 681 of 1990 filed by the appellant in this Court, by order dated December 6, 1990, the Company Judge restrained the company from holding any board meeting or general body meeting. It appears that certain settlement was reached between the members of Narang family on July 12, 1990 and to which not only respondent no. 1 but his two brothers were also parties. On July 5, 1991, the appellant applied for withdrawal of the company petition. The permission was granted. Thereupon Sanjay Narang, nephew of respondent no. 1, applied for transposition as petitioner, but his application was turned down.

Sanjay Narang thereafter preferred Petition No. 10 of 1991 on July 12, 1991 before Company Law Board, Principal Bench, New Delhi under Sections 397 and 398 of the Companies Act, inter alia, challenging appointment of respondent no. 1 as Managing Director of the company. The appointment was challenged on the identical grounds raised in Company petition filed in this Court, being that respondent no. 1 was convicted by a Criminal Court and could not have been appointed or continue to hold the office of Managing Director in accordance with provisions of Section 267 of the Companies Act. To this petition filed before Company Law Board, the appellant and respondent No. 5 were made respondents alongwith respondent no. 1. The appellant had filed affidavit-in-reply to the petition and in which the claim made by Sanjay Narang was denied. During the pendency of this petition, another family settlement was arrived at between the members of the Narang family including the appellant, respondent no. 1, respondent no. 5 and the second wife of respondent no. 1. The settlement, inter alia, provided that respondent no. 1 is validly appointed and continued to be Chairman and Managing Director of the company and has not ceased to be so or has not been disqualified to act as the Managing Director. In pursuance of the family settlement, consent terms signed by the parties were tendered before the Company Law Board and the petition was disposed of in accordance with the consent terms.

On June 30, 1992, the appellant instituted Petition No. 28 of 1992 before the Company Law Board at New Delhi complaining oppression and mismanagement of the company at the hands of respondent no. 1 who is the Chairman and Managing Director. In this petition, the appellant claimed that the Board of Directors should be reconstituted and suggested that respondent no. 1 be continued as Chairman and Managing Director. This Petition is pending.

5. On July 9, 1992, respondent no. 1, in his capacity as Chairman and Managing Director, issued notice to convene meeting of the Board of Directors on July 13, 1992. By this time it is clear that respondent no. 1 had fallen apart from his two sons. On July 10, 1992, respondent no. 1 informed respondent no. 5 that he has ceased to be a Director of the company. The claim was disputed and the appellant and respondent no. 5 claimed that respondent no. 1 could not continue as Managing Director in violation of provisions of Section 267 of the Companies Act. The appellant indeed terminated the appointment of respondent no. 1 as Managing Director and claimed that the appellant was now the Managing Director. The parties exchanged correspondence setting up their respective claims. The appellant, purporting to act as Managing Director, issued notice dated July 13, 1992 to convene a meeting of the Board of Directors at the registered office of the company. There is serious dispute as to whether any notice was given to respondent no. 1 in respect of this meeting or whether a meeting was at all held. The appellant claims that not only the meeting was held but several resolutions were passed including the one declaring that the respondent no. 1 had ceased to be the Managing Director and Director of the company in view of provisions of Section 267 of the Companies Act. In pursuance of the resolutions passed in this meeting, the appellant took several steps by issuing circulars and giving intimation to the banks and this gave rise to large correspondence between parties making allegations and counter-allegations. It is not necessary to refer to those allegations in the present judgment for the reasons which would be clear hereafter.

Respondent nos. 1, 2 and 3 then instituted Suit No. 2090 of 1992 on the Original Side of this Court on July 16, 1992 and the appellant and respondent Nos. 4 and 5 were joined as party defendants. The prayers made are –

(a) declaration that the board meeting purported to have been held on July 13, 1992 and all decisions purported to have been taken therein are null and void, illegal and of no effect;

(b) permanent injunction restraining appellant and respondent no. 5 from in any manner acting upon or implementing the decision taken in the meeting;

and

(c) damages in the sum Rs. 1,00,000/-. Respondent nos. 1 to 3 thereafter sought interim reliefs in terms of prayers (d) and (e) of paragraph 29 of the plaint and which are identical to this reliefs sought in Notice of Motion No. 1593 of 1992. The interim reliefs sought during the pendency of the suit are set out hereinabove and need not be repeated. Iterim reliefs were two in nature, viz., –

(i) restraining appellant and respondent no. 5 from acting upon decisions taken in the meeting alleged to have been held on July 13, 1992;

and

(ii) restraining the appellant and respondent no. 5 from obstructing respondent no. 1 from functioning as Chairman and Managing Director of the company.

6. The interim reliefs sought in the notice of motion were resisted by the appellants and respondent no. 5 by filing affidavits. The motion was heard for several days before the learned Single Judge and the learned Judge framed six points for determination. The principal bone of contention between the parties in the notice of motion was that whether respondent no. 1 could be appointed or continued as Director or Managing Director in view of the conviction. The parties also argued in detail as to whether the meeting was held on July 13, 1992 and, if so, whether it was properly convened. The learned Judge, by the impugned judgment, came to the conclusion that the appointment of respondent no. 1 on September 21, 1998 as Director and on June 25, 1990 as Managing Director is not void ab initio inspite of provisions of Section 267 of the Companies Act in view of order passed by the Delhi High Court in Criminal Miscellaneous Petition No. 15 of 1987. The learned Judge also held that the appellant is not entitled to challenge the validity of the appointment of respondent no. 1 as Director and Managing Director in view of the fact that the challenge raised in company petition before this Court and before the Company Law Board was not pursued.

The learned Judge thereafter exhaustively examined the affidavits and came to the conclusion that the meeting alleged to have been held on July 13, 1992 by the appellant was not in fact held and in any event it was not properly and validly convened and, therefore, the proceedings are not valid in law. On the strength of these findings, the learned Judge granted both the reliefs sought in the notice of motion and that has given rise to the filing of this appeal.

7. Mr. Sibal, learned counsel appearing on behalf of the appellant, at the outset, made it clear that the appellant is not challenging the prima facie findings recorded by the learned Trial Judge in respect of the meeting alleged to have been held on July 13, 1992. Mr. Sibal made it clear that for the purposes of this appeal the appellant wishes to restrict the submissions in respect of grant of prayer (b) of the motion whereby the Trial Judge restrained the appellant from obstructing or interfering with respondent no. 1’s functioning as Chairman and Managing Director of the company. The learned counsel made a faint submission that in case relief in terms of prayer (b) is not granted, then the suit is not maintainable and the relief in terms of prayer (a) is also required to be set aside. It is not possible to accede to the contention of Mr. Sibal that the relief in terms of prayer (a) cannot be granted, once the relief in terms of prayer (b) is set aside. We are unable to find any merit in the contention that the suit will not be maintainable in case respondent no. 1 was not entitled to be appointed and continued as Managing Director and Chairman of the company. The suit is not instituted only by respondent no. 1 but by the company and one more Director. Even assuming that respondent no. 1 is not entitled to prosecute the suit as Director or Managing Director, still we are unable to appreciate how the suit will not be maintainable because the respondent no. 1 is a shareholder of the company and can certainly proceed with the suit and challenge the validity of the meeting alleged to have been held by appellant on July 13, 1992. It is, therefore, not possible to accede to the contention that in case prayer (b) cannot be granted, then prayer (a) should also be denied.

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, Delhi. The fact that the respondent no. 1 was convicted by order dated December 22, 1986 and sentenced to undergo rigorous imprisonment for 2 1/2 years for an offence punishable under Section 420 read with Section 114 and Section 120B of the Indian Penal Code is not in dispute. It is equally not in dispute that respondent no. 1 was convicted of offences involving moral turpitude. The appointment of Respondent No. 1 after amalgamation of the two companies as Director and Managing Director were made on September 21, 1988 and June 25, 1990. It is not in dispute that respondent no. 1 was appointed as Director and Managing Director in the board meeting after the date of conviction, i.e., after December 22, 1986. Relying on these undisputed facts, it was contended on behalf of the appellant that the learned Single Judge was in error in holding that the appointment of respondent no. 1 or continuation of respondent no. 1 as Managing Director is permissible inspite of clear bar under Section 267 of the Companies Act. Reference was made to provisions of Section 274 of the Companies Act which deal with disqualification of a Director on a conviction being recorded by a Criminal Court for offence involving moral turpitude and in respect of which imprisonment of not less than six months is imposed. Sub-section (2) of Section 274 entitles the Central Government to remove the disqualification incurred by any person either generally or in relation to any company or companies specified in a notification to be published in the Official Gazette. Such a power to remove the disqualification is not available in respect of Managing Director and the provisions of Section 267 of the Companies Act make the bar to the appointment on conviction absolute. Section 283 of the Companies Act provides that the office of a Director shall become vacant if the Director is convicted by a Court of any offence involving moral turpitude and sentenced in respect thereof for not less than six months. Sub-section (2) of Section 283, inter alia, provides that the disqualification shall not take effect for thirty days from the date of imposition of sentence. This is a period in which the Director, who is convicted, can prefer an appeal. The sub-section then provides that in case an appeal is preferred, then the disqualification shall not take effect for a period of seven days from the date of disposal of the appeal and this rule is applied to further appeals which the accused can prefer. The persual of the provisions of Sections 267, 274 and 283 makes it clear that the Legislature had contemplated cases of disqualification of a Director on the one hand and Managing Director on the other. In case of a Director, the disqualification may not operate if the Central Government issues a notification or the Director files an appeal within the period of limitation. Such a provision is absent in respect of disqualification incurred by a Managing Director on being convicted of an offence involving moral turpitude. The distinction in the two cases is of crucial relevance because it is obvious that the Legislature was very particular that the benefit of an appeal or the power to remove the disqualification by the Central Government should not be available in the case of Managing Director. The Legislature has enacted the provisions of Section 267 by taking into consideration the public interest and the interest of not only the shareholders but of the general public, or it will be difficult for a person convicted of an offence involving moral turpitude to carry out the affairs of the company and which is likely to result into adverse impact on the functioning of the company. It is, therefore, obvious that respondent no. 1 cannot be appointed or continued as Managing Director of the company in view of the specific provisions of Section 267 of the Companies Act.

9. Mr. Cooper, learned counsel appearing on behalf of respondent no. 1, did not seriously dispute that the provisions of Section 267 of the Companies Act are mandatory in nature and it is not permissible to appoint or continue a person as Managing Director of the company on his being convicted of an offence involving moral turpitude. The learned counsel urged that the rigour of Section 267 is not attracted in the present case because of the interim order passed by the Delhi High Court in which by appeal the conviction is challenged. Mr. Cooper submitted that the respondent no. 1 not only sought release on bail pending the disposal of the appeal but also suspension of operation of the order and such relief was granted. Mr. Cooper claims that it was open for the Delhi High Court to direct suspension of conviction itself and such a power being exercised, the conviction can have no impact or effect upon appointment or continuation of respondent no. 1 as Managing Director. The question which, therefore, squarely arises is whether the Criminal Court entertaining appeal against the order of conviction has power to suspend the order of conviction itself. It was contended on behalf of the appellant Sub-section (1) of Section 389 of the Code of Criminal Procedure entitled the Appellate Court to order suspension of execution of the sentence or order but the expression “order” under Sub-section (1) should not be construed as a power covering the order of conviction itself. Sub-section (1) of Section 389 reads as follows :

“389. (1) Pending any appeal by a convicted person, the Appellate Court may, for reasons to be recorded by it in writing, order that the execution of the sentence or order appealed against be suspended and, also, if he is in confinement, that he be released on bail, or on his own bond.”

10. Before examining what expression “execution of the sentence or order” connotes, it is necessary to refer to the provisions of Chapter XXIX of the Code of Criminal Procedure which deals with appeals. Section 373 of the Code provides that any person who has been ordered under Section 117 to give security for keeping the peace or for good behaviour or is aggrieved by any order refusing to accept or rejecting a surety under Section 121 may appeal to the Court of Session. The appeals preferred under Section 373 are not in respect of any sentence but in respect of only orders passed for giving security or for accepting or rejecting the sureties. Section 374(2) of the Code provides preference of an appeal to the high Court by an person convicted on a trial held by a Sessions Judge or on a trial held by any other Court. The powers of the Appellate Court are set out under Section 386 of the Code which provides that in an appeal from a conviction the Appellate Court may reverse the finding and sentence and acquit or discharge the accused or alter the finding maintaining the sentence or even alter the nature or the extent of the sentence. It is also open for the Appellate Court to set aside the order of conviction and direct retrial. Chapter XXVII of the Code of Criminal Procedure deals with the subject of judgment and, inter alia, provides by Section 357 that the Court imposing a sentence of fine may, while passing the judgment, order the whole or any part of the fine to be paid to any person as compensation for the loss or the injury caused. Section 358 of the Code confers power upon the Court to award compensation to persons who are arrested without any reasonable ground. Section 359 of the Code entitles the Court holding a trial to direct payment of costs in non-cognizable cases. Section 360 of the Code provides for release of accused on probation of good conduct or after admonition. A perusal of these sections makes it clear that the Criminal Courts holding criminal trials not only pass orders of conviction and impose sentences but can pass diverse orders and which need not necessarily have a reference to the conviction. It is open for a Criminal Court to award costs or compensation for arresting persons without any sufficient ground. These orders are not passed by the Criminal Courts only on the basis of recording of conviction. These are the kinds of orders which are contemplated by provisions of Sub-section (1) of Section 389 of the Code of Criminal Procedure and the powers are conferred on the Appellate Court to suspend the execution not only of the sentence imposed on conviction but also the execution of the order which may be de hors of the conviction. The powers of the Appellate Court under section 389(1) of the Code cannot be construed with reference to the expression “order” as suspending the order of conviction itself. The powers of the Appellate Court do not entitle such a Court to direct that the order of conviction should stand suspended. The conviction can only be set aside. The contention of Mr. Cooper that the expression “order” covers even the order of conviction cannot be accepted because the expression used by the Legislature is “execution of the sentence or order”. The section makes it clear that the Appellate Court can suspend the execution of the sentence or the execution of the order and in respect of the order of conviction there is no question of execution and consequently suspension.

11. Mr. Cooper submitted that while construeing the provisions of sub-section (1) of Section 389 of the Code of Criminal Procedure it is necessary to keep in mind the consequences which flow from recording order of conviction. It was urged that the order of conviction may disentitle the accused from contesting the election under the Representation of the People Act, from holding the post of Managing Director under the Companies Act or securing a passport under the Passports Act. It was urged that the Criminal Code cannot ignore the consequences flowing from recording of the order of conviction and the Appellate Court, while exercising powers under sub-section (1) of Section 389 of the Code of Criminal Procedure should construe the provision as conferring the right to suspend the order of conviction. We are unable to find any merit in the contention. The Appellate Court exercising powers under Sub-section (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 include conviction.

Mr. Cooper then submitted that even assuming that provision of sub-section (1) of Section 389 of the Code do not confer power on the appellate Court to direct suspension of order of conviction, still such a power can be gathered from the provisions of Section 482, of the Code. Section 482 of the Code of Criminal Procedure deals with the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under the Code or to prevent abuse of the process of any Court or otherwise to secure the ends of justice. Mr. Cooper urged that the order of conviction can be suspended to secure the ends of justice. The submission is fallacious and cannot be acceded to. The inherent powers cannot be exercised to find some means to pass orders which are not permissible under the Code. We are unable to appreciate how it can be even suggested that conviction can be suspended to secure the ends of justice. In any 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 the Court.

12. Mr. Cooper placed strong reliance upon the decision of Division Bench of Andhra Pradesh High Court in the case of V. Sunderaramireddi v. State, 1990 Cri LJ 167. In the 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 the appeal. There may be cases where the convicted person may seek relief by way of suspension of the conviction as such till the appeal is disposed of. The Division Bench then referred to the decision of Supreme Court, Vidya Charan Sukla v. Purshottam Lal Kaushik, which was a case arising out of the Representation of the People Act. The Division Bench concluded (1990 Cri LJ 167 at pp. 170-171).

“But, before such scrutiny took place, the convicted person could ask for suspension of the conviction, so that it should not be a legal bar for his participating in the election or other affairs. There may be quite a few such cases, which may include the discharge from service of a public servant or where applications have to be filed for passports etc.

…………

In such cases, there can be no harm if the Court exercises its discretion.

…………

The words “order appealed against” must be given a wider meaning as to include ‘conviction’, also, so that the Court in appropriate or exceptional cases can suspend an order of ‘conviction’.”

The Division Bench further held that even otherwise Section 482 of the Code confers sufficient power upon the Appellate Court to suspend the order of conviction.

With respect, we are unable to share the view taken by the Division Bench for the reasons which have been set out hereinabove. The mere fact that the order of conviction leads to some consequences in respect of provisions of other statutes is not sufficient for assuming powers which the Appellate Court does not possess under the Code of Criminal Procedure. It was not brought to the attention of the Division Bench that the other statutes like Representation of the People Act, Companies Act etc. do make specific provisions to reduce the rigour of the order of conviction and the Legislature did not expect the Appellate Court exercising powers under the Code to examine the harm which may be caused by order of conviction. The powers of the Criminal Court flow from the Code and it is not open for the Criminal Court to assume powers only because the convicted person is likely to suffer certain disqualification under the provisions of other statutes.

Reference was also made to the decision of a Single Judge of Delhi High Court, reported in 1990 Cri LJ 1919, S. M. Malik v. State, where it was observed that the order of suspension passed by the Appellate Court would result into there being no final judgment either in respect of conviction or sentences in existence against the accused. We are unable to accept the conclusion that it is open for the Appellate Court to suspend the order of conviction. A reference was made to a decision reported, in Bansi v. Hari Singh, but save and except some stray observations, Mr. Cooper could not point out anything to support his submission as regards suspension of order of conviction.

Mr. Cooper referred to a decision reported, in Retti Deenabandhu v. State of Andhra Pradesh, to urge that a convicted person challenging conviction in appeal not only seeks to avoid undergoing the punishment imposed upon him as a result of the conviction but also desires that other evil consequences flowing from the conviction should not visit him and the stigma which attaches to him because of the conviction should be wiped out. It hardly requires to be stated that the purpose of appeal is to get the conviction order vacated but pending appeal it is not open to wipe out the order of conviction by claiming that the order of conviction can be suspended. The decision of the Supreme Court, in our judgment, is of no assistance.

13. Mr. Cooper then submitted that Delhi High Court, after admission of the appeal preferred by respondent No. 1 against order of conviction, did order suspension of conviction and, right or wrong, once the Delhi High Court had passed that order, the consequences of the conviction under Section 267 of 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. 1’s 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.

15. Accordingly, appeal is partly allowed and the judgment dated August 17, 1992 passed by the learned Single Judge in Notice of Motion No. 1593 of 1992 is set aside in respect of grant of prayer (b) of the motion is not disturbed. Grant of relief in terms of prayer (a) of the notice of motion is not disturbed.

In the circumstances of the case, the parties shall bear that respective costs in both the Courts.

16. Order accordingly.


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