Application to MA in Law, Politics and Society in Ambedkar University, Delhi is open till 24 June. Apply here
Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.
ORDER Horwill, J.
1. A sabha of the Sourashtra community was registered as a society. In contravention of the provisions of Section 86 (d) of the Companies Act, the directors sanctioned a loan to the second accused--who was a director--for a period of one year., Before that year had terminated, the present complainant, who is one of the directors, moved his fellow-directors to cancel the earlier resolution. They refused to do this and resolved that as the year for which the loan was made had not then elapsed, they would not interfere. The complainant thereupon filed a complaint in the Court of the City First Class Magistrate of Madura under Section 86 (3) of the Companies Act against the present directory, who were parties to the second resolution. The Magistrate summoned witnesses, but before he had taken their evidence he acquitted all the accused on a reading of the complaint; for he was of opinion that no offence had been committed by the present directors in passing the second resolution. The offence was committed when the loan was made as a result of the resolution passed in 1939 and the persons who were guilty of the offence were those who were parties to the first resolution.
2. The complainant approached the Sessions Judge who has referred the matter to this Court, expressing the opinion that the second accused was guilty of abetting the offence by receiving the loan himself.
3. The complainant has also filed a revision petition in this Court against the acquittal of the first accused, who is said to have been a party to the first resolution.
4. It appears that the Registrar of Joint Stock Companies was approached in this matter; but he refused to intervene and referred the complainant to a Criminal Court. There can be no doubt that the parties to both the resolutions acted wrongly. There was undoubtedly a contravention of the provisions of Section 86 (d) of the Companies Act in sanctioning a loan to a director and when the attention of the directors on the second occasion was drawn to this, they should have taken steps at once to see that the illegal loan was terminated. Even if the complainant was prompted by personal motives, he was justified in his conduct. I also think that the Registrar of Joint Stock Companies should have taken action in the matter and at least have told the directors that they should see that such an illegality was not committed again and that they should take steps to end it. However, I do not think that it is necessary to intervene in this matter at the instance of a private party and to punish various accused for something that was done in 1939, especially as the loan has been repaid and no fresh breach under this section seems to have been committed.
5. It is contended that the City Magistrate acted illegally in acquitting the accused without hearing the complainant's evidence. I have not thought it necessary to examine the authorities bearing on that point; but it may be pointed out that the Code of Criminal Procedure makes no provision for the acquittal of accused persons without examining witnesses. Lakshmana Rao, J., condemned the practice in In re Varadarajulu Naidu (1931) 35 L.W. 140.
6. The petitions are dismissed.