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V. THANGAVEL V/S ASSOCIATED BUSINESS CREDITS LTD. (IN LIQUIDATION), decided on Monday, September 12, 2005.
[ In the Company Law Board, Southern Region Bench, Chennai, Company Petition No. 197/614/SRB OF 2005. ] 12/09/2005
Judge(s) : K.K. BALU, VICE CHAIRMAN
Advocate(s) : S. Eshwar .
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v,thangavel,associated,business,credits,ltd,(in,liquidation),

  "2006 (71) CLA 250"   ==   "2007 (137) CC 506"   ==   "2006 (69) SCL 190 (CLB - CHENNAI)"  







judgment - 1. This is a petition filed on 22-2-2005 under section 614 of the Companies Act 1956 (hereinafter referred to as ?the Act?) by the petitioner seeking directions of the Bench against M/s. Associated Business Credits Limited (?the Company?) and its directors being the respondent Nos. 2 to 9 to file Form No. 32 with the Registrar of Companies Tamilnadu Chennai the tenth respondent herein notifying the cessation of directorship of the petitioner with effect from 28-10-1999. By an order dated 1-4-2005 of the Madras High Court made in company petition 128/2004 the Company was ordered to be wound up and the Official Liquidator attached to the High Court was appointed as the Liquidator of the Company. Consequently the Company is represented by the Official Liquidator attached to the Madras High Court in terms of the order dated 20-7-2005 made in C.A. No. 47/2005 by the Bench.2. According to the petitioner as reiterated by Shri S. Eshwar the learned Practicing Company Secretary and Authorised Representative the petitioner was one of the directors of the Company who had resigned from the office of director by a letter dated 28-10-1999 which was duly acknowledged by the Company on 3-11-1999. Shri Eshwar referring to the letter of resignation dated 28-10-1999 pointed out that the intention of the petitioner was clear that he had resigned with effect from 28-10-1999. The petitioner further by his letter dated 29-1-2000 requested the first and second respondents to file Form No. 32 with the Registrar of Companies Chennai without any further delay. The fact of resignation was reiterated by the petitioner in his letters sent on 24-10-2000 and 18-10-2000 to the respondent Nos. 4 and 5 respectively. However the Company by its letter dated 30-10-2000 advised the petitioner that the Company has not filed Form No. 32 because of non-acceptance of his resignation by the board of directors of the Company. The petitioner had made it categorically clear in his letter dated 3-7-2002 addressed to the Company that he had resigned as early as on 28-10-1999. The Company and other respondents failed to file Form No. 32 notifying his resignation to the Registrar of Companies Tamilnadu Chennai and therefore he received summons from the Deputy Superintendent of Police Economic Offences Wing-II Salem under section 91(1) of the Code of Criminal Procedure. A notice under section 614(1) of the Act was sent on 19-2-2005 calling upon the Company to file Form No. 32 within 14 days from the service of notice. The Company has not filed the Form No. 32 so far and therefore Shri Eshwar sought appropriate directions against the respondents 1 to 9 to file Form No. 32 with respondent No. 10 intimating cessation of the petitioner from the office of director of the Company with effect from 28-10-1999. Shri Eshwar while dealing with the proposition as to when a resignation takes effect relied on the following decisions:Mother Care (India) Ltd. v. Prof. Ramaswamy P. Aiyar [2004] 51 SCL 243 (Kar.) - to show that ?resignation means the spontaneous relinquishment of one?s own right and in relation to an office it connotes the act of giving up or relinquishing the office?.M. Lakshmi Narayanan v. Rasi Nidhi Ltd. [2005] 126 Comp. Cas. 824 57 SCL 435 - to show that the board to whom the act of relinquishment is communicated is not required to take any action by way of accepting resignation and therefore the relinquishment takes effect from the date of such communication where the resignation is intended to operate in praesenti.?According to Shri Eshwar leave of the company court under section 446 is not required to prosecute the present company petition in support of which reliance has been placed on the following decisions:?Rakoor Industries (P.) Ltd. v. R.L. Bali ITO [2002] 108 Comp. Cas. 83 36 SCL 747 (Delhi) - to show that ?the expression ?legal proceedings? in section 446(1) is wide enough to include criminal prosecution also but such proceedings must be in relation to the assets of the company?.Joshi Trading Co. (P.) Ltd. v. Essa Ismail Sait [1980] 50 Comp. Cas. 801 (Ker.) - to show that ?the object of section 446 of the Companies Act 1956 is to see that the assets of the company are brought under the control of winding up court to avoid wherever possible expensive litigation and to see that all matters in dispute which are capable of being expeditiously disposed of by the winding up court are taken up by that court. This does not however mean that all disputes wherein a company is involved should be proceeded with only by the company court or that if they are pending with other statutory bodies leave of company court should be obtained. Matters where collection or distribution of assets and other courts of law and those which are within the exclusive jurisdiction of other statutory bodies may not come under the purview of section 446.Sudarsan Chits (I) Ltd. v. Sukumaran Pillai [1985] 58 Comp. Cas. 633 (SC) - to show that ?in order to save the company which is ordered to be wound up from this prolix and expensive litigation and to accelerate the disposal of winding-up proceedings Parliament devised a cheap and summary remedy by conferring jurisdiction on the court winding-up the company to entertain petitions in respect of claims for and against the company?.?3. The Official Liquidator in his report dated 6-5-2005 submitted that by an order dated 1-4-2005 made in C.P. No. 128 of 2004 of the Madras High Court the Company was ordered to be wound up and appointed the Official Liquidator as Liquidator of the Company with directions to take charge of the assets and effects of the Company. The petition filed under section 614 of the Act is not maintainable as the Company is under liquidation and the relief claimed by the petitioner cannot be acceded to by the Official Liquidator. The Official Liquidator further by his letter dated 30-6-2005 reported that the petitioner has not made the Official Liquidator a party to the company petition and the petition may be decided on merits.4. Shri T.K. Seshadri Learned Senior Counsel for the respondent Nos. 3 5 to 9 who appeared on 5-5-2005 submitted that the respondent Nos. 3 and 5 to 9 are not aware of the resignation of the petitioner by his letter dated 28-10-1999 addressed to the second respondent. These respondents are neither necessary nor proper parties to the proceedings. The petitioner has not explained the delay in filing the petition as he reportedly resigned from the office of director as early as in October 1999. The petitioner is guilty of latches in filing the petition. Moreover by virtue of section 446 of the Act leave of the Company Court may be necessary to continue the proceedings against the Company.5. The Registrar of Companies Tamilnadu Chennai by his report dated 20-5-2005 submitted that the petitioner was originally appointed as director of the Company with effect from 21-10-1982 and that he is continued to be shown as director till date. As per annual return made up to 15-10-1995 the petitioner holds 130 equity shares of Rs. 100. In terms of Article 82 of the articles of association of the company no share qualification shall be required to be held by any director and as per article 83 a director may retire from his office upon giving one month?s notice in writing to the company of his intention to do so and such resignation shall take effect upon the expiration of such notice or its earlier acceptance.6. I have considered the arguments advanced on behalf of the petitioner as well as the respondent Nos. 3 5 to 9 and the report of both the Official Liquidator and the Registrar of Companies. The issue that arises for my consideration is whether respondent Nos. 1 to 9 shall be directed to file Form No. 32 with the tenth respondent notifying the resignation of the petitioner from the office of director of the company by the petitioner without leave of the winding up court?It is on record that the petitioner had tendered his resignation letter dated 28-10-1999 (Annexure-A3) by registered post with acknowledgement due to the Managing Director of the Company who is arrayed as the second respondent to the present company petition. This letter of resignation was duly received by the second respondent on 3-11-1999 (Annexure A-5). The petitioner reiterated his resignation from the post of director in his various communications and the lawyer?s notice as brought out by Annexures A-6 A-9 A-12 A-16 A-20 A-23 A-26 and A-29. The respondent Nos. 2 and 4 being Managing Director and Director respectively neither appeared nor denied these developments in spite of the opportunity afforded to them. However the second respondent by his letter dated 30-10-2000 (Annexure A-9) advised the petitioner that the board has not accepted his resignation and as such Form No. 32 has not been filed with the tenth respondent but never gave any valid reason for non-acceptance of the resignation of the petitioner by the board of directors of the company. The respondent Nos. 3 5 to 9 have not chosen to deny the specific plea of the petitioner that he had resigned from the post of director in terms of his letter dated 28-10-1999 (Annexure A-3). The sequence of correspondence clearly shows that the petitioner had resigned from his directorship as per his letter dated 28-10-1999 which was duly acknowledged on 3-11-1999 by the second respondent. At this juncture the articles of association of the company regulating the internal management assumes importance. Article 83 provides that ?a Director may retire from his office upon giving one month?s notice in writing to the Company of his intention to do so and such resignation shall take effect upon the expiration of such notice or its earlier acceptance?. The letter of resignation of the petitioner dated 28-10-1999 read thus: ?due to personal reasons I am unable to continue as director in your esteemed company. Hence I am resigning my directorship. Kindly please acknowledge and accept the same?. The letter of resignation in the matter before me was served on the second respondent on 3-11-1999 and therefore the petitioner?s resignation ought to have taken effect upon expiration of one month thereof i.e. 3-12-1999 in terms of article 83 especially when the refusal of the board of directors to accept the petitioner?s resignation took place after a lapse of one year. The cessation of office of the director of the petitioner with effect from 3-12-1999 is however without prejudice to his liabilities and obligations which had occurred up to that date viz. 3-12-1999 and the petitioner cannot evade such liabilities and obligations by severing his connection with the Company. In this connection beneficial reference is drawn to P.R.M. Abdul Hug v. Katpadi Industries Ltd. AIR 1960 Mad. 482. In terms of section 303(2) of the Act it is the duty of the Company to file with the Registrar a return in duplicate (Form No. 32) of any change among its directors managing directors managers or secretaries specifying the date of change within 30 days of change. There is delay as pointed out by the respondent Nos. 3 5 to 9 in invoking the provisions of section 614 but it would not discharge the Company from complying with its statutory obligation imposed on it. The Company has not so far made good the default by filing Form No. 32. In the meanwhile the Company has been ordered to be wound up by the Madras High Court and therefore it shall be seen whether the company petition shall be proceeded with against the Company with or without leave of the winding up court? Section 446(1) dealing with stay of suit or other legal proceedings on winding up order provides that - ?When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator no suit or other legal proceeding shall be commenced or if pending at the date of winding up order shall be proceeded with against the company except by leave of the court and subject to such terms as the court may impose?. The object of section 446(1) is to ensure that the assets of the company are brought under the control of the winding up court to avoid expensive litigation and to see that all matters in dispute are taken up by that court. It does not however mean that all disputes wherein a company is involved should be proceeded with only by the company court or that if they are pending with other statutory bodies leave of the company court should be obtained as held by the Kerala High Court in Joshi Trading Co. (P.) Ltd.?s case (supra). However the present prayer if allowed would entail payment of fee and additional fee for the delay in filing Form No. 32 in relation to the cessation of the directorship of the petitioner. The payment of fee and additional fee shall necessarily be made by the Official Liquidator from and out of the assets of the Company in liquidation which would attract operation of section 446(1) as held in Rakoor Industries (P.) Ltd.?s case (supra). The Company is now under the control of the Official Liquidator pursuant to the order of winding up made by the Madras High Court and it puts an end to the powers of its directors viz. respondent Nos. 2 to 9 to file Form No. 32. Therefore the Official Liquidator attached to the Madras High Court will file Form No. 32 with the tenth respondent notifying the resignation of the petitioner from the office of director of the Company with leave of the winding up Court. With these directions the company petition stands disposed of.