Holding

Section 633 of the Companies Act, 1956 provides relief only in respect of liability arising under the Companies Act and cannot be extended to liabilities under any other statute.

Summary

The appellants, former directors of a jute mill company, sought relief under Section 633 of the Companies Act, 1956 to be exempted from liability for delayed and non‑payment of Employees' Provident Fund dues. The Calcutta High Court had allowed a consent order permitting instalment payment and restraining criminal prosecution, but the Regional Provident Fund Commissioner appealed. The Supreme Court examined whether the phrase "any proceeding" in Section 633 extends to proceedings under statutes other than the Companies Act, such as the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the Industrial Disputes Act, 1947. Relying on statutory construction principles and comparative English law, the Court held that Section 633 is confined to proceedings arising under the Companies Act and cannot be used to obtain relief from liability under other statutes. Consequently, the appeal was dismissed and the related appeals and SLP were also dismissed.

Issues considered

The scope of Section 633 of the Companies Act, 1956: does "any proceeding" include proceedings under statutes other than the Companies Act?
Whether relief under Section 633 can be granted for liability arising under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952
Whether Section 633 can be invoked for offences under the Industrial Disputes Act, 1947, Section 32
Whether the mandatory notice to the Registrar of Companies under sub‑section (3) limits the applicability of Section 633

Legislation cited

Companies Act, 1913s. 281
Companies Act, 1948s. 448
Companies Act, 1956s. 281, s. 621, s. 633, s. 644
Companies Act, 1985s. 727
Employees' Provident Funds and Miscellaneous Provisions Act, 1952s. 14, s. 14-A
Industrial Disputes Act, 1947s. 32

Subjects

Section 633relief from liabilitydirectorsEmployees' Provident Fundstatutory interpretationcriminal liabilitynotice requirementCompanies Act

Judgment

A RABINDRA CHAMRIA AND ORS., ETC., ETC.
v. .
REGISTRAR OF COMPANIES
WEST BENGAL AND ORS., ETC., ETC.

NOVEMBER 19, 1991
B
[RANGANATH MISRA, CJ., KULDIP SINGH
ANDS. MOHAN, JJ.]

Companies Act, 1956:

C Section 633-Scope of-Power of Court to grant relieffrom liability
for default, negligence etc.-Whether relief could be granted for liability
under Employees' Provident Funds and Miscellaneous Funds Act, 1952-Ex-
pression "any proceeding "-Meaning of

Employees' Provident Funds and Miscellaneous Provisions Act, 1952:
D
Sections 14 and 14-A-Defau/tin payment of Provident Fund dues-
Relief from liability-Grant of-Section 633 of Companies Act, 1956--
Applfcability of

Industrial Disputes Act, 1947:
E
Section 32-0ffence by a Company-Relief from liability-Section
· 633 ojCompanies Act, 1956--Applicability of

· The appellants in Civil Appeal No:30l2of1990 were Directors
of a Company, which was owning a Jute mill. Due to lock out-and
F strike in the Jute industry, the Company defaulted 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
G order, allowing the outstanding provident' fund dues to be-paid in
. inonthly instalments of Rs.50,000 each until the entire liability was
paid off. As the Provident Fund authorities accepted this course,
summons were not served on the Registrar 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
H the respondents from initiating any criminal proceedings against

338
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES 339

·the appellants or any of them for non-payment or delayed· payment A
of the provident fund.
On appeal by the Regional Provident Fund Commissioner, the
Division Bench held that any proceed'ing 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 application in respect of any B
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 flied before'this Court.
On behalf of the appellants in Civil Appeal No. 3012 of 1990, it c
was contended that section 633 was very wide in its amplitude and
there was,no justification to restrict its application to on~y proceed-
ings 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 open to him to
plead before the concerned Magistrate that he bad acted honestly D.
and .reasonably, and if the Court came to the conclusion that he
should fairly be excused it would relieve him; that under sub-sec-
tion (2), it was an anticipatory action, and the High Court also
exercised a ·simililr power as it was exercising power under sub-
section (1)~ and if it was restricted only in respect of any liability
under the Com_panies Act, then the protection extended under sec- E
tion 633 was last, and that similarly, under section 32 of the Indus-
trial 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 bis 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 F
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 company, and that the Court
having respective.jurisdiction as provided under Section 201) was G
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, tliat 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 p~otection, even if it were a liability arising H
340 SUPREME COURT REPORTS (-1991) SUPP. 2 ~C.R.

A under any other Act, for instance, like delayed payment· or non-
payment of provident fund.
On behalf of the respondent • Regional Provident Fund Com-
missioner it was contended that. any proceeding occurring under
Section 633 could not relate fo a proceeding other than one arising
B. 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
me ail that section 633 could be availed of; otherwise, the conse-
quences would be disastrous and the penal provision of all other
Acts would be rendered ineffective, that Section 14 of the Employ-
C ees' 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 section also talked
of as to what a company would mean for the purpose of the section,
and, therefore, where an elaborate procedure was contemplated un-
der those sections for recovery of the dues and the Provident Fund
D Act, being a social welfare legislation, that could not be rendered
illusory by extenting the benefit under Section 633 of the Compa-
nies Act; similarly, Section 86 of the Employees' State Insurance
Act, providing for prosecution also dealt with Companies, 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,
·E 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 CJ • ·
F
1.2 The expression 'any proceeding' occurring under Section

G
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 inef-
fective by application of Section 633. Again, if Parliament intended
Section 633 to have a coverage wider than the Act, it would have
specifically provided for it. Moreover, it is a sound rule of construc-
-
tion 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· pro-
H ceeding arising out of negligence, default, breach of trust, misfeasance
or ·breach of duty in respect of duties prescribed under the provi·
r•
I

I
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES 341

sions of the Companies Act. Further, examining the sub-section with A
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 Compa-
nies Act. Sub-section (2) cannot apply to proceedings instituted against
the officer of the company to enforce the liability arising out of B
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. [349 HJ C
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 offences under Section 32
of the Industrial Disputes Act. [354 DJ
D
Customs and Excise Comrs. v. Hedon Alpha Ltd., (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.Ip. 881 and 5th Edn. 1985 p.679-680, referred to.
E
2.1 The authority to take action under the Provident Fund Act
as seen from Section 14 of the said Act is a Commissioner 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 share-
holder of a company, or of an officer authorised by the Central
Government in this behalf that action can be taken. F
Since it is mandatory for the Court to give notice to the Regis-
trar of Companies or such other person, if any, as it thinks neces-
sary, 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 G
under this Section without giving notice to the authority competent
to prosecute 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 is extended, officers who would
be deemed to have committed the offence under Section 14-A of the H
342 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A Provident Fund Act, because sub-section (1) states that every per-
son who was responsible to the company as well as the company
shall be deemed to be guilty of the offence and liable for such of-
fence would get the benefit and escape the rigour of Section 14-A.
The explanation also mak~s it abundantly clear that all companies
covered by the Companies Act would be companies within the meaning
B of explanation. On the contrary, those companies falling 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 explana-
tion to Section 14-A of the Provident Fund Act which does not come
c within the purview of the Companies Act, the liability of the per-
sons would be governed only by section 14A(l) and (2) of the Provi-
dent 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 man-
ner. (355 G-HJ
D CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3012 of
1990;

From the Judgment and Order dated 13 .3 .1990 of the Calcutta High .
Court in Appeal No. 266of1987.
E ·WITH
Civil Appeal Nos. 3117, 3118, and 3738 of 1990 and SLP No. 8081
of 1990.
K.K, Venugopal, Dr. Shatikar Ghosh, Kapil Sibal, Ajay K. Jain,
Pramod Dayal, Vivek Gambhir, Surinder Kamail and S.K. Gambhir for
F the Appellants.
Aruneshwar Gupta and Ms. Sushma Suri for the Respondents.
The Judgmentofthe Court was delivered by
l
S" MOHAN, J. All these matters can be dealt with under a common
G judgment sine~ ~he question which arises for consideration is the scope of
Section 633 ofth:e 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:

H Eastern Manufacturing Company Ltd. (''The Company" in short) is
the owner of a jute mill in West Bengal. The appellants were appointed
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES (MOHAN, J.) 343

Directors between 10.4.1981 and 15.6.1984. There was a lock out in the A
Jute Mill on 2.6.1982. By a notification daied 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 B
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 Companies Act, 1956 (hereinafter referred to as
'the Act') for being relieved of liability for delayed as well as non-pay-
ment of the provident fund dues and other ancillary dues. On 2L8. l986 a C
consent order was passed by the learn~d Single Judge· allowing the out-
standing 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 D
was not considered necessary to serve summons on the Registrar of Com-
pan.ies 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 criminal
proceedings against the appellants or any of them for n·on-payment or
delayed payment of the provident fund. E
Aggrieved by this order, the first respondent before us, namely, the
Regional Provident Fund Commissioner filed appeal No. 286of1987. 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 F
the Act in respect of offences committed under the Employees Provident
Fund and Miscellaneous Provisions Act of 1952 (hereinafter referred to
as "The Provident Fund Act").

It was argued on behalf of the appellants that the relief under Sec-
tion 633 of the Act could be granted only in respect of offences commit-
ted under the Companies Act and not in respect of offences under any G
other law. It is also submitted that in respect of violations of the provi-
sions of the Act, it is the Registrar of Companies or any one authorised on
his behalf who could initiate criminal cases. On the contrary,.in respect of
offences committed under the Provident Fund Act the appropriate author-
ity to initiate such action would be the Regional Provident Fund Commis-,
sfoner: On an elaborate consideration with reference fo ·decided cases, it H
344 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A 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 Provident Fund Act
inserted by Amending Act 37of1953 and it was concluded:

B "If the contention that Section 633 applies in respect of liabili-
ties 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
c which is covered both by Provident Fund Act and the Compa-
nies Act but a person sha'II 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 un-
D der 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 frus-
trate the object of welfare legislations.''

E . Accordingly it was held that Section 633 of the Act has no applica-
tion in respect of any liability under any other Act. In the result, the order
of the learned Single Judge was set aside and the application under Sec-
tion 633 was dismissed. We do not think worthwhile to refer to certain
preliminary object.ions raised by the Di vision Bench in relation to
maintainability as that is not argued before us. It is against this judgment
F that the appeal by special leave has been preferred.

An application was moved before the Company Court claiming re-
lief under Sec!tOn 633 an.d the same was di&missed 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
G & 3118of1990. In Civil Appeal No. 3738 of 1990 Company Petition No.
3l2 of I 989 for reiief ooder Section 633 too was dismissed.

In Special Leave Petition No. 8081 of 1990 also the Company Peti-
tion for similar relief has been dismissed.

H Mr. Venugopal, learned Counsel for the appellants urged that Seo-·
tion · 633 is very wide in its amplitude and there is no justification to
I
I

f
I
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J.) 345

restrict its application to only proceedings arising under the Act. He draws A
our attention to Secitons 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 B
him.

While this is the submission as far as sub-section (l) 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 (l). Otherwise if it is restricted only in respect of C
any liability under the Companies Act then the protection extended under
Section 633 is lost.

Under the Companies Act of 1913 the corresponding provision was
Section 281. Though certain categories of persons were catalogued under
sub-section (3) of the said section, presently Section 633 has employed D
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 Industrial Disputes E
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 offences 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 F·
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 counsei' appearing for the appellants, in G
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 company. The Court having respective jurisdiction as provided under
Section 2( l l) is with respect to any offence under the Act, the Court o("a
Magistrate of the First class or, as the case may be, a Presidency Magis-
trate, having jurisdiction to try such offence. li
346 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A 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 ill 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 arguments of Mr.
Venugopal.
B
Learned counsel for the Regional Provident Fund Commissioner would
urge that any proceeding occurring under Section 633 cannot relate to a
proceeding other than one arising 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
c 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. J'his provision is in pari materia with Section
448 of the English Companies Act, 1~48, However, as on today Compa-
D nies Act of 1985 has incorporated 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 scope
of Secion 448 of the 1948 Act came up for consideration. It was held that
although Section 448 ( l) of the 1948 Act was expressed in wide terms, in
its true construction the pnly proceeding for which relief under Section
E 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 com-
pany 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 consequences will be disastrous.
F The penal provision of all other Acts would be rendered ineffective by the
interpretation pressed for an acceptance. The further submision of learned
cmm.sel is if one looks at Section 14 of the Employees' Provident Funds
and Miscellaneous Provisions Act, 1952 that lays down the penalty for the
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
G purpose of this Section. Therefore, where an elaborate procedure is con-
templated under those sections for recovery of these dues and the Provi-
dent Fund Act being a social welfare legislation that cannot be rendered
illusory by extending the benefit under Section 633 of the Companies Act.
Similarly under Employees State Insurance Act, Section 86 talks of pros-
ecution which came to be introduced by Amending Act of 1989 also deals
H with Companies. The explanation under that Section specifically states as
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J.) 347

to what would be a company or Director for the purpose of that section. A
Hence it is submitted that no interference is called for.

Having regard to the above arguments, the only point that arises for
determination is as to the scope of Section 63 3.

The Companies Act was enacted in the year 1956. As the Preamble B
itself says it is an Act to consolidate and amend a law relating to compaines
and certain other associations. As to definition of Company, it is found
under Section 3(1) which consists of the following:

(i) Company
(ii) Existing Company c
(iii) Private Company
(iv) Public Company
Section 644 of this Act reads as follows:
"The enactments mentioned in Schedule XII are hereby re- D
pealed".
Schedule XII that is referred to under the Section refers to previous
Companies Act of 1913 a!so under certain other Acts by way of ordinance
or amendments.
E
Section 28 l ohl,le old Act of 1913 which talks of power of the Court
'to grant relief in certain cases reads as under :

"28 l : Power of Court to grant relief in certain cases: (I) if in
any proceedings for negligence, default, breach of duty or breach
of trust against a person to whom this Section applies, it ap- F
pears to the Court hearing .the case that that 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 reason-
ably, and that having regard to all the circumstances of the
case, including those connected with his appointment, he ought
fairly to be excused for the negligence, default, breach of duty G
or breach of trust, that Court may teheve him, either wholly or
partly, from h!s liability on such terms as the Cotirt 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
in respect of any negligence, default breach of duty or breach
H
348 SUPREME COURT REPORTS [1991] SUPP. 2 S.C.R.

A 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 i.f 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 follow-
B ing:-
(a) directors of a company;
(b) managers and managing agents ofa company;
(c) officers of a company;
c (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:
D
(l) If any proceeding for negligence, default, breac.h of duty,
misfeasance or bre.ach of trust against an .officer of a company,
it appears to the Court hearing the case that he is 01 may be
liable in respect of the negligence, default, breach of duty,
misfeasance or breach of trust, but that he-has acted honestly
E· 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,
F the Court shall have no power to grant relief from any civil
liability which may attach to an officer in respect of such
negligence, default, breach of duty, misfeasance of breach of
trust.
(2) Where any such officer has reason to apprehend that any
G proceeding will or might be brought against him in respect of
any negligence, default, breach of duty, misfeasance or breach ·
of trust, he may apply to the High Court for relief and the )'ligh
Court on such application shall have the same power to iJlieve
him as it would have had if it had been a Court before which a
proceeding against that officer for negligence, def~ult,, breach
H of duty, misfeasance or breach of trust had been brought under
sub-section(l ).
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J.) 349

(3) No Court shall grant any relief to any officer under sub- A
_section (I) 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 B
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 C
1913) various duties and liabilities have been imposed; equally offences
have been created for the non-performance 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.
D
The expression 'any proceeding' occurring under Section 633 can-
not 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
ai)plication of Section 633. Again, if Parliament intended Section 633 to
have a coverage wider than the Act, it would have specifically provided E
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 proceeding under
sub-section (2) the Parliament intended to restrict it only to the proceeding
arising out of negligence, default, breach of trust, misfeasance or breach F
of duty in respect of the duties prescribed under the provisions 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 G
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 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. H
350 SUPREME COURT REPORTS. [1991] SUPP. 2 S.C.R.

A We will now r~fer 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 certian cases:
(l) If in any proceeding for negligence, default, breach of
B 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
·c having regard to all -the circumstances of the case (including
those connected with his appointment) 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.
D (2) If any such officer or person as above-mentioned has rea-
son 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 application has the same power to relieve him as
under this section it would have had if it had been a court
E before which proceedings again.St 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 Jury, the Judge, after hearing the evi-
dence, niay, if he is satisfied that the defendant or defender
F 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".
G Halsbury's Laws of England (Fourth Edition) 7 (I) Compa-
nies, 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·
H breach of trust against an officer of a company or a person
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J .) 351

e~ployed by the company as auditor (whether or not he is an· A
' 9rticer 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 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 appointment, he ought fairly to be excused B
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
c
judge with a jury, the judge, after hearing the evidence, may if
he is satisfied that the defendant ought 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 on D
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
E
apply to the court for relief; and the court on any such applica-
tion has the same power to relieve him as it would have had if
it has been a court before which proceedings against that per-
son 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 F
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 Division. The petition
and all affidavits, notices and other documents in the proceed-
ings under it must be entitled in the matter of the company in
the m.atter of the Companies Act, 1985. G

Under the above provisions a director may be relieved against
liability in respect of a transaction wholly ultra vires the com-
pany or against the penalties imposed by the_ Act where he has
acted without obtaining or after ceasing to hold his qualifica-
tion shares. H
352 SUPREME COURT REPORTS (1991) SUPP. 2 S.C.R.

A . 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 carry-
ing on business as a bookmaker. The liability of the Director for general
betting duty was not paid by the company. The Director was acting hon-
B estly 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 com-
pany. Claim to recover betting duty would amount to default against
Director within the meaning Qf Section 448. Stephenson, LJ stated on this
aspect as follows :
c
"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
D third persons. The proceedings which qualified for the statu-
tory relief we're 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 en-
forcement of the Companies Act, but not proceedings for the
recovery of debis or the enforcement of civil liability to stran-
E gers."
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
F in my view clearly intended to enable the court to give relief
to a director who, althou_gh he has behaved reasonably and
honestly, has nevertheless failed in some way in the discharge
of his obligations to his company or their shareholders or who .,.
has infringed one of the numerous provisions in the Companies
Acts that regulate the conduct of directors."
G It requires to be stated that though St~phenson, 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
H and 1976, but not, it would seem, against civil liability to
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J.) 353

anyone other than the company and so apparently no relief A
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. I
page 881.lt is stated thus:

"Statutory relief (S.448), B
Section 448 (which is referred to in Section 205, proviso (b) is
a protective section for directors on lines similar to that ac-
corded to trustees. It provides that in any proceedings against,
inter a/ia, a director for negligence, default, breach of duty or
breach of trust, if a director who is or may be liable has in the C
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) (I). In spite of the wide words of D
the section it has been held that the section applies only to
actions brought by or on behalf of the compnay against its
directors for breach of duty and to penal proceedings for the
enforcement of the Compaines Act."
The 5th Edn. of Pennigton's Company Law, 1985 at page 679 and
E
680 contains the following 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 reasonably, and
that in all the circumstances he ought fairly to be excused, it F
may relieve him from liability on such terms as it thinks fit.
TI1is provision is identically worded to the provision in the
Trustees Act, 1925 which enables tl1e court to relieve default-
ing trustees, and the Courts, jurisdiction will probably be exer-
cised in the same way as under that Act. The Court is reluctant
to relieve remunerated trustees and will only do so if they G
show that they have taken all reasonable steps and to make
good their breach of trust; the same criterion has been applied
when a defaulting liquidator sought relief, and it would no
doubt also be applied in tll~ 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 H
though the members oppose relief being given.
.
i-

354 SUPREME COURT REPORTS. [1991] SUPP. 2 S.C.R.

A • • • • • • • • • •
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
B the liability arises by statute 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)
c
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
D 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
E 14 of the Employees Provident Fund Act specifically provides for penal-
ties with reference to contravention of the provisions of the Act. Section ',,
14A speaks of offences by the companies. We will now extract that sec-
tion:
I
'
1.
"14-A :(I) If the person committing an offence under this Act,
F the Scheme or the Family Pension Scheme or the Insurance
Scheme is a company, every person who at the·.time the of-
fence was committed was in charge of, and was resj)onsible to,
the 'COmpany for the conduct of the business of the _company,
~ well as the company, shall be deemed to be guilty of the
offence and shall be liable to be proceeded against and pun-
G ished 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 exer-
ci8ed all due diligence to prevent the commission of such of-
·H fence.

..
RABINDRA CHAMRIA v. REGISTRAR OF COMPANIES [MOHAN, J.) 355

. (2) Notwithstanding anything contained in sub-section (I), where A
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 offence has been com-
mitted with the consent or connivance of, or is attributable to,
any neglect on .the part of, any '.\irector or manager, secretary
or other officer of the company, such qirector, manager secre- B
tary or other officer shall be deemed to be guilty of that of-
fence and shall be liable to be proceeded against and punished
accordingly."
The authority to take action under Provident Fund Act as seen from
Section 14 is a Commissioner while the procedure so far as the Compa- C
nies 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 Goverment 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. Therefore, giving of notice is mandatory. That being so, if E>
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 sub-
section (3) of Section 633 can easily be bye-passed. Then again under E
Section 14A of the Provident Fund Act, officers who are talked of under
this section would be deemed to have committed the offence 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. If
therefore, the relief under Section 633 is extended, such officers or per-
sons who are otherwise liable for such offence would get the benefit of F
Section 633 and escape the rigour of Section 14A. The explanation also
makes it abundantly clear that all compaines covered by the Companies
Act would be companies wihtin the meaning of explanation. On the con-
trary, 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 falling under the explanation to Section 14A of the Provident G
Fund Act which does not come within the purview of the Companies Act,
the liability of the persons would be governed only by Section l4A (I)
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 H
356 SUPREME COURT RE?ORTS (1991) SUPP. 2 S.C.R.

A is accepted it would cover not only the existing laws but all legislations to
be enacted in future.

In the result, we find no merit in this appeal and it is dismissed.

In view of the dismissal of appeal No. 3012 of 1990 the other
B appeals and the special' leave petition where the same question arose, are
also dismissed.

However, looking to the facts and circumstances of the case, there ·
will be no order as to costs.

N.P.V. Appeals dismissed.

l