N.C.Bakshi vs Delhi & District Cricket ...
2012 Latest Caselaw 6435 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                 Date of Judgment:02.11.2012

+      CO.A(SB) 84/2012
       N.C BAKSHI                                  ..... Appellant
                         Through:    Mr.Tanuj Khurana and Mr.Issan
                                     Madan, Advocates.
                         versus
       DELHI & DISTRICT CRICKET
       ASSOCIATION & ORS                         ..... Respondent
                         Through:    Mr.J.S.Bakshi and Mr. Amitesh
                                     Bakshi, Advocate.
       CORAM:
       HON'BLE MS. JUSTICE INDERMEET KAUR

INDERMEET KAUR, J. (Oral)

1. This appeal is directed against the judgment of the Company Law

Board (CLB) dated 28.9.2012 wherein the application filed by the

applicant company (M/s Delhi and District Cricket Association- DDCA)

seeking a composition of an offence committed by them under Section

621A of the Companies Act had been allowed; penalty/compounding

fee of Rs.1,00,000/- has been imposed upon the company and

Rs.50,000/- on each member of the Governing Council.

2. This order is the subject matter of the present petition.

3. At the outset, this Court notes that this is an appeal under Section

10F of the Companies Act which clearly stipulates that an appeal lies

against the order of the CLB on a question of law arising out of such an

order. The decision of the CLB in the fact finding Court. It is only

when a question of law emanates that an appeal would lie under this

statutory provision. Relevant it would be state that no question of law

has been formulated in the entire body of the appeal. Grounds of appeal

are contained in the body of the petition which will be the subject matter

of discussion in the following paragraphs.

4. The DDCA have been issued a licence under Section 25 of the

Companies Act by the Regional Director. Object clause of the

Memorandum of Association of the Company permitted the Company to

promote the game of cricket in terms of certain conditions which had

been specified in the licence itself. Clauses 2,3,5,6,7 and 8 are relevant.

Clauses 3,6,7 and 8 read as under:

"(3) That no remuneration or other benefit in money or money's worth shall be given by the Company to any of its members, whether officers or servants of the company or not except payment of out-of- pocket expenses, reasonable and proper interest on money lent or

reasonable and proper rent on premises to the company; (4)......

(5).....

(6) That nothing in clauses (3), (4) and (5) shall prevent the payment by the company in good faith, with the previous approval of the Central Government of India reasonable and proper remuneration to any of its members in return for any services (Not being services of kind which are required to be rendered by a member), actually rendered to the company;

(7) That an alteration shall be made to the Memorandum of Association or to the Articles of Association of the Company, which are for the time being in force, unless the alteration has been previously submitted to and approved by the Central Government, and (8) That the licence and the registration of the said company pursuant hereto shall cease to have any force or effect on violation of any of the aforesaid conditions or any of the conditions and provisions contained in its memorandum of association and thereupon this licence shall be revoked in accordance with the provisions of the said section 25 of the Companies Act, 1956."

5. Submission of the appellant is that admittedly the company by

blatant violation of the conditions of the licence had paid lacs of rupees

to its members; no prior approval of the Central Government has been

taken. On 22.11.2010 a complaint had been made by the petitioner to

the Ministry of Corporate Affiaris bringing these facts to their

knowledge. Legal notice dated 25.6.2011 to the Ministry of Corporate

Affairs through Regional Director was also served upon them. Reply

was filed by the Regional Director to this notice along with the copy of

the communication furnished by the company (DDCA) dated

07.7.2011which had been forwarded to the CLB alongwith the

application of the Company filed under Section 621A of the Companies

Act.

6. A perusal of this application shows that the company had

admitted that it had paid honorarium to its members for the years 2008-

09, 2009-10, 2010-11. This position is also not disputed by the learned

counsel for the respondent. He has admitted that honorarium was in fact

paid by the company (DDCA) to its various members for the aforenoted

three years; submission being that for the year 2010-11 a prior approval

of the Central Government has been taken which fact had been brought

to the notice of the CLB. For the other two years i.e. for the financial

year 2008-09, 2009-10 prior approval for payment of honorarium to its

members had not been taken for which the requisite application under

Section 621A of the Companies Act seeking compounding of this

offence had been filed.

7. Impugned order after noting the respective the contentions of the

parties and the admitted facts as noted above had permitted the

compounding of the offence under Section 621 A of the Companies Act;

it had noted that the contravention by the company was one covered

under the category of Section 629A of the Companies Act.

8. Section 621 A permits the Central Government to impose penalty

for any default committed by a company or any its officers thereof

provided that the said offence is compoundable under Section 629A of

the said Act. Section 629A applies to cases where there is contravention

of provisions of this Act for which there is no punishment specifically

provided.

9. The licence had been granted to the company under Section 25 of

the Companies Act. Under Section 25(5) of the Companies Act the

licence may be granted by the Central Government on such conditions

and subject to such regulations as it thinks fit which shall be binding

upon on the body to which it is granted. Sub-Section 8 specifies the

conditions under which the licnece can be revoked by the Central

Government. Sub-Section 10 contains the penal provision for non-

compliance of sub-Section 9 which comes into play only on the

revocation of the licence.

10. In the instant case the company in breach of the conditions of the

conditions of the licence which had been granted to it paid honorarium

to its members without the prior approval of the Central Government.

Under sub-clause 6 of the licnece the company could pay a

remuneration to its members but only with the previous approval of the

Central Government

11. Record shows that the prior approval from the Central

Government for the year 2010-11 has been obtained. For the other two

years i.e. 2008-09, 2009-10 prior approval from the Central Government

has not been taken for which purpose the said application under Section

621A of the Companies Act had been filed.

12. Since the offence was committed by the company for the breach

of the conditions of the licence which licence has been given to the

company under Section 25 of the Companies Act, Section 629A of the

Companies Act rightly stood attracted. No specific penalty having been

provided for contravention of sub-section (5) with regard to the

conditions and regulations of the licence; accordingly the Company and

its officers shall in default be punishable under Section 629A; Section

629 A not creating any offence but only providing a penalty for such

contravention of the Act for which no specific penalty is provided.

13. Discretion was properly exercised by the CLB in imposing a

penalty of Rs.1,00,000/- on the company and Rs.50,000/- on each of the

members of the Council who had paid remuneration/honorarium to its

members without prior approval of the Central Government. It was a

fair exercise of the its discretion based on reasoned findings..

14. Even otherwise apart from the fact that no question of law has

been formulated, the grounds of appeal lay challenge only to the

express provisions of the licence; submission being that if there is a

breach or violation of any of the conditions of the licence there would be

an automatic revocation; this submission is a misdirected submission.

The licence can be revoked by the Central Government, but only after

an opportunity of hearing has been granted; it has to be a speaking order

and in consonance with the principles of natural justice.

15. Learned counsel for the respondent has also pointed out that a

Writ Petition No.6478/2012 has been filed before a Coordinate Bench of

this Court wherein also the pleas now made in the present appeal have

been taken in the said petition. A copy of this petition has been placed

on record. Averments made in this writ petition clearly show that the

petitioner was aggrieved by the remuneration paid by the company to its

members in the year 2008-09, 2009-10, 2010-11 which is also the same

grievance of the petitioner in this appeal. The prayer made in this

petition is that appropriate action be taken against the company for the

breach committed by it of Section 25 of the Companies Act under which

the licence has been granted to it.

16. There is no dispute that remedy of an appeal under Section 10F of

the Companies Act impugning the order of the CLB is an independent

remedy but at the same time this Court cannot lose sight of the fact that

the averments and the prayers made in the Writ Petition if granted would

tantamount to the same relief which has now been sought for in the

present appeal. That apart an appeal under Section 10F is maintainable

only on a question of law and as noted supra no question of law has

even been formulated. Grounds of appeal are contained on page 28 of

the paper book. All of them are bordered upon the conditions of the

licence which had been granted to the company under Section 25 of the

Companies Act; submission being that the breach of the mandatory

conditions of the licence amounts to an automatic revocation

17. Except sub-section (10) of Section 25 of the Companies Act

(which comes into play only after the licence has been revoked) there is

no provisions under Section 25 of the Act which lays down a penalty for

non-compliance of the licence granted under Section 25; for a breach of

such conditions provisions of Section 629 A of the Act have be to be

resorted to.

18. There is no infirmity in the impugned order of the CLB; it calls

for no interference. Appeal is without any merit; it is accordingly

dismissed with costs of Rs. 20,000/-.

INDERMEET KAUR, J

NOVEMBER 02, 2012 nandan