RAMANARANG versus RAMESH NARANG AND ORS.

Citation: [1995] 1 S.C.R. 456 · Decided: 19-01-1995 · Supreme Court of India · Bench: A.M. AHMADI, K. JAYACHANDRA REDDY, R.M. SAHAI · Disposal: Dismissed
Cited by 4 judgment(s) · cites 1 · see the full citation network in Lexace
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Judgment (excerpt)

A 
B 
RAMANARANG 
v. 
RAMESH NARANG AND ORS. 
JANUARY 19, 1995 
[AM. AHMADI, CJ, R.M. SAHAI AND 
K. JAYACHANDRA REDDY, JJ.) 
Companies Act, 1956-Ss.267, 274, 283-Managing Director-Appoint-
ment of after incurring disqualification-Effect of-COmpany appointing a 
C person as Managing Director after he was convicted of offence involving moral 
turpitude-operation of judgment of Sessions Cowt stayed by appellate court 
under s. 389(1) Cr.P.C.--Fact that stay sought of disqualification incurred 
unders s.267 because of conviction not mentioned in stay application-Held, 
company committed infraction. of mandatory provision of s.267-0peration 
D of s.267 would take effect as soon as conviction is recorded by a competent 
court-Order of appellate court can nt:Jt be extended to stay of conviction for 
avoiding disqualification under s.267. 
Code of Criminal Procedure 1973-Ss. 374. 389(1), 482-Suspension 
of sentence or order appealed-Held, appellate court can stay operation of 
E order of conviction for the purpose of avoiding disqualification under s. 267 
ol Companies Act, if the precise purpose is brought to notice of the 
court-High Court under s. 482 can pass orders preventing irreparable 
damages to applicant. 
F 
Practice and Procedure -
Parties to approach· the court with clean hands-A person against 
whom an order of conviction is passed by trial court cannot suppress the 
precise purpose for which he seeks suspension of conviction and obtain a 
I ---
general order of stay and then claim that disqualification as a resujt of 
\ 
'.·. 
G conviction has ceased to operate. 
The appellant and his sons, respondents no.1 and 2 had share 
,.._ 
holding in a deemed Public Limited Company. The appellant, who was the 
founder and largest shareholder of the Company was, by a resolution 
dated 25.6.1990, appointed as the Managing Director of the Company. 
, H Respondent no. 1 challenged the said appointment in a Company Petition 
456 
f
) 
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RAMANARANGv. RAMESH NARANG 
457 
before High Court of Bombay on the ground that the appellant having bee~ A 
convicted of an offence involving moral turpitude could not hold office of 
Managing Director in view of provisions of S. 267 of the Companies Act, 
1956. It was not disputed that the appellant had been convicted of offences 
punishable under ss. 120-B and 420 l.P.C. and sentenced to rigorous 
imprisonment for two and a half years, by Additional Sessions Judge, B 
Delhi on 22.12.1986 and on appeal, the High Court of Delhi released him 
on bail and directed stay of the operation of the order passed by Addi. 
Sessions Judge. However, respondent no. 1 unconditionally withdrew the 
said company petition. 
Subsequently, in a petition before the Company Law Board, the C 
functioning of the appellant as the Managing Director was again ques-
tioned on the ground of his conviction. Respondent no. 1 claimed himself 
to be the Managing Director and purporti~g to act as such issued a notice 
convening a meeting of the Board of Directors on 13. 7 .1992. It was claimed 
that in the said meeting it was inter alia resolved that the appellant had D 
ceased to be the Managing Director and Director of the Company by virtue 
of s.267 of the Companies Act. Thereupon, the appellant and ~espondents 
no. 4 and S filed a suit for declaration that the Board meeting held on 
13.7.1992 was illegal and the decisions taken therein were null and void, 
and for a permanent injunction restraining respondents no.1 and 2 from 
implementing the decisions taken in the said meeting. A Single Judge of E 
the High Court, while granting the interim reliefs sought, held that the 
appointment of the appellant as Managing Director was not void ab initio 
notwithstanding the provision of s.267 of the Companies Act and, that the 
' 
....ir 
meeting of 13. 7.1992 was not pro pertly and validly convened and, therefore, 
the entire proceedings were bad in law. 
F 
On appeal, the Division Bench of the High Court held that 
provisions of s.267 of the Companies Act were mandatory in nature and it 
was not permissible to appoint or continue any pers~n as Managing 
Director of a company on his being convicted of an offence involving moral 
turpitude. As regards the e~ect of the stay order granted by the High Court G 
of Delhi in appeal filed by the appellant against his conviction, the Division 
Bench held that under s.389(1) of the Code of Criminal Procedure, 1973 
the High Court of Delhi could only suspend the execution of the sentence;
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