BHARGAVA, J. —Petitioner Totalal, who at the relevant time, was a Director of the Edward Mills Co. Ltd., Beawar (hereinafter called the Mills) incorporated and registered as a public limited company under the provisions of the Indian Companies Act, 1882 on 9th August, 1906, has been sentenced to pay a fine of Rs. 500/- for an offence punishable under Sec. 295 (4) of the Indian Companies Act, 1956; in default of payment of fine, he is to undergo simple imprisonment for two months. Along with the petitioner, three other Directors, namely, Chandmal, Rishi Kesh and Lalita Parsad, were also convicted for the same offence, but no revision application has been filed on their behalf.

2. Sec. 295 of the Indian Companies Act 1956 runs thus:—

Sec. 295. Loans to Directors etc. (1) Save as otherwise provided in sub-sec. (2) no company (hereinafter in this sec referred to as the lending company) shall, without obtaining the previous approval of the Central Government in that behalf, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or any other person by,

(a) any director of the lending company which is its holding company or any partner or relative of any such Director;

(b) .........(c)......... (d)......... (e).........

(2)......................................................

(3) Where any loan made, guarantee given or security provided by a lending company and outstanding at the commencement of this Act could not have been made, given or provided without the previous approval of the Central Govt., if this sec. had then been in force, the lending company shall, within six months from the commencement of this Act or such further time not exceeding six months as the Central Government may grant for that purpose, either obtain the approval of the Central Government to the transaction or enforce the repayment of the loan made, or in connection with which the guarantee was given or the security was provided, notwithstanding any agreement to the contrary.

(4) Every person who is knowingly a party to any contravention of sub-sec. (1) or (3) including in particular any person to whom the loan is made or who has taken the loan in respect of which the guarantee is given or the security is provided, shall be punishable either with fine which may extend to...............five thousand rupees or with simple imprisonment for a term which may extend to six months.

Provided that where any such loan, or any loan in connection with which any such guaran tee or security has been given or provided by the lending company, has been repaid in full no punishment by way of imprisonment shall be imposed under this sub-section; and where the loan has been re-paid in part, the maximum punishment which may be imposed under this sub-section by way of imprisonment shall be proportionately reduced."

On 8th February, 1942, one Motilal Raniwala by a resolution passed at an extraordinary general meeting of the said Mills was appointed as Agent, Secretary, Treasurer and Managing Director for a period of twenty years. This Motilal Raniwala was also the proprietor of a concern known as Champalal Ram Swaroop at Beawar and Bombay. It was a joint Hindu Family concern of which Motilal Raniwala was the Karta or manager. It appears that on 15th February, 1945, the Directors of the Mills by a resolution decided to keep amounts of the Mills to the extent of Rs. 1,50,000/- in current account with Champalal Ram Swaroop for the purposes of Mills business. Copy of the resolution is marked Ex. P. 27. Some more amounts appear to have been advanced as on Ist of April, 1956, when the new Act (No. 1 of 1956) came into force, a sum of Rs. 3,96,000/- was due to the Mills from Champalal Ram Swaroop. The Directors of the Mills in compliance with the provisions of Sub-sec. (3) of Sec. 295, sought the approval of the Central Government for the continuance of the aforesaid amount in the current account of Champalal Ram Swaroop. On nth Janua

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