THE Supreme Court decided yesterday that a section of the 1963 Companies Act, designed to protect creditors from fraud, did not create a criminal offence.

The court upheld a High Court decision to dismiss an action brought by a former director of Aluminium Alloy Refiners Ltd, Dublin, against the liquidator of the company and the Attorney General.

Ms Sandra O'Keeffe, of Belle Isle House, Ranelagh Road, Dublin, claimed the manner in which the liquidator sought to invoke section 297 of the 1963 Act against her was invalid as it amounted to a trial of a criminal offence without due procedures for such a trial.

In his judgment, Mr Justice O'Flaherty said the company was hopelessly insolvent and the Revenue Commissioners were said to be owed a sum in excess of £1 million. It was wound up voluntarily in July 1988 and a liquidator appointed.

In August 1992, the liquidator sought a High Court declaration that Ms O'Keeffe, who was a director at the time it was wound up, was knowingly a party to the carrying on of the company's business with intent to defraud the creditors of the company.

The liquidator also wanted the court to state that she should be personally responsible without limitation of liability for all, or, alternatively, any part of the debts or liabilities of the company as the court might direct.

In addition, he sought a court order that she should pay the liquidator the amount of the debts or other liabilities of the company.

Mr Justice O'Flaherty said Ms. O'Keeffe had not alleged that the section created a criminal offence but, rather here was a civil proceeding which was really criminal in nature.

She had claimed it was a direct violation of Article 38 of the Constitution because it sought to impose a badge of, criminality on a person through the courts exercising their civil jurisdiction.

The liquidator and the Attorney General had submitted that section did not create a criminal offence.

They claimed the procedure under the legislation was necessary to safeguard the creditors of companies.

Mr Justice O'Flaherty said it was clear the sub section did not create a criminal offence. There was nothing to identify a criminal offence. There was no prosecutor, no offence created and no criminal sanction imposed.

The judge rejected a submission - on behalf of Ms O'Keeffe that the civil proceedings were really a disguise for what was truly an attempt by the Oireachtas to impose a criminal sanction in a civil context.

The section was designed to protect creditors and others who might fall victim of people engaged in fraud.

It was true, said the judge, that, fraud was an ingredient in many criminal offences but it was also an ingredient in various civil wrongs.