1968 (12) TMI 50 - SUPREME COURT

Whether the order made by the Central Government in No. 2(4)-CL.I/63, Government of India, Ministry of Commerce and Industry, Department of Company Law Administration, on April 11, 1963, is liable to be struck down as not having been made in accordance with law?

Held that:- We do not think that any reasonable person, much less any expert body like the Government, on the material before it, could have jumped to the conclusion that there was any fraud involved in the sale of the shares in question. If the Government had any suspicion about that transaction it should have probed into the matter further before directing any investigation. We are convinced that the precipitate action taken by the Government was not called for nor could be justified on the basis of the material before it. The opinion formed by the Government was a wholly irrational opinion. The fact that one of the leading directors of the appellant-company was a suspect in the eye of the Government because of his antecedents, assuming without deciding, that the allegations against him are true, was not a relevant circumstance. That circumstance should not have been allowed to cloud the opinion of the Government. The Government is charged with the responsibility to form a bona fide opinion on the basis of relevant material. The opinion formed in this case cannot be held to have been formed in accordance with law.

In the result we allow these appeals and set aside the impugned order.