TMI Blog1966 (3) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... . In or about February, 1955, one Nathmal Bhojnagarwalla instituted a suit in this High Court against the company and the mortgagees, inter alia , for a declaration that the mortgages were void. On the 13th May, 1955, a preliminary mortgage decree was passed in Suit No. 3365 of 1954. On or about the 22nd August, 1955, an order was made by this High Court for winding up of the said company at the instance of the petitioning creditor, Satya Narain Jugal Kishore. In the winding up proceedings, an application was made by the said creditor for an order for examination of certain persons including the said Shankarlal Agarwalla under section 195 of the Indian Companies Act, 1913 (hereinafter referred to as the said Act). On the 31st July, 1957, an ex parte order was passed by the company court, inter alia , for examination of the appellant, Shankarlal Agarwalla under section 195 of the said Act. The said Shankarlal Agarwalla thereupon made an application for setting aside the said order. On the 14th September, 1961, Mitter J. made an order setting aside the said ex parte order dated 31st July, 1957. The relevant part of the order is as follows : "It is ordered by and with the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of this court or such other officers as he may appoint. 2. That the said persons do bring with them and produce any document or documents in their custody or power relating to the said company at the time of such examination. 3. Leave be granted to the applicant (Satya Narain Jugal Kishore) to attend with attorney and advocate to assist the Registrar or such other persons as he may appoint for the purpose of such examination. 4. That the examining officer be at liberty to appoint a stenographer and interpreter. 5. Leave be granted to the said applicant to obtain on payment of usual charges the copies of the proceedings before the said officer." On 24th February, 1964, the said Shankarlal Agarwalla made an application before the company court for being represented and/or assisted by attorney and/or counsel at the examination. This application was contested by the petitioning creditor. On nth March, 1964, the company court dismissed the application and the dismissal was without prejudice to the contention of Shankarlal Agarwalla that the order dated 21st May, 1962, was bad. On the 22nd April, 1964, the said Shankarlal Agarwalla made an application, inter ali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. In order to appreciate the points raised, it will be necessary to examine certain provisions of the said Act and the said Rules. The relevant provisions of section 195 of the said Act are as follows : "195. (1) The court may, after it has made a winding up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company, or supposed to be indebted to the company or any person whom the court deems capable of giving information concerning the trade, dealings, affairs or property of the company. (2) The court may examine him on oath concerning the same either by word of mouth or on written interrogatories, and may reduce his answers to writing and require him to sign them. (3) The court may require him to produce any documents in his custody or power relating to the company; but, where he claims any lien on documents produced by him, the production shall be without prejudice to that lien, and the court shall have jurisdiction in the winding up to determine all questions relating to that lien. (6) The said rules have been framed under the provisions of section 246 of the said Act granting powers to the Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 195 in the annotated edition of the Indian Companies Act, 1913, by Sircar and Sen. The relevant part is set out below : "The section in itself gives no right at all to a liquidator, creditor or contributory to apply for and obtain an order for examination. It gives power to the court, if in its discretion it thinks it right so to do, to order any person capable of giving information concerning the trade dealings, estate or effects of the company, to be summoned before it for the purpose of being examined. This therefore leaves it open to the court to say if at the instance of any other person it will make the order : per Cotton L.J. in In re Imperial Continental Water Corporation [1886] 33 Ch. D. 314, 319-20 . The court can therefore make an order suo motu : In re Land Securities Co. [1894] W.N. 91; 42 W.R. 624. In practice, however, the court had got to be put into motion by somebody. Generally: it is the liquidator who does it. Where he does it, he applies ex parte ; he makes no affidavit. The reason why in his case no affidavit is asked for is, as was explained by Jessel M.R. in In re Gold Co. [1879] 12 Ch. D. 77, 83, ' that it is not desirable for h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator is invested, as we have seen, with many rights and powers, but for the useful exercise of these it is essential that he should have the means of ascertaining the facts connected with the company how it has been promoted, for example, how the directors have dealt with the funds, what assets are still outstanding and recoverable. To enable a liquidator to inform his mind on these and similar matters a section section 115 was inserted in the Companies Act, 1862, which is now replaced by section 268 ..The object of the examination is to get information to enable the court to determine what course ought to be followed with reference to some matter or some claim in the winding up. The object is discovery. There need not be any specific dispute ; but the court is bound to see that the inquisitorial powers given by the section are not used for vexation or oppression ..The court sanctions a private examination to enable the liquidator to obtain the necessary information to proceed in the winding up and opposing parties in contemplated litigation should not be allowed to be present, especially as in a proper case disclosure can be ordered under rule 74. Undertakings may therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the official liquidator. The question is whether, under rule 195, it was intended that no other person excepting the official liquidator could make such an application under any circumstances. In my opinion, it was not intended that it should be so. As stated above, a private examination is primarily intended for the benefit of the official liquidator; but where the official liquidator does not take action, it could not have been intended that the rules should whittle down the power of the court contained in section 195. The power to order private examination is vested in the court and neither in the official liquidator nor in any other person. Regard being had to the object with which such power has been granted to the court, it is obvious that primarily it is for the official liquidator to move in the matter. But if the official liquidator fails to do so or refuses to do so, the court is not powerless to exercise the power at the instance of other parties like a creditor or contributory. Coming to the facts of the present case, we find that originally joint liquidators were appointed ; but there are serious allegations made against them. The application by Satya Narain Juga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors to attend the private examination, was dealt with in an English case, In re Greys Brewery Co. [1884] 25 Ch. D. 400, 407-408 Chitty J. held that creditors have not a general right to attend. The learned judge said as follows: "That such a discretion exists as I say has not been contested at the Bar, nor could it be, because the court does in certain cases where the official liquidator, who is the officer of the court, and (to use Sir G. Jessel's expression) in dominus litis (I only use those words in analogy because here there is no lis pendens ) , allow him to have the conduct of the proceedings, and where he is willing to undertake the examination under the 115th section the court does not hand over the conduct of those proceedings to the creditor or contributory. But where the official liquidator himself declines to proceed, either from want of funds or for some other reason, the creditor or contributory is allowed in a fit and proper case, and on a proper statement communicated to the judge, to take proceedings. So that I am quite satisfied the court has discretion to allow a creditor or a contributory to attend even this secret tribunal." I hold that the law to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings The whole position has been lucidly explained by Jessel M. R. in Whitwortlis case [1881] 19 Ch. D. 118, 120-21 . The Master of Rolls said : "As I understand the 115th section of the Companies Act, 1862, it gives the judge discretion both as to the extent of the examination and as to the occasions on which it will be ordered, and also as to the persons who are to conduct it. Now, considering that the object for which the examination is ordered is discovery, it is the better and the usual course to entrust the examination to the official liquidator, who is under the control of the court, and represents the whole company, creditors and contributories. But there may be some cases in which he declines to interfere, or some creditor or contributory may think that he or his agents ought not to examine in a particular case. Although there is no ground for removing the liquidator, yet the judge may then commit either the whole or some part of the examination to some creditor or contributory. As a rule, when committing an examination to some creditor or contributory, the judge points out the extent and limits of that examination, but it may in many cases be extremely difficult to s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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