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TMI Blog1969 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... naging agency of the Rampur Company was to expire on 15th August, 1960, unless before that date the managing agent was reappointed for a fresh term in accordance with the provisions of the Companies Act. On 10th December, 1959, the Rampur Company reappointed Govan Brothers managing agent for ten years with effect from 15th August, 1960, and applied to the Central Government that the extension of the managing agency of Govan Brothers be approved. The Central Government granted extension for five years under section 326 of the Companies Act with effect from 15th August, 1960. In the report of the commission headed by Mr. Justice Vivian Bose appointed to enquire into and report on the working of the "Dalmia Jain group of industries", the dealings of V. H. Dalmia in relation to the financial affairs of some of the companies of which he was a director was severely criticized. In the view of the commission, V.H. Dalmia was in the year 1946-47 guilty of grossly improper conduct in relation to several companies of which he was a director. In May 1964, the police lodged criminal proceedings against V.H. Dalmia and 23 others in the court of the District Magistrate, Delhi, charging them wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss the writ petition. In appeal against the order, the High Court observed that in determining whether a person was fit and proper to be appointed a managing agent his "acts and activities" in the past cannot be ignored altogether, and, coupled with other circumstances, may provide a valid ground for not approving an appointment, but since under section 326(2)(b) the Board has to consider the fitness and propriety of a managing agent at the date of the proposal the Board has also "to take into consideration the subsequent conduct, acts and activities of the person", and the Board having failed to consider the entirety of the "acts and activities" of V.H. Dalmia, the opinion formed by the Board was" incomplete" and not "in accordance with the provisions of section 326(2)(b ) of the Companies Act". The High Court accordingly set aside the order and directed the Board to take into consideration material circumstances, namely, the "acts and activities" of V. H. Dalmia during the years subsequent to 1947 in forming the requisite opinion under section 326(2)(b). Against that order two appeals have been preferred-one by the Company Law Board, and the other by the Rampur Company-with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies of which he was a director between the years 1945 and 1947. The criticism by the commission of the conduct of V. H. Dalmia suggested that there were serious grounds for complaint against him, but these observations related to acts and omissions many years before the date on which the application was made. The Board has to consider "whether Govan Brothers is a fit and proper person to be appointed managing agent" on a review of all the relevant circumstances, the criticism by the commission, the progress made by the Rampur Company while under the management of V. H. Dalmia and others since 1946-47, the interests of the shareholders, the creditors and of the public generally, and also that a complaint was pending in a criminal court against V. H. Dalmia and others charging them with committing serious offences. The Solicitor-General appearing for the Union of India contended that by the use of the expression "in its opinion" occurring in section 326(2)(b ) of the Companies Act, it is meant that the subjective satisfaction of the Central Government is determinative of the question whether the proposed person is fit and proper to be appointed managing agent, and if the Board re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a proposed managing agent in the light of clauses (a), (b ) and (c) of sub-section (2). Though the sub-section is enacted in form negative, in substance it confers power upon the Government subject to the restrictions imposed by clauses (a), (b) and (c ) to refuse to accord approval. Sub-section (2) imposes upon the Central Government the duty not to accord approval to appointment or re-appoinment of a proposed managing agent unless the Government is satisfied that the managing agent is a fit and proper person to be appointed, that the conditions of the managing agency agreement are fair and reasonable and that the managing agent has fulfilled the conditions which the Central Government required him to fulfil. Thereby the Central Government is not made the final arbiter of the existence of the grounds on which the satisfaction may be founded. The satisfaction of the Government which is determinative is satisfaction as to the existence of certain objective facts. The recital about satisfaction may be displaced by showing that the conditions did not exist, or that no reasonable body of persons properly versed in law could have reached the decision that they did. The courts, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression points out that there must exist circumstances from which the authority forms an opinion that they are suggestive of the crucial matters set out in the three sub-clauses." Sarkar C.J. and Mudholkar J. did not agree with that view. Bachawat J. expressed no opinion on the nature of the power conferred by section 237. But in Rohtas Industries Ltd. v. S. D. Agarwal [1969] 39 Comp. Cas. 781 (SC) in dealing with an application challenging the action of the Company Law Board under section 237(b) of the Companies Act, this court held that the opinion formed is not open to challenge, but the circumstances can. The view expressed by Sarkar C.J. and Mudholkar J. was disapproved. Some reliance was sought to be placed upon the observations made in Nakkuda Ali v. M. F. De. S. Jayaratna [1951] AC 66, in which the Judicial Committee observed : "After all, words such as these are commonly found when a legislature or law-making authority confers power on a minister or official. However read, they must be intended to serve in some sense as a condition limiting the exercise of an otherwise arbitrary power. But if the question whether the condition has been satisfied is to be conclusively de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised wide issues and which he did not consider suitable for investigation. They claimed that he had unfettered discretion. The House of Lords remitted the case with a direction that the Minister should consider the complaint. We are, therefore, unable to agree that because the exercise of the power depends upon satisfaction, its exercise cannot be subjected to judicial review, the Government being the final arbiter of the conditions in which the power may be exercised. But in dealing with a petition against an order made by the Board under section 326 of the Companies Act, 1956, the High Court is not constituted a court of appeal over the judgment of the Board. The court has merely to consider whether in arriving at its decision the Board has restricted itself to the enquiry contemplated to be made and has taken into consideration all the relevant circumstances and that its decision is not vitiated by irrelevant or extraneous matters. The High Court was, therefore, right in holding that in determining whether Govan Brothers is a person fit and proper to be re-appointed managing agent, the past conduct and actings which were relevant to the issue had to be taken into account, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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