TMI Blog1978 (12) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... porated on August 21, 1971, as a private limited company but became a public company on December 28, 1973. The paid-up capital of the company is rupees five lakhs being the amount fully paid up on its 50,000 equity shares of the face value of Rs. 10 each. Of these 49,996 shares are held by M/s. Electrical Manufacturing Company Ltd. (hereinafter referred to as "the holding company") and the remaining four shares are held by three individuals. Respondents Nos. 2 to 6 are directors of the company. The petitioner is the attorney of Smt. Savitri Devi Maini and her five daughters who owned premises No. 11, Panchsheel Park, Diplomatic Enclave, New Delhi. In response to an advertisement by the petitioner, the second respondent approached the petitioner with an offer that the company would take on lease the first floor of the above house (hereafter' referred to as "the premises") on rent for a period of three years from August 15, 1975. The rent payable was agreed to be Rs. 2,750 per month from August 15, 1975, to July 31, 1977, and Rs. 3,000 from August 1, 1977: to July 31, 1978. The terms of the tenancy were set out in a letter addressed to the petitioner by the first respondent. The al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces. ( ii )The fifth respondent had developed political contacts and by virtue of association with persons in power abused his influence in business matters. ( iii )The balance-sheet and the profit and loss account and auditors' report of the company disclosed a state of affairs which called for investigation. ( iv )The sum of Rs. 53,625 had been misappropriated by the 5th respondent. For these reasons it prayed that this court should direct the Central Govt. to appoint an inspector to carry out an investigation into the affairs of the company. I may at once state that of the two preliminary objections raised by Sri Ved Vyas there is no substance in the second objection that the petition is mala fide and intended only to harass the respondents. It is no doubt true that some broad allegations have been made in paras. 18 and 19 of the petition making certain allegations against the respondents which may not be quite material for the disposal of the petition. But I do not think that the mere fact that such allegations have been made can result in the dismissal of the petition on the grounds suggested by Sri Ved Vyas. If otherwise the petitioner has made out a case for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by any contributory or a creditor or any other person interested, that the business of the company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose. Section 237 is the provision with which we are concerned in the present case. The section reads: "Without prejudice to its powers under section 235, the Central Government ( a )shall appoint one or more competent persons as inspectors to investigate the affairs of a company and to report thereon in such manner as the Central Government may direct, if ( i )the company, by special resolution; or ( ii )the court, by order, declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government; and ( b )may do so if, in the opinion of the Central Government, there are circumstances suggesting ( i )that the business of the company is being conducted with intent to defraud its creditors, members, or any other persons, or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive of any of its members, or that the company was formed for any fraudulent or unlawful purpose; ( ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) indicating that a petition simpliciter for action under section 237( a )( ii ) cannot be entertained, and that the power conferred by section 237( a )( ii ) can only be exercised by the court against a company in respect of which some other proceeding is pending in the court and the court considers it proper to direct appointment of an inspector." The same view was taken by Kapur J. in the case of Delhi Flour Mills Co. Ltd., In re [1975] 45 Comp. Cas. 33 (Delhi). In view of the above decisions, Shri Ved Vyas stated that he would not press that argument here but he contended that, however wide the language of section 237 may be, it should not be so construed as to vest an absolute and unlimited right in a complete and total stranger who has no manner of interest in or connection with a company to seek an investigation into its affairs. Before considering this contention, it is necessary to refer to the observations of Kapur J. in the case of Delhi Flour Mills Co. Ltd., In re [1975] 45 Comp. Cas. 33 (Delhi), which according to Shri Lekhi, have already decided the point. No doubt, Kapur J. observed in that case (p. 41) : "One serious misgiving has been in my mind con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ways insisted that the person who approaches the court must be one whose legal rights are affected and who has a legal grievance. This position has been reiterated in a series of decisions of the Supreme Court. In Chiranjilal Chaudhari v. Union of India [1950] SCR 869 ; [1951] 21 Comp. Cas. 33 , 54 (SC) Mukherjea J. observed : "To make out a case under this article, it is incumbent upon the petitioner to establish not merely that the law complained of is beyond the competence of the particular legislature as not being covered by any of the items in the legislative lists, but that it affects or invades his fundamental rights guaranteed by the Constitution, of which he could seek enforcement by an appropriate writ or order. The rights that could be enforced under article 32 must ordinarily be the rights of the petitioner himself who complains of infraction of such rights and approaches the court for relief. This being the position, the proper subject of our investigation would be what rights, if any, of the petitioner as a shareholder of the company have been violated by the impugned legislation." Instate of Orissa v. Madan Gopal Rungta [1952] SCR 28 the High Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms does not describe the classes of persons entitled to apply thereunder ; but it is implicit in the exercise of the extraordinary jurisdiction that the relief asked for must be one to enforce a legal right. In State of Orissa v. Madan Gopcd Rungta [1952] SCR 28 this court has ruled that the existence of the right is the foundation of the exercise of jurisdiction of the court under article 226 of the Constitution. In Chiranjilal Chaudhari v. Union of India [1950] SCR 869; [1951] 21 Comp. Cas. 33 (SC), it has been held by this court that the legal right that can be enforced under article 32 must ordinarily be the right of the petitioner himself who complains of infraction of such right and approaches the court for relief. We do not see any reason why a different principle should apply in the case of a petitioner under article 226 of the Constitution. The right that can be enforced under article 226 also shall ordinarily be the personal or individual right of the petitioner himself, though in the case of some of the writs like habeas corpus or quo war ran to this rule may have to be relaxed or modified. The question, therefore, is whether in the present case the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen the flood gates of litigation, for where the statute is clear, the court should give effect to the right created and should not restrict that right merely in order to minimise litigation. But where the language of the section is not so clear and where there is nothing in the scheme of. the Act to warrant the giving of an altogether too liberal and wide an interpretation I think it is legitimate to take into consideration the fact that such a wide interpretation might result in a spurt of litigation by persons having no direct interest or concern in the subject-matter thereof. I have already pointed out that, on general principles, it would not be correct to read the section as authorising any man in the street to seek orders for investigation into the affairs of a company, merely because it is a public company and its affairs are, in his opinion, being conducted to the detriment of public interest. The interest which the person may have as a member of the public in the purity of the administration of public companies is too remote and intangible for the infraction of which he may move a court. That apart, I do not think that section 237 is capable of such a wide interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed by other trade unions. The plaintiff, Gouriet, sought the Attorney-General's consent to act as plaintiff in relator proceedings for an injunction to restrain the postal union from the above course but the Attorney-General withheld his consent. Thereafter, the plaintiff issued a writ of summons in his own name and applied to the judge in chambers for an injunction in the same terms. The injunction in the terms sought for was granted by the Court of Appeal by invoking a very wide language of Order 15, rule 16 of the Rules of the Supreme Court which read as follows (p. 327): "No action or other proceeding shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether or not any consequential relief is or could be claimed." The above decision was reversed by the House of Lords for several reasons but we are concerned here only with the application of the principle that a person whose rights as a private individual are not affected cannot seek an injunction even if it be to present what he considers to be a threatened breach of law or even the commission of an offence. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an action will lie whenever a declaration is sought. It does not enlarge the jurisdiction of the court. It merely provides that no objection can be made on the ground only that a declaration is sought. In my opinion it provides no ground for saying that since 1883 the courts have had jurisdiction to entertain an action instituted by a person other than the Attorney-General who does not claim that any personal right or interest will be affected and who is seeking just to protect public rights." At page 332, Lord Diplock observed : "The only kinds of rights with which courts of justice are concerned are legal rights; and a court of civil jurisdiction is concerned with legal rights only when the aid of the court is invoked by one party claiming a right against another party, to protect or enforce the right or to provide a remedy against that other party for infringement of it, or is invoked by either party to settle a dispute between them as to the existence or nature of the right claimed. So for the court to have jurisdiction to declare any legal right it must be one which is claimed by one of the parties as enforceable against an adverse party to the litigation, either as a subs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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