9911796707
TMI Blog1984 (3) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... of respondent No. 5, Sri Amal Chandra Chakraborty, chartered accountant of M/s. S.R. Batliboi & Co., to carry on the investigation and report to the Company Law Board and also against the report submitted by the said inspector to the Under Secretary to the Company Law Board, Government of India, and also against the alleged violation of the provisions of section 241(2)(a) by the Central Government in not furnishing the company with a copy of the entire report of the inspector. The petitioners have also challenged with holding of the approval regarding reappointment of three whole time directors and the decision reached by the Company Law Board, Government of India, to launch criminal complaints before the Chief Metropolitan Magistrate, Calcutta, and also against filing of separate complaint petitions before the learned Chief Metropolitan Magistrate, Calcutta, under section 89(3) read with section 87 of the Companies Act, registered as Case No. 1966 of 1982 and also under section 209(5) of the Companies Act, registered as Case No. 2051 of 1982 and under section 420 read with section 418 of the said Act, registered as Case No. 2051 of 1982 and under section 297/299 and 301 of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have contended that either in the internal audit or in the statutory audit, no allegation of mismanagement and/or misfeasance and/or misconduct has been made. It is contended by the petitioners that the petitioner company was subjected to a proceeding of inspection of books of account by the officers appointed by respondent No. 1, namely, the Union of India, in accordance with section 209A of the Companies Act. Such proceeding of inspection went on for about three months, but in the absence of any communication from the inspection authorities, the petitioners believed in good faith that no irregularity was found in the said proceeding of inspection. The petitioners, however, were shocked and surprised at the publication of an order of the Government of India dated August 10, 1977, a copy whereof has been annexed to the writ petition being marked as Annexure 'C'. It has been alleged in the said order that the chairman of the Company Law Board had formed an opinion that there were circumstances suggesting that the persons concerned in the management of the affairs of the petitioner company were guilty of fraud, misfeasance and other misconduct towards the company and its members and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spection and/or notings therefrom entirely behind the back of or without communicating even the substance thereof to the whole time directors, principal executive officers of the petitioner company, although such officers had extended all possible co-operation and assistance to the said respondent No. 5. It is contended that the said respondent No. 5 chose to employ one Sri Swadesh Gupta, since deceased, who was a senior employee of the firm of auditors to which respondent No. 5 belonged, M/s. Batliboi & Co., to do the work of interrogation and recording evidence, statements and/or depositions of various persons. The petitioners have contended that respondent No. 5 and the said Sri Swadesh Gupta all throughout and entirely behind the back of the wholetime directors and/or other directors and/or principal executive officers of the petitioner company carried on such investigation, interrogation, etc., and they did not even communicate the substance of such information, statements, depositions, etc., recorded by them. It is also alleged that respondent No. 5 similarly inspected the records of other companies and gathered statements and depositions of several numerous persons and/or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 1, 1981. The petitioner company also by its letter dated December 18, 1981, addressed to respondent No. 1 requested him to furnish the petitioner company with the copy of the report made by the said inspector in accordance with the mandatory provisions of the Companies Act. Thereafter, petitioner No. 2 was furnished with an investigation report. It is the case of the petitioners that the copy of the investigation report furnished to petitioner No. 2 does not contain statements of evidence gathered and collected by respondent No. 5 and in spite of repeated requests and demands made by petitioner No. 1 to furnish the statements of evidence forming the report, such statements have not been furnished to the petitioners. The Director (Inspection and Investigation) of the Department of Law, Justice and Company Affairs of the Government of India, by his letter dated February 9, 1982, addressed to petitioner No. 2, Sri Souren Biswas, since deceased, refused to furnish the petitioner with the sets of evidence recorded by the inspector and informed the said petitioner No. 2 that he was at liberty to offer his comments, if any, on the findings of the inspector, without prejudice to the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriation, misfeasance of the company's funds and separate complaints have been filed by the Registrar of Companies at the instance of the Company Law Board before the Chief Metropolitan Magistrate, Calcutta, against the petitioners. In the aforesaid circumstances, the instant writ petition was moved by the petitioners. Mr. Banerjee, the learned counsel appearing for the petitioners, has submitted that the opinion formed by the Central Government as contained in the Notification dated August 10, 1977 (annexure "C"), for appointing an inspector to investigate into the affairs of the company was made contrary to the overwhelming basic material and relevant facts and circumstances readily available to respondents Nos. 1, 2 and 3 and their officers. Mr. Banerjee has contended that in view of the all round progress of the company, it was not possible to form any opinion about the maladministration of the company and in the context of statistics of gradually progressive performance being made by the petitioner-company, the alleged opinion that the company had not been running efficiently and/or there had been maladministration and/or diversion of funds of the company must have been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Reg (John M'Evoy) v. Dublin Corporation [1878] 2 LR Ir 371. Such definition of judicial decision in its wider sense has been cited with approval by Atkinson L. J. in the case of Frome United Breweries Co. Ltd. v. Keepers of the Peace and Justices for County Borough of Bath [1926] AC 586 (HL) and also by the Supreme Court in the judgment made in the case of Province of Bombay v. Khushaldas S. Advani, AIR 1950 SC 222. Mr. Banerjee has contended that the respondents flagrantly violated the norms of a quasi-judicial or a judicial decision in not disclosing the fact of reaching the fateful decision in launching the complaint against petitioner No. 1 and/or its directors and not granting any one of them any reasonable or adequate opportunity to show cause against the propriety/validity of the alleged decision and/or launching of four complaints. Mr. Banerjee has also contended that the report of the inspector cannot be treated as a valid report because the inspector has not conducted the said enquiry himself and he deputed some other persons to do the inspection on his behalf and on the basis of such alleged investigation made by other persons over a long stretch of years, the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spector made available to the petitioners was nothing but a pretext. Mr. Banerjee submits that the actions of the respondents are glaring examples of public authorities playing fast and loose with the powers vested in them but such actions are highly reprehensible and have been condemned in various decisions of the Supreme Court and different High Courts. Mr. Banerjee has referred to a number of decisions of the Supreme Court and other High Courts where the courts have condemned the public authorities failing to maintain proper standards of justice and fair play, but it is not necessary to refer to the said cases in detail because it is well-settled law that public authorities cannot act arbitrarily and capriciously and in violation of the principles of natural justice and they are bound to act fairly, bona fide and reasonably. Mr. Banerjee has also submitted that the complaint lodged by the Registrar of Companies in the Court of the Chief Metropolitan Magistrate, Calcutta, is not the complaint made by the Registrar of Companies on an independent consideration of the facts of the case but such complaint has, been made at the instance of the Company Law Board. Hence, the said compla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sired that the enquiry should be held, the petitioners should not be permitted to contend that the enquiry was illegal and should not be allowed to be held. Mr. Mukherjee has also contended that the petitioners have failed to produce any contemporaneous document showing that any protest about the investigation being carried out by the inspector was made on the allegation that such investigation was carried on behind the back of the petitioners. On the other hand, it has been specifically stated in the writ petition that the petitioners had rendered co-operation to the work of the inspector. Mr. Mukherjee has submitted that it is not physically possible for the inspector to scrutinise each and every document and for conducting investigation into the affairs of the company over a long stretch of years, it is necessary to take the assistance of other persons. Simply because the inspector had appointed some assistants to assist him in the enquiry, it cannot be held that the work performed by the assistants have rendered the enquiry proceeding void because they were not inspectors appointed by the Company Law Board. Mr. Mukherjee has submitted that such argument is void of any substance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of such decisions of the Central Government. The Registrar thereafter made the complaints before the Chief Metropolitan Magistrate, Calcutta. Accordingly, no illegality has been committed. Mr. Mukherjee has also contended that the petitioners will be free to raise the question of maintainability of the criminal proceedings before the learned Chief Metropolitan Magistrate and, in the facts and circumstances of the case, the writ court should not interfere at this stage. In reply to the aforesaid contentions made on behalf of the respondents, Mr. Banerjee has contended that the earlier writ proceeding was not pressed by the petitioners and was allowed to be dismissed for default. As the controversy raised in the writ petition has not been decided by this court, the said writ proceeding will not operate as res judicata. Mr. Banerjee has contended that the petitioners have explained as to why the earlier writ petition has not been pressed. Accordingly, no exception can be taken for presenting the instant writ petition challenging the initiation of the enquiry proceeding illegally and mala fide. He has also contended that the instant writ petition is more comprehensive and in the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lodge a complaint, but such complaint should be lodged by him on independent scrutiny by himself and not at the dictates of any other authority. In the instant case, the Central Government has directed the Registrar to lodge a complaint. Hence, it cannot be held that a proper complaint was made by the Registrar. In the aforesaid facts, Mr. Banerjee has submitted that the facts and circumstances of the case clearly demonstrate that flagrant violation of all principles of natural justice have been made by the authorities of the Company Law Board and the actions have been taken by the respondents illegally and mala fide. Hence, the writ petition should be allowed and the reliefs prayed for in the writ petition should be granted. After considering the respective submissions of the learned counsel appearing for the parties, it appears to me that the Company Law Board had taken the decision to investigate into the affairs of the petitioner company by appointing an inspector in 1977. It also appears that the petitioner company felt aggrieved by such a decision of the Company Law Board and a writ petition was moved challenging the said decision of the Company Law Board. The rule nisi is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and interference by the writ court is not always a must. If a party stands by and allows certain actions to be taken by other persons pursuant to a decision made against the party, such party should not be permitted to challenge the decision and the consequential actions taken on such decision at a latter stage thereby nullifying and frustrating all the actions taken in the meantime with full knowledge and consent of the other party. In that view of the matter, it is not necessary to go into the question agitated by the petitioners that the Company Law Board had acted improperly in deciding to appoint an inspector for the purpose of probing into the affairs of the company. The petitioners have seriously contended that the Company Law Board have not afforded reasonable opportunity to the petitioners to make their submissions against the report of the inspector in view of the fact that despite repeated requests, copies of evidence collected by the inspector and his assistants have not been forwarded to the petitioners. The petitioners have contended that the report of the inspector having been based on the materials including the materials collected by him, copies of such evidence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of the inspector has also been given to the petitioners by forwarding the report which is self-explanatory and self-contained. I am also unable to accept the contention of the petitioners that the report made by the inspector cannot be accepted because the inspector has not, for all intents and purposes conducted the enquiry himself, but he has relied on the reports and the materials collected by a number of persons engaged by him. In my view, section 237(b) of the Companies Act does not debar an inspector from taking the help of other persons in causing inspection. It can be reasonably accepted that for the purpose of probing into the affairs of a big company, it may not be possible for any single individual appointed as inspector to conduct all details of enquiry (by himself) including the inspection of various documents and registers and interrogation of different persons. There is no manner of doubt that for an effective enquiry, the inspector is bound to take the assistance of a number of persons. It will be sufficient if the inspector himself considers the materials collected by the assistants engaged by him for the said purpose and thereafter prepares his report. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d withheld the formal approval of appointment as managing director and as wholetime directors of some of the petitioners without any just cause. He has submitted that in the board of directors of the petitioner company, there are representatives from various public financial institutions and such board of directors had approved the appointment of the said persons as managing director and wholetime directors. In my view, simply because in the board of directors there are representatives from the public institutions which are agencies of the Central Government, it cannot be contended that the Company Law Board is bound to accord approval of the decision of the board for appointment of managing director or wholetime directors. The Company Law Board has a statutory duty to consider about the reasonableness and/or suitability of the personnel to be appointed as managing director and wholetime directors of the concerned company and it is only proper and desirable that the Company Law Board should give its anxious consideration about the suitability of such personnel in the matter of appointment to the board of directors. In the instant case, it appears that the Company Law Board had rece ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
