TMI Blog1986 (12) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ly allowing the application under sections 237, 247 and 250 of the Companies Act. Brief facts leading to the present petition may be stated as follows: The petitioner-company was promoted for setting up a mini cement plant in Chandrapur District of Maharashtra State and was incorporated in March, 1979. The plant has been set up and has gone into production from the end of June, 1986. The said company is financed by various financial institutions including nationalised banks, Industrial Development Bank of India (IDBI), Industrial Credit and Investment Corporation of India Ltd. (ICICI), Industrial Finance Corporation India (IFCI) and Investment Corporation of Maharashtra Ltd. (ICM). One Shri T.L. Arora, a non-resident Indian, was the director of the said company from June, 1981, to March, 1986, and is also a shareholder holding 20,000 equity shares in his own name and 20,000 equity shares held by him jointly with his wife. The said Shri Arora, it is alleged by the company, started creating difficulties in the management of the company with the sole object of taking over the control and management of the company. It is further alleged that he retired from the office of the dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that the said application is not maintainable. 26. With regard to the application under section 408, it may be mentioned that applicant No. 2 has not been able to prove most of the allegations and in particular the one relating to advances of Rs. l.64 crores said to have been given to companies connected with Shri G. R. Agarwal. The remaining transactions have been reasonably explained by the respondents. It is also significant that the financial institutions are actively associating themselves with conducting the affairs of the company and have suggested professionalisation of the board of directors, described in para. 11, supra, and appointment of concurrent auditors. These should adequately take care of proclivity, if any, towards mismanagement and we do not think if any further preventive action under section 408 of the Companies Act is warranted.....". It may not be out of place to mention here that before the above order was passed by respondent No. 1, the Company Law Board, the petitioner-company who was respondent therein had been duly served notice and they had filed their detailed statement and explanations before the Company Law Board. All the allegations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of its members, more specifically, certain villagers of Jeetpura in Haryana; and whereas the Company Law Board considered it necessary to appoint an inspector to investigate into the affairs of the company and report thereon...hereby appoints Shri V. Govindan, Joint Director (Inspection), Department of Company Affairs, Shastri Bhavan, New Delhi, as inspector to investigate into the affairs of the company and to report to the Company Law Board...". It is to be noted that even in the final conclusions in paragraph 27, the Board has held that no satisfactory answer was given in respect of benami shareholders, and that a probe, inter alia , into the related issue of purchase of shares by the said villagers seems necessary. The Board further directed that the affairs of the company should be investigate with a view to ascertain the correctness or otherwise of the various allegations made in the petitions including the aforesaid. Shri V. R. Manohar, learned counsel for the petitioner-company, attacked the impugned order as arbitrary, whimsical, irrational and perverse. He criticised the same as an order which is a result of total non-application of mind on the part of respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on an authority on its forming a certain opinion on the basis of certain facts, the courts are precluded from examining whether the relevant facts on the basis of which the opinion is said to have been formed in fact existed". This decision in 1953 has been overruled by the subsequent decision of the Supreme Court in the matter of Rohtas Industries Ltd. v. S. D. Agarwal [1969] 39 Comp Cas 781 ; AIR 1969 SC 707, in which the Supreme Court have observed that the 1953 decision cannot be considered as authority for this preposition. It was further held by the Supreme Court, approving the decision in Barium Chemicals' case [1966] 36 Comp Cas 639; AIR 1967 SC 295 that (at page 800 of 39 Comp Cas):" . ..the existence of circumstances suggesting that the company's business was being conducted as laid down in sub-clause ( i ) or the persons mentioned in sub-clause ( ii ) were guilty of fraud or misfeasance or other misconduct towards the company or towards any of its members is a condition precedent for the Government to form the required opinion and, if the existence of those conditions is challenged, the courts are entitled to examine whether those circumstances were existing when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd C to this petition. Scrutiny of the said documents shows that the affidavits are not by the shareholders themselves, but by some of the relatives of the recorded shareholders'. Some of the affidavits are not even sworn and are mere chits bearing thumb impressions or signatures of the villagers. Such documents, in our opinion, cannot form the basis of even the purported existence of any material before the Company Law Board. In the return filed on behalf of respondent No. 1, the Company Law Board, it has been sought to be contended that apart from the documents purporting to be the statements of the benami village shareholders, two applications of S/Shri Batra and Arora were also before the Board, which contained serious allegations regarding mismanagement of the affairs of the petitioner-company. Shri Darda, learned counsel for the respondents, has also taken the same stand during his arguments. We do not find that such a contention can be accepted at all, for the simple reason that the speaking order passed by the Board at annexure A clearly brushes aside the applications filed by Batra and Arora, and they have categorically concluded that most of the allegations in the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal to the making of an opinion, the existence of the circumstances, if questioned in court, has to be proved at least prima facie. It is not sufficient to say that circumstances exist but give no clue as to what they are, because the circumstances must be such as to lead to a conclusion of certain definiteness. When it is challenged that the opinion has been formed mala fide or upon extraneous or irrelevant matters, the respondent must disclose before the court, the circumstances which will indicate that his action was within the four corners of his own powers. We have already observed that none of the circumstances which could have led to the conclusion arrived at by respondent No. 1-Board were in existence. On the other hand, we have seen from the return and from the oral submissions of learned counsel for respondents that certain reasons have been added now to substantiate the opinion formed by respondent No. 1-Board. Such reasons, stated afterwards, cannot justify the order in retrospect, if they were not available to the authority at the time of exercising its powers in arriving at the opinion. In fact, other circumstances which were before the court were already consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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