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1960 (8) TMI 24 - SC - Companies Law


Issues Involved:
1. Jurisdiction of the inspector under the new Companies Act, 1956.
2. Violation of Article 20(3) of the Constitution.
3. Violation of Article 14 of the Constitution.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Inspector under the New Companies Act, 1956:
The primary issue was whether the inspector, appointed under the old Companies Act, 1913, had the authority to exercise powers under the new Companies Act, 1956. The appellant argued that the inspector, appointed under the old Act, could not exercise powers under the new Act. The Court examined the relevant sections of both the old and new Acts, particularly Sections 137 and 138 of the old Act and Sections 234 and 235 of the new Act.

The Court noted that Section 645 of the new Act preserved the appointments and actions taken under the old Act, stating they would continue to be in force as if made under the new Act. Section 646, which saved the operation of Section 138 of the old Act, was interpreted not as a proviso to Section 645 but as an additional saving provision. The Court concluded that the inspector appointed under Section 138(4) of the old Act was deemed to have been appointed under Section 235 of the new Act. Therefore, the inspector had the authority to issue the impugned notices under Section 240 of the new Act.

2. Violation of Article 20(3) of the Constitution:
The appellant contended that the investigation compelled him to be a witness against himself, violating Article 20(3) of the Constitution, which protects against self-incrimination. The Court analyzed whether the appellant was "accused of any offence" as required by Article 20(3). It was argued that the words "person accused of any offence" should be liberally interpreted, referencing the broad interpretation given to the Fifth Amendment of the U.S. Constitution.

However, the Court relied on previous decisions, including Maqbool Hussain v. State of Bombay and M.P. Sharma v. Satish Chandra, which established that the protection against self-incrimination applies only when a formal accusation relating to the commission of an offence has been made, leading to prosecution. The Court held that the investigation under Section 240 was a fact-finding process into the affairs of the company, not an accusation against any individual. Therefore, the appellant was not "accused of any offence" at the time of the notices, and Article 20(3) was not violated.

3. Violation of Article 14 of the Constitution:
The appellant argued that Sections 239 and 240 of the new Act violated Article 14 by denying him the protections available to witnesses under the Indian Evidence Act and the Criminal Procedure Code. The Court reiterated that Article 14 prohibits class legislation but allows reasonable classification. The classification must be based on an intelligible differentia and have a rational relation to the objective.

The Court noted that companies and their managers, due to the nature of their operations and the potential for widespread financial impact, could be classified separately from individual citizens. The provisions of the Companies Act aimed to safeguard the interests of creditors, contributories, and others involved with the company. Therefore, the classification was reasonable, and Sections 239 and 240 did not violate Article 14.

Conclusion:
The appeal was dismissed, and the Court upheld the validity of the impugned notices and the relevant sections of the Companies Act, 1956. The inspector had jurisdiction under the new Act, and there was no violation of Articles 20(3) and 14 of the Constitution.

 

 

 

 

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