1982 (6) TMI 217 - HC - Companies Law

Summary

Issues:
- Inspection of company records requested by respondents
- Challenge to the right of respondents for inspection
- Entitlement of a director to inspect company records
- Order for inspection and filing of affidavit

Analysis:
In this case, the applicants, who are respondents in a company petition, sought inspection of the entire records of the company. The company petition was filed under sections 397 and 398 of the Companies Act by three petitioners, challenging the removal of the second petitioner as managing director. The petitioners hold l/6th of the issued shares, while respondents hold 2/3rds of the shares. The business of the company involves managing and dealing in immovable properties in Bombay.

The petitioners contested the right of respondents to inspect the records, alleging it was a tactic to delay the proceedings. However, the second respondent, a director of the company, was entitled to inspect the books of account and other records under section 209 of the Companies Act. Citing precedent in the case of N. V. Vakharia v. Supreme General Film Exchange Co. Ltd., the court held that a director could exercise this right directly or through an agent, with the agent undertaking not to disclose the information to anyone else.

As a result, the court ordered the petitioners to allow respondent No. 2, his chartered accountant, and advocate to inspect the company records for the past 8 years. The chartered accountant and advocate were required to give an undertaking not to disclose the information to anyone other than respondent No. 2. Additionally, the petitioners were directed to provide inspection of all documents referred to in their petition to respondents. The inspection was to commence immediately, and respondents were given 6 weeks to file their affidavit in reply, with no further adjournments granted.

The costs of the company petition were to be decided later, and respondents were instructed to provide a copy of their affidavit to the petitioners by a specified date, with the hearing scheduled for a specific day. This judgment clarified the rights of a director to inspect company records and set out the procedure for inspection and filing of affidavits in the ongoing company petition.