2016 (12) TMI 1824 - AT - Companies Law

Oppression and MIsmanagement - misdeeds and dishonesty in the maintenance of minutes of the company - HELD THAT - On the directions of this Appellant Tribunal the Appellant Company also produced the originals of the relevant minutes of meeting. The 1 st Respondent also produced the Photostat copies of the minutes of meeting of the same period which were forwarded to the 1st Respondent for confirmation. The basic principle of justice delivery system involving offence resulting punishment is that if any-allegation is made by any person before a court of law or Tribunal such person is required to support the allegation by bringing on record some evidence to suggest that a prima facie case is made out and there are good reasons for seeking an order. Therefore, the sentence Supported by such evidence as may be necessary for the purpose of showing that applicants have good reasons for seeking an order for the conducting an investigation into the affairs of the company , as mentioned below clause (a) of Section 213 is applicable in all cases and the applicant(s), whoever prefers application under Section 213, whether they belong to category as mentioned in clause (a) or clause (b), such evidence is required to be relied upon not only to justify the allegations, but also to Show that there is a good reason for seeking an order, to enable the TribunaI to form its opinion - The other basic principle of justice delivery system that a court or a Tribunal while passing an order is not only required to give good reason based on record/evidence but also required to show that after being satisfied itself the Court/ Tribunal has passed such order. The sentence if it is satisfied that there are circumstances suggest mentioned in clause (b) of Section 213 is applicable to all cases, irrespective of the category to which the applicant(s) belong i.e. clause (a) or clause(b) of Section 213 of the Act - The Tribunal is not expected to refer all the evidence to form opinion about the malpractice or for fraud mentioned in sub-clause (i), (ii) and (iii). It is the-job of the Inspecting Authority (Inspector) to go through the evidence before coming to a conclusion and forming opinion that malpractice or fraud mentioned under sub clause (i) or (ii) or (iii) has been committed by one or other member or director(s) or person(s) or the company. In the present case, the Tribunal has relied on certain record/evidence, applied it mind, satisfied itself and given good grounds to Order investigation, there are no reason to interfere with the impugned order. For the reason aforesaid and in absence of any merit, appeal is dismissed.

Issues Involved:
1. Whether the Tribunal was correct in observing that sub-clause (i), clause (b) of Section 213 is wide enough to include contravention of any law.
2. Whether the Tribunal was bound to refer the ingredients mentioned in sub-clause (i) to (iii) of clause (b) of Section 213.
3. Whether the ingredients as referred in sub-clause (i) to (iii) of clause (b) of Section 213 only can be looked into on an application made to the Tribunal by 'any other person' or 'otherwise' even if the circumstances so suggest.
4. Whether the Tribunal can rely on the ingredients as mentioned in sub-clause (i) to (iii) of clause (b) of Section 213 in an application made by the members under clause (a) of Section 213.

Issue-wise Detailed Analysis:

1. Whether the Tribunal was correct in observing that sub-clause (i), clause (b) of Section 213 is wide enough to include contravention of any law:

The Tribunal observed that sub-clause (i), clause (b) of Section 213 is comprehensive enough to include contravention of any law. The Tribunal noted that there was prima facie evidence of malpractices, including tampering of records, which necessitated a deeper probe into the affairs of the company. The Tribunal concluded that the scope of sub-clause (i) is sufficiently broad to encompass various forms of legal violations.

2. Whether the Tribunal was bound to refer the ingredients mentioned in sub-clause (i) to (iii) of clause (b) of Section 213:

The Tribunal must be satisfied that the circumstances suggest the commission of offenses as specified in sub-clauses (i) to (iii) of clause (b) of Section 213. The Tribunal is required to pass an order after giving a reasonable opportunity of being heard to the parties concerned. The Tribunal's satisfaction must be based on materials or evidence on record that justify the need for an investigation. The Tribunal is not required to form an objective opinion but must satisfy itself on the basis of the evidence presented.

3. Whether the ingredients as referred in sub-clause (i) to (iii) of clause (b) of Section 213 only can be looked into on an application made to the Tribunal by 'any other person' or 'otherwise' even if the circumstances so suggest:

Section 213 allows the Tribunal to investigate the affairs of a company on an application made by a qualified number of members, any other person, or otherwise, if it is satisfied that there are circumstances suggesting that an offense has been committed. The Tribunal can entertain applications from various entities, including individual members, creditors, and depositors. The Tribunal can also initiate an investigation suo moto if it comes across any matter while dealing with a case. The Tribunal's satisfaction must be based on evidence that supports the allegations and shows good reasons for seeking an investigation.

4. Whether the Tribunal can rely on the ingredients as mentioned in sub-clause (i) to (iii) of clause (b) of Section 213 in an application made by the members under clause (a) of Section 213:

The Tribunal is required to form an opinion regarding the ingredients mentioned in sub-clauses (i) to (iii) of clause (b) of Section 213. The Tribunal must be satisfied that there are good grounds to order an investigation based on the materials or evidence presented. The Tribunal's satisfaction should be reflected in the order, but it is not required to refer to all the evidence in detail. The Inspecting Authority is responsible for going through the evidence and forming an opinion on whether malpractice or fraud has been committed.

Conclusion:

The Tribunal relied on certain records and evidence, applied its mind, and satisfied itself that there were good grounds to order an investigation. The Tribunal's decision was based on a prima facie satisfaction that the minutes book of the appellant company had not been maintained as per the provisions of the Companies Act, 1956. The Tribunal's order was upheld, and the appeal was dismissed.

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