1964 (3) TMI 136 - SC - Indian Laws

Summary

Issues Involved:
1. Constitutionality of Section 45G of the Banking Companies Act, 1949.
2. Interpretation and true scope of Section 45G of the Banking Companies Act, 1949.
3. Compliance with the procedural requirements under Section 45G(2) of the Banking Companies Act, 1949.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 45G of the Banking Companies Act, 1949:

The primary argument raised was that Section 45G contravenes Article 20(3) of the Constitution, which guarantees that "no person accused of any offence shall be compelled to be a witness against himself." The court examined whether a person subjected to public examination under Section 45G could be considered "accused of any offence" at the time of the order. The court concluded that the objective of the public examination is to gather evidence and determine if any acts or omissions caused loss to the banking company. It was emphasized that the person is not "accused of any offence" at the time of the order for public examination. Therefore, Article 20(3) does not apply, and Section 45G is not unconstitutional.

2. Interpretation and True Scope of Section 45G of the Banking Companies Act, 1949:

Section 45G(1) mandates the official liquidator to submit a report on whether any loss has been caused to the banking company by any act or omission of any person involved in its promotion, formation, or management. Section 45G(2) allows the High Court to order a public examination if it deems necessary based on the report. The court clarified that the acts or omissions need not be fraudulent and may include commercially unsound or unwise decisions. The court rejected the argument that the acts or omissions must be prohibited by law, stating that the section's context suggests a broader interpretation to include any acts or omissions causing loss to the company.

3. Compliance with Procedural Requirements under Section 45G(2) of the Banking Companies Act, 1949:

The appellants argued that the High Court did not comply with the proviso to Section 45G(2), which requires giving the person an opportunity to show cause why they should not be publicly examined. The court held that the High Court's role at this stage is to determine, prima facie, whether a case for public examination exists. This involves considering the liquidator's report and the person's explanation but does not necessitate a full-fledged inquiry. The court found that the High Court had appropriately considered the reports and explanations, fulfilling the proviso's requirements.

Conclusion:

The Supreme Court upheld the constitutionality of Section 45G, interpreting it to include acts or omissions causing loss to the banking company, whether or not fraudulent. The court affirmed that the High Court had complied with procedural requirements, and the appeals were dismissed with costs.