2017 (3) TMI 750 - HC - Companies Law

Public examination of six persons prayed for - to disclose the assets of a company in liquidation and such other relevant information as would be helpful in the liquidation of the company. - Held that - The issue is no longer res integra. Decision n case of Satish Churn Law Vs. H.K.Ganguly 1961 (12) TMI 39 - SUPREME COURT OF INDIA olds that the court has to decide the application filed before it without the involvement of the person whose public examination is prayed for. No doubt, if a person is summoned for being publicly examined he/she would have to be made known the subject matter and the issues on which the person would be examined. The person would also be entitled for the complaint filed against the person. The position therefore would be that the decision whether or not to publicly examine a person is a decision to be taken by the court with the assistance of only the Official Liquidator or the person who has moved the application. Needless to state that the Official Liquidator or the applicant person would have to prima facie satisfy the court with reference to objective facts that case is made out to publicly examine the person named. The said person cannot participate in said decision making process. Only if the court summons the person would the person have a right to know the material in respect of which the person is being examined so that the person can respond. Proceedings by their very nature are not adversarial and are intended at gathering relevant facts which would facilitate the assets of a company to be recovered so that the dues of the creditors can be paid in accordance with law. Accordingly we modify the impugned order and direct the learned Single Judge to decide the applications filed before the Company Judge seeking public examination of persons guided by the law declared by the Supreme Court in Satish Churn s case (supra).

Summary

Issues:
1. Application for public examination of persons involved in a company in liquidation.
2. Discretion of the court in conducting public examinations.
3. Role of the Official Liquidator in public examinations.
4. Legal principles regarding public examination of individuals.
5. Modification of the impugned order by the High Court.

Analysis:

1. The appellant challenged the issuance of notice for public examination of certain individuals involved in a company in liquidation. The court emphasized the principle of natural justice, audi alteram partem, in such cases.

2. The Serious Fraud Investigating Office and the Income Tax department submitted reports regarding the company's assets, leading to the request for public examination of individuals. The court highlighted that public examinations are at the court's discretion and can be assisted by any person.

3. The appellant, as an ex-Director of the company in liquidation, has a stake in the company's assets for creditors' payment. The Official Liquidator agreed that public examinations are essential for disclosing company assets, as per Section 478 of the Companies Act, 1956.

4. Referring to a Supreme Court decision, the court clarified that the decision to publicly examine individuals rests with the court, Official Liquidator, or the applicant. The person under examination cannot participate in the decision-making process.

5. The High Court modified the impugned order, directing the Company Judge to decide on applications for public examinations based on the law established by the Supreme Court. The court did not address a request for public examinations before a Registrar or Joint Registrar, leaving it to the Company Judge's discretion.

This judgment underscores the importance of public examinations in liquidation cases, ensuring transparency and asset recovery for creditors' benefit.