1947 (3) TMI 23 - HC - Companies Law

Summary

Issues:
- Right of a director to inspection of company's books of account through an agent.
- Interpretation of Section 130 of the Indian Companies Act.
- Applicability of articles of association in restricting the right of inspection.
- Consideration of mala fide intentions in seeking inspection through an agent.

Analysis:
The judgment pertains to a suit filed by a director of a company seeking a declaration that he is entitled to inspect the company's books of account through a skilled agent. The plaintiff appointed an accountant as his agent for inspection, but the company denied access, stating that only a director could inspect personally. The main issue was whether a director could appoint an agent for inspection as per Section 130(2) of the Indian Companies Act. The court referred to the law on partnership rights of inspection and held that a director can appoint an agent for inspection, subject to no reasonable objection to the agent and an assurance of confidentiality. The court emphasized that the right to inspection through an agent is statutory and not subject to the company's articles of association.

The judgment discussed the relevance of the company's articles of association, specifically clause 6, which mentioned that inspection required permission from the directors. The court clarified that a director's statutory right to inspection cannot be restricted by the company's articles. Even if the articles aimed to prevent inspection through an agent, it would be ultra vires as it would impede the statutory right. The court rejected the argument that the application for inspection through an agent was mala fide, highlighting the absence of any evidence supporting improper motives. Consequently, the court granted the declaration for inspection of the books of account through an agent, emphasizing the absence of reasonable objections to the chosen agent.

In conclusion, the judgment upheld the director's right to inspection through an agent, citing statutory provisions and legal precedents. It clarified that the statutory right prevails over any restrictions in the company's articles of association. The court dismissed claims of mala fide intentions in seeking inspection through an agent, emphasizing the absence of evidence supporting such allegations. The defendants were ordered to pay the plaintiff's costs, with the court rejecting the application to quantify costs due to the defendants' unjustified conduct.