1961 (12) TMI 39 - SC - Companies Law

Winding up Power to summon persons suspected of having property of company, etc. and Inherent powers of Court

Summary

Issues Involved:
1. Whether an ex parte order directing the examination of a person under section 477 of the Indian Companies Act, 1956, is liable to be modified or vacated on the application of the person affected thereby.
2. Whether there is any ground for discharging or modifying the order dated January 18, 1960.
3. Whether the appellant is entitled before his examination to inspect the statement submitted by the official liquidator in support of the application for the order dated January 18, 1960, or to be furnished with a copy thereof.

Issue-wise Detailed Analysis:

1. Ex Parte Order under Section 477:
The court considered whether an ex parte order under section 477 of the Indian Companies Act, 1956, could be modified or vacated. Section 477 allows the court to summon any officer or person capable of providing information about the company's affairs. Rule 243 of the Companies (Court) Rules permits such applications to be made ex parte. The court emphasized that while the power conferred by section 477 is broad, it must not be used to cause vexation or oppression. The court held that an ex parte order is not final and can be vacated or modified if obtained by misrepresentation or without adequate material. Rule 9 of the Companies (Court) Rules preserves the court's inherent powers to pass orders necessary for justice or to prevent abuse of process.

2. Grounds for Discharging or Modifying the Order:
The court examined whether the order dated January 18, 1960, was oppressive, vexatious, or otherwise liable to be vacated or modified. The appellant argued that the order was obtained without notice and was oppressive. However, the court found no grounds to support this claim. The appellant was a director of the company and likely to possess relevant information. The court noted that the official liquidator had stated that relevant records would be available during the examination. The High Court had also found it "desirable and necessary" for the appellant to be examined. The court concluded that the order was not oppressive or vexatious and was issued in the interest of the company's winding up.

3. Right to Inspect the Statement Submitted by the Official Liquidator:
The appellant contended that he should be allowed to inspect the statement submitted by the official liquidator. The court addressed two grounds: natural justice and procedural rules. Rule 243 allows ex parte applications without notice to the affected parties, maintaining confidentiality. The court referred to In re Gold Company, where it was established that such proceedings are intended to be secret. Rules 247 and 248 further emphasize confidentiality, restricting participation and inspection of examination notes. The court held that the appellant had no right to inspect the statement or obtain a copy, as it was not part of the liquidation proceedings file under Rule 360. The court dismissed the appeal, affirming that the examination order was just and necessary for the winding up process.

Conclusion:
The Supreme Court upheld the ex parte order for examination under section 477, finding no grounds for modification or vacating the order. The court also ruled that the appellant was not entitled to inspect the statement submitted by the official liquidator. The appeal was dismissed with costs.