1964 (5) TMI 23 - Other - Companies Law

Summary

Issues Involved:
1. Whether an inspector can be appointed to investigate the affairs of a receiver and manager under section 165 of the Companies Act, 1948.
2. Whether mandamus is the proper procedure given the availability of an alternative remedy.
3. Whether the court should exercise its discretion to grant the remedy of mandamus in this case.

Detailed Analysis:

1. Appointment of an Inspector under Section 165:
The applicant company, St. Martins Preserving Co. Ltd., sought an order of mandamus directing the Board of Trade to appoint an inspector to investigate its affairs under section 165(a)(i) of the Companies Act, 1948. The applicant argued that the actions of the receiver and manager, appointed by the bank under a debenture, in disposing of the company's assets constituted the "affairs" of the company.

The Board of Trade refused the investigation, asserting that the actions of a receiver and manager are not the affairs of the company. They argued that the receiver's activities are separate from the company's affairs and are primarily for the benefit of the debenture holder.

The court held that the natural meaning of "its affairs" includes the company's business affairs, contracts, assets, and shareholdings. The appointment of a receiver and manager does not change the nature of these affairs. The receiver's actions, even if primarily benefiting the debenture holder, are still affairs of the company because they are carried out in the company's name and can significantly impact its shareholders.

The court referenced previous cases to support this interpretation, including Farrar v. Farrars Ltd. and Gosling v. Gaskell and Grocott, which established that the company retains an interest in its business and assets even under receivership. The court concluded that the actions of the receiver and manager are indeed affairs of the company within the meaning of section 165(a).

2. Mandamus as the Proper Procedure:
The Board of Trade argued that an alternative remedy was available to the company by applying in the Companies Court under R. S. C, Ord. 96, rule 7(c), for an order under section 165(a)(ii) of the Act. However, the court found that the remedies are not truly alternative. The court noted that the procedure under section 165(a)(ii) is not as convenient for the company as seeking mandamus.

3. Discretion of the Court:
The court considered whether there were any special factors that should deter it from granting the remedy of mandamus. The Board of Trade expressed concern that companies might frequently invoke this provision, leading to numerous investigations and potential unrecoverable expenses. However, the court found this argument unpersuasive, stating that it is not an objection that can override the clear language of the statute.

The court emphasized the mandatory nature of section 165(a) when the conditions specified are met: (a) the company has made a declaration by special resolution, and (b) the subject matter of the investigation can be described as "its affairs." The court found that both conditions were satisfied in this case.

Conclusion:
The court concluded that the actions of the receiver and manager are indeed affairs of the company within the meaning of section 165(a) of the Companies Act, 1948. The alternative remedy suggested by the Board of Trade was not deemed equally convenient. The court decided to exercise its discretion in favor of granting the remedy of mandamus, directing the Board of Trade to appoint an inspector to investigate the affairs of the applicant company.

Judgments:
- Phillimore, J.: Delivered a detailed judgment outlining the facts, legal arguments, and the court's reasoning for granting mandamus.
- Winn, J.: Agreed with Phillimore, J., and provided additional reasoning supporting the mandatory nature of section 165(a) and the broad interpretation of "affairs of the company."
- Lord Parker, CJ.: Agreed with both judgments and had nothing further to add.