1965 (10) TMI 33 - HC - Companies Law

Summary

Issues Involved:
1. Verification of Petition under Section 398 of the Companies Act.
2. Sufficiency and nature of affidavits supporting the petition.
3. Jurisdiction and procedural requirements of the Companies Tribunal.
4. Admission and dismissal of petitions based on affidavits.
5. The right to lead further evidence in support of the petition.

Detailed Analysis:

1. Verification of Petition under Section 398 of the Companies Act:
The core issue is whether a petition under Section 398 containing allegations of fraud, misconduct, and misappropriation must be verified by an affidavit sworn on personal knowledge. The appellant contended that the verification must be on personal knowledge, and the absence of such verification renders the petition liable to be dismissed in limine. The court held that the verification of a petition could be based on information and belief, provided the sources of information and grounds of belief are stated with sufficient particularity. The court emphasized that the affidavit verifying the petition is not evidence in itself but a procedural requirement to ensure that allegations are not made recklessly.

2. Sufficiency and Nature of Affidavits Supporting the Petition:
The appellant argued that affidavits supporting the petition must be filed at the time of its presentation and must be based on personal knowledge. The court noted that the Companies (Court) Rules and the Tribunal's regulations allow affidavits to be based on information and belief. The court referenced various provisions, including Order 19, Rule 3 of the Civil Procedure Code, which allows affidavits to include statements based on information and belief in interlocutory applications. The court concluded that the affidavits filed by the Union of India complied with the legal requirements and were sufficient to admit the petition.

3. Jurisdiction and Procedural Requirements of the Companies Tribunal:
The court examined the procedural framework under the Companies Act and the powers conferred on the Tribunal. It highlighted that the Tribunal's procedure should be consistent with the Civil Procedure Code. The court referred to Section 10C of the Companies Act, which confers on the Tribunal powers similar to those of a civil court, including examining witnesses on oath and receiving evidence taken on affidavits. The court concluded that the Tribunal has the jurisdiction to admit the petition based on the affidavits filed and to decide whether further evidence should be led.

4. Admission and Dismissal of Petitions Based on Affidavits:
The appellant contended that the petition should be dismissed in limine due to the lack of affidavits on personal knowledge. The court rejected this argument, stating that the affidavit verifying the petition fulfilled the requirements of Rule 21 of the Companies (Court) Rules. The court emphasized that the statutory affidavit is sufficient to call for an answer from the respondent and that the petition should not be dismissed solely on the basis of the verification affidavit being based on information and belief.

5. The Right to Lead Further Evidence in Support of the Petition:
The appellant argued that the Union of India should not be allowed to lead further evidence since the initial affidavits were not based on personal knowledge. The court held that the procedural rules and regulations allow the Tribunal to decide whether further evidence should be led. The court noted that the Union of India had indicated its intention to lead evidence at the hearing, and the Tribunal has the discretion to enforce the attendance of witnesses and examine them on oath. The court concluded that the petition is not liable to be dismissed on merits at this stage and that the Union of India retains the right to lead further evidence.

Conclusion:
The High Court dismissed the appeal, upholding the Tribunal's decision to admit the petition. The court found that the verification of the petition and the affidavits filed by the Union of India complied with the legal requirements. The court emphasized that the Tribunal has the jurisdiction and discretion to decide whether further evidence should be led and that the petition should not be dismissed in limine based on the nature of the affidavits. The appeal was dismissed with costs in favor of the respondent, and the interim stay orders were vacated.