1970 (2) TMI 78 - HC - Companies Law

Winding up Power to summon persons suspected of having property of company, etc and Power of court to assess damages against delinquent directors, etc.

Summary

Issues Involved:
1. Nature of Examination: Private vs. Public under Sections 477 and 478 of the Companies Act, 1956.
2. Grounds for Revocation of the Ex Parte Order.
3. Jurisdiction and Adequate Grounds for Revocation.
4. Collateral Purpose and Misfeasance Summons.

Detailed Analysis:

1. Nature of Examination: Private vs. Public under Sections 477 and 478 of the Companies Act, 1956
The judgment addresses the controversy between the directors and the official liquidator regarding whether the examination ordered was a private examination under Section 477 or a public examination under Section 478 of the Companies Act. Section 477 allows the court to summon individuals suspected of having property or information about the company for private examination. Section 478 permits public examination if the official liquidator reports a fraud. The court concluded that the official liquidator intended a private examination under Section 477, despite the inadvertent use of the word "publicly" in the chamber summons. The mistake led to confusion, but the court clarified that the examination ordered was indeed under Section 477.

2. Grounds for Revocation of the Ex Parte Order
The directors sought revocation of the ex parte order dated 27th August, 1969, alleging it was obtained mala fide and with an ulterior motive to gather information for prosecuting a misfeasance summons under Section 543 of the Companies Act. The court examined the official liquidator's reply and the statement supporting the chamber summons. The liquidator admitted the examination aimed to elicit information for prosecuting the misfeasance summons, revealing the order was obtained for a collateral purpose.

3. Jurisdiction and Adequate Grounds for Revocation
The court acknowledged its jurisdiction to revoke an ex parte order if obtained without full disclosure, by mis-statement of facts, or if it was oppressive or vexatious. The Supreme Court in Satish Churn Law v. H.K. Ganguly emphasized that orders under Section 477 should serve the company's interest and not be used for vexation or oppression. The court found that the order for private examination was sought solely to facilitate the misfeasance summons, making it liable for revocation.

4. Collateral Purpose and Misfeasance Summons
The court discussed the distinction between an independent action and a misfeasance summons. It concluded that using Section 477's inquisitorial power solely to gather materials for a misfeasance summons is oppressive and not for the purposes specified in Section 477. The court referred to English cases and Indian precedents, emphasizing that misfeasance proceedings are akin to a suit and should not be facilitated through private examination orders obtained for collateral purposes.

Conclusion:
The court revoked the ex parte order dated 27th August, 1969, for private examination under Section 477 of the Companies Act, 1956, finding it was obtained solely to facilitate the misfeasance summons against the directors, which constituted an adequate ground for revocation. The court emphasized the need to guard against the misuse of inquisitorial powers for collateral purposes. No order as to costs was made.