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1971 (5) TMI 49 - HC - Companies LawAccounts - To be kept by company, Investigation of company s affairs in other cases, Power of inspectors to carry investigation into affairs of related companies, Production
Issues Involved
1. Jurisdiction of the Delhi Special Police Establishment to investigate offences in Tamil Nadu. 2. Validity of the report and subsequent actions by the Company Law Board. 3. Procedural requirements under the Companies Act for prosecuting company officers. 4. Alleged violation of Article 14 of the Constitution of India. Detailed Analysis Jurisdiction of the Delhi Special Police Establishment The petitioner contended that the Delhi Special Police Establishment (DSPE) lacked the authority to investigate offences in Tamil Nadu without the state government's consent. The court found this contention unfounded, citing the Delhi Special Police Establishment Act, 1946. Section 5 of the Act allows the Central Government to extend DSPE's jurisdiction to states, provided the state consents. Evidence showed that Tamil Nadu had given such consent via a letter dated January 23, 1957. The court upheld the presumption of regularity of official acts, referencing the case of Management of Advance Insurance Co, Ltd. v. Gurudasmal, and concluded that DSPE had the necessary jurisdiction. Validity of the Report and Subsequent Actions by the Company Law Board The petitioner sought to quash the report by the Assistant Inspecting Officer and subsequent actions by the Company Law Board, arguing that prosecution should follow an investigation under Section 237 of the Companies Act. The court clarified that Section 209(4) of the Companies Act allows for the inspection of books of account by government officers without prior notice. The court held that an inspection under Section 209(4) is distinct from an investigation under Sections 235 and 237. The latter requires a more comprehensive probe into the company's affairs, whereas the former pertains to routine inspections. The court found no legal bar preventing the Company Law Board from referring the matter to the Central Bureau of Investigation (CBI) based on the inspection report. Procedural Requirements Under the Companies Act The petitioner argued that prosecution should be initiated only after an investigation under Section 237 and the subsequent report under Section 241 of the Companies Act. The court disagreed, stating that the Companies Act does not mandate an investigation under Section 237 before prosecution. The court referenced the case of M. Vaidyanathan v. Sub-divisional Magistrate, Erode, which affirmed that Section 630 of the Companies Act does not bar police jurisdiction under Sections 154 and 157 of the Code of Criminal Procedure. The court concluded that the Company Law Board's actions were within legal bounds and did not require a prior investigation under Section 237. Alleged Violation of Article 14 of the Constitution The petitioner claimed that the lack of procedural safeguards, such as supplying a copy of the inspection report to the company, violated Article 14 of the Constitution. The court found this argument unconvincing, noting that Article 14 does not mandate a specific procedure for initiating prosecution. The court referenced the case of Northern India Caterers Private Ltd. v. State of Punjab, distinguishing it from the present case. The court emphasized that an inspection under Section 209(4) is not the same as an investigation under Sections 235 and 237, and thus, no procedural discrimination existed. The court also noted that no ground for violation of Article 14 was raised in the petition. Conclusion The court dismissed the petition, holding that: 1. The Delhi Special Police Establishment had the jurisdiction to investigate the offences in Tamil Nadu. 2. The Company Law Board acted within its legal rights in referring the matter to the CBI based on the inspection report. 3. There was no procedural requirement under the Companies Act mandating an investigation under Section 237 before prosecution. 4. There was no violation of Article 14 of the Constitution in the actions taken by the Company Law Board. The petition was dismissed without costs.
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