1971 (8) TMI 124 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the court under Section 237(a)(ii) of the Companies Act, 1956.
2. Prematurity of the petition.
3. Interpretation of Section 237 in relation to Sections 235 and 237(b).

Detailed Analysis:

1. Jurisdiction of the court under Section 237(a)(ii) of the Companies Act, 1956:
The petitioner, a shareholder of Alembic Glass Industries Ltd., sought the court's intervention under Section 237(a)(ii) of the Companies Act, 1956, to direct the Central Government to appoint an inspector to investigate the affairs of the company. The respondent contended that the court lacked jurisdiction to entertain such a petition. The court clarified that under Section 237, it has no power to appoint an inspector directly; this power is vested in the Central Government. The court can, however, direct the Central Government to appoint an inspector if it deems fit. The court emphasized that Section 237(a) allows it to order the Central Government to appoint an inspector without the petitioner first having to approach the Central Government under Section 237(b). This interpretation ensures that the court's jurisdiction is not unduly limited or fettered.

2. Prematurity of the petition:
The respondent argued that the petition was premature since the petitioner had already approached the Central Government, which had not yet decided on the matter. The court held that its jurisdiction under Section 237(a)(ii) is not contingent upon the Central Government's refusal to act under Section 237(b). The court can entertain a petition under Section 237(a)(ii) regardless of whether the Central Government has been approached or has taken any action. The court noted that while it may choose to wait for the Central Government's decision in some cases, it is not obligated to do so.

3. Interpretation of Section 237 in relation to Sections 235 and 237(b):
The respondent contended that Section 237 should be read in conjunction with Sections 235 and 237(b), suggesting that a petition under Section 237(a)(ii) should only be entertained after the Central Government has declined to act under Section 237(b). The court rejected this interpretation, stating that Section 237(a) is independent and does not require prior action or refusal by the Central Government. The court emphasized that the legislature has provided multiple avenues for appointing an inspector: through a special resolution by the company, a court order, or the Central Government's suo motu action. The court's power under Section 237(a)(ii) is broad and not restricted by the provisions of Sections 235 or 237(b).

The court also addressed the practice in England, where an application under the corresponding section of the English Companies Act is typically made after the board of trade refuses to appoint an inspector. The court noted that this practice does not imply a legal requirement and that the Indian Companies Act does not impose such a condition. The court concluded that it has the jurisdiction to entertain a petition under Section 237(a)(ii) without the petitioner first having to approach the Central Government.

Conclusion:
The court admitted the petition, directing that notice be issued to the company. The costs of the hearing were to be costs in the cause. The judgment clarified the court's jurisdiction under Section 237(a)(ii) and established that a petition under this section is maintainable without the petitioner having to approach the Central Government first.