1980 (9) TMI 201 - HC - Companies Law

Summary

Issues Involved:
1. Claim of privilege under Section 124 of the Indian Evidence Act.
2. Scope and applicability of Section 124 and Section 123 of the Indian Evidence Act.
3. Public interest and confidentiality of the inspector's report under Section 239 of the Companies Act.
4. Relevance of precedents and judicial interpretations in determining the privilege claim.

Detailed Analysis:

1. Claim of Privilege under Section 124 of the Indian Evidence Act:
The petitioner-company requested the production of the inspector's report on Swadeshi Polytex, Ghaziabad, under Section 239 of the Companies Act. The Central Government, through Mr. V.K. Burman, claimed privilege over this document, supported by an affidavit from Shri S. Balaraman, Under-Secretary to the Company Law Board. The affidavit emphasized that the report contained communications made in official confidence and that public interest would suffer from its disclosure. The court noted that Section 124 of the Evidence Act protects public officers from being compelled to disclose such communications when public interest is at stake.

2. Scope and Applicability of Section 124 and Section 123 of the Indian Evidence Act:
Section 124 of the Evidence Act states, "No public officer shall be compelled to disclose communications made to him in official confidence, when he considers that the public interests would suffer by the disclosure." The court reiterated that it is the public officer's responsibility to determine if the disclosure would affect public interest, and if so, the court should not compel the production of the document. Additionally, Section 123 of the Evidence Act was discussed, which relates to documents concerning the affairs of the State. The court referred to the Supreme Court's ruling in State of Punjab v. Sodhi Sukhdev Singh, which mandates a preliminary inquiry to validate objections to the production of documents under Section 123.

3. Public Interest and Confidentiality of the Inspector's Report under Section 239 of the Companies Act:
The court analyzed the nature of the inspector's report under Section 239 of the Companies Act, noting that it represents the inspector's views and is not binding on the Government or the company. The report is confidential and not of evidentiary value unless the inspector is examined. The court emphasized that making such reports public could hinder the free and frank expression of inspectors and affect subsequent investigations. The court concluded that disclosing the report before its acceptance by the Government would not be conducive to public interest, as it could thwart further proceedings and investigations.

4. Relevance of Precedents and Judicial Interpretations in Determining the Privilege Claim:
The petitioner-company's counsel, Mr. Raja Ram Agarwal, argued against the claim of privilege, citing Supreme Court decisions in State of Punjab v. Sodhi Sukhdev Singh, Amur Chand Butail v. Union of India, and State of U.P. v. Raj Narain. However, the court distinguished these cases, noting that they primarily dealt with Section 123 of the Evidence Act, which concerns documents related to the affairs of the State. The court highlighted that the principles of public interest and confidentiality apply, as established in these precedents, but the specific context of Section 124 justified upholding the privilege claim.

Conclusion:
The court concluded that public interest would be affected by the disclosure of the inspector's report. Therefore, the claim for privilege under Section 124 of the Evidence Act was well-founded and upheld. Consequently, the court sustained the objection and refused the prayer for summoning and producing the inspector's report.