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TMI Blog1965 (8) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, an agreed measurement and is disputed in the affidavit-in-opposition. On April 11, 1963, the Central Government made the following order against the petitioner-company : "Whereas the Central Government is of the opinion that there are circumstances suggesting that the business of Sahu Jain Limited, a company having its registered office at 11, Clive Row, Calcutta (hereinafter referred to as the said company), is being conducted with intent to defraud its creditors, members or other persons and the persons concerned in the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the said company or its members; And whereas the Central Government consider it desirable that an inspector should be appointed to investigate the affairs of the said company and to report thereon ; Now, therefore, in exercise of the several powers conferred by sub-clauses ( i ) and ( ii ) of clause ( b ) of section 237 of the Companies Act, 1956 (1 of 1956), the Central Government hereby appoints Shri S. Prakash Chopra of Messrs. S. P. Chopra Co., Chartered Accountants, 3IF Connaught Place, New Delhi, as inspector to investigate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lastly thereafter by two letters dated June 26, 1963, and July 16, 1963. Copies of these letters are all annexed to the petition. The petitioner-company further alleges that it gave to S.P. Chopra all co-operation, including preparation of statements and production of books as and when required. The measure of co-operation alleged to have been extended is not admitted in the affidavit-in-opposition and paragraph 12 of the affidavit contains vague and indefinite charges of obstruction and intimidation by the petitioner-company. Be that as it may, the investigation was not completed within the time fixed by the order dated April 11, 1963, and had to be extended up to October 31, 1963, by an order dated August 9, 1963, which I set out below : "In continuation of the Central Government order of even number dated the 11th April, 1963, the Central Government hereby extends the time for the completion of the investigation and for submission of the report by the inspector appointed to investigate into the affairs of Sahu Jain Ltd., a company having its registered office at 11, Clive Row, Calcutta, under section 237( b ) of the Companies Act, 1956 (Act 1 of 1956), up to the 31st Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide Central Government's order of even number dated 11th April, 1963, an investigation was ordered into the affairs of Sahu Jain Ltd., 11, Clive Row, Calcutta, under section 237 ( b ) of the Companies Act, 1956 (1 of 1956), and Shri S. Prakash Chopra of Messrs. S.P. Chopra Co., Chartered Accountants, 31F, Connaught Place, New Delhi, was appointed as inspector for the purpose; And whereas the date for completion of the said investigation and for submission of the report by the said inspector was first fixed as 30th June, 1964; And whereas it has been represented to the Central Government that due to refusal of the company and its officers to produce all books and other papers or to appear before the inspector for the purpose of examination and other non-co-operative and dilatory tactics it would not be possible to complete the investigation by the aforesaid date; And whereas Shri S. Prakash Chopra, inspector, has regretted his inability to continue any longer with this appointment due to his other professional engagements; And whereas after consideration of the aforesaid circumstances and also the magnitude of the work involved, the Central Government are of the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the same reasons as I did in that matter. I do not repeat the reasonings at this place for the sake of brevity. Mr. Deb, however, raised certain other points in this rule, which I need separately consider. In paragraphs 9 to 12 of the petition, it is alleged : ( a )that all loans and advances obtained by the petitioner-company from banks are fully secured to the satisfaction of the bankers ; ( b )that the unsecured loans are from directors, shareholders and family members of the directors of the petitioner-company who are fully conversant and satisfied with the conduct of the business of the petitioner- company ; ( c )that the petitioner-company has only eight members, namely, three directors, their family members and an officer of the petitioner-company who are all satisfied with the working of the company ; ( d )that the allegation of intention to defraud "other persons" is devoid of particulars; ( e )that there were no complaints ever made against the petitioner- company by anybody. On the above basis Mr. Deb contended that there were no circumstances suggesting necessity of an investigation under section 237( b ) of the Companies Act and that the order for inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, appears in paragraph 6 of the affidavit-in-opposition, in which it is stated : "I say that the Central Government on proper and sufficient grounds formed its opinion and bona fide made the order dated the 11th April, 1963. I submit that the opinion of the Central Government is not justiciable. I further submit that it is neither necessary or proper that the order of the 11th April, 1963, should on the face of it disclose the nature and contents of the materials on the basis of which the Central Government formed its opinion." The above statement has only an assertive value but is not revealing in any measure. I have held in Matter No. 272 of 1964 ( New Central Jute Mills Co. Ltd. v. Dy. Secy. [1966] 36 Comp. Cas. 512) ; "The Government may proceed under section 237( b ) only if there are 'circumstances suggesting' the existence of malpractices envisaged in sub-clauses ( i ), ( ii ) and ( iii ) of clause ( b ). In other words, the Central Government must proceed reasonably and must not be actuated by bad faith or dishonesty, must exclude from consideration matters which are irrelevant and must act according to law and not humour." I have further held in the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n degree than the speculative view, which goes by the name of subjective satisfaction. Reading the affidavit, I do not find any material from which I can infer that the Central Government proceeded even on prima facie materials. I cannot, therefore, ignore the criticism that there is nothing to indicate that the Central Government had any legal excuse in making the order and may have proceeded on mere subjective satisfaction. I need notice that the respondents do not claim privilege in respect of the materials on which they made the order of investigation under section 237( b ). They merely say that it is not necessary to disclose the materials in the order itself. That may be so, but when called upon to vindicate the making of the order before a court of law the respondents are not to hold back from the court the circumstances which suggested to them the necessity for making the order. The respondents failed to indicate those circumstances before this court, either in the affidavit-in-opposition or in course of argument. The mere assertion that they followed the law in making the order and did not act without any legal excuse is not enough to satisfy the judicial conscience of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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