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TMI Blog1965 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... reserve of over Rs. 40,00,000. After having made provisions for taxation and reserves, the petitioner-company is said to have declared substantial dividends to its shareholders during the years 1958-59 to 1962-63. The directorate of the petitioner-company, it is said, includes businessmen of reputation and lawyers of respectability. The above facts are pleaded in order to emphasise upon the contention that the petitioner-company should have been regarded as beyond reproach. The measure put by the petitioner-company upon itself is not, however, an agreed measurement and is disputed in the affidavit-in-opposition. On 11th April, 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 Ashoka Marketing Company Limited, a company having its registered office at No. 18-A, Brabourne Road, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtended by the Central Government. A separate order will be issued with regard to the remuneration and other incidental expenses of the inspector." The aforesaid order, in so far as it is one under clause (b ) of section 237 of the Companies Act, is characterised by the petitioner-company to be bad, illegal, without jurisdiction and mala fide in law on the same grounds as were urged against similar orders made against New Central Jute Mills Co. Ltd. [1966] 36 Comp. Cas. 512 dealt with by me in my judgment (Matter No. 272 of 1964). In so far as the order is one under section 249(1)(a) of the Companies Act, the petitioner-company denies that it is an associate of Sahu Jain Ltd., and asserts that there is no reason even to suspect such association. However, without prejudice to its contentions that the impugned investigation could not and should not have been ordered, it is said the petitioner-company decided to comply with the requisitions made by S. P. Chopra, the inspector. The petitioner-company alleges to have supplied to S. P. Chopra such statements and information as he wanted and ultimately on 17th May, 1963, the managing director of the petitioner wrote to him in the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust, 1963, respectively, the Central Government hereby extends the time for the completion of the investigation and for submission of the reports by the inspector appointed to investigate into the affairs of Ashoka Marketing Limited, a company having its registered office at No. 18-A, Brabourne Road, Calcutta, and also its associateship with Sahu Jain Limited under sections 237(b) and 249(1)(a) of the Companies Act, 1956 (1 of 1956), respectively, up to the 31st January, 1964." The petitioner condemns this order as illegal and contends that a lapsed investigation under section 249(1)(a) cannot be revived by a mere order of extension. The second extension of time to complete the investigation was also uselessly consumed, except to the extent hereinafter indicated, and on 29th January, 1964, the Central Government granted further extension of time in the following language: "In continuation of the Central Government orders of even number dated the nth April, 1963, 9th August, 1963, and 31st October, 1963, respectively, the Central Government hereby extends the time for the completion of the investigation and for submission of the reports by the inspector appointed to investigate i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 237(b)( i) and (ii) from the investigation under section 249(1)(a) and extended the period of investigation by an order, dated 12th June, 1964, reading as hereinbelow set out: "Whereas vide Central Government's order of even number dated the nth April, 1963, an investigation was ordered into the affairs of Ashoka Marketing Limited, Calcutta, and Shri S. Prakash Chopra of M/s S.P. Chopra & Co., Chartered Accountants, 31-F, Connaught Place, New Delhi, appointed as inspector for the purpose ; And whereas the date for completion for the said investigation and for submission of the report by the said inspector was last extended up to the 30th June, 1964, by order of even number dated the 29th January, 1964; And whereas it is felt that for the efficient conduct of the investigation, it is necessary to appoint an additional inspector: Now, therefore, in exercise of the 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 appoint Shri I. M. Puri, an Accounts Officer in the Company Law Board, as co-inspector, with co-extensive powers which may be exercised by him severally or join ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the theory that the petitioner-company had refused production of books of account. The representations made by the petitioner-company to the Central Government against the attitude taken by I.M. Puri and S. B. Gupta elicited no reply. On the other hand, the Company Law Administration Department of the Central Government sent the following telegram, on 28th June, 1964, to the petitioner company : "Inspectors report your refusal to produce books and papers stop violation section 240 stop request production forthwith stop failing shall be obliged to proceed against you for persistent default in carrying out your obligations and functions under the law in such manner as advised stop confirm compliance stop shall consider your representation when reed, stop please bring contents this telegram all senior officers employees, agents, of your company." Since the period of submission of report was about to expire, the Central Government made the following order, on 30th June, 1964, in respect of the investigation under section 237(b): "Whereas vide Central Government's orders of even number dated the 11th April, 1963, and 12th June, 1964, respectively, Sarvashri S. Prakash Chopra and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Sahu Jain Limited, as denned in clauses (c) and (d) of sub-section (3) of section 2 of the Companies Act, 1956 (1 of 1956); And whereas the date for completion of the said investigation and for submission of the report by the said inspectors was last fixed as 30th June, 1964 ; And whereas it has been represented to the Central Government that due to the refusal of the company and its officers to produce all books and other papers or to appear before the inspectors for the purpose of examination and other non-co-operative and dilatory tactics, it would not be possible for them 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 it has also become necessary to relieve Shri I.M. Puri from this assignment on account of increase in his investigation work in other companies due to Shri Chopra's relinquishment of the office of inspector ; And whereas after consideration of the aforesaid circumstances and also the magnitude of the work involved, the Central Government are of the opinion that certain modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 237(b). But when the exercise of the power is challenged as actuated by malice in law, before a court of law, justification for the exercise of the power must not be blanketed from the court." If the affidavit-in-opposition had been wholly uninformative, I do not think I could overrule the contention of Mr. Deb that the order for investigation under section 237(b) was made without legal excuse. But the affidavit-in-opposition is not as bad as that in so far as the investigation under section 237(b) is concerned. It appears from paragraph 5 of the affidavit-in-opposition as quoted below : "I say that the working results profits and/or amounts distributable amongst the shareholders as dividend would have been much higher had the circumstances as mentioned in the order dated nth April, 1963 did not exist." It appears from paragraph 6 of the petition that the petitioner-company was purporting to keep large sums in reserve and as a result thereof reduced the dividend from Rs. 37'50 nP. per share in 1958-59 to Rs. 28 per share in 1959-60 and thereafter to Rs. 10 per share during the years 1960-61 to 1962-63 Unreasonable declaration of dividends was upheld as prima facie grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent of Rohtas Industries Ltd. and New Central Jute Mills Co. Ltd., both managed by their managing agents, Sahu Jain Ltd., and on that basis, it was said, there arose the question whether the petitioner-company was an associate of the managing agency company, within the meaning of section 2(3)(c), and ( d) of the Companies Act. In paragraph 18 of the petition, the petitioner-company categorically stated that it was not an associate of Sahu Jain Ltd. and that there did not exist any ground even to suspect that the petitioner was an associate. Paragraph 18 of the petition has been colourlessly dealt with in paragraph 14 of the affidavit-in-opposition, in the following language : "I dispute the allegation contained therein that the petitioner is not an associate of Sahu Jain Ltd. In this respect I submit that the Central Government did have materials before it on the basis of which it formed an opinion that there was necessity to investigate the question of the petitioner being an associate of Sahu Jain Ltd. It is submitted in this regard that it was not necessary for the Central Government to set out any particulars of the good reason which led the Central Government to order the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viz., M/s. Sahu Jain Ltd., as defined in clauses (c) and ( d) of sub-section (3) of section 2 of the Companies Act, 1956 (1 of 1956)." The same plea was pleaded in the order dated 30th June, 1963, when the resignation of S.P. Chopra was accepted and the investigation under section 249(1)(a) was entrusted to Puri-Menon-Gupta-combination of co-inspectors. Now, admittedly, Sahu Jain Ltd. is not the managing agent of the petitioner-company. As a matter of fact the petitioner-company is not at all a company managed by a managing agent. How the different plea crept into the order is difficult to visualise. This may be due to mistake, oversight, inadvertence and the like, while summarising the original plea as in the order dated nth April, 1963, but may also be due to confusion while making the order. I have already indicated that the plea recited in the order dated nth April, 1963, is irrelevant without more. I am not sure whether the orders, dated 15th June and 30th June, 1963, intended to say what was lacking in the original order, although what was said was also incorrect and unmeaning. Since an order under section 249(1)(a) can be made only if it appears to the Central Government t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court observed (at page 445): "It is significant that the only occasion when the State Government can, under the U.P. Act, specify a fresh period of time is when it remits the award for reconsideration under sub-section (2) of section 6, for under sub section (3) the adjudicator is enjoined to submit his award, after reconsideration, within such period as may be specified by the State Government. Even in this case under section 6(2) and (3) the State Government may in the order remitting the award specify a time within which the award, after reconsideration, must be filed. This gives the power to the State Government to fix a fresh period of time to do a fresh Act, namely, to reconsider and file the reconsidered award. It does not give the State Government any power to enlarge the time fixed originally for the initial making of the award............. Learned advocate for the intervenes the State of Uttar Pradesh, draws our attention to section 21 of the U. P. General Clauses Act, 1904, and contends that the order of 26th April, 1950, should be taken as an amendment or modification, within the meaning of that section, of the first order of February 18, 1950. It is true th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e upon the parties, the line concerning extension of time for submission of report under section 249(1)(a) dropped out through the typist's inadvertence and nobody detected the omission. In support of this submission he produced the original order and had his submission supported by an affidavit affirmed by the respondent-Deputy Secretary. I find no reason to disbelieve the affidavit, although I am constrained to observe that the department of Company Law Administration will never deserve an efficiency certificate, if the department conducts and continued to conduct its affairs in such a slipshod manner, Mr. Chaudhuri submitted, in the next place, that the petitioner-company acquiesced in the jurisdiction for investigation under section 249(1)(a) in spite of the defect, if any at all, and it was not open to the company to find fault with the order so long thereafter. He relied on the observations of the Supreme Court in Pannalal Binjraj v. Union of India [1957] 31 ITR 565 ; [1957] SCR 233 in support of this contention. I am not much impressed by this argument. If the petitioner-company submitted to the investigation under protest, as it says it did, there may not arise any question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for by Mr. Deb, because it does not always follow that the Legislature intends something different only because the language used in different sections is not exactly the same : vide observations of Lord Goddard in Lines v. Hersotn [1951] 2 KB 682. Mr. Deb lastly contended that the investigations under section 237(b ) and 249(1)(a) could not be combined under one order and, if at all, two separate orders of investigation should have been made. He submitted that this was all the more so because powers exercisable under the two investigations were not the same, for example, an investigation under section 249(1)(a) did not attract power of seizure of documents under section 240-A. He invited my attention to sections 249(2) and 247(5) in support of this argument. He further submitted that a combined order would create difficulties in apportioning costs of two different investigations lumped together. I am not convinced by the argument. Power to order investigation being there, it mattered little whether investigations under sections 237(b) and 249(1)(a) were made under one order or by different orders and this is so even though all the powers exercisable under the different investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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