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TMI Blog1969 (9) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... take steps to dispose of the application within one month from the date on which the order reaches the Company Law Board. - 488 AND 489 OF 1969 - - - Dated:- 2-9-1969 - J.C. SHAH, V. RAMASWAMI AND A.N. GROVER, JJ. A.C. Mitra, S. Ray, B.K. Chakravarti, H.K. Puri and B.N. Kirpal for the Appellant. Jagdish Swaarup, V.C. Mahajan and S.P. Nayar for the Respondent. JUDGMENT Shah, J. The Rampur Distillery Company Ltd. hereinafter called "the Rampur Company" is a manufacturer of industrial alcohol. In 1943 the Rampur Company appointed Govan Brothers as its managing agent for 20 years. In July, 1946, a group of persons who may be referred to as the "Dalmia group" assumed control over Govan Brothers. V. H. Dalmia, who became managing director of Govan Brothers, besides being a director of a number of other companies, held important positions in several trade associations. On 19th March, 1953, information was lodged by the Registrar of Joint Stock Companies, Delhi, that V. H. Dalmia and others had committed offences of criminal breach of trust. By virtue of section 330 of the Companies Act, 1956, the managing agency of the Rampur Company was to expire o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10th June, 1967, for an order quashing the decision of the Board and for an order extending the term of the managing agency till 31st March, 1970. A single judge of the High Court granted the petition holding that the managing agent was a private limited company and the reasons for failure to extend the managing agency agreement of Govan Brothers being "entirely personal to V. H. Dalmia" were "completely irrelevant in so far as the affairs of the managing agent company or of the petitioner company (Rampur Company) were concerned". In appeal against that order a Division Bench of the High Court observed that where a managing agent is a corporate body, the acts and conduct of the directors of that body become the object of scrutiny in determining whether such a corporate body may be considered to be a fit and proper person for appointment or re-appointment as managing agent, and that the enquiry must cover all relevant activities and actions of the directors of the corporate body. The High Court accordingly set aside the order and remitted the case for a fresh decision. The learned judge who heard the petition after remand proceeded to dismiss the writ petition. In appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not against the public interest to allow the company to have a managing agent, that the managing agent proposed is, in its opinion, a fit and proper person to be appointed or re-appointed as such, and that the conditions of the managing agency agreement proposed are fair and reasonable. The section uses the present tense. The satisfaction must be with reference to the three conditions existing in praesenti, but in adjudging whether a person is fit and proper to be appointed past acts and conduct cannot be ignored. In considering whether a person is fit to be appointed a managing agent the Board is not restricted to a consideration of his acts, conduct and activities proximate to the date of the application. The Board has to consider the acts and activities, past and present, the interest of the shareholders and the general interests of the public in allowing the management to be continued by the directors of the company and other circumstances which have a bearing on the question. The Board apparently restricted itself to the findings recorded by the Commission headed by Mr. Justice Vivian Bose relating to the dealings of V.H. Dalmia with the companies of which he w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilection and without prejudice. The satisfaction contemplated by section 326 must, therefore, be the result of an objective appraisal of the relevant materials. The reason is clear. By section 326 several restrictions upon the power of the companies and individuals to carry on business are imposed in the interest of the shareholders, the creditors, and in the larger interest of the public. The order made by the Central Government under section 326 may result in serious detriment of the company and the proposed managing agent, but in the larger public interest, if it is valid, they have to suffer it. Exercise of the power conferred upon the Central Government is restrictive of valuable rights of the company and of the proposed managing agent, and severely restricts the liberty of contract. The scheme of the section implies investigation and a decision on the matters set out therein. Section 326 lays down conditions by sub-section (1)( a ) in which the Central Government may override the resolution of the general body of shareholders in certain specified conditions. Upon the Central Government is imposed a duty not to accord approval to the appointment or re-appointment of a propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing for the Board invited our attention to the judgment in Barium Chemicals Ltd. v. Company Law Board [1966] SCR Supp. 311 ; [1966] 36 Comp. Cas. 639 , 688, 689. But in that case Hidayatullah and Shelat JJ. held that the action of the Board under section 237(b) was administrative. Shelat J., with whom Hidayatullah J. agreed, observed at page 362 : "There is no doubt that the formation of opinion by the Central Government is a purely subjective process. There can also be no doubt that since the legislature has provided for the opinion of the Government and not of the court such an opinion is not subject to a challenge on the ground of propriety, reasonableness or sufficiency. But the authority is required to arrive at such an opinion from circumstances suggesting what is set out in sub-clauses ( i ), ( ii ) or ( iii ). If these circumstances were not to exist, can the Government still say that in its opinion they exist or can the Government say the same thing where the circumstances relevant to the clause do not exist ? ............But the expression ' circumstances suggesting ' cannot support the construction that even the existence of circumstances is a matter of subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n", but certiorari to correct the order did not lie, and there was no other means for obtaining redress. That was a case under the Defence Regulations, and the Judicial Committee was of the view, in our judgment erroneously, that the duty to act judicially arises only from an express provision to that effect. It was pointed out, and we think rightly, by Lord Reid in Ridge v. Baldwin [1963] 2 WLR 935 ; [1963] 2 All. ER 66 ; [1964] AC 40 , that when an enactment requires an official to have reasonable grounds for the decision, the law was not so effective that the aggrieved person cannot bring up the decision for review, however seriously he may be affected, and however obvious it may be that the official acted in breach of his statutory obligation. Again in Padfield v. Minister of Agriculture, Fisheries and Food [1968] AC 997 ; [1968] 1 All. ER 694 (HL) , the Minister declined to refer a complaint to the committee of investigation established under the Agricultural Marketing Act, 1968, that the price differential worked unfairly against the south-east region of England where milk was more valuable and the cost of transport was less and the price of land was high. The Minis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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