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TMI Blog1970 (2) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... s suspected of having property or books or papers of the company or who are suspected to be indebted to the company or who are capable of giving information concerning the promotion, formation, trade, dealings, property, books or papers, or affairs of the company. Section 477 provides for private examination of such person. Section 478 provides that, when the official liquidator makes a report to the court stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the court may, after considering the report, direct that that person or officer shall be publicly examined. While section 477 appears to be for the purpose of getting information about the indebtedness, property, books and papers of the company and other matters stated therein, section 478 contemplates ultimately a claim for damages for fraud. An order under section 478 cannot be made without a report of the official liquidator that in his opinion a fraud has been committed. The controversy as to the nature of the examination ordered appears to have arisen out of the mistake committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 477 of the Companies Act, and that the said application was granted and that the examination that was sought was under that provision and not under section 473. The official liquidator submitted that the docket would show that the provisions of section 477 were invoked and that it was never his intention to invoke the provisions of section 478. He also argues that the procedure required to be followed was under section 477 and not under section 478. He submits that the word "publicly" was inadvertently used and that the examination should proceed only under section 477 and not under section 478 of the Companies Act. It would appear to me that the official liquidator intended to obtain an order for private examination under the provisions of section 477 of the Companies Act. He follows the procedure prescribed for an order to that effect. The word "publicly" has been used in the chamber summons inadvertently and the description on the docket of the chamber summons as well as the averment in the statement dated 13th June, 1969, clearly indicate that what was sought was private examination. The mistake on the part of the official liquidator in the chamber summons has corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents under that provision. This will in fact aid the administration of justice and also the proceedings initiated under section 543 of the Companies Act. It is submitted that such a examination is only (underlining Here printed in italics supplied) with a view to find out as to whether the various charges of misfeasance and/or breach of trust could be supported or not. There is no question of any fishing enquiry as alleged under the provisions of section 477 or under section 478 since the examination contemplated under those provisions is a matter of investigation into the affairs of the company and acts of its officers. 3.The summons is neither oppressive nor vexatious but has been issued in the interest of justice as well as in the interest of the company with a view to have further information to facilitate the progress of the misfeasance summons filed against the respondents". The applicants, for revocation, made an attempt at pointing out to me certain averments in the statement of the official liquidator, dated 13th June, 1969, in support of the chamber summons for an order of private examination. Mr. Masodkar on behalf of the official liquidator objected to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial liquidator contains the following passages : 1.The official liquidator is, therefore, desirous of having the said directors and other officers examined under section 477 of the Companies Act with a view to eliciting further information from the said directors and other officers so that he could prosecute misfeasance summons filed by the official liquidator against the said directors and other officers in this hon'ble court ; a list of points on which the auditors have found the directors and other officers guilty of misfeasance is given below. 2.The official liquidator has therefore taken out a summons for examination of the directors and other officers of the company. The official liquidator submits that it is absolutely essential that the said directors and other officers are examined by this hon'ble court so that further information may be elicited from them with a view to prosecuting the misfeasance summons filed against them efficiently". On the basis of the averments made in the reply of the official liquidator and the statement filed by the official liquidator in support -of the chamber summons for an order under section 477 of the Companies Act, I have no hesitat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 862 (25 and 26 Vict., c. 89), the English Companies Act, 1929 (19 and 20 Geo. V, c. 3) and the English Companies Act, 1948 (11 and 12 Geo. VI, c. 88) on the question relating to examination of officers of the company or other persons are substantially the same as section 477 of the Indian Companies Act, 1956, and the principles laid down by the superior courts in England, which have been assimilated in the practice of company winding up by the courts in India are useful in determining the nature of the proceeding. The said judgment proceeds to decide as follows [1962] 32 Comp. Cas. 97 , 105 (SC) : "The jurisdiction to vacate or modify an ex parte order under rule 243 being granted, the question which falls to be determined is whether the order passed by Mr. Justice Mitter was oppressive or vexatious or otherwise liable to be vacated or modified for adequate grounds. In our view, there is no ground for holding that the order is liable to be vacated or modified. It was never even suggested in the High Court that the order for examination was per se oppressive or vexatious. This is not a case in which the order is sought to facilitate the progress of an action filed by the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the progress of the misfeasance summons taken out against him". In my opinion, therefore, the order which is made ex parte is not final ; it is always open to a person summoned to apply for vacating or modifying the order on the ground that it has been obtained without placing all the requisite materials before the court or by mis-statement of facts or on other adequate grounds, and the court has jurisdiction in proper cases, i.e. , where it is satisfied that the order is vexatious, or oppressive, or where other adequate grounds exist, to discharge the same. This jurisdiction may be exercised where the order for examination is per se oppressive or vexatious, or where the order is sought to facilitate the progress of an action filed by the official liquidator against the applicants, or the order is sought in aid of some collateral purpose a purpose other than effective progress of the winding-up in the interest of the company. Such action may be by way of a misfeasance summons. If the order has been obtained solely for the purpose of facilitating the progress of the misfeasance summons taken out against a director that will be an adequate ground on which the order ought t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d if he comes to the conclusion that there is no case under section 543 of the Companies Act, he may drop the proceedings. He further contended that, unless the proceedings for private examination are oppressive or vexatious or lead to harassment, there can be no revocation. The Supreme Court judgment in Satish Churn Law v. H.K. Ganguly [1962] 32 Comp. Cas. 97; [1962] Supp. 1 SCR 943; AIR 1962 SC 806 provides that an order under section 477 may be revoked where it has been obtained without placing all the requisite materials before the court or by mis-statement of facts, or where it is oppressive or vexatious or on other adequate grounds. Such adequate grounds may be that the order has been obtained to facilitate the progress of an action filed by the official liquidator against the director, or that it has been obtained in aid of some collateral purpose a purpose other than effective progress of the company. It would appear from the judgment of the Supreme Court that if the order is sought or obtained to facilitate the progress of an action filed by the official liquidator against the directors or officers, it is an adequate ground for revocation. In my opinion, such an orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be content with the answers he obtained. It is true that in this case there was an independent suit against a director. Similarly, in the case of In re North Australian Territory Co. [1890] 45 Ch D 87 [CA] the liquidator filed with the leave of the court an action against another company for setting aside an agreement of purchase and obtained an order for affidavit of documents but the court declined to make an order for production of documents, or the examination of the company's secretary on interrogatories, on the ground that no defence having been filed, the discovery was premature in that stage of the action. The liquidator thereafter obtained an order for examination of the secretary before an examiner under section 115 of the Companies Act, 1862. In that examination, the secretary refused to answer a question relating to the matters in issue in the action. It was held that, as the liquidator had shown no reason for seeking the discovery except to assist him in the action, and so to evade the order of the court postponing discovery in the action and, for that reason, the witness was justified in refusing to answer the question. In this case also it would appear that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the scope of the words "in any suit or other legal proceedings" in section 141, Civil Procedure Code. It was consequently held that the procedure provided in the Code, in so far as it could be made applicable, should be applied to such proceedings and since there was nothing in section 235, Companies Act, which rendered the provisions of Order 23, rule 3, Civil Procedure Code, inapplicable to misfeasance proceedings, a compromise which was a fair and proper one should be given effect to by the court. Mr. Bobde, on behalf of the respondents Nos. 10, 11 and 13, contended that if, instead of being items in misfeasance summons, the same items had been contained in a plaint in an independent suit, it should not make any difference because after all section 543 was a summary remedy and a suit in respect thereof was not barred. If an order for private examination in furtherance of such suit could be said to be for collateral purpose and not for the purpose of winding-up, would not such order be for collateral purpose if the same charges were made in the misfeasance summons ? The collateral or ulterior purpose in obtaining an order for private examination may be achieved for a suit or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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