9911796707
TMI Blog1971 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company in 1967 was over Rs. 19 lakhs. The company was incorporated with the object of carrying on business of tea and coffee plantations, and owns a number of tea and coffee estates in District Nilgiris. Its shares are quoted on the Madras Stock Exchange. According to the petitioner, he was the managing director 6f the said company between 1966 and 1969. Since June, 1969, the petitioner claims to have severed his connections with the company and to have sold his entire holdings in it. 0a November 10, 1968, Shri G. Srinivasan, Assistant Inspecting Officer, Company Law Board, visited the office of the company and carried out an inspection of the books of accounts and other records of the company by virtue of authority conferred by section 209 of the Companies Act, 1956. Shri Srinivasan made a report of the outcome of the inspection to the Company Law Board. The Company Law Board considered the report. On January 25, 1969, Shri S.S. Singh, respondent No. 3, addressed the following letter to the Director, Special Police Establishment, CBI, New Delhi, respondent No. 4 : "M/s. Ouchterlony Valley Estates (1938) is a public limited company situated at New Hope, New Hope (P.O.), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease be registered for investigation and the offenders brought to-book." Respondent No. 4 then took cognizance and had a case registered on the basis of the above letter. Copy of the first information report was forwarded by the police to the Magistrate having jurisdiction. On November 6, 1969, the petitioner filed the present writ petition for the issuance of a writ to quash : "( a )the report of the Assistant Inspecting Officer of the Company Law Board; ( b )the reports and proceedings of the Company Law Board subsequent to the report of the Assistant Inspecting Officer aforesaid; ( c )the decision of the Company Law Board to prosecute the manager meat of the company; and ( d )the reference of the matter by the Board to the Central Bureau of Investigation and the communication of the Under-Secretary of the Company Law Board dated January 25, 1969, and the proceedings now being taken by the Central Bureau of Investigation in pursuance thereof." The petitioner has also prayed for a direction restraining the respondents from in any manner taking steps in relation to the said allegations in pursuance of the report or in relation to the conduct and affairs of the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment of India. According to that letter, the Madras Government agreed to the members of the Delhi Special Police Establishment exercising powers and jurisdiction within the Madras State with regard to the offences mentioned in the notification dated November 6, 1956. Affidavit has also been filed by Shri A. T. Sathianathan, Deputy Secretary to the Government: of Tamil Nadu. It is stated by Shri Sathianathan in that affidavit "that proper sanction was accorded by the State of Tamil Nadu in letter No. 188-Home, dated January 23, 1957, for the functioning of the Delhi Special Police Establishment exercising powers and jurisdiction within the State of Tamil Nadu with regard to offences mentioned in the notification of the Government of India". According further to the affidavit, the file was dealt with at proper level in accordance with the Tamil Nadu Government Business Rules and Secreatriat Instructions then in force. Shri Sathianathan has added that the final orders for according sanction for the functioning of the Delhi Special Police Establishment in the State of Tamil Nadu were approved by the then Chief Minister, Shri Kamaraj. The material brought on record, in our opinion, cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Registrar or such officer may during the course of inspection ( i )make or cause to be made copies of the books of account and other books and papers, ( ii )place or cause to be placed any marks of identification thereon in token of the inspection haying been made. ( d )In order to enable the Registrar or such officer to make an inspection of the books of account and other books and papers of the company it shall be the duty of the company ( i )to produce to the Registrar or such officer such books of account and other books and papers of the company as the Registrar or such officer may require, ( ii )otherwise to give to the Registrar or such officer all assistance in connection with the inspection which the company is reasonably able to give." Sections 23.5 to 251 pertain to investigation of the affairs of a company. Section 235 provides for investigation of affairs of a company on application by members or report by Registrar. Section 237 deals with investigation of the affairs of a company in other cases and reads as under: "237. Without prejudice to its powers under section 235, the Central Government ( a )shall appoint one or more competent persons as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to the company, been guilty of an offence. Sub-section (1) of that section- reads as under: "242. (1) If, from any report made under section 241, it appears to the Central Government that any person has, in relation to the company or in relation to any other body corporate, managing agent, secretaries ad treasurers, or associate of a managing agent or secretaries and treasurers, whose affairs have been investigated by victual of section 23 been guilty, of any offence for which he is criminally liable, the Central Government may, after taking such legal advice as it thinks fit, prosecute such person for the offence; and it shall be the duty of all officers and other employees and agents of the company, body corporate, managing agent, secretaries and treasurers, or associate, as the case may be, (other than the accused in the proceedings), to give the Central Government all assistance in connection with the prosecution which they are reasonably able to give." Section 243 makes provision for an application: for winding up of a company or for an order under sections 397 or 398, if it appears to the Central Government from the inspectors report that it is expedient to do so. Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government in the name of the company for recovery of damages or property, vide section 244 of the Act. It is also manifest that investigation is ordered into the affairs of a company when there is some aspect of those affairs regarding which the Government is not in possession of full facts and the circumstances exist as are referred to in section 235 or 237 of the Act. In such an event, the Government orders probe into these aspects to apprise itself of the correct facts. It is only after that probe, when further facts come to the notice of the Government, that the Government has to decide about the next step, i.e ., whether it should drop the matter Or proceed in any of the ways mentioned in sections 242 to 244 of the Act. There is, however, nothing in section 237 which makes it imperative for the Government to order investigation into the affairs of the company when the Government does not consider the necessity of further probe and is already in possession of facts which, in its opinion, show the commission of an offence by an officer of the company or other person in respect of the assets of the company. There is, in such an event, no legal bar to the officer of the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Code of Criminal Procedure", thus indicating that those provisions would have an overriding effect. There is, however, nothing in section 242 or the other provisions of the Companies Act to point to the conclusion that no prosecution can be launched or no report can be made to the police in respect of an alleged act of embezzlement or malfeasance by an individual connected with the company without recourse to an investigation under sections 235 or 237 of the Act. In the case of M. Vaidyanathan v. Sub-divisional Magistrate, Erode [1957] 27 Comp. Cas. 97 ; AIR 1957 Mad. 65 , the question arose whether the provisions of section 630 of the Companies Act constituted a bar to the exercise of the jurisdiction vested in a police officer under sections 154 and 157 of the Code of Criminal Procedure. The question was answered in the negative by Rajagopalan J. The above decision was affirmed on appeal by a Division Bench of the Madras High Court (Rajamannar C. J. and Panchapakesa Ayyar J.) in In re M. Vaidyanathan [1957] 27 Comp. Cas. 142 ; AIR 1957 Mad. 432 (DB). It has been argued on behalf of the petitioner that a company or the individual concerned may have a complete answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner because we are not dealing here with two available procedures one more drastic or prejudicial to the party concerned than the other to be applied at the arbitrary will of the authority. An investigation under sections 235 and 237 of the Companies Act as mentioned earlier is not the same as inspection of account book under section 209(4). No inference of contravention of article 14 can be drawn from the procedural difference between the aforesaid investigation and inspection of records. The fact that information derived as a result of the above-mentioned investigation or inspection can give rise prosecution would not attract article 14 of the Constitution. The said article does not postulate that information, which may be the basis for making report to the police, must be derived in one particular way and no other way. Reference has also been made on behalf of the petitioner to the case of Nazir Ahmad v. King Emperor AIR 1936 PC 253 wherein, while dealing with a confession recorded by a Magistrate, their Lordships held that where a power is given to do a certain thing in a certain way the thing must be done in that way or not at all. The above dictum could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to read such a restriction in the statue when none exists. Reference has been made by Mr. Tarkunde, to. the report, of a committee which preceded the enactment of the Companies Act. The petitioner in our opinion cannot derive much assistance from the report of that committee in the matter of the construction of the .provisions of the Companies Act. Even in .respect of the statement of objects ; and reasons for introducing a particular piece of legislation the court can refer to the statement only for the purpose of ascertaining the circumstances which led to the legislation in order to find out what was the mischief which the legislature aimed at. The statement of objects and reasons for introducing a particular piece of legislation cannot be used for interpreting the legislation if the words used therein are clear enough. (See in this connection S . C. Prashar v. Vasantsen Dwarkadas [1963] 49 ITR (SC) 1 ; [1964] 1 SCR 29 ; AIR 1963 SC 1356). A report of a committee can obviously not stand on a higher footing than the statement of objects and reasons. As a result of the above, the petition fails and is dismissed, but in the circumstances without costs. - - TaxTMI - TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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