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TMI Blog1964 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... section. 2. The appellant, Joseph Augusthi, was the Managing Director of the Palai Central Bank Limited from 26-1-1927, to 8-8-1960; K. George Thomas and George Joseph who are the appellants in the two other appeals Nos. 255 and 256 of 1963 respectively, were the Directors of the said Bank; the first of them was the Director from 14-1-1935 to 8-8-1960 and the latter from 26-1-1927 to 8-8-1960. 3. An application for the winding up of the said Bank was made before the Kerala High Court by the Revenue Bank under section 38(3)(b)(iii) of the Act. The said provision justifies the making of an application by the Reserve Bank in case in the opinion of the Reserve Bank, the continuance of the banking company in question is prejudicial to the interests of the depositors. On the 8th August, 1960, an order was passed on the said application appointing the Official Liquidator of the High Court the Provisional Liquidator of the Bank. The order of winding up then followed on the 5th December, 1960, and on the 8th December, 1960, an Official Liquidator was appointed under section 39 of the Act. After the Official Liquidator came on the scene, he made three reports to the High Court - r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -sections of this section need not be cited, because it would be enough for our purpose to notice, in substance, what their effect is. Sub-section (3) allows the Official Liquidator to take part in the examination and to employ such legal assistance as may be sanctioned by the High Court, if he is specially authorised by the High Court in that behalf. Sub-section (4) permits the creditor or contributory to take part in the examination either personally or by any person entitled to appear in the High Court. Sub-section (5) gives authority to the High Court to put questions to the person who is being examined; sub-section (6) empowers oath to be administered to the said person and compels him to answer questions as may be put to him by the High Court, or as the High Court may allow to be put to him. Under sub-section (7), such a person is entitled to appear by a lawyer and the lawyer so appointed shall be at liberty to put to him such questions as the High Court may deem fit just for the purpose of enabling him to explain or qualify any answer given by him; there is a proviso to this sub-section which authorises the High Court to make an order for costs in its discretion in case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct of the banking company of which he was a director or an auditor. Therefore, there is no difficulty in holding that a person examined publicly under s. 45G may, in some cases, be compelled to be a witness against himself. Thus, one element of Art. 20(3) is satisfied; but the question still remains whether the other essential element is satisfied or not. 9. Article 20(3) guarantees to every citizen the fundamental right not to be compelled to be a witness against himself, provided the person who is being compelled in that way, is accused of any offence. In other words, it is only when a person can be said to have been accused of any offence that the prohibition prescribed by Art. 20(3) comes into operation. If a person who is not accused of any offence, is compelled to give evidence, and evidence taken from him under compulsion ultimately leads to an accusation against him, that would not be a case which would attract the provisions of Art. 20(3). The main object of Art. 20(3) is to give protection to an accused person not to be compelled to incriminate himself and that is in consonance with the basic principle of criminal law accepted in our country that an accused person i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the application of Art. 20(3) is a condition precedent for the application of the principle prescribed by the said Article, and since this essential condition is lacking in all cases covered by section 45G, it is difficult to sustain the argument that the said section contravenes Art. 20(3). Therefore, we do not think Dr. Seyid Muhammad is right in contending that s. 45G is invalid on the ground that it contravenes Art. 20(3) of the Constitution. It appears that in the case of Mallala Suryanarayana v. The Vijaya Commercial Bank Ltd. [Civil Appeal No. 286 of 1959 decided on 26-10-1961], the same view has been expressed by this Court, though it may be added that this question does not appear to have been then elaborately argued. 11. In this connection, we may refer to a decision of this Court in Raja Narayanlal Bansilal v. Maneck Phiroz Mistry and Anr. [1961]1SCR417 , where a somewhat similar provision contained in s. 240 of the old Companies Act fell to be considered and it was held that it did not contravene Art. 20(3) of the Constitution. 12. That takes us to the question of the construction of s. 45G. Dr. Seyid Muhammad contends that s. 45G requires that the acts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the liquidator and decide whether it can reasonably entertain the opinion that any person who has taken part in the promotion or formation or conduct of the banking company should be publicly examined. In other words, it is a preliminary stage of the enquiry and the point which the Court has to consider is whether, prima facie, a case has been made out to hold a public examination of the person concerned. It cannot be the object of s. 45G(2) read with the proviso that the Court should allow the appellants to lead evidence rebutting the allegations made by the liquidator in his reports, for if such a course was adopted, it would itself develop into a full-fledged enquiry and the very object of a limited enquiry at the initial stage would be defeated. What the Court can and should do in such cases is to read the report submitted by the Official Liquidator, consider whether the opinion expressed in the report appears to be, prima facie, reasonable; hear the explanation of the person concerned; and find out prima facie whether the explanation tendered by the person is sufficient to reject the liquidator's request for such person's public examination and whether, on the who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his costs. He further observed : I confess I am unable, looking at the whole of the legislation on the subject, to entertain the least doubt that that was what the Legislature intended, and I am a little surprised, I confess, that there should have been any doubt that fraud must be found. In our opinion, this passage is hardly relevant for our purpose, because as we have already indicated, s. 45G(1) expressly provides that the act or omission complained of need not necessarily be fraudulent, and so, there can be no question, under s. 45G(1), of coming to a conclusion that fraud has been committed before directing public examination of a person. 16. The other decision on which Dr. Seyid Muhammad has relied is the judgment of the Bombay High Court in Sir Fazal Ibrahim Rahimtoola v. Appabhai G. Desai A.I.R. 1949 Bom. 339. In that case, dealing with the provisions contained in s. 196 of the old Companies Act, Chagla C.J. disapproved of the practice of ordering ex parte public examination of persons. In that connection, he quoted with approval the warning sounded by Sir Lawrence Jenkins in the Ahmedabad Advance Spinning and Weaving Company v. Lakshmishanker I.L.R. 30 Bom. 173, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were declared without earning profits. The appellant Joseph Augusthi contended before the High Court that the bank used to treat interests accrued on advances, though not received, as income, and so, income-tax and super-tax were paid on such income and dividends were also paid on the same basis. He suggested that the Reserve Bank had noticed these facts and had waived its objection. In other words, he relied on a practice which is obviously unsound in a commercial sense and pleaded that at this stage the Reserve Bank cannot challenge the correctness or propriety of the said practice. This practice has been described by the appellant as mercantile system of accounting. It would thus be seen that some of the facts alleged by the liquidator in his report are not disputed; the effect of those facts was a matter of argument between the parties before the High Court. In such a case, we do not see how the appellants can successfully challenge the correctness of the view taken by the High Court that a case had been made out for the public examination of the appellants. That is why we do not think there is any substance in the argument urged before us by Dr. Seyid Muhammad that on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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