# [1959] 1 S.C.R. 1263

- **Citation:** [1959] 1 S.C.R. 1263
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Criminal AppeafNo. 28 of 1956
- **Bench:** Jafer Imam, J. L. Kapur
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1959-1-s-c-r-1263-1530
- **Pages:** 13

## Headnote

•
Offecial Liquidator-Powers of-Prosecution of Director of
Company-If direction of Court necessary-Court giving direction,
if bottnd to hear Director-Indian Companies Act, r9r3 (VII of r9r3),
ss. r79 and 237(r).
The Official Liquidator got a complaint under ss. 120-B, 406,
467 and 477A, Indian Penal Code filed before the Presidency
Magistrate against the appellants one of whom was a past director and the other the Managing Director of the Bank of Commerce Ltd., which was in compulsory liquidation. The appellants applied to the Presidency Magistrate for dismissal of the
con'lplamt on the ground that the Official Liquidator was incompetent to prefer the complaint as there was no sanction of the
Company Judge. This was dismissed.
The appellants then
applied to the High Court for quashing the criminal proceedings
on the ground that the prosecution was ab initio void because of
the absence of a prior direction judicially given by the High
Covrt under s. 23'7(1) of the Indian Companies Act.
The High
• Court rejected the application.
Held, that a direction of the Court under s. 237(1) of the
Indian Companies Act was not a co14dition precedent to the prosecution of the appellants by the Official Liquidator. In fact, a
valid and proper direction had been given by the Court under
s. 237(1) to the Official Liquidator for the prose<>Ution of the
appellants. In giving a direction under this section the Court
could act ex parte and it was not necessary to give to the appellants any opportunity of being heard. Section 179 of the Companies Act deals with the powers of liquidators to institute or
defend legal proceedings with the sanction of the Court and
s. 239(1) deao!s with the powers of the Court to give directions
for prosecution of delinquent directors, etc. In the present case,
the Cour~ had made an order under s. 179 giving liberty to
the Official Liquidator to institute or defend legal proceedings, and the Official Liquidator was entitled to lodge the
complaint against the appellants even without a direction
under s. 237(1).
CRIMINAL
APPELLATE
JURISDICTION:
Criminal
AppeafNo. 28 of 1956.
Appeal by special leave from the. judgment aqd
order dated June 21, 1954, of the Calcutta High Court
in Criminal Revision No. 811of1953.
Septnnber zr .
•
•
•
•
1264
SUPREl\IE COURT REPORTS
[1959]
1958
Ranadeb Clwudlzury and P. K. Ch'-itteijee, for t.hc
--
appellants.
•
Dr. Sni!t:n/HI ,\'afi;
•
s'"'""' .. /,.,.,""
B. Sen and P. K. Bose, for the re8ponclent.i.
v
1958. Srptcmbcr 11.
The Judgnwnt of the Court
fa5nda !Jitlfll
A.JJ;rfl(ni 6-
\\'a,~ lkli\·Pred b)'
•
A·' 011"'
KAPt:m J.-This appeal by special leave raises a
!(up"' J.
•
q1w;tion of interpretation of s. 237 of the lnclian Companies Act.
Appellant No. 1 is one of the past directors of the Bank of Commerce Ltd., now in liquidation
and appellant ~o. 2 was its l\Ianaging Director.
The
Bank was ordered to be wound up by the High Court
of Calcutta on August 7, 1950, and one G. K. Dutt,
Bar-at-law was appointed it$ Official Liquidat-0r hut
on September 7, 1950, the Officit11 Receiver ,,.aR
appointed in place of Dutt. On .July 23, Hl52, respondent Xo. I filed in Court of the Presidency lllagistrate
a complaint agai1rnt the appellant under ss. 120B, 406,
467, 477A, Indian Penal Code and 182A of the Indian
Companie.-; Act and stat.Pd that. he was doing so under
the authority of the ofliciid liquidator and
th•~ officfal •
liquidator had obtained the directions of the High
Court tn file the romplaint. On :\Iiiy 5, 1953, the appellant applie<l to the l'residrncy :IIagistrate for dismiss~!
of the compbii11t as being without 1 he samtion of tho
Company .J'udgc anrl then·forc the official liquidator in
his official capacity was incomprtent to prefer the
complaint, being the creation of the st11tute h" could
only act within the four corners of the statute.
He
possessed only those powPrs which the •tat.11te confrrrct! 011 him.
This ripplicMio11 was diRmissed by the
l.'re.,idency :llagistrntc on June 13, 1953.
.

## Text

•
.,
•
S.C.R.
SUPREME COURT REPORTS
1263
Dr. SAILENDRA NATH SINHA AND ANOTHER
I958
v. .
•
JASODA DULAL ADHIKARI AND ANOTHER
(JAFER IMAM and J. L. KAPUR JJ.)
•
Offecial Liquidator-Powers of-Prosecution of Director of
Company-If direction of Court necessary-Court giving direction,
if bottnd to hear Director-Indian Companies Act, r9r3 (VII of r9r3),
ss. r79 and 237(r).
The Official Liquidator got a complaint under ss. 120-B, 406,
467 and 477A, Indian Penal Code filed before the Presidency
Magistrate against the appellants one of whom was a past director and the other the Managing Director of the Bank of Commerce Ltd., which was in compulsory liquidation. The appellants applied to the Presidency Magistrate for dismissal of the
con'lplamt on the ground that the Official Liquidator was incompetent to prefer the complaint as there was no sanction of the
Company Judge. This was dismissed.
The appellants then
applied to the High Court for quashing the criminal proceedings
on the ground that the prosecution was ab initio void because of
the absence of a prior direction judicially given by the High
Covrt under s. 23'7(1) of the Indian Companies Act.
The High
• Court rejected the application.
Held, that a direction of the Court under s. 237(1) of the
Indian Companies Act was not a co14dition precedent to the prosecution of the appellants by the Official Liquidator. In fact, a
valid and proper direction had been given by the Court under
s. 237(1) to the Official Liquidator for the prose<>Ution of the
appellants. In giving a direction under this section the Court
could act ex parte and it was not necessary to give to the appellants any opportunity of being heard. Section 179 of the Companies Act deals with the powers of liquidators to institute or
defend legal proceedings with the sanction of the Court and
s. 239(1) deao!s with the powers of the Court to give directions
for prosecution of delinquent directors, etc. In the present case,
the Cour~ had made an order under s. 179 giving liberty to
the Official Liquidator to institute or defend legal proceedings, and the Official Liquidator was entitled to lodge the
complaint against the appellants even without a direction
under s. 237(1).
CRIMINAL
APPELLATE
JURISDICTION:
Criminal
AppeafNo. 28 of 1956.
Appeal by special leave from the. judgment aqd
order dated June 21, 1954, of the Calcutta High Court
in Criminal Revision No. 811of1953.
Septnnber zr .
•
•
•
•
1264
SUPREl\IE COURT REPORTS
[1959]
1958
Ranadeb Clwudlzury and P. K. Ch'-itteijee, for t.hc
--
appellants.
•
Dr. Sni!t:n/HI ,\'afi;
•
s'"'""' .. /,.,.,""
B. Sen and P. K. Bose, for the re8ponclent.i.
v
1958. Srptcmbcr 11.
The Judgnwnt of the Court
fa5nda !Jitlfll
A.JJ;rfl(ni 6-
\\'a,~ lkli\·Pred b)'
•
A·' 011"'
KAPt:m J.-This appeal by special leave raises a
!(up"' J.
•
q1w;tion of interpretation of s. 237 of the lnclian Companies Act.
Appellant No. 1 is one of the past directors of the Bank of Commerce Ltd., now in liquidation
and appellant ~o. 2 was its l\Ianaging Director.
The
Bank was ordered to be wound up by the High Court
of Calcutta on August 7, 1950, and one G. K. Dutt,
Bar-at-law was appointed it$ Official Liquidat-0r hut
on September 7, 1950, the Officit11 Receiver ,,.aR
appointed in place of Dutt. On .July 23, Hl52, respondent Xo. I filed in Court of the Presidency lllagistrate
a complaint agai1rnt the appellant under ss. 120B, 406,
467, 477A, Indian Penal Code and 182A of the Indian
Companie.-; Act and stat.Pd that. he was doing so under
the authority of the ofliciid liquidator and
th•~ officfal •
liquidator had obtained the directions of the High
Court tn file the romplaint. On :\Iiiy 5, 1953, the appellant applie<l to the l'residrncy :IIagistrate for dismiss~!
of the compbii11t as being without 1 he samtion of tho
Company .J'udgc anrl then·forc the official liquidator in
his official capacity was incomprtent to prefer the
complaint, being the creation of the st11tute h" could
only act within the four corners of the statute.
He
possessed only those powPrs which the •tat.11te confrrrct! 011 him.
This ripplicMio11 was diRmissed by the
l.'re.,idency :llagistrntc on June 13, 1953.
.
The >tppellant. then applied to thp, High Court for
q11aohing the criminal proceedings 011 the ground that
the prosccut.ion waA ab initio void because of the
absence of prior direct.ion judicially given by t.he High
Cclllrt under s. 237(1) of the Indian Companies Act .
The High Court found against the 1tppellanh and
discharged the rule.
The lcamed Chief Just.ice held
that the provisions of s. 237(1) are no bar to a prosecution by.the liquidator; that under s. 23i(I) there is
• " nothing in the_ nature of a judicial procl!edings" ;
•
• •
•
~:
•
•
•
S.C.R.
SUPREME COURT REPORTS
1265
that it could •not be said that the order was not a
z958
valid direction under s. 237.(1).. He said:
D
5 .1 d
N
h
b
•
.
h
'" at en ra
at
" There can e no quest10n m t e present case Sinha & Anoth"
that the relevant facts were all placed before the
v.
Company Judge, because they are all set out in the
Jasoda Dula/
repor1; of Adhikary and the affidavits annexed tlrnreto
Adhihari &
to which the order expressly refers and with reference
Another
to which the liberty to bring legal proceedings was
expressly given. In view of those circumstances, it is
.impossible to say that the Company Court had not
before it all the facts on which the prosecution is
based or that it did not apply its mind to the considerations relevant to section 237(1) ".
He also held that clause (a) of s. 179 empowers the
liquidator to institute or defend legal proceedings in
the name ofthe company and that it was expressly
concerned with the powers of the liquidator \vhereas
s. 237 dealt with the powers of the Court to give
directions.
P. B. Mukherji J. gave a concurring
judgment. After referring to the history of s. 237,
• he held that under that section the Company Judge
can act ex parte and it was not necessary for him to
hear a director or an officer of the company comptained against and that direction given under that
section was not a condition precedent to a prosecution
by the official liqnidator nor is it the intention of that
section to impinge on the powers of a criminal court
under the Code of Criminal Procedure. Leave to appeal
having been refused by the Calcutta High Court, the
appellants have come to this Court in pursuance of
special leave .
On tb.e application of the official liquidator Bachawat J. an January 15, 1951, made an order which
must be taken to be one under s. 179. In this order it
was said:
"And it is further ordered that the said applicant
be at liberty to institnte or defend any suit or prosecution, or other legal proceedings, civil or .criminal in
the name and on behalf of the said Bank and to
continue all pending suits and execntfon proce.edin.gs
by or against the said Bank and for that pll.rpose to
engage advocate~, Vakils and other lawyers and to'
. .
•
Kapur].
•
•
•
1266
SUPRE)lE COURT REPORTS
[1959]
195&
pay out of the assets of the said Bank tn his hands all
-
costs of and incidental ID such suits, prosecutions
Dr. SailtJ/dra Nath
d I
I
I
d"
• "
Sfoha .s. A>ioth" an 1 or cga procee mgs .
v.
On ,Jul.v 22, 1952, the official liquidator obtained the
]•soda Dula/
order from Banncrji J. which the High Court has
Adhikari .s.
held, 'and in our opinion rightly, to be an order ·under
Another
s. 23i(l) of the Indian Companies Act.
This order
Kapur ].
•
said:
" It is ordered that the said applicant be at liberty
to take such civil or criminal proceedings as he may
think necessary over the report of the said J asoda
Dula! Adhikary read with the affidavits of H. Sen
Gupta and ~epa.l Chandra Adhikary read with the
affidavit.s of H. Sen Gupta and Xepal Chandra Mitra
as set out in the said Exhibit "A" ".
•
'.!'he passage already quoted from the judgment of the
learned Chief ,T ust-ice shows that all the relevant facts
were before the Company ,Judge, as they were all set
out in the affidavits placed before him. The complaint
was then filed on July 23, 1952. During the penclen,py
of the complaint the appellants took an appeal against •
the order of the Company Judge dated July 22, 1952,
but it was dismissed OQ the objection ta.ken by the
liquidat~ir that it was an administ.rative order and n'ot
a judicial order.
On Aug~st 5, 1953, the official liquidator took out
ruisfeasancc proceedings under s. 235 of the Companies
Act. and the appellants then applied to the High Court
for quashing the criminal proceedings already started
on the ground of commencement of proeeedu1gs under
s. 235.
This application was also heard with the rule
which was issued on June 29, 1953, and it wa• diomisscd by the same judgment by which the rule was
di•charged, i.e., of .June 21, 1954.
The general schPme of the Companies Act is that
the Court should have complete control of all proceed .
ingH in winding up and it was therefore urged that the
official liquidator was not authorised to do anything
either witlwut t.he sanction of the Court or without its
di'rectiouH. Section l iO deal; with the powers of official
• liquidator. It provides:
•
•
•
•
•
•
•..
•
S.C.R.
SUPREME COURT REPORTS
1267
"The offi1iial liquidator ·shall have power, with
'958
the sanction of the court, tei dq the fo!lowing things:
Dr. Sailendra Nath
(a) to institute or defend any suit <tr prosecution Sinha & Anath"
or other legal proceeding, ci vii or criminal in the name
v.
and on behalf of the company ; ............ ".
J asada Dulal
Under s. 180 the Court may provide that the ~tficial
Adhikari"'
liquidator may exercise any of the powers given under
s. 179 without the sanction or intervention of the
Court. Section 183 deals with the exercise and control
of liquidator's powers. Sub-section 3 authorises him
to apply to the Court for directions in relation to any
particular matter arising in the winding up. Subsection 4 is a provision under which the official liquidator is entitled to use his own discretion in the
administration of the assets of the company and in
the distribution amongst the creditors. Sub-section 5
provides:
"If any person is aggrieved by any act or decision
of the ofiicial liquidator, that person may apply to the
CQurt and the" Court may confirm, reverse or modify
the act or decision complained of, and make such
order as it thinks just in the circumstances ".
T!J.ese provisions show that• s. 179 deals with the
powers of the liquidator.
Under s. 235 the Court has the pow~ to assess
damages against delinquent directors and the Court may
on the application of the liquidator or a creditor or a
contributory examine into the conduct of a director and
compel him to pay or restore money or property or to
contribut~ such sum to the assets of the company by
way of compensation in respect of any misfeasance
on his part and this power may be exercised irrespective of the criminal liability of the director. Section 237
· deals with prosecution of delinquent directors and the
relevant. portion of this section is :
(1) "If it appears to the Court in the course of a
winding up by, or subject to the supervision of; the
Court, that any past or present director, manager or
other officer, or any member, of the cmppan,y has been
guilty of any offence in relation to the company for
which he.is criminally liable, the Court may, either on •
161
•
Another
Kapur].
•
•
1268
SUPREME COURT HEPORTS
[1959)
i9:;8
the application of any person intereste<l"in the winding
D
.. 1 d
N h up or of itll own motiolJ'. direct the li11uidator either
'· 5'" '" '"
ai I .
1 f
•h
"" d
Sinha & A>iolher Hmse
to :i:wosecute t c ouen er or to refer the
v.
matter to the registrar.
Jasoda Dula/
(2) If it appears to the liquidator in the course of
Adhihari 6a voruntary winding U!J that any past or present
Another
director, manager or other officer, or any member of
J(apur J.
•
•
the company has been guiJt.y of any offence in relation
to the company for which he is criminally liable, he
shall forthwith report the matter to the registrar and
shall furnish to him such information and give to him
such access to and facilities for inspecting and taking
copies of any documents, being information or documents in the possession or under the control of the
liquid11t-0r relating to the matter in question, as Jie
may require.
(3) Where any report is made under sub-section (2)
t-0 the registrar, he may, if he thinks fit, refer the
matter to the Central Government for further enquiry,
and the Central Government shall t.hemupon inYcstigate the matter and may, if they think it expediei1t, •
apply to the Court for an order conferring on any
person designated by thf Central Government for the
purpose with respect to the company concerned ttll
such po,rnrs of investigating the affairs of the company
as are prov1ded by this Act in the case of a winding
up by the Court.
(4) If on any report to the registrar under subs. 2 it appears t{) him that the case is not one in which
proc(.,>edings ought to be taken by him, he shall inform
the liquidator accordingly, and thereupon, "subject to
the preYious sanction of the Court, the liquidator may
himself take proceedings against the offender.
(5) lf it appears to the C-0urt in the course of
voluntary winding up that any past or present
director, manager or other officer, or any member, of
the company has been guilty as aforesaid, and that no
report with respect to the matter has been mado by
tho liquidator to the registrar, the Court may, on the
a11plicatio1\ of iruy person interested in the winding up
• or of its' own motion, direct the liquidator to make
such a. report! an~ on a report being made accordingly,
•
•
..
•
•
..
•
•
S.C.R.
SUPREME COURT REPORTS
1269
the provisions• of this section shall have effect as
r958
thou~~ the report has _been• m~e in pursuance of the Dr. S«ilendra Nath
prov1s10ns of sub-sect10n (2).
Sinha &· Another
(6) If, where any matter is reported or referred to
v.
the registrar under this section, he considers that the
Jasoda Dula/·
case ill one in which a prosecution ought to beo instiAdhikari &
tuted, he shall place the papers before the Advocate-.
Another
General or the public prosecutor and if advised to do
Kapur J • .
so institute proceedings :
Provided that no. prosecution shall be undertaken
without first giving the accused person an opportunity
of making a statement in writing to the registrar and
of being heard thereon.
,,
I~ was this section which the appellants pressed in
support of the argument that without the order of the
Court the official liquidator cannot lodge.a criminal
com plaint against a past director and if he does so the
proceedings will be ab initio void. All that sub-s. (1)
requires is that if the Court finds in the course of
winding up that any past or present director, etc., has
been guilty of any offence in relation to the company
t)le Court may either on the 1j.pplication of the person
interested or of its own motion direct the liquidator to
prosecute the offender or to refer the matter to the
registrar. In the latter case if the registr~r finds that
the prosecution ought to be instituted he can do so if
advised by the Advocate-General or the public prosecutor. But emphasis was placed by counsel for the
appellan1<,s on the proviso that no prosecution could be·
undertaken without first giving the accused person an
opportunity of making a statement to the registrar or
of being heard and it was urged that if the registrar
cannot institute prosecution without first giving an
opportunity to the person accused to file an explanation, no directions could be given by the judge unless
the pfirsons accused are first allowed an opportunity of
giving an explanation. But this contention must be
repelled. Under s. 237 (1) the Court may direct the
liquidator to himself prosecute thA offender or· to
refer th~ matter. to the registrar. Giving an oppor-.
tunity to the offender before such direct.ion is given by
•
..
•
•
1270
SCPRE:ME COURT REPORTS
[Hl59)
r938
tho Court is not a prerequisite of the 8" udgc making
.-
• h an order under sub-s. (1). Umler 8ub-s. (6) the regist.rar
I». s.,,,.,d.,. .~·at .
. d t
.
I
tr d
·
l
,
,
, A 1,
1s reqmre
o give t 1c 011cn er an opportumt v to s 10w
""'"''•" <?
110 ner
J
v.
cause before a prosecution is undertaken. That is a
Jasoda liulal
far step from saying that s. 237(1) of the Compani"s
AJMk•" • e>
Act requires a Judge t<J giYc the offender an opporAnolh"
tnnity before he gires a direction for prosecution hy
/{ap11r j.
•
•
the liquidator or for reference to the registrar.
It was further urged that under sub-s. (4) in the
case of voluntary liquidation, the liquidator has to
proceed after obtaining the sanction of the Court and
therefore it was urged that the liquidator cannot
institute criminal proceedings without such sanction
in the case of winding up by tho Court.
Whatever
may be the case of a liquidator under voluntaPy
winding up sub-s. (1) of s. 237 makes no s11ch pro.
vision in the case of compulsory liquidation.
Our
att{)ntion was drawn t.o 8ome passages from the ] ndian
Companies Act hy Sircar & Sen, 1937 Editio11.
At
page 624 it is stated that the object of the section is to
provide against abuses and indiscriminate commence.
ment of prosecutions and also for the first time a
provision has been made ,under this sect ion for proscc11tions being conducted as crown prosecutions.
In 'a
passage at page 628 it is stated:
"But before the Court can exercise its jurisdiction
it must come to the conclusion that in the course of
winding up the person intended to be charged under
this section has been guilty of an offence in relation
to the company for which he is criminally li!lble. But
such a finding is not to prejudice tho accused i11 any
way in his trial. Per Chitty J. in re Charles Denham &
Co. Ltd. L.T. 570 at 571."
The procedllre under s. 237(1) as stated in this Look at
the same page is as follows :
"The application should be made on a petition
,·erified by an affidavit in which materials must lie set
out sufficient to make out a prima facie case.
• It is m;1t quite settled as to whether the liquidator sho!Md make the application upon notice to any
'one. Generally the application shoulti be ex parte, but
•
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..
•
•
•
•
S.C.R.
SUPREME COURT REPORTS
1271
the Court may•direct notice to be given to any person
r958
who is in its opinion entitled oo be heard ".
D 5 .1 d
N h
•
.
h
r.
ai en ra
at
These passages do not support the content10n t at Sinha & Anoth"
before a prosecution can be validly instituted against
v.
a past director the sanction of the Court is necessary.
}•soda Dnlal
Mr. Chaudhuri then relied on an observatitm of
Adhikari &
Buckley J. In Re London and Globe Finance CorporaAnother
tion(') also quoted in Sircar & Sen's book at page 625.
There the principles guiding the Court in ordering prosecutions have been laid down as follows:
"I have next to consider upon what principles I
ought to exercise the power given me by s. 167 of the
Companies Act, 1862, to direct the official receiver to
institute and conduct a prosecution at the expense of
tb.e assets. It is obvious that no one legitimately can
or ought to institute a criminal prosecution with a
view to his personal profit. Neither should a prosecution be instituted from motives of vengeance against
the offender. The motive of every prosecution ought
to be to inflict punishment upon the criminal for the
proper enforcement of the law and for the advantage
of the State and with a view to deter others from
doing the like ".
•
This passage does not support the giving of an opportunity to the offender before the Judge can give
direction nor do they affect the powers of'the liquidator to start a prosecution or the criminal court. to
entertain a complaint when filed by the liquidator.
The following passage from Buckley's Company
Law und~r the commentary under s. 334 of the English
Companies Act, 1948, which corresponds to s. 237 of the
Indian Companies Act was then referred to :
·
" Proceedings will accordingly be taken by the
Director of Public Prosecutions (or Lord Advocate) or
not at all ".
But this is because of the peculiar and express
language of s. 334 under which the Judge can only
direct the liquidator to refer the matter to the Director of Public Prosecutions or to Lord Advocate as the
case may be. In the English Act, specfal ,proviflion
has bee11 made f"r England saving the institution oL
(r) (1903) r Ch. 728, 733·
•
Kapur].
•
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1272
SUPRE.ME COGRT REPORTS
(1959]
1958
criminal proceedings by private prose~tors. l\Icrcly
D
0
.1
/
,. 1 because no such provisi"n lrns been made in regard to
r'..lOltn•1u n·11/1~
]
>
51,,r.a""' A•"'"" ,.cot. and docs not affect the argument.
v
l\Ir. Choudhuri then relied on certain English cases
Jusoda D1<fol
1lealing with the mode of giving directions.
In
Adh•kaoi {~
re ll'o!thern Counties Bank Limited(') the ,Judgll had
Ano""'
ordcrcd t.he liquidator to ascertain by circular the
J(af"" J.
wishes of the creditors and after they had appeared t-0
oppose the starting of the prosecution, it was held (!)
that it did not sufficiently appear that the offoncp, had
heen committed and (2) that as 2/3 of the creditors
opposed the application the prosecution should not be
ordered as expenses will have to be paid from out of
the money belonging t-0 the credit-Ors.
The main
question for decision in that case was whether tlio
prosecution should he at the cost and expense of the
assets of the com pitny but com petcncy of the liquidator to file the complaint was not in dispute. Reference
was t.hcn made to Palmer's Company Precedents, 1952
Edition, Vol. II, again stating as to wher.leavc to prosecute should he given but the law stated there docs
not support. the c1~se for the appellants.
At page 605
it is stated :
•
"The summon8 will be ex partc, and should l1e
Hnpported by affidavit showing a strong case for prosecution, and a!Ao the extent of the assets and liabilities.
The <"Ourt is not willing when the assets are small, to
sanction proceedings which may swallow up or largely
reduce those asset8 ".
The form at p. 607 doeH not show that 11nder the
English Companies Act whp,n liberty is given to prosecute the perso'i1 accused is heard. All that is rliqnired
is that the court will make its order upon affidavits
etc. filed before it and it c1tn also order that. the costs
and charges incurred by the liquidator shall be paid
out of the assets of the company .
It was next eonu•ml<·d that although the l!111gunge
of s. 237 was not in the m·gativc form still the effect of
the wmds was thn.t 110 prosecution could he instituted
without the" sanction of the C-0urt being obtained by
.the liquidator.
In support of the st:bmissio\l counsel
(•I ltH83l 31 ~'.R. W>
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SUPREME COURT REPORTS
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relied on Th11 Queen v. Cubitt (') which was a case
'958
under the Sea Fisheries Act. which created certain D
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N
h
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d b
'd d.
r. aien '" at
ouences an
y s. 11 prov1 e :
Sinha o;. Another
"The provisions of this Act ............... shall be
v.
enforced by sea-fishery officers",
J osoda Dula/
who ltre defined by that section and it was held that
Adhikari"'
Another
the effect of the words was that no one except the
sea-fishery officer could prosecute an offence under the
Act. But there are no such words of limitation in
s. 237. In Taylor v. Taylor(') the words of the statute
were "entitled to the possession or the receipt of the
rents and profits" and it was held that the order
under the statute could only be made upon a petition
which was within the words above quoted and if there
wM.s no such person no order could be made but that
again was decided on the peculiar language of the
statute. Counsel also relied on Nazir Ahmad v.
Crown(') where it was held that if the statute
authorises the doing of an act in one way then it had
to be done in .that way or not at all.
·The argument of Mr. Choudhuri really comes to
this that the complaint filed on behalf of the official
liquidator was incompetent iIJ. the absence of a direction under s. 237 or without complying with the procedure laid down in that section. Section 237(1) does
not lay down any procedure for the giving t>f directions
and the provisions in regard to the action taken by
the registrar do not have any relevancy to what the
court should do before it gives directions. English
cases that have been cited do not go to the extent of
saying that no prosecution can be instituted without
the sanction of the court. They deal with another
subject and that is the circumstances in which the
Judge would give directions for prosecution and would
sanction the assets of the company to be expended in
prosecution. Besides nowhere has it been stated that
the coprt cannot give directions without first hearing
the persons accused or that the directions of the
Judge are a condition precedent to the lawful institution of criminal proceedings by the liquidator:
(I) (1889) 22 Q.B.D. 622.
(2) (<875) I Ch. 426.
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t3) (1936) L.R. 63 LA. 372, ~SI.
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SUPRE:l1E COURT REPORTS
[1959]
1958
On the other hand it ha.s been held tllat under s. 179
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of the Indian Comp&nie2 Act no sanction is rcDr. Sailendra ,\'ath
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Sinha & Anoth" qnirc.
or commencing a prosecution.
n , asu:anti·ai
v.
.Mamhil Akhaney v. The ::Jtate of Bombay(') a.t the inJasoda Dula/
stance of the official liquidator 11 report. was lodged
Adhika•i e;.
with •the police against the Managing Directer of a
Anoth"
Bank and the police submitted a c:hargc sheet to
Kap10 j.
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the l\Iagistrate. It was obse1Ted by Sinha J. 1tt
page 502:
"In terms the section lays down the powers of the
official liquidator. Such a liquidator has to function
under the directions oft.he court which is in charge of
the liquidation proceedings. One of his powers is to
institut{) prosecutions in the name and on behalf of the
company under liquidation with the sanction oft.he
court. This section docs not purport to impose any
limitations on the powers of a criminal court to entertain a criminal prosecution launched in tho ordinary
courso under the provisions of the Code of Criminal
Procedure".
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It was also pointed out in this ju<lgment that s. 1 i!l
contains no words corresponding to the language of
Drug Control Order, 1943, which was held to be a CO)ldition precedent for i1rntituting prosecution in the case
of Blisdeo Aggarwal/a Y. King Emperor(') nor n.re there
any prohibitor)· wonls like those that arc contained
in ss. 196 and 197 of the Criminal Procedure Cnde.
In the formrr case no prosecution could be instituted
without the prnvions sanction of the Provincial
Go\•crument and the htt{)r provides that:' no court
shq.ll take cognirnrwe ............... ". There are two
cases clecidcd by
two Indian High Courts· which
support the submission of the respondents' counsel.
lu Emperor v. Rishan Sahai (') it was held that the
C<>mpanics Act nowhere pro\·ides that wit.hout the
directions of a Judge no eriminal prosecntion can be
instituted. In 1\frityunjoy Clwkrawrti v. Pnn:ot l(umar
Pal ('), it was hel<l that neither s. 1 i9 nor s. 237
in'.licatcs tl1nt if, the liquidator takes actiou without a
{I) [1956! S.C.H. 483.
l31 J.L.R. (1937) All. i79·
12j [1945) F.C.R. 93 .
l~i ,,..J.R. 1933 tal. 153.
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1275
direction of the Court this action would be illegal or
z958
invalid or it would invalid~te u, prosecution.
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uld h
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fDr. Sailendra Nath
t wo
t us appear that uot 1 on t e a'.1guage o Sinha & Another
s. 237(1) as well as on precedent the complarnt made
v.
by the liquidator against the appellants suffers from no
;asoda n .. 1a1
such .infirmity as to make the proceedings ml'!! and
Adhikari &
void.
The section contains no such words which
Another
indicate that such a prosecution cannot be instituted
by a liquidator without the sanction of the Judge or
that the Court cannot take cognizance of a complaint
without such sanction or direction. Section 179 as the
learned Chief Justice of Calcutta High Court has
rightly ·pointed out, deals with the powers of liquidators to institute or defend proceedings with the sanctiQn of the Court and s. 237(1) deals with the powers
of the Court to give directions for prosecution of
delinquent directors, etc.
It was further urged on behalf of the respondents
that in the case before us there was a proper direction
under s. 237(]).
The judgment of the High Court
shows that before the learned Judge gave a direction
on July 22, 1952, there were before him proper materials and, therefore, his sanction was perfectly valid,
legal and proper. Before this order made by Ban.
nerji J. there was an order of Bachawat J. dated
January 15, 1951, under s. 179 and, trherefore, when
the liquidator authorised his Assistant, respondent
No. 1 to institute the proceedings he was entitled to
do so. As we have said above even in the absence of
such directions the legality of the criminal proceedings
instituted• would not be affected.
Noth_ing that we have said in this judgment must
be taken to be an expression of opinion which in any
way affects the control by the Judge of proceedings
in windirig up or over the liquidators.
We would, therefore, dismiss this appeal.
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Appeal dismissed .
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