# Hari Shanlcat v. Rao Girdhari Uil Chowdhury Kapur J

- **Citation:** [1962] Supp. 1 S.C.R. 943
- **Court:** Supreme Court of India
- **Decided:** 1960-01-18
- **Bench:** B. P. Sinha, J. L. Kapur, M. Hidayatullah, J.C. Shah, J. R. MuDHOT.KAR
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/hari-shanlcat-v-rao-girdhari-uil-chowdhury-kapur-j-2578
- **Pages:** 19

## Headnote

Company Law-Winding uir-Examinntion ~f •x-Director-Applicatian of Liquidator accompanied by •igned •tatement-Ex parte ordtr-Modijication or vacating of-Right to
insptct statement filed by Liquidator-Whether statement confidtntial-(Jompaniea Act, 1956 (1 of 1956), •· 477-0ompani"
(Oourt) Rules, 1959, "· 243, 244 and 249.
A company was ordered by the High Court of Calcutta
to be wound up. The Official Liquidator submitted an application accompanied by a signed statement for an order that
the appellant, an ex-director of the company, be examined
concerning the affairs of the company under s. 4 77 Companies
Act, 1956, and that he be ordered to produce certain records.
The application was granted ex-parte. The appellant applied
for an order vacating or modifying of the order and for supplying copies of or facility for inspection of all documents including
the signed statement of the Liquidator. The Company Judge
rejected the application holding that the ex-parte order wa1
final and he had no power to review it and that the appellant
was not entitled to a copy of or to in•pect the signed statement
of the liquidator. On appeal Court held that the application
to modify or vacate the order was maintainable, but in the
circumstances of the case the Court held that the order was
"desirable and necessary" and that the appellant was not
entitled to an inspection of the signed statement of the
liquidator.
Held, that the ex-parte order was not final and it was
open to the Company Judge to modify or vacate. it on the
ground that it had been obtained without placing all the
requisite materials before the court or by ·mis-statement of
1961
Hari Shanlcat
v.
Rao Girdhari Uil
Chowdhury
Kapur J,
1961
Decemhtr 6
1961
Salish Churan Law
v.
H, K. Ganguly
944 SUPRE¥E COU~T REPORTS fl962] SUP}'..
facts or on other adeq11ate groun~s~ The primary test for
m1;tking the ordt"r was whe~her it' was just' and beneficial to
th'e 'bu::.ineSs of the company ; • the power conferred on the
court Was very ,vi de and the court had to gu'!:rd itself againat
being made an instr~ur1ent of vexation OT oppres·don. IIf-the
prc~rnt case none of the circumstances ju11tif)·ing interference
w~th the ex-parte order were made out.
The order was not
snltght f(ir a1iy coJlateral p1u-.pose, a purpose other than the
rfft:"ctive proi[rcss of the winding up in
th~ interest of the
comp:iny.
'fhe appellant was primafacie a person who was
likely to give inf'>rmation useful aboUt the ,affairs
of the
company jn winding up.
In re North Australian• >rerritory • Oomf,any, (1890) •n
Ch. D. In ••. Metrop>lit"n
B"n,~, (1880) 15 Ch. D. 139, In
rt. M•1vile Hose, lim:1&1., (1939) I Ch .. D. 32 and In re.
Gold Co'!'J>'my Ltd., (1879) 12 Cir. D. 77, referred to.
Held,
further, fliat the. appellant .had no right to
inspect the .•igned statzment made by the liq~idator -p_n w!'ic!>
the order of the ~ourJ proceeded. The statement of the L1qu1dator i:licl hot for~ part oftlie file of-\he p~ocee!lingsof liqu;dation.
lt{ITH'Tely enabled the cour
1t to be satisfied that the
appellant should be'examined in the in\erest of the compony.
The rules permitted the making ot:_ such an orde't ex' parte.
The examinarion was confidential.·
"'
~
j
I'\_
In re Golif' Qompnny ltd.;\1B7?J l2 c.h. D. 77; r~ferrcd to.
'.
Crv1L APPELL4TE Ju~Ii=!DICTIO~,: Qivil Appet?-1
No.·521 ·of U.161.
Appeal by spe,cial,.Jea~e· froJ?. th11 -~tl.dginent
and order dated April 17,. 1!}6i of the Calcutta.
High Cour,t in.Appeal from Original Order .No. 13~
of 11160.
M .. G. Setalvad,
Attorney-General of J.ndia,
M. K .. Baner1i.~nd 8. N. Mt,tkherji,. fo-,; the ·appe1lt?-nt.
·J
8. Mukkerjee and P. K .. Bose, for tlie respon-
,.i
dent.
'
1961. December, 5.
The Judgment of the
Court ~·as. "deli V'ored b,Y
.,.
SHAH. J.-,-Ballygunge Real :Property ,and B'uilding Society Ltd.~hcreina.fter called the Companywas on J a.nuary 8, ,1938, orqe~11.d by ,th~ High Court
of J udieatu;e at Calcutta.,. to b!l wouμd up.
OP,
January 18, 1960, the Official Liquidator

## Text

l .
-
11. I
(I) S.C.R.
SUPREME OOURT REPORTS
943
cases which would fall within the jurisdiction of
the High Court under s. 35(1) of the Act but it is not
to be narrowly interpreted nor to be so widely
interpreted as to convert the revision into an appeal
OD facts.
Appeal allow~.
SATISH CHURAN LAW
!),
H.K.GANGULY
(B. P. SINHA, C.J., J. L. KAPUR, M. HIDAYATULLAH,
J.C. SHAH and J. R. MuDHOT.KAR, JJ.)
Company Law-Winding uir-Examinntion ~f •x-Director-Applicatian of Liquidator accompanied by •igned •tatement-Ex parte ordtr-Modijication or vacating of-Right to
insptct statement filed by Liquidator-Whether statement confidtntial-(Jompaniea Act, 1956 (1 of 1956), •· 477-0ompani"
(Oourt) Rules, 1959, "· 243, 244 and 249.
A company was ordered by the High Court of Calcutta
to be wound up. The Official Liquidator submitted an application accompanied by a signed statement for an order that
the appellant, an ex-director of the company, be examined
concerning the affairs of the company under s. 4 77 Companies
Act, 1956, and that he be ordered to produce certain records.
The application was granted ex-parte. The appellant applied
for an order vacating or modifying of the order and for supplying copies of or facility for inspection of all documents including
the signed statement of the Liquidator. The Company Judge
rejected the application holding that the ex-parte order wa1
final and he had no power to review it and that the appellant
was not entitled to a copy of or to in•pect the signed statement
of the liquidator. On appeal Court held that the application
to modify or vacate the order was maintainable, but in the
circumstances of the case the Court held that the order was
"desirable and necessary" and that the appellant was not
entitled to an inspection of the signed statement of the
liquidator.
Held, that the ex-parte order was not final and it was
open to the Company Judge to modify or vacate. it on the
ground that it had been obtained without placing all the
requisite materials before the court or by ·mis-statement of
1961
Hari Shanlcat
v.
Rao Girdhari Uil
Chowdhury
Kapur J,
1961
Decemhtr 6
1961
Salish Churan Law
v.
H, K. Ganguly
944 SUPRE¥E COU~T REPORTS fl962] SUP}'..
facts or on other adeq11ate groun~s~ The primary test for
m1;tking the ordt"r was whe~her it' was just' and beneficial to
th'e 'bu::.ineSs of the company ; • the power conferred on the
court Was very ,vi de and the court had to gu'!:rd itself againat
being made an instr~ur1ent of vexation OT oppres·don. IIf-the
prc~rnt case none of the circumstances ju11tif)·ing interference
w~th the ex-parte order were made out.
The order was not
snltght f(ir a1iy coJlateral p1u-.pose, a purpose other than the
rfft:"ctive proi[rcss of the winding up in
th~ interest of the
comp:iny.
'fhe appellant was primafacie a person who was
likely to give inf'>rmation useful aboUt the ,affairs
of the
company jn winding up.
In re North Australian• >rerritory • Oomf,any, (1890) •n
Ch. D. In ••. Metrop>lit"n
B"n,~, (1880) 15 Ch. D. 139, In
rt. M•1vile Hose, lim:1&1., (1939) I Ch .. D. 32 and In re.
Gold Co'!'J>'my Ltd., (1879) 12 Cir. D. 77, referred to.
Held,
further, fliat the. appellant .had no right to
inspect the .•igned statzment made by the liq~idator -p_n w!'ic!>
the order of the ~ourJ proceeded. The statement of the L1qu1dator i:licl hot for~ part oftlie file of-\he p~ocee!lingsof liqu;dation.
lt{ITH'Tely enabled the cour
1t to be satisfied that the
appellant should be'examined in the in\erest of the compony.
The rules permitted the making ot:_ such an orde't ex' parte.
The examinarion was confidential.·
"'
~
j
I'\_
In re Golif' Qompnny ltd.;\1B7?J l2 c.h. D. 77; r~ferrcd to.
'.
Crv1L APPELL4TE Ju~Ii=!DICTIO~,: Qivil Appet?-1
No.·521 ·of U.161.
Appeal by spe,cial,.Jea~e· froJ?. th11 -~tl.dginent
and order dated April 17,. 1!}6i of the Calcutta.
High Cour,t in.Appeal from Original Order .No. 13~
of 11160.
M .. G. Setalvad,
Attorney-General of J.ndia,
M. K .. Baner1i.~nd 8. N. Mt,tkherji,. fo-,; the ·appe1lt?-nt.
·J
8. Mukkerjee and P. K .. Bose, for tlie respon-
,.i
dent.
'
1961. December, 5.
The Judgment of the
Court ~·as. "deli V'ored b,Y
.,.
SHAH. J.-,-Ballygunge Real :Property ,and B'uilding Society Ltd.~hcreina.fter called the Companywas on J a.nuary 8, ,1938, orqe~11.d by ,th~ High Court
of J udieatu;e at Calcutta.,. to b!l wouμd up.
OP,
January 18, 1960, the Official Liquidator submittti.d·
-
_
..
(1) S.C.R.
SUPREME COURT REPORTS
9~5
an application accompanied by a signed statement
for an order that the appellant be examined under
s. 477 of the Indian Companies Act, 1956. This
application was granted ex-parte by Mr. Justice
G.K. Mitter on January 18, 1960, and the appell1tIJ.t
was served with the order to attend the Court on
March 22, 1960, for the purpose of being examined
concerning the affairs of the Company, and to bring
with him and produce at the said time and place the
following books and papers, mentioned in Schedule
B to the order, viz.,
(a) Ballygunge Estate (Private) Ltd.-Cash
Books, General Ledger, Journal, Minutes Books
from 1939 to 1948, Property Register.
(b) Ballygunge Building Society Private Ltd.-
Cash Books, GenerafLedger, Journal, Minute
Books, Property Register.
(c) Ballygunge Real Property
& Building
Society Ltd. (In liquidation)-General Ledger
for 1949,
and "all such other books, papers, deeds, writings
and other documents in his custody or power in any
way relating to the affairs of the Company". This
order was published in public newspapers. The
solicitors of the appellant by letters
dated
February 29, 1960, and March 10, 1960, called upon
the Official Liquidator to furnish them with copies
of the petition and the report on the basis of which
the order was made. The Official Liquidator having
informed the solicitors of the appellant that the
latter were not entitled to a copy of the report of
the official liquidator, the appellant applied by a
judge's summons for an "order recalling vacating,
setting aside or modifying" the order dated January
18, 1960, and for a direction to the official liquidator
requiring him to supply copies of the report of the
official liquidator and of the other documents relat·
ing to the application and alternatively for an order
granting leave to inspect the court records and
1981
Salish Churan Law
v.
H. K Ganguly
Shah J.
J9fi1
Salish C""'"" Law
v.
/I. K. G"'lluly
SM!oJ.
946 SUPRIDIE COURT REPORTS [I!l62] SUPP.
proceedingR of the application and to take copies
thereof. ThP appellant contended that the order
m11d~ by Mr.
.Ju~tice Mitter on January 18, I !160,
was obtained by suppression of mat~rial facts and
that, in any event, the order made without notice
to the appellant wa.~ vexatious and opprn88ive and
amounted to an ahmm of the proooss of Court. He
submitted that ho was a Director of the Company
between the vcars 1939 to I 953 and hl\d attended
meetings of the Board of Directors of the Company
and without reference to the records of the meetings
of the Board and particularly without reference to
the Minute Books, it was not pOSBiblo for him to recollect any details as to transactions which might
have taken place in the Board's meetings. He
stated that he was not oonoemed with the a<lminis·
tration, management or tho day to day working of
the Company, except to the extent of taking part in
the Board'8 meetings, that he never had in his
custody the books referred to in the order and that
the official liquidator had never asked for or enquir·
ed of him about any documents, that he was not
aware of the matters on which information was
required by the official Iir1uidator and unless those
matters were made known to him, it was not posaible
for him, to answer questions or to give information
required of him, that to enable him to answer questions or supply information, it was necessary for him
to know the nature of the enquiry and the charges
and to inspect the records and documents of the Com·
pany and without the assistance of such records and
documents his proposed examination would
be
highly oppressive and harsh and was likely to prove
futile.
The official liquidator submitted that all the
available papers in the books with the liquidator
will be made available at the time of tho examina·
tion of the appellant but he-the official liquidatorwas not bound to give information in advance
about the nature of the enquiry; to do so, he contended, would defeat the purpose of the enquiry.
He also submitted that tho appellant had no right
-
.. _
•
•
•
- .
(1) S.C.R.
SUPREME COURT REPORTS
94 7
claim inspection or to obtain copies or the statement which accompanied the judge's summons dated
January 18, 1960.
Mr. Justice Law rejec1ed the application filed
by the appellant, holding that the order dated
January 18, 1960, was final and that he had no
power to review, modify, alter or vary the same,
that the order merely summoning for examination
under s. 477 of the Companies Act did not affect a
plirty's rights, there being no charge, no complaint
and no allegation against him. The learned Judge
observed that it was not necessary
for
the
Court in the first instance to determine that
the person called upon to
furnish
information
actually
possessed
that information : if
the Court has reasons to think, or if even
an allegation is made that a certain person is in
possession of information which would be of use in
the course of winding up, the Court can call upon
him t.o appear in Court and examine him, and that
rr. 243 (1) and 243 (2) of Companies (Court) Rules
laid down the same procedure as was laid down in
In re Gold Company (1879 12 Ch. D. 77 at page 82)
and different from the procedure which was laid
by r. 195 of the Indian Companies Act, 1913. In
the view of the learned Judge the statement of the
official liquidator on which the order dated January
18, 1960, was made not being on oath or affirmation was not "legal evidence" and did not form
part of the proceedings of the Court and the appellant could not demand facility for inspection of the
statement or copy thereof.
Against the order of Mr. Justice Law an appeal was preferred to a Division Bench of the High
Court. The High Court held that the order having
been initially pass ex parle an application for discharging or modifying the order was in law maintainable at the instance of the appellant but the
order in so far as it directed the appellant who was
a director of the Company to appear before the
19U
Satish Churan l..UJ
v,
H.K. Gangu(1
Shah.>.
tisk Outran Law
••
H, K, Ganfl/l.1
S"411J,
948 SUPREME OOURT REPORTS [1962] SUPP.
Court to be examined touching upon the affairs of 1
the Company was, in the, circumstances of the case, ,
"desirable and noce388.ry ', and that the statEment
of the official liquidator on which the order dated
January 18, 1960, was issued not being an affidavit
was not required by the Companies (Court) Rules
1959 to be kept on the file of the liquidation pro.
ceedings: the statement was a confidential document and was-save by order of the Court-not open
to inspection of any person other than the liquida- •
tor. The learned judges modified the order in so far
as it directed production of the books ·of account
relating to the Ballygunge Estate (Private) Ltd.
and the Ballygunge Building Society Private Ltd.,
because those companies were not parties to the
liquidation proceedings.
Against the order of the High Court this
appeal with special leave has been preferred to this ,..
Court.
Three questions fall to be determined :
( 1) Whether an ex parte order directing
the examination of a person under s. 477 of
the Indian Companies Act, 1956 is liable to be
modified, or vacated on the application of the
persons affected thereby ;
(2) Whether there is any ground for discharging or modifying the order dated January 18, 1960; and
•
(3) Whether the appellant is entitled before hie examination to inspect the statement
submitted by the official liquidator in support
of the application for the order dated January
18, 1960, or to be furnished with a copy
thereof.
.. -
Section 477 of the Indian Companies Act, 1956,
provides:
"477 ( 1) The Court may, at any time after the
appointment of a provisional liquidator or
the ma.king of a winding up order summon
•
(1) S.C.R. SUPREME COURT REPORTS
949
before it any officer of the company or person
known or suspected to have in his possession
any property or books or pr.pers of the company, or known or suspected to be indebted
to the company, or any person whom the
Court deems capable of giving information
ooncerning the promotion, formation, trade,
dealings, property, books or papers, or affairs
of the company.
(2) The Court may examine any officer or person so summoned on oath concerning the
matters aforesaid, either by word of mouth
or on written interrogatories; and may, in the
former case, reduce his answers to writing and
require him to sign them.
(3) The Court may require any officer or person
so summoned to produce any books and papers
in his custody or power relating to the company; but, where he olaims any lien on books
or papers, produced by him, the production
shall be without prejudice to that lien, and
the Court shall have jurisdiction in the winding
up to determine all questions relating to that
lien.
( 4) If any officer or person so summoned, after
being paid or tendered a reasonable sum for
his expenses, fails to appear before the Court
at the time appointed, not having a lawf'ul
impediment (made known to the Coan at the
time of its sitting and allowed by it), the
..
Court may cause him to be apprehended and
brought before the Court for examination.
(5) If, on his examination, auy officer or person
so summoned admits that he is indebted to
the company, the Court may order him to pay
to the provisional liquidator or, as the case
may be, the liquidator at such time and in
such manner as to the Court may seem just
the amount in which he is indebted, or any
11141
Satish Chur"" La.,
v.
H. K. Ganzuly
S/iahJ.
1961
SatUh Churan Law
v.
H.K.Ganvl!
ShahJ.
\
--··----
950 SUPREl\IE COURT REPORTS (1962] SUPP.
pa.rt thereof, either in full discharge of the
whole amount orinot, as the Court thinks fit,
with or without costs of the examination.
(6) If, on his examination, any such officer or
person admits that he has in his possession
_ any property belonging to the company, the
Court may order hiiμ to deliver to the pro·
visional liquidator or, as the case may be, the
liquidator, that property or any part thereof,
at such time, in such manner and on such
terms as to the Court may s!'lem just.
- (7) Orders made under -sub-sections __ (5} and (6)
shall be executed in the same manner as
decrees for the payment of money or for
delivery of property under the Code of Civil
Procedure, 1908 respectively.
(8) Any person making any payment or delivery
in pursuance of an order made under subsection ( 5) or sub-section (6) shall by such payment or delivery be, unless otherwise directed
by such order, discharged from all liability
whatsoever in respect of such debt or
property.''
Clauses (5), (6), (7) and (8) it may ?e noted, were
inserted by Act 65 of 1960. Section 463 of the
Companies Act authorises this Court to make rules
for all matters relating to winding up of companies
which by the Act are to be prescribed and for other
matters. This Court has framed Companies (Court)
Rules, 1959, out of which rr. 243, 244 and 249,
·which are material, are as follows :-
"243. Application for examination under Section _
477.-(1} An application for the examination
of a person under Section 477 may be made
ex parte provided that where the application
is made by any person other than the Official
Liquidator, notice of the application shall be
given to the Official Liquidator.
•
•
.,,
•
•
(1) s.c.R. SUPREME COURT REPORTS
951
(~) The summons shall be in Form 109
aud, where the application is by the Official
Liquidator, shall be accompanied by a statement signed by him setting forth the facts
on which the application is based.
Where
the application is made by a person other
than the Official Liquidator, the summons
shall be supported hy an affidavit of the
applicant setting forth the matters in respect of which the examination is sought and
the grounds relied on in support of the
summons."
"244. Directions at hearing of summons.-:..Upon
the hearing of the summons the Judge may,
if satisfied that there are grounds for making
the orders, make
an order directing the
issue of summons against the person named in
tl>e order for his examination and/or for the
production of documents. Unless the Judge
otherwise directs, the examination of such
person shall be held in Chambers. The order
shall be in }form No. 110."
".249. Order for public examination under section
478.-(I) where an order is made for the
examination of any person or persons under
Section 4 78, the examination shall be held
before the Judge ; provided that in the case
of High Court, the Judge may direct that the
whole or any part of the examination of any
such person or persons, be held before any
,.._ •
of the officers mentioned in sub-section ( 10)
of the said Section as may be mentioned in the
order:
Where the date of the examination
has not been fixed by the order, the Official
Liquidator shall take an appointment from
the Judge or officer before whom the examination is to be held as to the date of the
examination. The 01·der dfrecting a public
examination shall be in Form No. 112.
1961
Satis!i Churan Law
v.
H. K. Gangulj
Shah J.
1961
Chu1an L"w
Y,
H. K. Gtu1py
ShohJ.
952 SUPREME OOURT REFOR TS [1962) SUPP. ··1
(2) The Judge may, if he things fit,
either in the order for examination or by
any subsequent ordr-r, give directions aa to
the specific matters on which such person is
to be examined."
By s. 4 77 the Court iti authorised to summon
before it (I) any officer of the Company, (2) any
person known or suspected to have in hie po88easion any property or books or papers of the Company, and (3) any person known or suspected to be
indebted to the company, or any person whom the
Court deems capable of giving information concerning the promotion, formation, trade, dealings,
property, books or pupers or affairs of the company. By r. 243 an application for an order for examination may be ma.de ex parle, and the Company
Judge may, if he is satisfied that the interest of
the company will be served by the examination of
a person-be he an officer of the company or
other person make the order. The primary test
for ma.king the order is whether it is just and beneficial to the busineBB of the company, But the
power conferred by the section is very wide and
the Court must guard itself against being made an
instrument of vexation or oppreBBion.
The order
which is made ex parle is not final ; it is al ways
open to a person summoned to apply for vacating
or modifying the order on the ground that it has
been obtained without placing a.11 the requisite
materials before the Court or by mis-statement
of facts or on other adequate grounds. Rule 9 of
the Companies (Court) Rules preserves to the
Court its inherent powers to give such directions
or pa.as suoh orders as may be neceaaary for the
ends of justice or to prevent abuse of the procees
of Court, and
a. direction to va.oatfi an order
previously ma.de, is in a proper case within the
Court's inherent jurisdiction.
The relevant provisions
of the English
Companiea Aot,
186~ (25 & 26 Viet. c. 89), the
•
'
•
•
•
•
J
~ ..
(I) S.C.R. SUPREME COURT REPORTS
953
English Companies Act, 1929 (19 & 20 Geo V c.3}
and the English Companies Act, 1948 (11 & 12 Geo
VI c,88) on the question relating to examination
of officers of the company or other persons are
substantially the same as s. 4 77 of the Indians
Companies Act, 1956, and the principles. laid
down by the superior Courts in England, whioh
have been assimilated in the practice of Company
winding up by the Courts in India are useful in
determining the nature of the proceeding. In re
N<trth
Australian Territory Company ('), Lord
Justice Cotton vacated an order in appeal where
the order for examination was not made in the
interest of the Company in liquidation, but was
made with a view to assist the interest of the
company in prosecuting an action which has been
brought up by the liquidator. In that case the
liquidator filed with leave of the Court an action
against another company for setting aside an
agreement of purchase and obtained an order for
affidavit of document, but the Court refused to
order production of certain documents, or the
examination of the defendant company's secretary
on interrogatories, on the ground that discovery
was premature. The liquidator then obtained
an order under s. 115 of the Companies Act, 1862
for the examination of the secretary before an
examiner. The Secretary refused to answer certain questions relating to the matters in issue in
the action and the Court held that the liquidator
had shown no reason for seeking discovery except
to assist him in the action and so to evade the
order of the Judge postponing discovery in the
action and therefore the witness was justified in
refusing to answer the question.
Lord Justice
Bowen in that case observed that the power conferred bys. 115 is an extra-ordinary power. "It
is a power of an inquisitorial kind which enables
the Court to direct to be examined-not; merely
(I) (1890) 45 cb. D. 87.
1961
Satish Churan Law
v.
H.K. Gongu{ll
Shah J,
1961
~athh~Churan La_w
v,
H. K': Ganguly
Shah J.
954 SUPREME COURT REPORTS Il962] SIJPP.
before itself, but before the examiner appointed
by the Court-some third persqn who is no part)'
to -a. litigation. That 1is. a.n inquisitorial power,
which may work with g1:eat sev<;1·ity against third
pernons, And it seems to me to be obvious that
such a section ought to be used with the greatest
care, so .as not· unnecessarily to put in motion the
machinery of justice wheH it is not wanted or to
put it in motion at a stage when it is not clear
that it is wanted, and; certainly not to put it ·in
motion if unnecessary mischief is going to be done
or hardHhip inflicted upon the third person who is
called upon to appear and give infmma.tion."
in re JJ:letropolitan Bank (Heiron's case)(') a similar situation arose. The liquidator who had brought
ru1 action on behalf of the company against an officer
exhibited interrogatories which had been fully
.answered by the defendant, and thereafter, the
liquidator sought an order from the Court to
examfne the defendant -under a.
115 of the
Companies ~ct, 186~. It was held that the liquidator must 'satisfy. the Court that it would be just
and beneficial for the purposes of the winding up.
The Court in that case held that the action of the
liquidator was vexatious.• In In re M ai·ile Hose,
Limited, (') an order which ·was regarded-as-premature ,and oppressive in the circumstances of the
CASO was discharged by the Court. The Court baa
therefore jmisdiction in•proper cases, i.e. where it is
sa~isfied that thu order is vexatious, or oppressive,
or where other adequate grounds exist to discharge
the same. In our view, the High Court was.right
in holding that in a proper case it would be open to
the . Company Judge to vacate an ez.parte order
obtained under r.
243 "Of the Companies (Court)
Rules.
•'
The jurisdiction to va<Jfj1e or modify an exparte order under r. ·243 bein~granted, the question
(I) (1860) 15 Ch. D, 139.
(2) (1939) I Cb. D. 32
•
'
(1) S.C.R.
SUPREME COURT REPORTS
955
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
prqgress of an action filed by the official liquidator
agi,linst the appe!l&nt, nor is there reason to hold
that 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. The
appellant was for many years a director of the
company, and therefore concerned with guiding the
affairs of the company. He was prim,a facie a
person who would be able to give information likely
to promote the" purpose of the winrli11g up. lt
appears also that Mr. Justice Mitter was satisfied
on the statement filed by the official liquidator that
the appellant had the custody of certain important
books of the company. The plea of the appellant
that compelling him to submit to examination with·
out permitting him to have access to the books
before answering questions put to him is oppressive
has no substance. The affidavit filed on behalf of
the liquidator clearly states that the relevant
records of the company will be made available to
the appellant at the time of the examination.
The High Court, in appeal, expressed the
_
t
view that on the merits there was no ground for
interference and it was satisfied that it wall'
"desirable and necessary" that the appellant as a
director should be examined. The appellant having
been a director of the company during the period
when it is alleged the affairs were mismanaged, is
likely to be aware of the management and in
possession · of information conducive to effective
prosecution of the winding up and if the learned
1961
Satish Churnn Law
v.
H.K. Gartguly
ShahJ
1161
Batis/, Churan La.w
••
H, K. Ga11g11J,
SAnJa,1.
!156 SUPREME COURT REPORTS [1962) SUPP. "1
Judge thought it fit to order that the appellant be
examined the order cannot be regarded as either
vexatious or oppressive or otherwise liable to be set
aside.
Counsel for tho appellant submitted that the
order for examination must be made after considering all the fact11 and circumMtances of the case and
that there was nothing on the record to show that
the facts and circumstances were considered by
Mr. Justice Mitter before he made the order for examination. Tho appellant has admitted in his affidavit
that he was served with a copy of the order, but he
has not chosen to produce it in tho Court of First
Instance, nor is the order printed in th<J record
prepared for the use of the Court in this appeal. It
was nev<Jr suggested before the High Court that the
order was made without .considering the material
facts and circumstances. The Court has ma :le the
order in exercise of the jurisdiction vested in it and
in the absence of any material to show that the order
was made for a collateral purpose or by misleading
the Court, the appellant is not entitled to have the
order vacated. As pointed out by the Master of the
Rolls in In re Gol.d Company Ltd., (') "It must be
remembered that both the Chief Clerk and the
Judge know a great deal more of the proceedings in
the winding-up than the Court of Appeal oan know,
and there may be various grounds for exercising the
discretion, upon which the Court of Appeal cannot
possibly form any opinion. We must recollect also
thatitis. not necessary to make out a prima facie
case-the probability of a case is enough. A fair SUS·
pioion may be well worthy of further investigation,
and it may well be worth the expense and trouble of
examining witnesses to see whether it is well
founded. It is not necessary that the applicant
should establish his case before he applies to the
Judge: he may say to the Judge, "I have a strong
ground for suspecting that a oertain transaction was
(I) (1879) 12. Ch. D. 77.
•
•
,
t
-
·•
• (1) S.C.R. SUPREME COURT REPORTS
957
fraudulent; if it is proved to be so we shall get a
large some of money; will you let me lay out a
small sum of money in order to examine a witness
or two, so as to ascertain the facts? In that case the
Court will exercise a discretion." Mr. Justice Mitter
was the company Judge in charge of the liquidation
proceedings of the Company. Before him a state-
; ment of the official liquidator was produced: and in
the light of the materials placed before him, he
passed the order which is now sought to be modified.
This Court cannot promied upon an assumption
that the order for examination of a person who
has ceased to be a. director prior to the date of the
winding up must necessarily be re~arded as oppressive or vexatious. A director of a company, past
• or present, is ordinarily in a position to give useful
information a.bout the affairs of the Company in
winding up. In the circumstances, we think that
the High"Court was"right in holding,.that no case
was ma.de out for modification of the e;i: parte
order.
Two grounds were set up in support of the
plea. that the appellant before he is examined is
entitled to inspect the statement of the ofticial
liquidator : (a) that it is contrary to rules of natural justice to disallow inspection of the statement
on which a judicial order imposing an obligation
upon a party is made, and (b) that the rules of
procedure prescribed under the Companies (Court)
Rules authorise the person summoned to inspect
the statement of the official liquidator on which the
order is made. Rule 243 expressly contemplates
that an application for examination under ~· 477
may be made ex parte. An application by an official
liquidator is required to be supported by a statement signed by him, but the rule does not contemplate any notice to the parties likely to be affected
by the issue of the summons. The proceedings are
intended to be confidential. As observed in
1961
Satish Churan Law
v.
H. K. Gangu(J
Shah J,
1961
Satish Churari Law
••
H. K.G<mguly
SlwhJ.
958 SUPREME COURT REPORTS [1962J SUPP
In re Gold Oompanv (')by Sir George Jessel M.R ....
in these matters ... the object being to kt>ep the proeee·
dings Moret from the person sought to be affected,
and the practice is, and as far as I know alwn.ys haR
been, that the liquidator, instead of mn.king an
affid11vit, simnlv mak<'s a written statement which
ho leaves with the Chief Clerk, who thereupon issues
an order, anrl the written statement. cannot be got
at by anybody. whereas an affidavit ean." This pwctice in our juilgment is consonant wit.h right
and justice. That proceedings for examination of
officers and other persons are confid1mtial is empha.-
sised by rr. 247 and 248. By cl. (21 of r. 247 no
person is entitled to ta.ke part in thA examination
under s. 477 except the official liquirlator and his
advo~ate but the court may, ff it thinks fit, permit
any creditor or contrihntorv to attend the exami·
nation subject to surh conditions as it may imuose.
Cla.use ( 3) provides that notes of the examination
may be )l"rmitted to he ta.ken bv a witne~s or any
person on his behalf on his giving an undertakiug
that such notell shall he used onlv for the purpos<i
of re.examination of the witness.' It is also provided
that on the conclusion of the examination, the notes
shall, unless otborwise directed, be handed over to
the Ceurt for destruction. Rule 248 provides inter
alia, that the notes shall not he open t-0 the inspection of any creditor, contributory or other person,
exoopt the official liquidator, nor shall 11 copy thereof or extract there from he supplied to any person
othl'r than the official liquidator, save upon orders
of the Court. The proceedings for examination
under s. 477 being intended to be commenced only
in the interest of the Company and for the purpose
of collecting evidence for the a!frctive prosecution
of the liquidation are by rules expreSllly to be
commenced by order which may on the applicatfon
of the official liquidator be made e.-i: parte. The order
does not purport to deci<le any question in dispute
between the Company and the persons sought to be
(l)jl879) 12. Ch. D. 77.
•
'
•
'
(I) s.c.R.
SUPREME OOURT REPORTS
959
1961
examined. It only proceeds upon the satisfaction
of the Court that the person should be examined in
sa·f.h c,,.,,,, Law
the interest of the Company, it appearing to the
H. K.'G •• ,.11
Court just proper that he should be so examined.
There is nothing in the schemil of the Act which
indicates that an order passed for t.he exam in:ttion
of a person under. s. 477 may be mad" only after
serving a notice upon such person: the Rules expressly contemplate that the order may he made ex
parte. Rules of natural justice are therefore not
violated merely by the issue of an order requirini:: a
person or persons to appear before a Court for
his examination under s. 477.
N 0r do the rules of procedure framed by this
Court for examination under s. 477 contemplate
11.ny right of inspection of the statement of the
official liquidator. As we have already pointed out,
r. 243 contemplates an order ex parte and the
scheme of the Rule further emphasises the fact that
all these enquiries are intended as already discussed
to be confidential proceedings.
The person whose
examination is sought to be held, has therefore no
right to inspect the statement· made by the liquidator on which the order of the Court proceeds.
Rule 360 of the Companies (Court) Rules provides
that every duly authorised officer of the Central
Government, and, save as otherwise provided by
these Rules, every person who has been a director or
offic1>r of a company which is being wound up, ~hall
be entitled, free of charge, at all reasonable times to
inspect the file of proceedings of the liquidation and
to take copies or extracts from any document therein, and, on payment of the prescribed charges, to
be furnished with such copies or extracts. The
right to inspection is given in respect of the file of
the proce,edings of the liquidation. But the statement
made by the officia 1 liquidator under Rule 243
does not form part of the file of the proceedings
of the liquidation. The statement is not to he
made on oath : it has to be shown to the Company
Sha\ J.
1961
Satish Ohuran Law
y,
H. Ii. Gangu/y
Shah J.
960 SUPREME OOURT REPORTS (1962] SUPP.
i._...
Judge and the Judge has to apply his mind to the
contents thereof, but it does not, as pointed out
by Mr. Justice Law, form part of the liquidation
proceedings.
In the Company (Court) Rules,
there is no rule specifying the documents which
are to be included in the file of the liquidation
proceedings. The order passed by the Court and
the summons issued thereon may be regarded as
forming part of the f ik of the proceedings of liquidati<m, but having regard Go the nature of the
statement made by the official liquidator on which
this Judge's order is passed, it is not part of the
file of the proce.edings of liquidation. The person
summoned even if he is an officer or director of
the company, is therefore not entitled to inspection
thereof relying upon Rule 360.
It was urged by counsel for the appellant that
the petition for an order under s. 4 77 was inextricably connected with the statement of the official
liquidateor, and if the party affected by the order
was entitled to inspect the petition, he was entitled
to inspect the statement which formed part of the
petition. There is however, no warrant for the
view that the petition and the statement form part
of tha same document. The petition has, it is true,
to be supported by a statement, but the statement
is independent of the petition.
It appears that the practice of the Calcutta
High Court, prior to the promulgation of the Companies (Court) Rules, was different. Under r. 195 an
application for examination of a person under s. 195
of the Indian Companies Act 1913, could be made
ex parte to the Judge but it had to be by petition
verified by the official liquidator stat in I? the facts
upon which the application was based. It was
also provided that at the hearing, the Judge m<ty,
if sa. tisfied that a prima. facie case for examination
had been ma.de out, direct the issue of a summons
or summonses against the person or persons named
'
•
•
•
•
(1) S.C.R. SUPREME OOURT REPORTS
961
in the order for examination and/or for the production of the documents. Manifestly, the order
oould be obtained on a petition which was required to be verified by the official liquidator and
there had to be a formal hearing and only if a
prima facie case for hearing had been made out
the order could be made. U11der the Companies
(Court) Rules a different praetice, which approaches
the practice prevailing in the English Courts baa
been set up. The mere fact that under r. 195 of
the Calcutta High Court Rules under Act of 1913
the appellaut might have had a right of access
to the statement on which the order was founded
will not be an adequate ground for holding that the
earlier practice must continue to prevail. If the
appellant is not entitled to inspection of the statement he would certainly, for the si;tme reason, not
be entitled to a copy of that statement.
On the view taken, this appeal must fa.ii and
is dismia8ed with cOBts.
Appwl dismissed.
JETHA NAND
v.
THE BON'BLE JUDGES OF 'l'HE PUN.JAB
IDGH COURT
(P. B. GAJENDRA.GADKAR, A. K. SARUR,
K.N. WANCHOO, K.C. DAB GUI'TA and
•
N. RAJAGCPA.LA AYYANGAR, JJ.)
AdlJOCIJU on tke R"ll of Bind High Oourt-Sind cta.ie& to
form part of India--If right w pra-Otiee in court. of India continue-India (Adaptation of Existing Indian Law•) Order, 1947,
•· 5--Phe Indian Bar 0ouMil8 Act, 1926 [38 of 1926], •· 14.
The appellant J who was enrolled as an advocate in the
Chief Court of Sind in May 1947 came to India at the end of
the year 1948 and practiced in the Courts at Delhi. The
Chief Justice of Punjab High Cour~ prohibited the ap~ellant
from practiciny u an advocate m the Courts of Delhi. At
JHI.
Satish Churan law
v.
H. K. Gang11fy
Shah J.
1P61
Dtcnntn 6 .