# RAJA NARAYANLAL BANSILAL v. MANECK PHJHOZ MISTHY AND ANOTHER

- **Citation:** [1961] 1 S.C.R. 417
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** B. P. Sinha, P. B. Gajendragadkar, K. N. \;Vanchoo, K. C. DAs GUPTA, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/raja-narayanlal-bansilal-v-maneck-phjhoz-misthy-and-another-2173
- **Pages:** 28

## Headnote

Company-Investigation into affairs of-Inspector appoi11tcd
11nder olcf Act, if can exercise po<ecrs"under ·new Act-Constitution--
Testimonial compulsion-Trhether provisions for production of documents and evidence offend guarantee-Equal protection of the lm<'--
If provisions for investigation and production of evidence offend
g·uarantcr-Indian Companies Act, r913 (VII of I9IJ), s. I JS--
Indian Companies Act, I956 (I of I95fi), ss. 235, 239, 240, 645 and
646, Constitution.of India, Arn. I4 and 20(3).
On November 15, 1954, the Registrar wrote to the company
of which the appellant was the Managing Agent under s. 137,
Indian Companies Act, -1913, that it had been represented to him
that the business of the company was carried on in fraud and
called upon it to furnish certain information. On April 15, 1955,
the Registrar made a report to the Central Government under
s. 137(5) to the effect that in his opinion the affairs of the company
were carrie<l on in fraud of co11ntrihutories and they disclosed an
unsatisfactorv state of affairs and that a case had been n1ade out
for an investigation under .s. 138.
Thereupon, the Central
Government, on November I, 195j, appointed an Inspector to
investigate the affairs of the company and to report thereon.
The Inspector \Vas authorised under s. 140 to examine any person
on oath, and he wrote to the appellant that he would examine
him on oath in relation to the business of the company. On
April 1, 1956, the Indian Companies Act, 1913, was repealed. by
the Indian Companies Act, 1956, which conferred wider and more
drastic powers o( investigation. On July 26, 1956, .the Central
Government accorded apprornl under s. 239(2) of the new Act to
the Inspector exercising his powers of investigating into ancl
reporting on the affairs of the company. In May 1957 the Inspector served notices upon the appellant calling upon him to
attend his office on the date and the time specified for the purpose of being examined on oath and to produce certain account
books and papers relating to the company. The appellant challenged the investigation and contended: (i) that since the
Inspector was appointed under the old Act he had no jurisdiction
to exercise the po\vers referable to the provisions of the new Act,
(ii) that s. 240 of the new Act which provided !or the production
of documents and evidence at such investigations offended Art.
20(3) of the Constitution, and (iii) that s. 239.of the new Act
which conferred po\vers on inspectors for investigation antis. 240
offended Art. 14 of the Constitution.
1960
,-l11g11st 3r.
- -
418
SUPRE:\IE COt;RT REPORTS
[ J!)(\J]
1960
Held, that the Inspector appointed under s. 138(4) of the old
Act must be deemed tn ha,·e been appointed under s. 235 of the
Uaja .\'aruya11lal nt\V Act and had authority and pov;er to issue notices under
Ra,,<ilal
s. 240 of the new Act. Section 645 of the new Act provided that
"·
the appointment of an Inspector under the old Act shall, on repeal
ff/a,,rck Pliiiv::
of the old :\ct and cin coming into force of the nc\v ,\ct, have
1\fistry (. .. Anvtlur effect as if it was n1a<le under the nc\v Act.
Section 646 '''hich
provided that not.hi:1g in the new Act shall affect the O]'eration of
s. 138 of the old Act as respects inspectors was not an exception
or proviso to s. 645 <ind the l\\'O se:ctions being saving sections
had to be read as independent of and in atldition to, and not as
exceptions to, each other.
Hdd, further thats. 240 of Indian Companies Act, HJ56, did
not offend Art. 20(3) of .the Constitution.
For invoking the constitutional right again5t testimunial compulsion guaranteed
un.ler Art. 20(.1) there must !Jc at the relevant stage a formal
accusation against the party pleading the guarantee relating to
the commission of an offence which rnay result in a prosecution.
The enquiry undertaken under s. 240 by the Inspector was in
substance an enquiry into the affairs of the company; at this
stage there \Vas no accusation, formal or other\l.·is

## Text

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1 S.C.R. SUPREME COURT REPORTS
417
RAJA NARAYANLAL BANSILAL
v.
MANECK PHJHOZ MISTHY AND ANOTHER.
(B. P. SINHA, c .. J., P. B. GAJENDRAGADKAR,
K. N. \;VANCHOO, K. C. DAs GUPTA and
J. c. SHAH, JJ.)
Company-Investigation into affairs of-Inspector appoi11tcd
11nder olcf Act, if can exercise po<ecrs"under ·new Act-Constitution--
Testimonial compulsion-Trhether provisions for production of documents and evidence offend guarantee-Equal protection of the lm<'--
If provisions for investigation and production of evidence offend
g·uarantcr-Indian Companies Act, r913 (VII of I9IJ), s. I JS--
Indian Companies Act, I956 (I of I95fi), ss. 235, 239, 240, 645 and
646, Constitution.of India, Arn. I4 and 20(3).
On November 15, 1954, the Registrar wrote to the company
of which the appellant was the Managing Agent under s. 137,
Indian Companies Act, -1913, that it had been represented to him
that the business of the company was carried on in fraud and
called upon it to furnish certain information. On April 15, 1955,
the Registrar made a report to the Central Government under
s. 137(5) to the effect that in his opinion the affairs of the company
were carrie<l on in fraud of co11ntrihutories and they disclosed an
unsatisfactorv state of affairs and that a case had been n1ade out
for an investigation under .s. 138.
Thereupon, the Central
Government, on November I, 195j, appointed an Inspector to
investigate the affairs of the company and to report thereon.
The Inspector \Vas authorised under s. 140 to examine any person
on oath, and he wrote to the appellant that he would examine
him on oath in relation to the business of the company. On
April 1, 1956, the Indian Companies Act, 1913, was repealed. by
the Indian Companies Act, 1956, which conferred wider and more
drastic powers o( investigation. On July 26, 1956, .the Central
Government accorded apprornl under s. 239(2) of the new Act to
the Inspector exercising his powers of investigating into ancl
reporting on the affairs of the company. In May 1957 the Inspector served notices upon the appellant calling upon him to
attend his office on the date and the time specified for the purpose of being examined on oath and to produce certain account
books and papers relating to the company. The appellant challenged the investigation and contended: (i) that since the
Inspector was appointed under the old Act he had no jurisdiction
to exercise the po\vers referable to the provisions of the new Act,
(ii) that s. 240 of the new Act which provided !or the production
of documents and evidence at such investigations offended Art.
20(3) of the Constitution, and (iii) that s. 239.of the new Act
which conferred po\vers on inspectors for investigation antis. 240
offended Art. 14 of the Constitution.
1960
,-l11g11st 3r.
- -
418
SUPRE:\IE COt;RT REPORTS
[ J!)(\J]
1960
Held, that the Inspector appointed under s. 138(4) of the old
Act must be deemed tn ha,·e been appointed under s. 235 of the
Uaja .\'aruya11lal nt\V Act and had authority and pov;er to issue notices under
Ra,,<ilal
s. 240 of the new Act. Section 645 of the new Act provided that
"·
the appointment of an Inspector under the old Act shall, on repeal
ff/a,,rck Pliiiv::
of the old :\ct and cin coming into force of the nc\v ,\ct, have
1\fistry (. .. Anvtlur effect as if it was n1a<le under the nc\v Act.
Section 646 '''hich
provided that not.hi:1g in the new Act shall affect the O]'eration of
s. 138 of the old Act as respects inspectors was not an exception
or proviso to s. 645 <ind the l\\'O se:ctions being saving sections
had to be read as independent of and in atldition to, and not as
exceptions to, each other.
Hdd, further thats. 240 of Indian Companies Act, HJ56, did
not offend Art. 20(3) of .the Constitution.
For invoking the constitutional right again5t testimunial compulsion guaranteed
un.ler Art. 20(.1) there must !Jc at the relevant stage a formal
accusation against the party pleading the guarantee relating to
the commission of an offence which rnay result in a prosecution.
The enquiry undertaken under s. 240 by the Inspector was in
substance an enquiry into the affairs of the company; at this
stage there \Vas no accusation, formal or other\l.·ise, against any
specified individual. The mere fact that a prosecution may utlimately l>e launched against the alleged offenders would not
fl~trospecti\'ely cliangc the complexion or character of
tlu~
proceedings held by the Inspector when he makes the im·estigation.
Maqbool lltissaii; v. The Sta"' of liomlay, [1953] !'.C.K 730,
S. A. Vc11k<1laraman '" The l..'nio11 of India, [1954] S.C.R. u50,
~f. P. Sliar1110 v. 3olid1 Cha11<ira, District Magistrale, /Je/hi, [1954]
S.C.K 1077, Thomas Dana'" S/af,; of Punjab, [1959] Supp. l
S.C.I{. 274 anu ,\fohammcd Dastagir '" Fhe Slate of Madras, [ 1960]
3 S.C.R. u6, relied on.
Jldd, further that ss. 239 and 240 of the fndian Companies
Act, 1951>, <lid not violate Art. 14 of the Constitution. Thes" sections dPnied the company and persons in charge of the man;1ge1nent of such co1npanir~s the ordinary protection afforde<l to \Vitnesses under s. 132 of the Evidence Act and under s. 161(1) and (2)
of the Criminaf Procedure Code.
As they were entrusted with
the financial interests of a large number of citiz~ns it \vas li:>gitirnate to treat such cornpanies ancl their rnanagers as a class hy
themsel\'es and to provide for necessary safeguards and checks
against abuse of p0\\·1~r by the managers. The basis of the
classitiratinn is founc'.ed rJn 311 inteJligibJc differentia \Vhich has.
a rational relation to the object sought to be achicvell.
Sltri Ram /(ris/11111 Da!mia v. ju.1tirr Toidol/;ar, [1959] S.C.R.
297, applied.
CIYII.
APPELi.A TE
JURISDICTION :
Civ ii A ppea.l
No. 268 of 1959.
1 S.C.R. SUPREME COURT REPORTS
419
Appeal froru the judgment and decree dated Sepz960
tember 3, 1958, of the former Bombay High Court in R . N1 1
A
I N
28/1958
a1a
arayan a
ppea I O.
•
1
Bansilal
A. V. Viswanatha Sastri, Ganpat Rai and I. N.
M
kv.
.
Sh ,ff c
II
anec Phiroz
roJJ, !Of the appe ant.
Mistry & Another
JJf. C. Setalvad, Attorney.General for India, B. Sen
and T. M. Sen, for the respondents.
1960. August 31. The Judgment of the Court was
delivered by
GAJENDRAGADKAR J.-The appellant Raja Nara- Gajendragadkar ].
yanlal Bansilal of Bombay is the Managing Agent of
a Limited Company named the Harinagar Sugar Mills
Limited. By virtue of the power conferred on him
by s. 137 of the Indian Compl~nies Act, 1913 (VII of
1913), the Registrar wrote to the mills on November
15, 1954, that it had been represented to him under
s. 137(6) that the business of the company was carried
on in fraud, and so he called upon the company to
furnish the information which he required as set out
in a part of his letter (Ex. A).
On April 15, 1955, the
Begistrar made a. report (Ex. AA) to the Central
Government under s. 137(5) of the said Act. This report showed that according to the Registrar the affairs
of the company were carried on in fraud of contributories and they disclosed an unsatisfactory state of
affairs. The report pointed out that the appellant
was the Managing Agent of the company as well as
its promoter, and that it was suspected that under a
fictitious name of Bansilal Uchant Account the company was advancing money to the several firms owned by the appellant which were ostensibly purchased
from the company's funds.
The report further stated
that between the years ending in September, 1942 and
1951 about Rs. 19,200 were paid for Harpur Farm
and Rs. 39,300 for Bhavanipur Farm, and accounts
disclosed that the Uchant Account was chiefly operated upon for purchasing E:mch lands out of the funds of
the company though the purchase in fact was for and
on behalf of the appellant. The Registrar also added
that he had reason to believe that the Managing
5-1
420
Sl:PRE:IIE COCRT REPORTS
[1061]
'960
Agent was utilising the property of the company in
Raia .~-,,-;;,,.,,,,;,. 1 some cases for his pers011al gain, and concluded that,
· n.,.,;z.1
in his opinion, a case had liecn ma.de out for an invcs-
"·
tig<ition under s. 138.
Mai"'k Phi•w
On receiving this report, on ~ovembcr l, 1955, the
M"''·'· "'- 11''"'"" Centrnl Government passed an order under s. 138(4)
Gajrnd"''"d""' 1_ of t.he said Act (Ex. B) appointi11g the first respondent
·
t.faneck P. Mistry, who is a Chartered Accountant., as
an inspector to investigate the affairs of the company
from the date of its incorporation. The said inspector was asked to point out all irregularities and contraventions of the provisions of tho said Act or any
other law, and make a full report as indicated in a
communication which was separately sent to him.
This separate communic<!.t.ion (Ex. llBJ prescribes thti
mode of enquiry whieh should be adopted by inspectors. It requires
th:~t while i11vestigating the affairs
of companies the inspectors should liear in mind that
for a successful prosecution the evidence in support
of •L charge must be clear, tangible and cogent, and
that their reports should specify with reference to t.he
evidence collected during the investigations the points
specified under paragraph 2(a) to (e).
ln the course
of their inHstig1~tion the inspectors are asked LO
make use of the powers availablo to them under s. 140
of the said Act including the right to examine a person on oath. The investigation should be conducted
in. private and the inspect-0rs a.re not Plltitled to make
public the information received by them during the
course of thejnvestigation.
Pursuant· to the powers conferred on him by the
said order n•spondent 1 wroto to the appellant inti·
mating to him that he would examine him on oath in
relation to the business of the company under s. 140(2)
of the said Act (Ex. C).
Meanwhile on April I, 1956,
the Companies Act of 1913 (Vll of 1913) was repealed
by the Companies Act of 1956 (I of 1956).
For the
sake of convcnienee we would hereafter refer to the
repealed ~\ct as tho old Act and the Act which came
imo force ou April 1, 1956, as the new Act. On July
26, 1956, the Contra! Government purported to exorcise its power undor s. 239(2) of the new Act and
1 S.C.R. SUPREME COURT REPORTS
421
accorded approval to respondent 1 exercising his
1960
powers of investigating into, and reporting on, the• . -
affairs of the appellant including his personal books RaJa Narn
1y
1
anlal
ff ,
f
Bansi a
of accounts as well as the a airs o the three concerns
v,
specified in the order. These three concerns are M/s. Man.ch Phiroz
Narayanlal Bansilal, who are the Managing Agents Mistry & Another
of Harinagar Sugar Mills, the Shangrila Food Pro-
. ·-·
ducts Limited and Harinagar Cane Farm. It appears Ga1endragadkar ].
that the appellant is the proprietor of the firm of
·
N arayanlal Bansilal. After this order wa.s passed
respondent 1 served upon the appellant tho four impugned notices (Ex. E collectively) on May 9, 1957,
May 16, 1957, May. 29, 1957 and June 29, 1957, respectively. These notices are substantially identical in
terms, and so it would be sufficient for our purpose to
set out the purport of one of them. The first notice
called upon the appellant to attend the office of respondent 1 on the date and at the time specified for the
purpose of being examined on oath in relation to the
affairs of the company, and to ·produce before respondent 1 all the books of accounts and papers relating to
the sajd company as mentfo'ned in the notice. The
appellant was further .told that in default of compliance with the requisition. aforesaid necess!Lry legal
steps would be taken without further reference to
him. The notice contains a list of twelve items describing the several documents which the appellant
was required to produce before respondent 1.
After these notices were serv.ed on the appellant he
filed a petition (N"o. 201 of 1957) in the Bombay High
Court and prayed that the High Court should issue
a writ of certiorari or any other appropriate direction,
order or writ under Art. 226 of the Constitution calling upon respondent 1 to produce the records of the
case relating to the notices in question and to set aside
the said notices, the proposed examination of the
appellant and the interim report made by him. It
fu!'ther prayed for a writ of prohibition or any other
appropriate direction, order or writ restraining respondent 1 from making any investigation under the said
notices and from exercising any powers of in vestigation under s. 239 and/or s. 240 of the new Act and/or
422
SGPREJJE COL"RT REPORTS
[I!J6l]
196o
from investigating into the affairs of any persons or
\-:--
1 1 C'onr.crns specified in the petition. Tho petitioner
Raia . araya" a
l .
d h
•
· 1
d
H
fi
8 • 11,,1•1
c am1e t ese writs mam y on two groun s.
e
rst
v
alleged that since respondent l had been appointed
Ma11eck l'M•o• under the old Act he had no jurisdiction to exercise
Mist'Y & A 11oth" powers referable to the relevant provisions of the new
.
-
Act.
This ground assumed t·hat the sn.id relevant
Ga;rndo-agadq"' J.
. .
f h
\
l .d b
. .
d
prov1s10ns o t e new 1 ct arc va 1 ,
ut 1t 1s urge
that the powers rcferablo to the said provisions are
not available to respondent I since he was appointed
under the old Act.
The other ground on II' hich the
lrrits wer11 claimed challenges tho vircs of ss. 23!J and
240 of the new Act. This challenge assumed an allernat.ive form.
It is argued thats. 240 offends against
the constitutional guarantee provided by Art. 20(3) of
the Constitution and it is also urged that certain portions of ss. 239 and 240 offend against another constitutional guarantee prnvided by Art. 14 of the Constitution. It is thus on these three contentions that the
petitioner claimed appropriate writs by his petition
bt'fore the Bombay High Court. These pleas wern
resisted by the Union of India which had been joined
to the proceedings as respondent 2. '.\Ir. ,Justice K. T.
Desai, who heard the petition, rejected the contentions raised by the petitioner, and held that no case
had been made out for the issue of any writ.
This
decision was challenged by the appellant beforo
the Court of Appeal in the Bombay High Court; the
Court of Appeal agreed with the view taken by
DPsai, J., and dismissed the appeal. Thereupon the
1ippella.nt applied for and obtained a certificate from
the High Court, and it is with the said certilicato that
he has come to this Court by his present appeal.
On
his behalf :\Ir. Viswanatha Sastri has raised the same
three point.s for our decision.
Lot us first examine the question whether or not the
first respondent has jurisdiction t-0 exercise the powers
under the relevant provisions of the new Act. It is
common ground that ff respondent 1 's powers to hold
the investigation in question are to be found in the
relevant provisions of the old Act and not those of the
.new Act tbe impugned notices issued by him would be
1 S.C.R. SUPREME COURT REPORTS
423
without authority and jurisdiction. In dealing with
'960
this question it is necessary to examine the broad fea. Raja Narayanlal
tures of the relevant sections of the two Acts.
Bansilal
We will begin with the old Act. Section 137 of the
·v.
old Act deals with investigation by the Registrar. Maneck Phiro•
Section 137(1) pr0vides that where the Registrar on M"1'Y &- Another
perusal of any document which a company is required Gajendragadkar J.
to submit to him is of opinion that any information or
explanation is necessary in order that such document
may afford full particulars of the matter to which it
purports to relate he may, by a written order, call on
the company to furnish in writing the necessary infor.
mation or explanation within the time to be specified
in the order. Section 137(5) requires the Registrar to
make a report in writing to the Central Government
if no information is supplied to him within the speoi·
lied time, or if the information supplied to him appears
to him to disclose an unsatisfacto.ry state of affairs, or
does not disclose a full and fair statement of the relevant matters. Thus s. 137(1) to (5) deal with the
investigation which the Registrar is empowered to
make on a persual of the document submitted to him
by .a company under the provisions of this Act. Section 137(6) deals with a case where if it is represented
to the Registrar on materials placed before him by
any contributory or creditor that the business of a company is carried on in fraud or in fraud of its creditors
or in fraud of persons dealing with the company or
for a fraudulent purpose, he may, after following the
procedure prescribed in that behalf, call for information or explanation on matters to be specified in his
order within such time as he may fix, and when such
an order is passed the provisions of s. 137(2) to (5)
would be applicable. This sub-section provides that
if at the end of the investigation the Registrar is satisfied that the representation on which he took action
was frivolous or vexatious he shall disclose the iden.
tity of the informa.nt to the company. This provision
is obviously intended as a safeguard against frivolous
or vexatious representations in respect of the affairs
of any company. The provisions. of this section 8.fe
substantially similar to the provisions of s. 234 of thenew Act.
·
,124
SCPRE:\IE corRT REPORTS
[1961]
'9""
Section 138,
which drals with inveatigation of
R
\-:- --
1 . a.fTa.irs of companies bv inHpcotorn, 1rnthori8rH the
a;a • ·11rn1·n11 fl! 1.,
l ,..,
•
n ... ,.1~1
_-cntra 1,overnme11t t•) appoint orrn or more compet-
'"
ent inspectors to investignte thn affair; of any com-
"'"'"'k l'h"o: pany and report thereon in ;uch manner <\S tho said
~fosrry <:- .4notlu'Governrucnt may direct. The 11ppointment of comG .
--d'
petent inspectors ca;n he made hy thn C'~nt.ral Govern-
•1••draga ""' I
,
r
1
f
, ' ;i ,
138( I
· nwnt rn 1our e asses o cases as ~pec1l;cu in s.
)
to (4). It would be relevant to refer to t-"·o of tlwse
cases.
Under s. 138(1) a compet.cnt insp•:ctor r1t11 bo
appl)inted in tho o,ase of a hanking compn.11y havin~ a
sham capital on the application of memliern holding
not less than one-fifth of the shares issued, and under
s. 138(4) in the case of any company 011 a report hy
the Registrar under s. l:l7(5).
This sectio11 substantially corresponds t•) s. 233 of the new Act.
The other sections of tho old Act to whiclo reference
must be marle r.re
ss. 140, 141 · a11d 141 A.
Secti•m 140( I) imposes upon n.11 persons who are or have
been officers of the company an obligation tu produce
before the inspectors all books and documents in their
custody or power relating to the company.
Section 140(2) empowers the inspector to ex:i.mine on oath
any such person, meaning a person who is or hns heen
an officer of the company in relation to thP busiJJess of
the eompany and t.o administ€r an oath to him.
Section 140(3) pro\' ides that if a peri;on refuses tu produce
a Look or a document or to answrr uny questio11 lw
sbfall be liable to a fine not. exceeding Hs. 50 ill respe0t of each offo11ce.
Section 141 pruYides tha.t on
the conclusion of an invcstigntion the inspect.ors shall·
report their opinions to the Central Government, and
shall forward a copy ,,f their report to the registered
office of the company; and it also provides that ti
eopy of the said report. can be delivered at their requ.
est to tho applicants for the im·estigation.
Thon wo
haves. 141A which deals with the institution oJf pro.
sec11t10ns.
Section 14lA(l) provides that if from
1rn~·
report made under s. 138 it appears to the CPntral
GoYcrnment th11t any person has been guilty of any
offence in relation t•J the company for which he is criminally liable the Central Government shall refer the
I
l S.C.R. SUPREME COURT REPORTS
425
matter to the Advocate.General or the Public Prosecutor. Section 141A(2) lays down that if the law offi- Raja Narnyanlal
cer who is consulted under (I) considers that there is
Ba11silal
a case in which prosecution ought to be instituted he
v.
.
shall cause proceedings to be instituted accordingly. Maneck Phiroz
Th
· b · f ·
h
h
f h
1
t
· ·
Mistry & Another
at m r1e 1s t e sc eme o t e re evan prov1s10ns
of the old Act.
-
Gajeadragadkar j.
We will now examine the scheme of the relevant
provisions of the 1iew Act. It has already .been noticed that ss. 234 and 235 of the new Act arc substantially similar to ss. 137 and 13.8 of the old Act. Section 239 of the new Act provides for the powers of the
inspectors to carry on investigation into the affairs of
related companies or of managing agent or associate.
'l'he sweep of the enquiry authorised by this section is
'very mnch wider than that under the corresponding
section of the old Act.
Sub-section (1) of this section
authorises an inspector to investigate the affairs of a·
company and also the-affairs of any other body corpornte or person specified in els. (a) to (d) if he thinks
it necessary so to do.
These clauses include several
cases of body corporate which may have any connec-
"ti<>n direct or indirect, immediate or remote, with the
dfairE of the company whose affairs are under invest igatiou.
IL is unnecessary for our purpose in the
present appeal to enumerate the Raid cases serially or
exhaustively. It is conceded that the three other
persons who have been called "upon by respondent 1
to prodμce documents and give evidence fall within
the purview of s. 239.
As a result of the 'provisions
of s. 239(1) the inspector has to report not only on the
affairs of the company under investigation but also on
the affairs of other bodies or persons who have been
compelled to give evidence and produce documents
during the couri;e of the enquiry. The only safeguard
provided against a possible abuse of these extensive
powers is that in the case of any body corporate or
person rderred to in els. (b)(ii), (b)(iii), (c) or (d) of subs. (1) the inspector shall not exercise his relevant
power without first having obtained the prior approval of the Central Government thereto.
Section 240 of the n·ew Act imposes an obligation
42ti
SUPRE:\JE COURT REPO!t'l'S
[ l!J!il J
'9"°
on the corporate bodies and persons in respect of
R .
~-
1 1 which or whum ill\·estigation is authorised bys. 239 to
a1a ivar11ya11 a
H<omlal
produce all books and papers and to gi~·e all assistance
v.
in connection with the said investigation ; that is tho
Ala""" Phi>or result of s. 240(1).
Section 240(2) empowers th0 insM"1'Y 6· A"°'"" pector t.o examine 011 oa.t.h any of the persons referred
c.,,,,d,:~:dka' J. to i1_l. sub-s. (I~ iu rela.tion to the. relevant matters as
spec1h8d.
Sect10n 240;3) deals with a case where a
person refuses to comply with the obligation imposed
on him by s. 240(1) or (2); and it provides that in
such a case tho inspector may certify the refusal
under his hand to tho court, and tho court may thereupon <'nquiro into the case, hear witnesses who may
be produced against or on behalf of the alleged offender, consider any statement which may Le offered in
defence, and puni~h the offender as if he had been
guilty of contempt oft.he court. Section 240(4) deals
with a case where the inspector thinks it necp;·sary
fur the purpose of his investigation that a person
w horn ho has no power to examine on oath shoulrl ho
cxaminod, and it provides that in such a. case he may
apply to the court, and the court may, if it thinks
tit, order that person to attend and be examined on
oath before it on any m1ttt-0r relevant to the invest.igation. This sub-section provides for the procrdure
to be followed in examining such a witness.
Section 240(.'i) lays down that notes of any examination
under sub-s. (2) or (4) ohall be ta.ken down in writing,
and shall be read over to or by, and signed by, the
persan examined, and may thereafter be used as
evidence against him.
Having thus made elaborate
prol'isions for tho production of documents and
evidence in the course of the investigation by the
inspect-Or, s. 241 deals with the inspectors' report and
provides that inspectors may, and if su directed by the
Cemml Govemment sh.'\11, make interim reports to
that. Government, and on the conclusion of the investi-
"at1on shall make a final report to it.
SecLion 241(2)
provide• for the supply of the copy of tho said mport to
the several parties concerned as specified in els. (a) to (e).
That takes us to s. 242 which deals with prosecution.
Section 242(1) provides inter alia that if from
1 S.C.R. SUPREME COURT REPORTS
427
any report made under s. 241 it appears to the
r96o
Central Government that any person has in relation R . ,-, -
1 1
.
f
cc
,,
h' h
a;a1 nrayana
to the· company been gmlty o any ouence 1or w JC
Bansital
he is criminally liable, the Central Government may,
v.
after taking such legal advice as it thinks fit, prosecute Maneck Phiro:
such person for the offence, and it imposes on all officers Mistry <> Another
and agents of the company, except those prosecuted, G . d--dk 1
.
h C
l G
ll
.
,
a;en rnga
ar .
to give t e entra
overmrient a assrntance m connection with the prosecution which they are reasonably able to give. That broadly stated.is the position
with regard to the relevant provisions of the new Act.
Mr. Sastri has drawn our pointed attention to the
fact that the scope and nature of the enquiry authorised by the new Act are very much wider than under
the old Act, and he has characterised the relevant
powers conferred on the investigating inspectors as
draconian. He, therefore, contends that unless it is
established that these powers are available to the
inspector appointed under the relevant provisions of the
old Act the impugned notices must be set aside; and
his argument is that these powers are not available to
the inspector appointed under the old Act. The deci.
sion of this question will depend mainly on the construction of ss. 645 and 646 of the new Act.
Section 644 provides for the repeal of the enactments mentioned in Schedule XII; the old Act is one
of the enactments thus repealed. Ordinarily the effect
of the repeal of the old· Act would have been governed
by the provisions of s. 6 of the General Clauses Act
(10 of 1897), but in the case of the new Act the aμplication of the said section is subject to· the provisions
of ss. 645 to 657 of the Act ; that is'\he effect of s. 658
which provides that the mention of particulars in
ss. 645 to 657 or in any other provisions of this Act
shall not prejudice the general application of s. 6 of
the General Clauses Act, 1897, with respect to the
effect of repeals. In other words, though s. 6 of the
General Clauses Act will generally apply, its application will be subject to the provisions contained in
ss. 64~ to 657; this position i~ not disputed.
It 1s now necessarv. to consider s. 645. It reads
thus:
· -
55
•
428
SUPRE~IE COUHT REPORTS
[HJ61]
'960
"~othing in this Act shall affect any order, rule,
Raja Xarnyonlol regulation, appointment, conveyance, mortgage, deed,
llansilal
document or agreement made, fee directed, resolution
v.
passed, dirrction given, proceeding ta.ken, instrument
Monrc• P"" 0 ' executed or issued, or thing done, under or in pursu-
~"'''Y
1~ Anotha a.nee of any previous companies law; but any such
c.1,,.,1,.,.dkor ;. order, rule, regulation, appointment, conveyance,
·
mortgage, deed, document, agreement, fee, res(>lution,
direction, proceeding, instrument or thing shall, if in
force at the commencement of this Act, continue to I.Jo
in forct1, and so far as it could have been made, directed, passed, given, ta,ken, executed, issued or done
under or in pursuance of this Act, shall have effect as
if made, directed, passed, given, taken, executed,
issued or done under or in pursuance of this Act."
The effect of this section is clear. If an i11spector has
been a.ppointed under the relevant section of the old
Act, on repeal of the old Act and on coming into force
of the new Act, his appointment shall have effect a.s if
it wao made under or in pursuance of the new Act.
Indeed it is common ground that if s. 645 had stood
a.lone and had not been followed by s. 646 there would
have been no difficulty in holding that the inspector
appointed under the old Act could exercitie his powers
and authority under the relevant provisions of the
new Act, and the impugned notices would then be
perfectly \'a.lid.
Incidentally we may rofor to the
'provisions of s. 652 in this connection.
Under this
section any pernon appointed to any oflice under or by
virtue of any previous company law shall be deemed
to have been appointed to that office under this Act.
It is, however, urged that the authority of the
inspector which is in dispute is governed by s. 646.
This section provides :
" Nothing in this Act shall affect tbe operation of
section 138 of the Indian Companios Act, Hll3 (Vll of
1913), as respects inspectors, or as respects the continuation of an inspection begun by inspectors,
app•Jinted before the commenccmont of this Act ; and
tho provisions of this A.ct shall apply to or in relation
to a report of inspectors a.ppointod under the said
~cction 138 as thoy apply to or in relation to a report
1 S.C.R. SUPREME COURT REPORTS
429
of inspectors appointed under section 235 or 237 of
I96o
this Act.''
Ra1a N'arayanlal
The argument is that the expression "nothing in
;ansital
this Act" includes s. 645 and so s. 646 should be read
v.
as an exception or proviso to s. 645; and if that is so, Maneck P~ii-oz
all matters covered by s. 138 of the old Act must con- Mistry & Another
tirrne to be governed bv the said Act and not by any G . d--dk 1
•
W
·bl
a1en raga
ar
.
of the provisions of the new Act.
e are una e to
accept this argument. In appreciating the effect of
the provisions of s. 646 it is necessary to bear ill mind
that it occurs in that part of the new Act which deals
with repeals.and savings. Sections 645 to 648 are the
saving sections, and ordinarily and in the absence of
any indication to the contrary these saving clauses
should be read as independent of, and in addition to,
and not as providing exceptions to, one another. It
is significant that whereas s. 646 provides for the continuance of the operation of s. 138 it does not make a
corresponding provision for the continuance of the
operation of s. 140 of the old Act which deals with the
powers of the inspector to call for books and to ex11mine parties. Besides, it may perhaps not be accurate
to suggest that having regard to the provisions of
s. 645, s. 646 is wholly redundant. It would be possible- to take the view that cases falling under s. 138(1)
of the old Act are intended to be covered by s. 646 as
they would not be covered by s. 645. In regard to
the case of a banking company coveted by s. 138(1)
s. 646 will come into operation and that may be one
of the reasons for which s. 646 was enacted. It may
be that the case of the banking company may also be
covered by s. 35 of the Banking Companies Act 10 of
1949, but since s. 138(1) applied to the said case until
the old Act was repealed the Legislature may have, as
a matter of caution, thought it necessary to provide
for the continuance of the operation of s. 138 by
enacting s. 646.
However that may be, we feel no
difficulty in holding that s. 646 should not be construed as a proviso to s. 645 but as an additional saving
provision. The words used iri s. 645 are so clear, and
the .policy and object of enacting the said provision
are in our opinion so emphatically expressed, that it
430
SUPRK\fE COURT REPORTS
[1961]
i96o
would be unr<'asonable to hold thats. 646 was intendR .
\~. 1 1 cd t-0 provide for such a radical exception to s. 645.
"'
0
- "'
0 •""
0 \\"J
h L . 1
· n,..,,, 101
· · 1erc t e
cg1s ature enacts a saving section as a
"·
runlter of abundant caution the argument that the
Ma .. cck pi,,,,, eun.ctmcnt of the said Hect.ion was not wholly necesMi•1'.Y "- Ano11,., sary cannot be treatBd as decisive or even d'fective.
G .
---
Therefore, in our opinion, the High Court was right in
a~ettrlragadkar J
.
l
J •
,
·
· conung to tie cone us10n that the mspoctor appointed
under s. 138(4) of tl1e old Act mtrnt hy legal fiction,
which ·is aut.horised by s. 645, be deemed to have been
appointed un<lor s. 23.i of tho new Act, and if that is
so, respondent. I had R nt.bority and power to issue the
impugned notices under s. 240 of the new Act. The
challenge to the validity of the impugned notices on
tho ground that respondcnt I bad no authority to
issue the said notices must, the·refore, fail.
That takes us to the question as to whether the
relevant provisions of s. 240, which empower respondent I t-0 issue the relevant notices by which the
appellant was called upon to givo evidence and to
produce documents, offend against the fundamental
constitutional right guaranteed by Art. 20(3). It has
ooen strenuously urged before us that the mn,in object
of lhe present investigation is to diseo-rrr whether the
appellant has commit.ted any offences, and so by compelling him to give oddenco and produce documents
he is denied the constitutional protection against sC'!fincrimination.
Art.icle.20(3) provides that " no person accused of
any offence shall he compelled to be a witness against
himsolf". It may be assumed that the appellant is
being compelled to be witness againRt himself in the
prrnent proceedings; but even so the question which
a.rises for our decision is whcthor the appellant can be
said to be a person who is accused of any offence as
required by Art. 20(3).
Mr. Sastri has contended that
the words " person accused of any offence" should not
rect·h·e a narrow or literal const.n1ction; they should
be liberally in!Npreted because the clause in which
they occur Pnshrines a fundamental constitutional
right R-nd the scope and reach of the said right should
not be unduly narrowed down. In support of this
I
I

r
l I

1 S.C.R. SUPREME COURT REPORTS
431
general argument Mr. Sastri has naturally relied on
I96o
t?e hist?rical b~ckwo?nd .of the doctrine of protea- Roja ,,:-;,-:;,yon/al
t1on agamst self-nicr1mmat10n; and he has strongly
Bansilot
pressed into service the decisions of the Supreme
v.
Court of the United States of America dealing with Maneck Phfroz
the Fifth Amendment to the Constitution of the Mistry & Another
United States. The said Amendment inter alia pro-
.
-dk 1
'd
h
h II b
IJ d ·
· Ga1endraga
ar
.
v1 es t at " no person s a
e compe e
rn any criminal case to be a witness against himself". It would
be noticed that in terms the Amendment refer to a
criminal case, and yet it has received a very broad
and liberal' interpretation at the h0,nds of the Supreme
Court of the United States of America. It has been
held that the said constitutional protection is not confined only to criminal cases but it extends even to
civil proceedings (Vide: McCarthy v. Arndstein(') ).
As observed by Mr. Justice Blatchford in Charles
Counselman v. Frank Hitchcock(') "it is impossible
that the meaning of the constitutional provision can
only be that a person shall not be compe!led to be a
witness against himself in a criminal prosecution
against himself. It would doubtless cover such cases
but it is not limited to them. The object was to
insure that a person should not be compelled, when
acting as a witness in any investigation, to give testimony which might tend to show that he himself had
committed a crime. The privilege is limited to criminal matters, but it is as broad as the mischief against
which it seeks to guard".
In support of his plea that a liberal interpretation
should be out on an article which enshrines a fundamental co11stitutional right Mr. Sastri bas also invited
our attention to the observation made by Mr. Justice
Bradley in Edward A. Boyd and George H. Boyd v.
United States('). Says Bradley, J., "illegitimate and
unconstitutional practices get their first footing in
that way, namely by silent approaches and slight
deviations from legal modes of procedure. This can·
only be obviated by adhering to the rule that constitutional provisions for the security of person and
(1) (1924) 6n L. Ed. 158.
(2) (1892) 35 L. Ed. I!ro.
(3) (1886) 29 L. Ed. 746, 7 52.
432
Sl'.PREJfE COlJRT REPORTS
[ 1961]
r96o
property should oo liberally construed ''. The learned
R"J" _;,;;.,"'"!a! judge has also _added
that ,any compulsory dis-
/Jo.,,.1;,1
covery by extort mg thu party s oath, or compelling
'"·
the production of his private books and papers, to
,ir.,,,.,1. Plii•oz convict him of crime or to forfeit his prop0rty, is conMimy 0- A"'""'t.ra.ry to the principles of a free government, and is
. .
--dk 1 abhorrent to the instinct.a of an American. It may
c.;"1'"baga
0
' ·snit the purposes of despotic power; hut it cannot
abide the pure atmosphere of political liberty and persona.I freedom". In regard to this eloquent statement
of the law it may, however, be permissible to state
that under the English Law the doctrine of protection
against self-incriminativn ha8 never been applied in
the departmC'nts of Company Law and Insolvency
Law. There is !lo doubt that undr,r s. 15 of the English Bankruptcy Act when a public examination of
a debtor is held he ia compelled to answer all questions as the court may put, or allow to be put to him,
and that the answers given have to be signed by him
and can be used against him in evidence (Vide: In
Re: Atherton(')); similar is"tht' position under s. 270
of the English Compani•)S· Act. However, the general
argument for the appellant is that in construing
A rt. 20(3) we may take some assiRta.nce from the
I
broad and libcra.I conAtr11ction which has been placed
on the apparent.Iy narrow and limited words used in
tho Fifth Amendmout to the ConHtitution of the United StalM of America.
Thus presented the argument is no doubt at.tractive,
and its validitv ancl
effr-ctivene~s would have had to
be fully and carefully examined if the question raised
in the present appeal had been a. matter of first impression; hut the const.ruction of Art. 20 in genera.I and
Art .. 20(2) and (3) in particular has been the subjectmatterof some decisions of this Court, and naturally
it is in the light of the previous decisions that we have
({> dPal with the merits of the appdlant's case in tho
present appeal. In 1\faqbool Hus.ooin ,., 'l'he State of
Bombay (') this Court had occasion to consider the
,.
scope and effect oft he constitutional guarantee provided by Art. 20(2). A person against whom proceedings
(1) 11912) 2 K.B. 251.
(2) [1953] S.C.R. 730.
1 S.C.R. SUPREME COURT REPORTS
433
had been taken by the Sea Customs Authorities under
z96.o
s. 167 of the Sea Customs Act and an order for confis. R . N
1 1
,
f.
d h d b
d
b .
ti
a;a
aray...in a
cation o goo s
a
een passe
was su sequen y
Bansilal
prosecuted before the Presidency Magistrate for an
v.
offence under s. 23 of the Foreign Exchange RegulaManeck Phiroz
tions Act in respect of the same act. It was urged on Mistry G> Another
his behalf that the proceedings taken against him
-
before the Sea Customs Authorities was a prosecution Gajendragadkar f.
and the order of confiscation passed in the said proceedings was a punishment, and so it was argued that
the constitutional guarantee afforded by Art. 20(2)
made his subsequent prosecution under s. 23 of the
Foreign Exchange Regulation Act invalid. This, plea
was rejected. In deitling with the merits of the plea
this Court had to consider the meaning of the words.
" prosecuted and punished " used in Art. 20(2). Article 20(2) provides that no person shall be prosecuted
and punished for the same offence more than once, and
the question raised was whether the proceedings before
the Sea Customs Authorities constituted prosecution,
and whether the order of confiscation was punishment
under A/rt. 20(2). In construing .Art. 20(2) this_Court
considered Art. 20 as a whole and examined the interrelation of the relevant terms used in the three clauses
of the said article.
" The very Wording of Art.