Appeal No 268 of 1959
419 Appeal from the judgment and decree dated September 3 1958 of the former Bombay High Court in Appeal No 281958
A V Viswanatha Sastri Ganpat Rai and I N Shroff for the appellant
M C Setalvad Attorney General for India B Sen and T M Sen for the respondents
August 31
The Judgment of the Court was delivered by GAJENDRAGADKAR J
The appellant Raja Narayanlal 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 section 137 of the Indian Companies Act 1913 VII of 1913 the Registrar wrote to the mills on November 15 1954 that it had been represented to him under section 1376 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 exhibit A
On April 15 1955 the Registrar made a report exhibit AA to the Central Government under section 1375 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 19200 were paid for Harpur Farm and Rs 39300 for Bhavanipur Farm and accounts disclosed that the Uchant Account was chiefly operated upon for purchasing such 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 54 420 Agent was utilising the property of the company in some cases for his personal gain and concluded that in his opinion a case had been made out for an investigation under section 138
On receiving this report on November 1 1955 the Central Government passed an order under section 1384 of the said Act exhibit B appointing the first respondent Maneck 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 the said Act or any other law and make a full report as indicated in a communication which was separately sent to him
This separate communication exhibit BB prescribes the mode of enquiry which should be adopted by inspectors
It requires that while investigating the affairs of companies the inspectors should bear in mind that for a successful prosecution the evidence in support of a charge must be clear tangible and cogent and that their reports should specify with reference to the evidence collected during the investigations the points specified under paragraph 2a to e
In the course of their investigation the inspectors are asked to make use of the powers available to them under section 140 of the said Act including the right to examine a per son on oath
The investigation should be conducted in private and the inspectors are not entitled to make public the information received by them during the course of the investigation
Pursuant to the powers conferred on him by the said order respondent 1 wrote to the appellant intimating to him that he would examine him on oath in relation to the business of the company under section 1402 of the said Act exhibit C
Meanwhile on April 1 1956 the Companies Act of 1913 VII of 1913 was repealed by the Companies Act of 1956 1 of 1956
For the sake of convenience we would hereafter refer to the repealed Act as the old Act and the Act which came into force on April 1 1956 as the new Act
On July 26 1956 the Central Government purported to exercise its power under section 2392 of the new Act and 421 accorded approval to respondent 1 exercising his powers of investigating into and reporting on the affairs of the appellant including his personal books of accounts as well as the affairs of the three concerns specified in the order
These three concerns are Ms Narayanlal Bansilal who are the Managing Agents of Harinagar Sugar Mills the Shangrila Food Pro ducts Limited and Harinagar Cane Farm
It appears that the appellant is the proprietor of the firm of Narayanlal Bansilal
After this order was passed respondent 1 served upon the appellant the four impugned notices exhibit 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 said company as mentioned in the notice
The appellant was further told that in default of compliance with the requisition aforesaid necessary 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 served on the appellant he filed a petition No 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 article 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 further 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 investigation under section 239 andor section 240 of the new Act andor 122 from investigating into the affairs of any persons or concerns specified in the petition
The petitioner claimed these writs mainly on two grounds
He first alleged that since respondent 1 had been appointed under the old Act he had no jurisdiction to exercise powers referable to the relevant provisions of the new Act
This ground assumed that the said relevant provisions of the new Act are valid but it is urged that the powers referable to the said provisions are not available to respondent 1 since he was appointed under the old Act
The other ground on which the writs were claimed challenges the vires of sections 239 and 240 of the new Act
This challenge assumed an alternative form
It is argued that section 240 offends against the constitutional guarantee provided by article 203 of the Constitution and it is also urged that certain portions of sections 239 and 240 offend against another constitutional guarantee provided by article 14 of the Constitution
It is thus on these three contentions that the petitioner claimed appropriate writs by his petition before the Bombay High Court
These pleas were resisted by the Union of India which had been joined to the proceedings as respondent 2
Mr 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 before the Court of Appeal in the Bombay High Court the Court of Appeal agreed with the view taken by Desai J and dismissed the appeal
Thereupon the appellant applied for and obtained a certificate from the High Court and it is with the said certificate that he has come to this Court by his present appeal
On his behalf Mr Viswanatha Sastri has raised the same three points for our decision
Let us first examine the question whether or not the first respondent has jurisdiction to exercise the powers under the relevant provisions of the new Act
It is common ground that if respondent 1 s powers to bold the investigation in question are to be found in the relevant provisions of the old Act and not those of the new Act the impugned notices issued by him would be 423 without authority and jurisdiction
In dealing with this question it is necessary to examine the broad features of the relevant sections of the two Acts
We will begin with the old Act
Section 137 of the old Act deals with investigation by the Registrar
Section 1371 provides that where the Registrar on  perusal of any document which a company is required 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 information or explanation within the time to be specified in the order
Section 1375 requires the Registrar to make a report in writing to the Central Government if no information is supplied to him within the specified time or if the information supplied to him appears to him to disclose an unsatisfactory state of affairs or does not disclose a full and fair statement of the relevant matters
Thus section 1371 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 1376 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 section 1372 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 identity of the informant 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 are substantially similar to the provisions of section 234 of the new Act
424 affairs of companies by inspectors authorises the Central Government to appoint one or more competent inspectors to investigate the affairs of any company and report thereon in such manner as the said Government may direct
The appointment of competent inspectors can be made by the Central Government in four classes of cases as specified in section 1381 to 4
It would be relevant to refer to two of these cases
Under section 1381 a competent inspector can be appointed in the case of a banking company having a share capital on the application of members holding not less than one fifth of the shares issued and under section 1384 in the case of any company on a report by the Registrar under section 1375
This section substantially corresponds to section 235 of the new Act
The other sections of the old Act to which reference must be made are sections 140 141 and 141A Section 1401 imposes upon all persons who are
or have been officers of the company an obligation to produce before the inspectors all books and documents in their custody or power relating to the company
Section 1402 empowers the inspector to examine on oath any such person meaning a person who is or has been an officer of the company in relation to the business of the company and to administer an oath to him
Section 1403 provides that if a person refuses to produce a book or a document or to answer any question he shall be liable to a fine not exceeding Rs 50 in respect of each offence
Section 141 provides that on the conclusion of an investigation the inspectors shall report their opinions to the Central Government and shall forward a copy of their report to the registered office of the company  and it also provides that a copy of the said report can be delivered at their request to the applicants for the investigation
Then we have section 141A which deals with the institution of prosecutions
Section 141A1 provides that if from any report made under section 138 it appears to the Central Government that any person has been guilty of any offence in relation to the company for which he is criminally liable the Central Government shall refer the 425 matter to the Advocate General or the Public Prosecutor
Section 141A2 lays down that if the law officer who is consulted under 1 considers that there is a case in which prosecution ought to be instituted he shall cause proceedings to be instituted accordingly  That in brief is the scheme of the relevant provisions of the old Act
We will now examine the scheme of the relevant provisions of the new Act
It has already been noticed that sections 234 and 235 of the new Act are substantially similar to sections 137 and 138 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
The sweep of the enquiry authorised by this section is very much 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 corporate or person specified in cls
a to d if he thinks it necessary so to do
These clauses include several cases of body corporate which may have any connection direct or indirect immediate or remote with the affair of the company whose affairs are under investigation
It is unnecessary for our purpose in the present appeal to enumerate the said cases serially or exhaustively
It is conceded that the three other persons who have been called upon by respondent 1 to produce documents and give evidence fall within the purview of section 239
As a result of the provisions of section 2391 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 course 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 referred to in cls
bii biii 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 new Act imposes an obligation 426 on the corporate bodies and persons in respect of which or whom investigation is authorised by section 239 to produce all books and papers and to give all assistance in connection with the said investigation  that is the result of section 2401
Section 2402 empowers the inspector to examine on oath any of the persons referred to in sub section
1 in relation to the relevant matters as specified
Section 2403 deals with a case where a person refuses to comply with the obligation imposed on him by section 2401 or 2  and it provides that in such a case the inspector may certify the refusal under his hand to the court and the court may thereupon enquire into the case hear witnesses who may be produced against or on behalf of the alleged offender consider any statement which may be offered in defence and punish the offender as if he had been guilty of contempt of the court
Section 2404 deals with a case where the inspector thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be examined and it provides that in such a case he may apply to the court and the court may if it thinks fit order that person to attend and be examined on oath before it on any matter relevant to the investigation
This sub section provides for the procedure to be followed in examining such a witness
Section 2405 lays down that notes of any examination under sub section
2 or 4 shall be taken down in writing and shall be read over to or by and signed by the person examined and may thereafter be used as evidence against him
Having thus made elaborate provisions for the production of documents and evidence in the course of the investigation by the inspector section 241 deals with the inspectors  report and provides that inspectors may and if so directed by the Central Government shall make interim reports to that Government and on the conclusion of the investigation shall make a final report to it
Section 2412 provides for the supply of the copy of the said report to the several parties concerned as specified in cls
a to e
That takes us to section 242 which deals with prosecution
Section 2421 provides inter alia that if from 427 any report made under a 241 it appears to the Central Government that any person has in relation to the company been guilty of any offence for which he is criminally liable the Central Government may after taking such legal advice as it thinks fit prosecute such person for the offence and it imposes on all officers and agents of the company except those prosecuted to give the Central Government all assistance in 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 decision of this question will depend mainly on the con struction of sections 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 section 6 of the General Clauses Act 10 of 1897 but in the case of the new Act the application of the said section is subject to the provisions of sections 645 to 657 of the Act that is the effect of section 658 which provides that the mention of particulars in sections 645 to 657 or in any other provisions of this Act shall not prejudice the general application of section 6 of the  with respect to the effect of repeals
In other words though section 6 of the will generally apply its application will be subject to the provisions contained in as
645 to 657 this position is not disputed
It is now necessary to consider section 645
It reads thus 55 428 Nothing in this Act shall affect any order rule regulation appointment conveyance mortgage deed document or agreement made fee directed resolution passed direction given proceeding taken instrument executed or issued or thing done under or in pursuance of any previous companies law but any such order rule regulation appointment conveyance mortgage deed document agreement fee resolution direction proceeding
instrument or thing shall if in force at the commencement of this Act continue to be in force and so far as it could have been made directed passed given taken 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 inspector has been appointed 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 as if it was made under or in pursuance of the new Act
Indeed it is common ground that if section 645 had stood alone and had not been followed by section 646 there would have been no difficulty in holding that the inspector appointed under the old Act could exercise his powers and authority under the relevant provisions of the new Act and the impugned notices would then be perfectly valid
Incidentally we may refer to the provisions of a 652 in this connection
Under this section any person appointed to any office 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 section 646
This section provides Nothing in this Act shall affect the operation of section 138 of the Indian Companies Act 1913 VII of 1913 as respects inspectors or as respects the continuation of an inspection begun by inspectors appointed before the commencement of this Act and the provisions of this Act shall apply to or in relation to a report of inspectors appointed under the said section 138 as they apply to or in relation to a report 429 of inspectors appointed under section 235 or 237 of this Act
 The argument is that the expression  nothing in this Act  includes section 645 and so section 646 should be read as an exception or proviso to section 645 and if that is so all matters covered by section 138 of the old Act must continue to be governed by the said Act and not by any of the provisions of the new Act
We are unable to accept this argument
In appreciating the effect of the provisions of section 646 it is necessary to bear in 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 section 646 provides for the continuance of the operation of section 138 it does not make a corresponding provision for the continuance of the operation of a 140 of the old Act which deals with the powers of the inspector to call for books and to examine parties
Besides it may perhaps not be accurate to suggest that having regard to the provisions of section 645 section 646 is wholly redundant
It would be possible to take the view that cases falling under section 1381 of the old Act are intended to be covered by section 646 as they would not be covered by section 645
In regard to the case of a banking company covered by section 1381 section 646 will come into operation and that may be one of the reasons for which section 646 was enacted
It may be that the case of the banking company may also be covered by section 35 of the Banking Companies Act 10 of 1949 but since a 1381 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 section 138 by enacting section 646
However that may be we feel no difficulty in holding that s 646 should not be construed as a proviso to s645 but as an additional saving provision
The words used in section 645 are so clear and the policy and object of enacting the said provision are in our opinion so emphatically expressed that it 430 would be unreasonable to hold that section 646 was intended to provide for such a radical exception to section 645
Where the Legislature enacts a saving section as a matter of abundant caution the argument that the enactment of the said section was not wholly necessary cannot be treated as decisive or even effective
Therefore in our opinion the High Court was right in coming to the conclusion that the inspector appointed under section 1384 of the old Act must by legal fiction which is authorised by section 645 be deemed to have been appointed under section 235 of the new Act and if that is so respondent 1 had authority and power to issue the impugned notices under section 240 of the new Act
The challenge to the validity of the impugned notices on the ground that respondent 1 had no authority to issue the said notices must therefore fail
That takes us to the question as to whether the relevant provisions of section 240 which empower respondent 1 to issue the relevant notices by which the appellant was called upon to give evidence and to produce documents offend against the fundamental constitutional right guaranteed by article 203
It has been strenuously urged before us that the main object of the present investigation is to discover whether the appellant has committed any offenses and so by compelling him to give evidence and produce documents he is denied the constitutional protection against self incrimination
Article 203 provides that  no person accused of any offence shall be compelled to be a witness against himself 
It may be assumed that the appellant is being compelled to be witness against himself in the present proceedings but even so the question which arises for our decision is whether the appellant can be said to be a person who is accused of any offence as required by article 203
Mr Sastri has contended that the words  person accused of any offence  should not receive a narrow or literal construction they should be liberally interpreted because
the clause in which they occur enshrines a fundamental constitutional right and the scope and reach of the said right should not be unduly narrowed down
In support of this 431 general argument Mr Sastri has naturally relied on the historical background of the doctrine of protection against self incrimination and he has strongly pressed into service the decisions of the Supreme Court of the United States of America dealing with the Fifth Amendment to the Constitution of the United States
The said Amendment inter alia provides that  no person shall be compelled in 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 hands 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 vs Arndstein1
As observed by Mr Justice Blatchford in Charles Counselman vs Frank Hitchcock 2  it is impossible that the meaning of the constitutional provision can only be that a person shall not be compelled 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 put on an article which enshrines a fundamental constitutional right Mr Sastri has also invited our attention to the observation made by Mr Justice Bradley in Edward A Boyd and George H Boyd vs United States 3
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  2  3  752
432 property should be liberally construed 
The learned judge has also added that any compulsory discovery by extorting the party s oath or compelling the production of his private books and papers to convict him of crime or to forfeit his property is contrary to the principles of a free government and is abhorrent to the instincts of an American
It may suit the purposes of despotic power but it cannot abide the pure atmosphere of political liberty and personal 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 incrimination has never been applied in the departments of Company Law  and Insolvency Law
There is no doubt that under section 15 of the English Bankruptcy Act when a public examination of a debtor is held he is 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 1 similar is the position under section 270 of the English Companies Act
However the general argument for the appellant is that in construing article 203 we may take some assistance from the broad and liberal construction which has been placed on the apparently narrow and limited words used in the Fifth Amendment to the Constitution of the United States of America
Thus presented the argument is no doubt attractive and its validity and effectiveness would have had to be fully and carefully examined if the question raised in the present appeal had been a matter of first impression  but the construction of article 20 in general and article 202 and 3 in particular has been the subject matter of some decisions of this Court and naturally it is in the light of the previous decisions that we have to deal with the merits of the appellants case in the present appeal
In Maqbool Hussain vs The State of Bombay 2 this Court had occasion to consider the scope and effect of the constitutional guarantee provided by article 202
A person against whom proceedings 1 2  433 had been taken by the Sea Customs Authorities under section 167 of the Sea Customs Act and an order for confiscation of goods had been passed was subsequently prosecuted before the Presidency Magistrate for an offence under section 23 of the Foreign Exchange Regulations Act in respect of the same act
It was urged on his behalf that the proceedings taken against him before the Sea Customs Authorities was a prosecution and the order of confiscation passed in the said proceedings wag a punishment and
so it was argued that the constitutional guarantee afforded by article 202 made his subsequent prosecution under section 23 of the Foreign Exchange Regulation Act invalid
This plea was rejected
In dealing with the merits of the plea this Court had to consider the meaning of the words  prosecuted and punished  used in article 202
Article 202 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 article 202
In construing article 202 this Court considered article 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 article 20  observed Bhagwati J  and the words used therein convicted   commission of the act charged as an offence   be subjected to a penalty   commission of the offence   prosecuted and punished   accused of any offence  would indicate that the proceedings therein contemplated are of the nature of criminal proceedings before a court of law or a judicial tribunal
and the prosecution in this context would mean an initiation or starting of proceedings of a criminal nature before a court of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulated the procedure 
Having thus construed article 202 in the light of the relevant words used in the different clauses of the said article this Court naturally proceeded to enquire whether the Sea Customs Authorities acted as a judicial tribunal in holding proceedings 434 against the person
The scheme of the relevant pro
visions of the Act was then examined and it was held that the said authorities are not a judicial tribunal with the result that the I adjudging increased rate of duty or penalty and confiscation under the provisions of the said act did not constitute a judgment or order of a court or judicial tribunal necessary for the purpose of supporting the plea of double jeopardy
In the result the conclusion of this Court was that when the Customs Authorities confiscated the gold in question the proceedings taken did not amount to a prosecution of the party nor did the order of confiscation constitute a punishment as contemplated by article 202
This decision has been affirmed by this Court in the case of section A Venkataraman vs The Union of India 1
In that case an enquiry bad been made against the appellant Venkataraman under the Act XXXVII of 1850
On receiving the report of the enquiry commissioner opportunity was given to the appellant under article 3112 to show cause and ultimately after consultation with the Union Public Service Commission the appellant was dismissed by an order passed by the President
The order of dismissal was passed on September 17 1953
Soon thereafter on February 23 1954 the police submitted a charge sheet against him charging him with having committed offenses under sections 161165 of the Indian Penal Code and section 52 of the Prevention of Corruption Act
The validity of the subsequent prosecution was challenged by the appellant on the ground that it contravened the constitutional guarantee enshrined in article 202
The appellant s plea was however rejected on the ground that the proceedings taken against him before the commissioner under the Inquiries Act did not amount to a prosecution
The relevant provisions of the said act were examined and it was held that in an inquiry under the said Act there is neither any question of investigating an offence in the sense of an act or omission punishable by any law for the time being in force nor is there 1 435 any question of imposing punishment prescribed by the law which makes that act or omission an offence
Mukherjea J as he then was who delivered the judgment of the Court has referred to the earlier decision in the case of Maqbool Hussain 1 and has observed that  the effect of the said decision was that the proceedings in connection with the prosecution and punishment of a person must be in the nature of a criminal proceeding before a court of law or a judicial tribunal and not before a tribunal which entertains a departmental or an administrative enquiry even though set up by a statute but which is not required by law to try a matter judicially and on legal evidence 
Thus these two decisions can be said to have considered incidentally the general scope of article 20 though both of them were concerned directly with the construction and application of article 202 alone
Article 203 was considered by the Full Court in M P Sharma vs Satish Chandra District Magistrate Delhi 2
The question about the scope and effect of article 203 was raised in that case by a petition filed under article 32 of the Constitution
It appears that the Registrar of the Joint Stock Companies Delhi State lodged information with the Inspector General Delhi Special Police Establishment against the petitioners alleging that they had committed several offenses punishable under the Indian Penal Code
The lodging of this information was preceded by an investigation into the affairs of the petitioners  company which had been ordered by the Central Government under a 138 of the old Act and the report received at the end of the said investigation indicated that a well planned and organised attempt had been made by the petitioners to misappropriate and embezzle the funds of the company by adopting several ingenious methods
On receipt of the said First Information Report the District Magistrate ordered investigation into the offenses and issued warrants for simultaneous searches at as many as thirty four places
By their petitions the petitioners contended that the search warrants 1  2  56 436 were illegal and they prayed that the same may be quashed as being in violation of Art 203
The plea thus raised by the petitioners was ultimately rejected on the ground that the impugned
searches did not violate the  said constitutional guarantee
Jagannadha das J who spoke for the Court observed that  since article 203 provides for a constitutional guarantee against testimonial compulsion its words should be liberally construed and that there was no reason to confine the content of the said guarantee to its barely literal import 
He therefore held that the phrase  to be a witness  means nothing more than to furnish evidence and such evidence can be furnished through the lips or by production of a thing or of a document or in other modes
He also pointed out that the phrase was  to be a witness  and not  to appear as a witness  and so the protection afforded was not merely in respect of testimonial compulsion in the court room but may well extend to compel testimony previously obtained from him
The conclusion of the Court on this part of the construction was thus stated
The constitutional guarantee  is available to a person against whom a formal accusation relating to the commission of an offence has been leveled which in the normal course may result in prosecution  whether it is available to other persons in other situations does not call for a decision in this case 
Since the First Information Report bad been recorded against the petitioners in that case it followed that the first test that a formal accusation relating to the commission of an offence must have been leveled was satisfied
The question which was then considered was whether there was any basis in the Indian Law for the assumption that a search or seizure of a thing or document is in itself to be treated as compelled production of the same and it was held that there would be no justification for treating the said search or seizure as compelled production that is why the challenge to the validity of the search warrants issued against the petitioners was repelled
The effect of this decision thus appears to be that one of the
essential conditions for invoking the constitutional guarantee enshrined in article 203 437 is that a formal accusation relating to the commission of an offence which would normally lead to his prosecution must have been leveled against the party who is being compelled to give evidence against himself and this conclusion in our opinion is fully consistent with the two other decisions of this Court to which we have already referred
There are two other subsequent decisions of this  Court to which reference may be made
In Thomas Dana vs State of Punjab 1 according to the majority decision  prosecution  in article 202 means a proceeding either by way of indictment or information in a criminal court in order to put an offender upon his trial
It would be noticed that this conclusion is wholly consistent with the view taken by this Court in the case of Maqbool Hussain 2 and section A Venkataraman 3
In Mohammed Dastaqir vs The State of Madras 4 this Court had to consider article 203
The appellant in that case had gone to the bungalow of the Deputy Superintendent of Police to offer him a bribe which was covered in a closed envelope with a request that he might drop the action registered against him
The police officer threw the envelope at the appellant who took it up
While the appellant was still in the bungalow he was asked by the police officer to produce the envelope and he took out from his pocket some currency notes and placed them on the table without the envelope
The notes were then seized by the police officer and a rubber stamp of his office was placed on them
On these facts it was urged that in relying upon the evidence of compelled production of notes the prosecution had  violated the provisions of article 203
In support of this contention the general observations made by this Court in the case of M P Sharma5 were strongly pressed into service
This Court however rejected the appellant s arguments and held that the prosecution did not suffer from any infirmity
On the facts it was found that though the offence had in fact been already committed 1 1959 Supp 1 SCR 274
2  3  4  5  438 by the appellant he had in fact not been accused of it at the stage when the currency notes were produced by him it was also held that it could not be said that he was compelled to produce the said currency notes because he might easily have refused to produce them and so there was no occasion for him to invoke the constitutional protection against self incrimination
What then is the result of these decisions  They show that in determining the complexion and reach of its respective sub clauses the general scheme of article 20 as a whole must be considered and the effect of the inter action of the relevant words used in them must be properly appreciated
Thus considered the constitutional right guaranteed by article 202 against double jeopardy can be successfully invoked only where the prior proceedings on which reliance is plac ed must be of a criminal nature instituted or continued before a court of law or a judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the procedure
It would be noticed that the character of the said proceedings as well as the character of the forum before which the proceedings are initiated or conducted are treated as decisive in the matter
Similarly for invoking the constitutional right against testimonial compulsion guaranteed under article 20 3 it must appear that a formal accusation has been made against the party pleading the guarantee and that it relates to the commission of an offence which in the normal course may result in prosecution
Here again the nature of the accusation and its probable sequel or consequence are regarded as important
Thus we go back to the question which we have already posed was the appellant accused of any offence at the time when the impugned notices were served on him  In answering this question in the light of the tests to which we have just referred it will be necessary to determine the scope and nature of the enquiry which the inspector undertakes under section 240  for unless it is shown that an accusation of a crime can be made in such an enquiry the appellant s plea under article 203 cannot succeed
Section 240 439 shows that the enquiry which the inspector undertakes is in substance an enquiry into the affairs of the company concerned
Certain documents are required to be furnished by a company to the Registrar under the provisions of the new Act
If on examining the said documents the Registrar thinks it necessary to call for information or explanation he is empowered to take the necessary action under section 2341
Similarly under section 2347 if it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of the company is carried on in the manner specified in the said sub section the Registrar proceeds to make the enquiry
Thus the scope of the enquiry con templated by section 234 is clear wherever the Registrar has reason to believe that the affairs of the company are not properly carried on he is empowered to make an enquiry into the said affairs
Similarly under section 235 inspectors are appointed to investigate  the affairs of any company and report thereon
The investigation carried on by the inspectors is no more than the work of a fact finding commission
It is true that as a result of the investigation made by the inspectors it may be discovered that the affairs of the company disclose not only irregularities and malpractice but also commission of offenses and in such a case the report would specify the relevant
particulars prescribed by the circular in that behalf If after receiving the report the Central Government is satisfied hat any person is guilty of an offence for which he is criminally liable it may after taking legal advice institute criminal proceedings against the offending person under section 2421 but the fact that a prosecution may ultimately be launched against the alleged offender will not retrospectively change the complexion or character of the proceedings held by the inspector when he makes the investigation
Have irregularities been committed in managing the affairs of the company  if yes what is the nature of the irregularities  Do they amount to the commission of an offence punishable under the criminal law  If they do who is liable for the said offence These and 440 such other questions fall within the purview of the ins pector s investigation
The scheme of the relevant sections is that the investigation begins broadly with a view to examine the management of the affairs of the company to find out whether any irregularities have been committed or not
In such a case there is no accusation either formal or otherwise against any specified individual there may be a general allegation that the affairs are irregularly improperly or illegally managed but who would be responsible for the affairs which are reported to be irregularly managed is a matter which would be determined at the end of the enquiry
At the commencement of the enquiry and indeed throughout its proceedings there is no accused person no accuser and no accusation against anyone that he has committed an offence
In our opinion a general enquiry and investigation into the affairs of the company thus contemplated cannot be regarded as an investigation which starts with an accusation contemplated in article 203 of the Constitution
In this connection it is necessary to remember that the relevant sections of the Act appear in Part VI which generally deals with management and administration of the companies
It is well known that the provisions of the Act are modeled on the corresponding provisions of the English Companies Act
It would therefore be useful to refer to the observations made by the House of Lords in describing the character of the enquiry held under the corresponding provisions of the English Act in the case of Hearts of Oak Assurance Co vs Attorney General 1
In that case Lord Thankerton said  it appears to me to be clear that the object of the examination is merely to recover information as to the company s affairs and that it is in no sense a judicial proceeding for the purpose of trial of an offence it is enough to point out that there are no parties before the inspector that he alone conducts the enquiry and that the power to examine on oath is confined to the officers members agents and servants of the company 
We ought however to add that the last 1 441 observation is no longer true about the inspector s powers under section 240 of the new Act
In the same case Lord Macmillan observed that  the object of the enquiry manifestly is that the Commissioner may either by himself directly or through the medium of a delegate obtain the information necessary to enable him to decide what action if any he should take
The cardinal words of the section are those which empower the Commissioner or his inspector to examine into and report on the affairs of the society 
Thus it is clear that the examination of or investigation into the affairs of the company cannot be regarded as a proceeding started against any individual after framing an accusation against him
Besides it is quite likely that in some cases investigation may disclose that there are no irregularities or if there are they do not amount to the commission of any offence in such cases there would obviously be no occasion for the Central Government to institute criminal proceedings under section 2421
Therefore in our opinion the High Court was right in holding that when the inspector issued the impugned notices against the appellant the appellant cannot be said to have been accused of any offence and so the first essential condition for the application of article 203 is absent
We ought to add that in the present case the same conclusion would follow even if the clause accused of any offence  is interpreted more liberally than was done in the case of M P Sharma 1 because even if the expression accused of any offence is interpreted in a very broad and liberal way it is clear that at the relevant stage the appellant has not been and in law cannot be accused of any offence
Thus the tests about the character of the proceedings and the forum where the proceedings are initiated or intended to be taken are also not satisfied but as we have already indicated such a broad and liberal interpretation of the relevant expression does not appear to be consistent with the tenor and effect of the previous decisions of this Court
It is true that in his report the Registrar has made 1  442 certain allegations on which Mr Sastri has relied
He contends that the statements in the report do amount to allegations of commission of offenses by the appellant
What the Registrar has stated in his report in this particular case cannot be relevant or material in deciding the vires of the impugned section
The vires of the section can be determined only by examining the relevant scheme of the Act and we have already Been that such an examination does not assist the appellants contention that article 203 is contravened
Besides what the Registrar has stated in his report can hardly amount to an accusation against the appellant it is a report submitted by him to the Central Government and it is only intended to enable the Central Government to decide whether it should appoint an inspector
It is not as if the investigation before the inspector begins on the basis that the Registrar is the complainant who has made an accusation against the appellant or that the function of the investigation is to find out whether the said accusation is proved or not
As we have already seen an enquiry under section 240 may require a large number of persons to give evidence or produce documents but it cannot be said that any accusation is made against any of the said persons
In fact three persons have been served with similar notices in the present enquiry which shows that the inspector desires to obtain relevant evidence from them as from the appellant
How can it be said that an accusation has been made against the said three persons and that incidentally helps to bring out the real character and scope of the enquiry
Therefore we do not think that the state ments made in the Registrar s report on which Mr Sastri relies can really assist us in deciding the question of the vires of section 240
It is also significant that the appellant has not challenged the validity of the impugned notices on any ground relatable to or based on the said report
The challenge is founded on
the broad and general ground that section 240 offends against article 203
We may incidentally add that it was in support of his argument based on the Registrar s report that 443 Mr Sastri sought to rely on the decision of the Calcutta High Court in Collector of Customs vs Calcutta Motor and Cycle Co 1
In that case certain notices had been issued under section 171A of the Sea Customs Act to certain persons to appear before the customs officials and to produce certain documents
The High Court took the view that  it appeared from the accusations made in the search warrants at the instance of the customs authorities and those made in one of the notices by the customs authorities themselves that the accusations of criminal offenses could not be excluded   and so it was held that the requirements of article 203 were satisfied and the protection under the said article was available to the persons concerned
In our opinion this decision does not assist the appellant
It proceeded on the finding that accusations of criminal offenses could be held in substance to have been made against the persons concerned and it dealt with the other points of law on that assumption
That being so we think it unnecessary to discuss or consider the said decision
Our conclusion therefore is that section 240 does not offend against article 203 of the Constitution
That still leaves the challenge to the vires of the said section under article 14 of the Constitution though we ought to add that Mr Sastri did not seriously press his case under article 14 and we think rightly
The argument under article 14 proceeds on familiar lines
It is urged that the ordinary protection afforded to witnesses under section 132 of the Indian Evidence Act as well as the protection afforded to accused persons under section 1611 and 2 of the Criminal Procedure Code have been denied to the appellant in the investigation which respondent 1 is carrying on in regard to the affairs of his company and that violates equality before the law
The scope and effect of article 14 have been considered by this Court frequently
 It has been repeatedly held that what article 14prohibits is class legislation it does not however forbid reasonable classification for the purpose of legislation
If the classification on which legislation is based is founded 57 444 on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and if the differentia has a rational relation to the object sought to be achieved then the classification does not offend article 14 Vide Shri Ram Krishna Dalmia vs Justice Tendolkar 1
Now in the light of this test how can it be said that the classification made by sections 239 and 240 offends article 14 of the Constitution  A company is a creature of the statute
There can be no doubt that one of the objects of the Companies Act is to throw open to all citizens the privilege of carrying on business with limited liability
Inevitably the business of the company has to be carried on through human agency and that sometimes gives rise to irregularities and malpractice in the management of the affairs of the company
If persons in charge of the management of companies abuse their position and make personal profit at the cost of the creditors contributories and others interested in the company that raises a problem which is very much different from the problem of ordinary misappropriation or breach of trust
The interest of the company is the interest of several persons who constitute the company and thus persons in management of the affairs of such companies can be classed by themselves as distinct from other individual citizens
A citizen can and may protect his own interest but where the financial interest of a large number of citizens is left in charge of persons who manage the affairs of the companies it would be legitimate to treat such companies and their managers as a class by themselves and to provide for necessary safeguards and checks against a possible abuse of power vesting in the managers
If the relevant provisions of the Act dealing with enquiries and investigations of the affairs of the companies are considered from this point of view there would be no difficulty in holding that article 14 is not violated either by section 239 or section 240 of the new Act
The result is the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
The appellants who were carrying on the business of com mission agents in forward contracts filed a petition before the High Court of Punjab under article 226 of the Constitution of India challenging the validity of the Punjab Forward Contracts Tax Act 1951 on the ground that it was ultra vires the powers conferred upon the State Legislature
The Act provided for the levy of a tax on forward contracts which were defined by
section 2 as agreements oral or written for sale of goods on a future date but on the basis of which actual delivery of goods was not made or taken but only the difference between the price of the goods agreed upon and that prevailing on the date mentioned in the agreement or any other date was paid or received by the parties
The High Court took the view that the Act was one to tax speculation in futures and fell within Entry 62 of the State List as an Act to impose taxes on betting and gambling
Held that as the definition of the expression  forward contract  in the Punjab Forward Contracts Tax Act 1951 does not set out all the elements which are necessary to render a contract a wagering contract the legislature could not be considered to have contemplated wagering contracts in defining  forward contracts  in the way it did
The Act therefore does not fall within Entry 62 List II Seventh Schedule of the Constitution and is beyond the legislative competence of the State Legislature
Held further that even if the definition could be considered to be wide enough to include certain contracts which may be wagering contracts because of the fact that the parties to the contract had no intention to deliver the goods the portion of the Act which would then be valid is so thin and truncated that the entire Act should be held invalid
R M D Chamarbaugwala vs The Union of India 1957 section C R 93o relied on