Case: Satish Churan Law Vs. H. K. Ganguly

Ballygunge Real Property and Building Society Ltd. - hereinafter called the Company - was on January 8, 1958, ordered by the High Court of Judicature at Calcutta to be wound up. On January 18, 1960, the Official Liquidator submitted an application accompanied by a signed statement for an order that the appellant be examined under s. 477 of the Indian Companies Act, 1956. This application was granted ex-parte by Mr. Justice G. K. Miter on January 18, 1960, and the appellant was served with the order to attend the Court on March 22, 1960, for the purpose of being examined concerning the affairs of the Company, and to bring with him and produce at the said time and place the following books and papers, mentioned in Schedule B to the order, viz.,        (a) Ballygunge Estate (Private) Ltd. - Cash Books, General Ledger, Journal, Minutes Books from 1939 to 1948, Property Register.        (b) Ballygunge Building Society Private Ltd. - Cash Books, General Ledger, Journal, Minute Books, Property Register.        (c) Ballygunge Real Property & Building Society Ltd. (In liquidation) - General Ledger for 1949,        and "all such other books, papers, deeds, writings and other documents in his custody or power in any way relating to the affairs of the Company". This order was published in public newspapers. The solicitors of the appellant by letters dated February 29, 1960, and March 10, 1960, called upon the Official Liquidator to furnish them with copies of the petition and the report on the basis of which the order was made. The Official Liquidator having informed the solicitors of the appellant that the latter were not entitled to a copy of the report of the official liquidator, the appellant applied by a judge summons for an "order recalling vacating, setting aside or modifying" the order dated January 18, 1960, and for a direction to the official liquidator requiring him to supply copies of the report of the official liquidator and of the other documents relating to the application and alternatively for an order granting leave to inspect the court records and proceedings of the application and to take copies thereof. The appellant contended that the order made by Mr. Justice Mitter on January 18, 1960, was obtained by suppression of material facts and that, in any event, the order made without notice to the appellant was vexatious and oppressive and amounted to an abuse of the process of Court. He submitted that he was a Director of the Company between the years 1939 to 1953 and had attended meetings of the Board of Directors of the Company and without reference to the records of the meetings of the Board and particularly without reference to the Minute Books, it was not possible for him to recollect any details as to transactions which might have taken place in the Board meetings. He stated that he was not concerned with the administration, management or the day to day working of the Company, except to the extent of taking part in the Board meetings, that he never had in his custody the books referred to in the order and that the official liquidator had never asked for or enquired of him about any documents, that he was not aware of the matters on which information was required by the official liquidator and unless those matters were made known to him, it was not possible for him, to answer questions or to give information required of him, that to enable him to answer questions or supply information, it was necessary for him to know the nature of the enquiry and the charges and to inspect the records and documents of the Company and without the assistance of such records and documents his proposed examination would be highly oppressive and harsh and was likely to prove futile.The official liquidator submitted that all the available papers in the books with the liquidator will be made available at the time of the examination of the appellant but he - the official liquidator - was not bound to give information in advance about the nature of the enquiry; to do so, he contended, would defeat the purpose of the enquiry. He also submitted that the appellant had no right claim inspection or to obtain copies of the statement which accompanied the judge summons dated January 18, 1960.Mr. Justice Law rejected the application filed by the appellant, holding that the order dated January 18, 1960, was final and that he had no power to review, modify, alter or vary the same, that the order merely summoning for examination under s. 477 of the Companies Act did not affect a party rights, there being no charge, no complaint and no allegation against him. The learned Judge observed that it was not necessary for the Court in the first instance to determine that the person called upon to furnish information actually possessed that information : if the Court has reasons to think, or if even an allegation is made that a certain person is in possession of information which would be of use in the course of winding up, the Court can call upon him to appear in Court and examine him and that rr. 243(1) and 243(2) of Companies (Courts) Rules laid down the same procedure as was laid down in In re Gold Company (1879 12 Ch. D. 77 at page 82) and different from the procedure which was laid by r. 195 of the Indian Companies Act, 1913. In the view of the learned Judge the statement of the official liquidator on which the order dated January 18, 1960, was made not being on oath or affirmation was not "legal evidence" and did not form part of the proceedings of the Court and the appellant could not demand facility for inspection of the statement or copy thereof.Against the order of Mr. Justice Law and appeal was preferred to a Division Bench of the High Court. The High Court held that the order having been initially pass ex parte an application for discharging or modifying the order was in a law maintainable at the instance of the appellant but the order in so far as it directed the appellant who was a director of the Company to appear before the Court to be examined touching upon the affairs the Company was, in the circumstances of the case, "desirable and necessary", and that the statement of the official liquidator on which the order dated January 18, 1960, was issued not being an affidavit was not required by the Companies (Court) Rules 1959 to be kept on the file of the liquidation proceedings : the statement was a confidential document and was - save by order of the Court - not open to inspection of any person other than the liquidator. The learned judges modified the order in so far as it directed production of the books of account relating to the Ballygunge Estate (Private) Ltd. and the Ballygunge Building Society Private Ltd.. because those companies were not parties to the liquidation proceedings.Against the order of the High Court this appeal with special leave has been preferred to this Court.

Court's reasoning:
It was never suggested before the High Court that the order was made without considering the material facts and circumstances. The Court has made the order in exercise of the jurisdiction vested in it and in the absence of any material to show that the order was made for a collateral purpose or by misleading the Court, the appellant is not entitled to have the order vacatedThe person whose examination is sought to the held, has therefore no right to inspect the statement made by the liquidator on which the order of the Court proceeds. Rule 360 of the Companies (Court) Rules provides that every duly authorised officer of the Central Government, and, save as otherwise provided by these Rules, every person who has been a director or officer of a company which is being wound up, shall be entitled, free of charge, at all reasonable times to inspect the file of the proceedings of the liquidation and to take copies or extracts from any document therein, and, on payment of the prescribed charges, to be furnished with such copies or extracts. The right to inspection is given in respect of the file of the proceedings of the liquidation. But the statement made by the official liquidator under Rule 243 does not form part of the file of the proceedings of the liquidation. The statement is not to be made on oath : it has to be shown to the Company Judge and the Judge has to apply his mind to the contents thereof, but it does not, as pointed out by Mr. Justice Law, form part of the liquidation proceedings. In the Company (Court) Rules, there is no rule specifying the documents which are to be included in the file of the liquidation proceedings. The order passed by the Court and the summons issued thereon may be regarded as forming part of the file of the proceedings of liquidation, but having regard to the nature of the statement made by the official liquidator on which this Judges order is passed, it is not part of the file of the proceedings of liquidation. The person summoned even if he is an officer or director of the company, is therefore not entitled to inspection thereof relying upon Rule 360.It was urged by counsel for the appellant that the petition for an order under s. 477 was inextricably connected with the statement of the official liquidator, and if the party affected by the order was entitled to inspect the petition, he was entitled to inspect the statement which formed part of the petition. There is however, no warrant for the view that the petition and the statement form part of the same document. The petition has, it is true, to be supported by a statement, but the statement is independent of the petitionIt appears that the practice of the Calcutta High Court, prior to the promulgation of the Companies (Court) Rules, was different. Under r. 195 an application for examination of a person under s. 195 of the Indian Companies Act 1913, could be made ex parte to the Judge but it had to be by petition verified by the official liquidator stating the facts upon which the application was based. It was also provided that at the hearing, the Judge may, if satisfied that a prima facie case for examination had been made out, direct the issue of a summons or summonses against the person or persons named in the order for examination and/or for the production of the documents. Manifestly, the order could be obtained on a petition which was required to be verified by the official liquidator and there had to be a formal hearing and only if a prima facie case for hearing had been made out the order could be made. Under the Companies (Court) Rules a different practice, which approaches the practice prevailing in the English Courts has been set up. The mere fact that under r. 195 of the Calcutta High Court Rules under Act of 1913 the appellant might have had a right of access to the statement on which the order was founded will not be an adequate ground for holding that the earlier practice must continue to prevail.