Judgment Case ID: 3874

Judgment:
Civil Appeal No. 1501 of 1978. Appeal by Special Leave from the Judgment and Order dated 18 1 1978 of the Delhi High Court in Civil Misc. Petition No. 1120 W of 1977 and 109/78 in Writ Petition No. 585/77. Soli J. Sorabjee Addl. General	 Girish Chandra for the Appellant. 13 549 SCI/78 736 section T. Desai	 B. P. Maheshwari and Suresh Sethi for Respondent No. 1. A. K. Sen and Vineet Kumar for Respondent No. 2. ORDER An ad interim order of stay passed by the High Court of Delhi has been challenged before us in this appeal. We should have hesitated to interfere with an interlocutory order following the usual practice in this Court. But	 where repercussions are incalculable and the basis of the direction; though interlocutory	 is obscure	 the ends of justice dominate and we may interfere if public interest so dictates. Here is an order of the Company Law Board under sec. 408(1) of the 	 which gives a wealth of facts and a variety of reasons to support an ultimate direction which runs thus: "Since all the three conditions referred to in sub section (1) of sec. 408 of the 	 are established on the facts and circumstances of the case	 the Company Law Board hereby appoint officers for three years	 in addition to the existing directors of the company: 1. Shri B. M. Kaul	 Member	 Railway Board (Retd.) 5 J 4 Jawahar Nagar	 Jaipur. Shri A. K. Mazumdar	 Chief Secretary	 Orissa Govt. (Retd.) 26/2	 Dover Road	 Apartment No. 4	 Calcutta 19. 3. Shri P. K. Choksi	 Senior Partner	 Price Water house Pest & Co.	 B 4	 Gillander House	 Calcutta 1. 4. Shri section K. Mitra	 President	 Institute of Cost & Works Accounts of India	 14 A/6 Western Extension Area	 Karol Bagh	 New Delhi 5. 5. Shri P. A. section Rao	 Formerly President of the Institute of Company Secretaries of India	 C 7/7	 Vasant Vihar	 New Delhi. Shri M. C. Bhatt	 Joint Secretary	 Govt. of India (Retd.) B 22	 Defence Colony	 New Delhi 24. 7. Shri Triloki Nath Sharma	 Business Executive	 247	 Mohan Nagar	 G. T. Road	 Sahibabad	 Ghaziabad (U.P.) 737 The Company Law Board direct further under sub section (6) of sec. 408 of the Act that Shri B. M. Kaul will act as Chairman of the Board of Directors of the Company. In accordance with the order passed by the Delhi High Court on 24th August	 1977	 referred to hereinbefore the implementation of this order will be subject to any order that may be passed by the Delhi High Court in the matter pending before it." This order	 which inducted seven additional directors was based on the ground that the affairs of the company in question "are being conducted in a manner which is prejudicial to the interests of the company and to public interest." The High Court	 after hearing counsel on both sides	 passed a laconic order that: "We consider that the proper order to be made	 in view of the circumstances of the case	 is to stay the operation of the order of the Company Law Board	 dated 17th December	 1977	 except as regards Shri P. K. Choksi	 Shri section K. Mitra and Shri P. A. Rao	 and also to direct that the said three gentlemen will not vote at the meetings of the Board of Directors till the disposal of the writ petition. We order accordingly. " A company of considerable financial dimensions and involved in operations using public resources as investment	 naturally becomes the concern not merely of the Company Law Board but also of the economic process of the country. The specialised body with responsibility to watchdog corporate process	 is the Company Law Board. When it investigates and reaches a definite conclusion and makes a consequential direction	 it is entitled to prima facie respect unless there are glaring circumstances to the contrary. We do not wish to make any observations on the merits of the matter since the High Court is seized of the case. It may well be that the order of the Board may be vitiated by infirmities	 legal or other. It may also be that the reasoning of the Board and the factual foundation for it is sound. In such situations	 acting at an interlocutory stage	 the benefit of reasonable doubt belongs to the specialised body. Of course	 as stated earlier	 if there are good grounds to strike down the order	 certainly the High Court has jurisdiction to stay its operation. However	 we find nothing stated in the order itself indicating why the High Court prima facie thought it necessary substantially to stay the operation of the Company Law Board 's order of induction of seven persons as directors. Nor have we any light regarding the total eclipse of four directors and the partial eclipse of the other three. Unfortunately	 the inscrutable face of a sphinx does not go well with the judicial process. Whatever might have been 738 the basis of the High Court 's order we do not make any comments thereon we are inclined to nullify the interim stay. Our inclination is explained by the prefatory observations we have earlier made in this order. To expatiate more may prejudice one side or the other. To indicate this much is obligatory to explicate ourselves. There was some argument at the Bar about an order under sec. 18AA of the Industries (Development and Regulation) Act	 1951	 and its impact upon the order impugned before us. Maybe	 by virtue of that appointment	 the entire company comes under the control of the authorised person appointed under that provision. It is not for us to explore here the effect and import of the order of the Central Government under section 18AA and we desist from doing so. All that we need do and that we can do in the present appeal is to allow it so that the Company Board 's direction in regard to seven additional directors will come into full force until the final decision of the High Court. We allow the appeal. We may make it clear that the learned Additional Solicitor General did assure the court that nothing which will stultify the two writ petitions before the High Court will be done by the Company Law Board or the Central Government. We hope the High Court will dispose of the case very expeditiously. S.R. Appeal allowed.

Summary:
The Company Law Board by its order dt. 17th December	 1977 inducted several additional directors in addition to the existing directors of the respondent company	 under section 408(1) of the 	 since it was of the opinion that the affairs of the company in question "are being conducted in a manner which is prejudicial to the interest of the company and to public interest". But the Delhi High Court passed an ad interim stay of the said orders	 while admitting the writ Petition. Allowing the appeal by special leave	 the Court ^ HELD: Where repercussions are incalculable and the basis of the direction	 though interlocutory	 is obscure	 the ends of justice dominate and the Supreme Court may interfere	 if public interest so dictates under article 136 of the Constitution. [736B] (2) A company of considerable financial dimensions and involved in operations using public resources as investment naturally becomes the concern not merely of the Company Law Board but also all of the economic process of the country. The specialised body with responsibility to watchdog corporate process is the Company Law Board. When it investigates and reaches a definite conclusion and makes a consequential direction	 it is entitled to prima facie respect unless there are glaring circumstances to the contrary. It may well be that the order of the Board may be vitiated by infirmities	 legal or other. It may also be that the reasoning of the Board and the factual foundation for it is sound. In such situations acting at an interlocutory stage	 the benefit of reasonable doubt belongs to the specialised body. If there are good grounds to strike down the order certainly the High Court has jurisdiction to stay its operation. [737D G]