PALAI CENTRAL BANK LTD Vs. STATE

JUDGEMENT

(1.) BY these reports, made under S. 45 G of the Banking companies Act, the official liquidator asks for the public examination of ten persons - I shall call them respondents - the first nine of whom were directors (the first of them the managing director) of the banking company that is being wound up, and the tenth its auditor. The 2nd respondent died soon after the filing of the first of these reports, and he is beyond the reach of human examination.

(2.) NOTICE has gone to the remaining respondents and they have been heard as required by the proviso to sub-section (2) of the section. But, before considering the objections taken by them, I think it would be profitable to have a close look at the section and compare it with its parent section, now s. 478 of the Companies Act, 1956.

(3.) THERE are other differences between the two provisions, but I do not think that they materially affect the scope of the inquiry. The more important of these differences are: (1) While S. 478 of the Companies Act applies to all officers of the company, S. 45 G of the Banking Companies Act applies only to directors and auditors. (I am leaving out promoters ). (2) While S. 478 of the Companies Act makes it quite clear that it is only that person against whom a fraud is alleged that can be summoned for public examination, the wording of S. 45 G of the Banking Companies act (following the wording of S. 196 of the Indian Companies Act, 1913) is rather vague, and, on a literal construction, is capable of the meaning that, even a person (of the classes mentioned) against whom no act or omission resulting in loss is alleged, can be publicly examined on a general allegation of such acts or omissions. But, as I have shown in Official Liquidator v. Krishna Kamath (1958 K. L. T. 908) there is, despite the difference in wording, no difference between the two provisions on this point, and the principle laid down by the House of Lords in Exparte Barnes, (1896) A. C. 146, that a general incrimination would not be enough and that the individual person sought to be examined must be incriminated applies also to S. 45 G of the Banking Companies act. (3) S. 478 of the Companies Act does not in terms require that the person sought to be examined should be heard before his examination is ordered. This is expressly required by the proviso to sub-section (2) of S. 45 G of the Banking Companies Act. But, as pointed out by Chagla, C. J. in Fazal ibrahim v. Appbhai (A. I. R. 1949 Bombay 339) the practice both in England and in india with regard to public examination under the provisions of the Companies act is to hear the person concerned before making an order against him, although in England the practice takes the form of first making an exparte order and then, after the order is served upon the person, to hear him if he applies to have the order discharged. THEREfore, this provision regarding giving the person concerned an opportunity to show cause why he should not be examined contained in the Banking Companies Act only expressly lays down what is the settled practice even with regard to examinations under the Companies act. It was perhaps thought necessary to make this obligatory since, for an examination under the Banking Companies Act, fraud need not be alleged and only an act or omission leading to loss need be alleged. (4) While S. 478 (1) says that the court may, after considering the report, direct that the person concerned be publicly examined, s. 45 G (2) of the Banking Companies Act says that if, on consideration of the report, the High Court is of opinion that the person concerned should be publicly examined, it shall direct that he be so examined. Here again I think that despite the difference in language the meaning is the same. Obviously, after considering the report as required by S. 478 of the Companies Act, the court would direct public examination only if it is of opinion that the person concerned should be so examined, not otherwise. This is after all all that sub-section (2) of S. 45 G of the Banking Companies Act says; and I should think the "may" of the former section means the same thing as the "shall" of the latter.