K S SUNDARAM Vs. UNION OF INDIA

JUDGEMENT

(1.) The appellant/petitioner challenges the judgment of the learned single Judge, dismissing the writ petition, challenging the order dated 21-6-1990 passed by the Union of India, first respondent herein, (in short the "Government") whereby the Government refused to grant approval to the appointment of the appellant as the Chairman and Managing Director of the second respondent company (in short "the company").

(2.) On 2-6-1988, a resolution came to be passed in the Annual General Meeting of the company, appointing the appellant as the Chairman and Managing Director with effect from 14-7-1988 upto 13-7-1992, i.e. for a period of four years. He was to get the remuneration of Rs.7500/- per month in addition to 1% commission on the net profits of the company and other perquisites. As per the amended provisions of Sec.269 of the Companies Act, which amendment came into force from 1-6-1988, an application dated 19-7-1988 came to be made for approval under that section. 2.1. The Government called for some particulars from the company,which were duly furnished. Thereafter, by communication dated 19-3-1990, the company as also the appellant were called upon to show cause within thirty days as to why the proposal of the company for reappointment of the appellant as the Chairman and Managing Director should not be rejected. 2.2. In this detailed show cause notice, it was, inter alia, contended that one M/s. Tambraparani Enterprises, wherein the appellant, his wife and son were the partners, was appointed as the Commission Agent under an agreement dated 10-7-1986 and had received huge commissions in the years 1986, 1987 and 1988. It was urged that while making an application for reappointment, the appellant had failed to disclose his own interest in the aforesaid partnership firm against item No.7 in Form 25-A and this amounted to a misstatement, punishable under Sec.628 of the Companies Act. BY way of second reason, it was stated that the Managing Director had misused his fiduciary capacity in respect of the contracts with M/s.Tambraparani Enterprises which in turn had entered into a contract with M/s. Tambraparani Distempers for the manufacturing of distempers since the company parted with its machinery, technical knowhow and the research. It was alleged that the sale of assets of the company to M/s.Tambraparani Enterprises, which was only a trading concern, was not above board. It was also suggested that advances were given of huge amounts to a concern called M/s. Madras Fabricators wherein the wife of the appellant was holding 55% shares and, therefore, the appellant had misused his fiduciary capacity. Fourthly, it was stated that the expenses of the trip of the son of the appellant to Singapore were unjustifiably borne by the company. It was also stated that the Colour Television and Video Cassette Recorded, imported in 1982, belonging to the company were installed at the residence of the appellant and it was lastly suggested that he had incurred expenditure on account of gas and electricity consumption amounting to approximately Rs.13,000/-, which was in excess of the limits prescribed in the approval letter dated 29-4-1985 of the Government. 2.3. On these counts, it was suggested that the Government was satisfied that the appellant was not a fit and proper person to be appointed as the Chairman and Managing Director of the company.

(3.) A detailed reply is claimed to have been given by the appellant to this show cause notice on 16-4-1990. In this reply, the appellant claimed that there was no need for the approval of the Government and the application for approval was being withdrawn. Yet it seems the appellant had supplemented his reply by another communication dated 23-4-1990 and also appeared in person before the Joint Secretary for a personal hearing. It seems that these communications of the appellant were sent by the Government to the company for its comments because obviously these two communications were sent not by the company but by the appellant himself. On 24-5-1990, the company wrote to the Government and requested further three months' time to offer its' comments.