G HARESH CHAND Vs. GEE GEE GRANITES LIMITED

JUDGEMENT

(1.) THIS original side appeal has been filed against a judgment and order dated 14th July 2008 passed by the learned Company Judge in the Company Petition No.256 of 2007 filed by the present appellant. The Company Petition (hereinafter referred to as the -said petition-) was filed under Section 237(a)(ii) of the Companies Act (hereinafter referred to as the -said Act-) seeking a declaration that the affairs of M/s. Gee Gee Granites Limited, (hereinafter referred to as the -said company-), the first respondent herein, are liable to be investigated, and as such a direction is prayed for on the Central Government to appoint number of Inspectors to investigate the affairs of the said company and to ensure that proper and necessary action was taken on such investigation.

(2.) IN the said petition, the case of the petitioner is that the petitioner and his other family members, who were share holders of the said company, had entered into an agreement with the 2nd and 3rd respondents in March, 2004, who agreed to purchase the shares of the petitioner and his family members for a total consideration of Rs.87,50,000/- The case of the petitioner is that after the purchase of those shares, the conduct of the 2nd and 3rd respondents is totally against the interest of the shareholders and creditors of the company, and they are indulging in various fraudulent activities, which demand investigation in the affairs of the said company, to be ordered by the central government, and also by the CBI. The further case is that the valuable properties of the said company has been sold for a song and there is total lack of transparency in the conduct of the affairs of the said company, and there is also total lack of corporate governance. It is alleged that several amounts due to the creditors were unilaterally written off by the 2nd and 3rd respondents, and the balance sheet of the company gives a misleading picture. It is also urged that the sale of the entire factory of the said company is a collusive transaction with the 4th respondent, and the same was done at a very low price. It is further urged that the said sale of the factory virtually amounted to the winding up of the said company and after the said sale the existence of the company became meaningless. It is also alleged that the said sale was not supported by the consent of the shareholders under Section 293(1(a) of the said Act.

(3.) BASICALLY on those allegations, the learned Judge of the Company Court, in a rather well considered judgment, held that under the provisions of Section 237(a)(ii) of the said Act the Court has no general discretion to go in a fishing expedition to find evidence. In coming to the said finding the learned Judge relied on the celebrated decision in the case of Barium Chemicals Ltd. Vs. The Company Law Board, 36 Company Cases 639. The learned Company Judge also noted that in the subsequent decision of the Supreme Court in the case of Rothas Industries Ltd. Vs. S.D.Agarwal, 39 Company Cases 781 wherein the principles in Barium Chemicals have been reiterated. In the said decision, pointing out the provisions of Section 237(a)(i) of the said Act, the Apex Court said that the said section is an inroad on the power of the company to carry on its business and any order passed under the said section may seriously tarnish the reputation of the company. Therefore only on disclosure of strong materials Court can exercise its discretion in ordering an investigation under the aforesaid section. In our view, the learned Judge has placed the reliance correctly on those judgments, as also on the judgment in the case of Purie (V.V.) Vs. E.M.C. Steel Ltd., 50 Company Cases 127, wherein it has been said that a person having no interest or concern with the company as a shareholder, creditor or otherwise has no locus standi to invoke the aforesaid provision of the said Act.