CHOTANAGPUR BANKING ASSOCIATION LTD Vs. STATE OF BIHAR

JUDGEMENT

(1.) The Official Liquidator filed his statement of accounts for the period commencing from 1-10-1966 to 31-3-1967 in accordance with Rule 298 of the Companies (Court) Rules, 1959 --hereinafter called the Rules -- framed by the Supreme Court of India under Section 643 of the Companies Act, 1956 hereinafter to be referred to as the Act.

(2.) The accounts have got to be audited as required by Sub-section (3) of Section 462 of the Act. So far the half-yearly accounts of this Company filed under the said section of the Act were being audited by the Examiner of Local Fund Accounts as directed by this Court under Rule 302 of the Rules. The Official Liquidator filed the report which is at flag 725 dated the 30th of June, 1967 wherewith he appended a letter from Messrs. R.N. Rudra and Company, Chartered Accountants, Patna which have been carrying on the work of auditing the accounts of various companies in liquidation either under orders of this Court or under its supervision. The amount of fees which Messrs. R.N. Rudra and Company have been getting for auditing the liquidator's accounts under rule 304 of the Rules has been, rather, low according to them, since in accordance with that rule the Company being small and small sums of money being involved in the Official Liquidator's account, they were not entitled to get more than the fee prescribed therein. The Chotanagpur Banking Association. Limited is a big company. The figures involved in the account of the official Liquidator are rather substantial and much more compared to the figures involved in the accounts of small companies. The said Chartered Accountants, therefore, approached the Official Liquidator through, their letter of June 13, 1967--which letter in original is appended to the Official Liquidator's report--to allow them to audit bigger companies like the Chotanagpur Banking Association Ltd., which would enable them to earn more fees as prescribed under Rule 304. Thus, they thought they would be compensated for the loss which they had to suffer because of the small amount of fees which they were getting for the audit of the Official Liquidator's account in respect of smaller companies. In their letters Messrs. R.N. Rudra and Company have further stated that they would be agreeable to deviate from the rate of fees prescribed by Rule 304 and would be prepared to accept any reasonable fees which may be fixed by the Hon'ble Company Judge.

(3.) When this report of the Official Liquidator with the letter aforesaid was placed before me on 7-8-1967, a question arose as to whether this Court was competent to vary the manner or the fees prescribed for audit of the Official Liquidator's account in Rules 301 to 304 of the Rules, In this connection a decision of the Calcutta High Court in "In Re: Fire & General Insurance Co. of India Ltd.", 66 Cal WN 566 was brought to my notice. S.P. Mitra, J., has held in that case that the Supreme Court has no power to prescribe rules relating to the manner in which the Court shall cause the Liquidator's account to be audited and hence rules 301 to 304 of the Rules dealing with the manner of auditing are beyond the rule-making power of the Supreme Court; they have been struck down as being ultra vires and void as they contradict the express provisions of the Act. I, therefore, directed by my order No. 241(6) dated 7-8-1967 as modified by order no. 242 dated 25-8-1967 to issue a show cause notice to the Central Government as also to the Registrar of Supreme Court to give them an opportunity to have their say in the matter and to show cause as to why the said rules should not be declared ultra vires. In response to the said notice, Mr. Bajrang Sahay, learned Government Advocate of the State of Bihar, has appeared for the Union of India to support the vires of the rules. The Registrar, Supreme Court, has not instructed anybody to appear in the matter. Mr. Shreenath Singh, learned Advocate for the Official Liquidator, has placed before me all that could be said in support of the vires of the rules as also against it as said by the Calcutta High Court in the case referred to above. Mr. S.C. Ghosh who appears in this case on behalf of certain depositors submitted that the rules are beyond the rule-making power of the Supreme Court. The point is not free from difficulty. Having given my due consideration to the matter, I have come to the conclusion that the rules are not ultra vires, but even then they are subject to the order which the Court may pass under Sub-section (8) of Section 462 of the Act either in regard to the manner of auditing which would include as to who is to be appointed for auditing the accounts or the fees to be paid for auditing or any other matter connected therewith.