SIR FAZAL IBRAHIM RAHIMTOOLA Vs. APPABHAI GDESAI

JUDGEMENT

(1.) This is an appeal from an order of Mr. Justice Bhagwati making an order for the public examination of Sir Fazal Ibrahim Rahimtoola on a summons taken out by the official liquidator of the Associated Banking Corporation of India, Ltd., under Section 196 of the Indian Companies Act.

(2.) The order is contested by Sir Jamshedji mainly on two grounds. The first ground is that the order made was without jurisdiction. Now, jurisdiction of the Court to make an order for the public examination of a director and Sir Fazal was a director of the company with which we are concerned in this case is founded on Section 196 of the Indian Companies Act. That section provides that "when an order has been made for winding up a company by the Court, and the official liquidator has applied to the Court stating that in his opinion a fraud has been committed by...", then the section goes on to state the class of persons who might be guilty of fraud, and then it goes on, "the Court may, after consideration of the application, direct that any person...", and then it sets out the same class of persons which are mentioned earlier in the section. There is another section to which attention might be drawn in order to understand Sir Jamshedji's contention, and that is Section 177B. Sub-clause (2) of that section provides: (2) The official liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was formed and whether in his opinion any fraud has been committed by any person in its promotion or formation or by any director or other officer of the company in relation to the company since the formation thereof, and any other matter which in his opinion it is desirable to bring to the notice of the Court. Briefly put, Sir Jamshedji's argument is this that the statutory jurisdiction of the Court can only be invoked after the official liquidator has made a report under Section 177B (2) and the Court can only make an order under Section 196 after taking into consideration the report made by the official liquidator. Sir Jamshedji says that the jurisdiction of the official liquidator to make a report is based upon Section 177B (2), and he having made that report, it is for the Court to consider it and then proceed to decide whether any particular person should or should not be publicly examined.

(3.) Now, let us consider a few facts as to how the official liquidator came to apply for an order under Section 196. On May 21, 1948, the official liquidator submitted a report to the Vacation Judge and headed that report as being pursuant to Secs.197, 196, 195 and 237. On that report the learned Judge gave directions to the official liquidator to take out a chamber summons for the public examination of the various persons mentioned in his report as being party to the fraud. Thereupon the official liquidator took out a chamber summons on May 28, 1948, and it was on this summons that the learned Judge made the order complained of. Sir Jamshedji says that the report of the official liquidator is not made under Section 177B but under other sections. Looking to the report it is obvious that the report is made for the purpose of ultimately getting an order under Section 196, and in my opinion at the most there is a clerical error on the part of the official liquidator in not mentioning Section 177B along with other sections that he has mentioned. But I would go further. Looking to the provisions of the law in this country, I am not at all sure that it is not open to the official liquidator to make an independent report under Section 196 from the report contemplated by Section 177B. It is necessary to consider the analogous law which we find in England. The provision with regard to the public examination was first introduced into the English company law by the Companies Winding Act of 1890 and Section 8(2) corresponds to Section 177Bf2) and Section 8(3) corresponds to Section 196 of our Companies Act. It is very significant to note that Section 8 (3) speaks of "the Court may, after consideration of any such report", any such report being the report referred to in Section 8(2) corresponding to our Section 177B. When we turn to our Section 196, there is no reference whatever to the report which the official liquidator has got to make under Section 177B. When we turn to the English Companies Act, which is in force today, we find that Section 182 corresponds to Section 177B and Section 216 corresponds to Section 196, and Section 216 provides that "Where an order has been made in England for winding up a company by the Court and the official receiver has made a further report under this Act..." and that report under the Act is obviously the report referred to in Section 182. Again, no similar words are to be found in Section 196 of our Companies Act, and, therefore, in my opinion it would be open to the Court to make an order under Section 196 if the official liquidator applies under Section 196, and in his application he states that in his opinion a fraud has been committed by any person whom he wants to get examined Under that section. There is no doubt that in this case when the official liquidator applied by the chamber summons for an order under Section 196 he has clearly and categorically stated that in his opinion Sir Fazal Was guilty of a fraud and that he should be publicly examined. Therefore I see no force in Sir Jamshedji's contention that the order made by the learned Judge was an order without jurisdiction.