Judgment

MUDHOLKAR, J. (For self and Sarkar, C. J.) : On May 19, 1965, Mr. D. S. Dang Secretary of the Company Law Board issued an order on behalf of the Company Law Board made under S. 237 (b) of the Companies Act, 1956 appointing 4 persons as Inspectors for investigating the affairs of the Barium Chemicals Ltd., appellant No. 1 before us, since its incorporation in the year 1961 and to report to the Company Law Board inter alia "all the irregularities and contraventions in respect of the provisions of the Companies Act, 1956 or of any other law for the time being in force and the person or persons responsible for such irregularities and contraventions". The order was made by the Chairman of the Board, Mr. R. C. Dutt on behalf of the Board by virtue of the powers conferred on him by certain rules to which we shall refer later. On June 4, 1965 the Company preferred a writ petition under Art. 226 of the Constitution in the Punjab High Court for the issue of a writ of mandamus or other appropriate writ, direction or order quashing the order of the Board, dated May 19, 1965. The Managing Director, Mr. Balasubramanian joined in the petition as petitioner No. 2. The writ petition is directed against 7 respondents, the first of which is the Company Law Board. The second respondent is Mr. T. T. Krishnamachari, who was at that time Minister for Finance in the Government of India. The Inspectors appointed are respondents 3 to 6 and Mr. Dang is the 7th respondent. Apart from the relief of quashing the order of May 19, 1965 the appellants sought the issue of a writ restraining the Company Law Board and the Inspectors from giving effect to the order, dated May 19, 1965 and also sought some other incidental reliefs. The order of the Board was challenged on 5 grounds which are briefly as follows :

(1) that the order was made mala fide;

(2) that in making the order the Board had acted on material extraneous to the matters mentioned in S. 237 (b) of the Companies Act;

(3) that the order having in fact been made at the instance of the shareholders is invalid and on a true construction of S. 237 this could not be done;

(4) that the order was invalid because it was made by the Chairman of the Board and not by the Board: and

(5) that the provisions of S. 237 (b) are void as offending Arts. 14 and 19 (1) (g) of the Constitution.

2. The allegations of mala fides were denied on behalf of the respondents. They disputed the validity of all the other grounds raised by the petitioners. The High Court rejected the contentions urged before it on behalf of the appellants and dismissed the writ petition. The appellants thereafter sought to obtain a certificate of fitness for appeal to this Court; but the High Court refused to grant such a certificate. They have now come up to this Court by special leave.

3. In order to appreciate the arguments addressed before us a brief statement of the relevant facts would be necessary. The Company was registered in the year 1961 and had an authorised capital of Rs. 1 crore divided into 100,000 shares of Rs. 100 each. Its primary object was to carry on business of manufacturing all types of barium compounds. Appellant No. 2 was appointed Managing Director of the Company from December 5, 1961 and his appointment and remuneration were approved by the Central Government on July 30, 1962. The erection of the plant was undertaken by M/s. L. A. Mitchell Ltd., of Manchester in pursuance of a collaboration agreement between it and the company entered in October, 1961 and approved by the Central Government in November of that year. Thereafter a permit for importing the requisite machinery was granted to the Company. The issued capital of the Company was Rs. 50,00,000 and the public was invited to subscribe for shares in the Company. It is said that the issue was oversubscribed by March 12, 1962.

4. It would seem that soon after the collaboration agreement was entered into M/s. L. A. Mitchell Ltd., was taken over by a financial group (M/s.