Judgment

SHAH, J.: The Rampur Distillery Company Ltd. - hereinafter called `the Rampur Company - is a manufacturer of industrial alcohol. In 1943 the Rampur Company appointed Govan Brothers its managing agent for 20 years. In July 1946 a group of persons who may be referred to as the `Dalmia Group assumed control over Govan Brothers. V. H. Dalmia who became Managing Director of Govan Brothers, besides being a director of a number of other companies, held important position in several trade associations. On March 19, 1953, information was lodged by the Registrar of Joint Stock Companies, Delhi, that V. H. Dalmia and others had committed offences of criminal breach of trust.

2. By virtue of Section 330 of the Companies Act, 1956, the Managing agency of the Rampur company was to expire on August 15, 1960, unless before that date the managing agent was re-appointed for a fresh term in accordance with the provisions of the Companies Act. On December 10, 1959 the Rampur Company re-appointed Govan Brothers, Managing Agent for ten years with effect from August 15, 1960, and applied to the Central Government that the extension of the managing agency of Govan Brothers be approved. The Central Government granted extension for five years under Section 326 of the Companies Act with effect from August 15, 1960.

3. In the report of the Commission headed by Mr. Justice Vivian Bose appointed to enquire into and report on the working of the `Dalmia Jain Group of Industries , the dealings of V. H. Dalmia in relation to the financial affairs of some of the companies of which he was a director was severely criticized. In the view of the Commission, V. H. Dalmia was in the year 1946-47 guilty of grossly improper conduct in relation to several companies of which he was a director.

4. In May 1964 the police lodged criminal proceedings against V. H. Dalmia and 23 others in the Court of the District Magistrate, Delhi charging them with being parties to a "Criminal conspiracy having for its objects the commission of criminal breach of trust of the assets of the Dalmia Jain Airways, Ltd., and committing offences of forgery and falsification of accounts , and that criminal breach of trust was committed by them in respect of amounts "running into crores of rupees . The proceedings so instituted are still pending.

5. On September 23, 1964, the Rampur Company passed another resolution appointing Govan Brothers Managing Agent for five years with effect from August 15, 1965, and applied to the Central Government to accord approval to the appointment. This application was referred by the Central Government to the company Law Board which was constituted under Section 10-E of the Companies Act, 1956, with authority to exercise the powers of the Central Government among others to deal with applications under Section 326 of the Companies Act 1956. The Company Law Board extended the tenure of Govan Brothers till March 31, 1967. Another application by the Rampur Company dated August 25, 1966 for extension of the term of the managing agency upto August 14, 1970 was rejected by the Board.

6. The Rampur Company then moved a petition in the High Court of Delhi on June 10, 1967, for an order quashing the decision of the Board and for an order extending the term of the managing agency till March 31, 1970. A single Judge of the High Court granted the petition holding that the managing agent was a private limited company and the reasons for failure to extend the managing agency agreement of Govan Brothers being "entirely personal to V. H. Dalmia were "completely irrelevant in so far as the affairs of the Managing Agent company or of the petitioner Company (Rampur Company) were concerned. In appeal against that order a Division Bench of the High Court observed that where a Managing Agent is a corporate body, the acts and conduct of the Directors of that body become the object of scrutiny in determining whether such a corporate body may be considered to be a fit and proper p