Moolchand Gupta vs Jagannath Gupta And Company Private LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1979 Supreme(SC) 85

SUPREME COURT OF INDIA
R.S. SARKARIA AND O. CHINNAPPA REDDY, JJ.
Mool Chand Gupta, Appellant
Versus
Jagnnath Gupta and Co. (P) Ltd., Respondent.
Civil Appeal No. 1700 of 1969, D/- 30-1-1979.
Advocates appeared
Mr. S. N. Andley Sr. Advocate (M/s. B. P. Maheshwari and Suresh Sethi, Advocates with him), for Appellant; Mr. Y. S. Chitaley Sr. Advocate (M/s. Vineet Kumar and Praveen Kumar, Advocates with him), for Respondent.

Headnote:WHETHER IT IS OBLIGATORY ON PART OF CENTRAL GOVERNMENT TO DIRECT INVESTIGATION—USE OF EXPRESSION “MAY”—INTENTION OF LEGISLATURE - Investigation—WHETHER IT IS OBLIGATORY ON PART OF CENTRAL GOVERNMENT TO DIRECT INVESTIGATION—USE OF EXPRESSION “MAY”—INTENTION OF LEGISLATURE -Investigation—POWERS OF - Investigation—Appointment of Inspector—Powers of Central Government to direct investigation - Investigation—WHETHER OBLIGATORY ON PART OF CENTRAL GOVERNMENT TO DIRECT INVESTIGATION—USE OF EXPRESSION “MAY”—INTENTION OF LEGISLATURE - Investigation—WHETHER, IT IS OBLIGATORY ON PART OF CENTRAL GOVERNMENT TO DIRECT INVESTIGATION—USE OF EXPRESSION “MAY”—INTENTION OF LEGISLATURE
-under Section 235 it is not obligatory for the Central Government to direct an investigation. It has a discretion to appoint or not to appoint inspectors for investigating the affairs of the Company the word used in the section being “may”. Before the Government can take such action under Section 235, certain pre-conditions including those specified in Section 236, must be satisfied. Furthermore, unlike the power of the Court in a proceeding for winding up of a company, the discretionary power of the Central Government to direct investigation is neither judicial nor quasi-judicial. It follows therefrom, the investigation on a complaint under Sections 235/237 may not be an adequate substitute for proceedings in Court on a winding up petition. In other words , a petition under Section 235/237/239 may not afford an equally efficacious and alternative remedy, as a petition under Section 439 to court for winding up of the company,
-under Section 235 it is not obligatory for the Central Government to direct an investigation. It has a discretion to appoint or not to appoint inspectors for investigating the affairs of’ the Company, the word used in the Section being “may”. Before the Government can take such action under Section 235, certain pre-conditions including those specified in Section 236, must be satisfied. Furthermore unlike the power of the Court in a proceeding for winding up of a Company, the discretionary power of the Central Government to direct investigation in neither judicial nor quasi-judicial. It follows therefrom, that investigation on a complaint under Sections 235/237 may not be an adequate substitute for proceedings in Court on a winding up petition. In other words, a petition under Sections 235/237/239 may not afford an equally efficacious and alternative remedy, as a petition under Section 439 to court for winding up of the Company, as held in the case of Mool Chand Gupta v. Jagannath Gupta & Co. (P) Ltd., AIR 1979 SC 1038 : (1979) 4 SCC 729 : (1979) 2 SCJ 181. The intention of the Legislature as discernible from Section 243 seems to be that when the Court is already seized of the matter, at the instance of a party the Central Government should refrain from taking the initiative. Even where it appears to be Central Government from the report of the investigating inspectors appointed under Sections 235/237 that it is expedient to move the Court for winding up of the Company on the ground that it is just and equitable to wind it up, or that an application for an order under Section 397 or 398 be made, then also it must stay its hands from doing so if proceeding for winding up of the Company are already being taken up by the Court.

Judgment

SARKARIA J.:- This appeal by certificate is directed against a judgment dated July 26, 1968 of the High Court of Judicature at Calcutta. The facts leading to this appeal are as follows:-

2. Jagannath Gupta & Co. (P) Ltd. the respondent herein, (hereinafter referred to as the Company) was incorporated in the year 1940 under the Indian Companies Act as a private Company limited by shares with its registered office in Calcutta. Its nominal capital was and still is Rs. 25,00,000 divided into 1000 ordinary shares of Rs. 2,500/- each with the entire capital paid up or credited as paid up.

3. Prior to 1940, Jagannath Gupta used to carry on business under the name and style of Jagannath Gupta and Co. as Karta of a Joint Hindu Family business. Subsequently, as a result of the family arrangement, the Joint Hindu Family trading partnership was converted, into a contractual partnership under the name and style of Jagannath Gupta & Co. It was thereafter converted into a private limited Company in 1940 as aforesaid.

4. Jagannath Gupta had four sons: Bidya Bhushan Gupta, Padam Chand Gupta, Moolchand Gupta and Bhim Sen Gupta. Bidya Bhushan Gupta had a son Mahadev Prasad who died in 1945 and a daughter, Bimla who was married to Uma Shankar Shroff. Uma Shankar Shroff was adopted in May 1967 by the widow of Mahadev Prasad Gupta. Moolchand Gupta had two sons; Gopal Krishan and Inderjeet. Bhim Sen Gupta had two sons; Devi Prasad and Shukla.

5.The shares of the Company were originally held by Jagannath Gupta, as follows:-

(a) Jagannath Gupta 495 shares

(b) Bidya Bhushan Gupta 125 shares

(d) Moolchand Gupta 125 shares

(e) Bhim Sen Gupta 120 shares

(f) Bhuran Devi wife of Jagannath Gupta 5 shares

(g) Krishna Devi, wife of Bhim Sen Gupta 5 shares

6. The appellant is a share-holder of the Company, which was a domestic concern of the family of Jagannath Gupta. He is a holder of 125 fully paid up shares from the very inception of the Company.

7. It is alleged on behalf of the respondents, by Bidya Bhushan Gupta, that during his lifetime, the said Jagannath Gupta at a meeting of the Board of Directors, presided over by him, initiated and passed a resolution, whereby he nominated his successors to or bequeathed or transferred his 495 shares in the event of his death as follows:-

(a) To Padam Chand Gupta 125 shares

(b) To Bidya Bhushan Gupta 250 "

(d) To Debi Prasad Gupta (s/o Bhim Sen Gupta) 55 "

8. Another distinctive feature of the case is that the Company was formed with 19 properties specified in Sch. A to the Memorandum of Articles of Association.

9. On July 19, 1967, Moolchand Gupta filed a petition under Ss. 433, 434 and 439 of the Companies Act, 1956, in the High Court of Calcutta. This was registered as Petition No. 158/67. A two-fold prayer was made in the petition (a) The Company be would up by the High Court; (b) A professional liquidator be appointed. The petition was admitted on August 1, 1967 and directions were given for publication of the advertisements in the Calcutta Gazette and other papers. The petition was fixed for hearing on September 25, 1967 in the said High Court. The allegations made in the petition were as under:-

That the respondents allegation that prior to his death. Jagannath Gupta had transferred/bequeathed his 495 shares as aforesaid, was wrong and the said Minutes of the alleged meeting of the Board of Directors under the Chairmanship of Jagannath Gupta purporting to be held on Sept. 6, 1946, are false and fabricated. This was also the stand taken by Bhim Sen Gupta in his affidavit filed before the High Court. It is also alleged that prior to the death of the said Bhuran Devi, Bhim Sen Gupta had sold and/or transferred his 120 shares to this Bhuran Devi and said 120 shares along with the 5 shares originally allotted to her, stood registered in the name of Bhuran Devi (since deceased). It was further stated that after the death of Jagan

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1979 Supreme(SC) 85

Cases Referred (1)