The Central Government can order an investigation under Section 237(b) of the Companies Act, 1956, if it has reasonable grounds to believe that there are circumstances suggesting that the company's business is being conducted with intent to defraud its creditors, members, or other persons. An order under Section 249(1)(a) can be made only if the Central Government has good reasons to believe that the company is an associate of its managing agent.

( 1 ) THE petitioner-company claims to carry on business as exporter, investor and financier and further claims to have been acting as selling agent for the State Trading Corporation in respect of cement and also as sole selling agent or selling agent of several other companies. According to the petitioner-company, it has built up a very efficient and effective marketing organisation covering the whole of India. In paragraph 5 of the petition, there is a recitation of the commodities in which the petitioner-company trades, which includes cement, paper, fertilisers, plywood, bicycles, machinery, machine parts, motors and transformers, cables, tools, refractory materials and oil firing equipments. The petitioner-company has an issued and subscribed capital of Rs. 15,00,000 and claims to have built up a reserve of over Rs. 40,00,000. After having made provisions for taxation and reserves, the petitioner-company is said to have declared substantial dividends to its shareholders during the years 1958-59 to 1962-63. The directorate of the petitioner-company, it is said, includes businessmen of reputation and lawyers of respectability. The above facts are pleaded in order to emphasise upon the contention that the petitioner-company should have been regarded as beyond reproach. The measure put by the petitioner-company upon itself is not, however, an agreed measurement and is disputed in the affidavit-in-opposition.

( 2 ) ON 11th April, 1963, the Central Government made the following order against the petitioner-company ;"whereas the Central Government is of the opinion that there are circumstances suggesting that the business of Ashoka Marketing Company Limited, a company having its registered office at No. 18-A, Brabourne Road, Calcutta (hereinafter referred to as the said company), is being conducted with intent to defraud its creditors, members or other persons and the persons concerned in the management of its affairs have in connection therewith been guilty of fraud, misfeasance or other misconduct towards the said company or its members; and whereas it has come to the notice of the Central Government that the said company is acting as the selling agent of M/s. Rohtas Industries Limited, Dalmianagar, Bihar, and New Central Jute Mills Co. Ltd. , Calcutta, (hereinafter referred to as the said managed companies); and whereas Sahu Jain Ltd. , a company having its registered office at No. 11, Clive Row, Calcutta, is the managing agent (hereinafter referred to as the managing agent) of the said managed companies ;and whereas a question (hereinafter referred to as the said question) has arisen as to whether Ashoka Marketing Limited is an 'associate' as denned in Clauses (c) and (d) of Sub-section (3) of Section 2 of the Companies Act, 1956 (1 of 1956), of the managing agent ; and whereas it appears to the Central Government that there is good reason to investigate the said question ; and whereas the Central Government consider it desirable that an inspector should be appointed to investigate the affairs of the said company as well as to investigate the said question and to report thereon ;now therefore in exercise of the several powers conferred by Sub-clauses (i) and (ii) of Clause (b) of Section 237 of the Companies Act, 1956 (1 of 1956), and Clause (a) of Sub-section (1) of Section 249 of the said Act, the Central Government hereby appoint Shri S. Prakash Chopra of M/s. S. P. Chopra and Co. , Chartered Accountants, 31-F, Connaught Place, New Delhi, as inspector to investigate the affairs of the said company, namely, Ashoka Marketing Company Ltd. , for the period from 1st April, 1958, to date and also prior to 1st April, 1958, should the inspector consider necessary and to investigate the said question, namely, whether M/s. Ashoka Marketing Co. Ltd. is the associate of Sahu Jain Ltd. , which is the managing agent of the said managed companies and report thereon to the Central Government pointing out, inter alia,