Judgment

GAJENDRAGADKAR, J. : The appellant Raja Narayanlal Bansilal of Bombay is the Managing Agent of a Limited Company named the Harinagar Sugar Mills Limited. By virtue of the power conferred on him by S. 137 of the Indian Companies Act, 1913 (VII of 1913) the Registrar wrote to the mills on November 15, 1954, that it had been represented to him under S. 137 (6) that the business of the company was carried on in fraud, and so he called upon the company to furnish the information which he required as set out in a part of his letter (Ex. A). On April 15, 1955, the Registrar made a report (Ex. AA) to the Central Government under S. 137 (5) of the said Act. This report showed that according to the Registrar the affairs of the company were carried on in fraud of contributories and they disclosed an unsatisfactory state of affairs. 31 The report pointed out that the appellant was the Managing Agent of the company as well as its promoter, and that it was suspected that under a fictious name of Bansilal Unchant Account the company was advancing money to the several firms owned by the appellant which were ostensibly purchased from the company s funds. The report further stated that between the years ending in September 1942 and 1951 about Rs. 19,200 were paid for Harpur Farm and Rs. 39,300 for Bhavanipur Farm, and accounts disclosed that the Unchant Account was chiefly operated upon for purchasing such lands out of the funds of the company though the purchase in fact was for and on behalf of the appellant. The Registrar also added that he had reason to believe that the Managing Agent was utilising the property of the company in some cases for his personal gain, and concluded that, in his opinion, a case had been made out for an investigation under S. 138.

2. On receiving this report, on November 1, 1955, the Central Government passed an order under S. 138 (4) of the said Act (Ex. B) appointing the first respondent Meneck P. Mistry, who is a Charactered Accountant, as an inspector to investigate the affairs of the company from the date of its incorporation. The said inspector was asked to point out all irregularities and contraventions of the provisions of the said Act or any other law and make a full report as indicated in a communication which was separately sent to him. This separate communication (Ex. BB) prescribes the mode of enquiry which should be adopted by insepctors. It requires that while investigating the affairs of companies the inspectors should bear in mind that for a successful prosecution the evidence in support of a charge must be clear, tangible and cogent, and that their reports should specify with reference to the evidence collected during the investigations, the points specified under paragraph 2 (a) to (e). In the course of their investigation the inspectors are asked to make use of the powers available to them under S. 140 of the said Act including the right to examine a person on oath. The investigation should be conducted in private and the inspectors are not entitled to make public the information received by them during the course of the investigation.

3. Pursuant to the powers conferred on him by the said order respondent 1 wrote to the appellant intimating to him that he would examine him on oath in relation to the business of the company under S. 140 (2) of the said Act (Ex. C). Meanwhile on April 1, 1956, the Companies Act of 1913 (VII of 1913) was repealed by the Companies Act of 1956 (I of 1956). For the sake of convenience we would hereafter refer to the repealed Act as the old Act and the Act which came into force on April 1, 1956, as the new Act. On July 26, 1956, the Central Government purported to exercise its power under S. 239 (2) of the new Act and accorded approval to respondent 1 exercising his powers of investigating into and reporting on the affairs of the appellant including his personal books of accounts as well as the affairs of the three concerns specified in the order. These three con