1996 (1) TMI 452 - Board - Companies Law

Company Law Board emphasizes natural justice principles in cross-examination application dismissal

The Company Law Board dismissed the application for cross-examination and oral evidence, emphasizing adherence to principles of natural justice and its ... - Issues Involved:1. Cross-examination of respondents who filed affidavits.2. Admissibility and necessity of oral evidence.3. Applicability of the Civil Procedure Code (CPC) and Evidence Act to Company Law Board proceedings.4. Principles of natural justice in Company Law Board proceedings.5. Res judicata concerning previous applications for cross-examination.Issue-wise Detailed Analysis:1. Cross-examination of respondents who filed affidavits:The petitioners sought permission to cross-examine all persons who filed affidavits in opposition. They argued that since the affidavits were already on record, only cross-examination was necessary, not examination-in-chief. The respondents countered that cross-examination should only occur if the respondents offer themselves for examination-in-chief. The Board concluded that cross-examination of all respondents who filed affidavits was unnecessary as the extensive affidavits already provided sufficient material for consideration.2. Admissibility and necessity of oral evidence:The petitioners argued that oral evidence was necessary due to disputed facts, citing the need to establish the veracity of the affidavits through cross-examination. The respondents contended that oral evidence should be led strictly according to the CPC and Evidence Act, and only if issues were framed. The Board noted that in proceedings under Sections 397/398 of the Companies Act, oral evidence is rarely necessary as most allegations can be adjudicated based on documentary evidence. The Board emphasized that oral evidence is generally unnecessary unless specific circumstances warrant it, such as contradictory statements by third parties.3. Applicability of the Civil Procedure Code (CPC) and Evidence Act to Company Law Board proceedings:The petitioners argued that the CPC and Evidence Act do not strictly apply to the Company Law Board, which should be guided by principles of natural justice. They cited Union of India v. T.R. Varma, where the Supreme Court held that the Evidence Act does not apply to tribunals. The respondents argued that the Company Law Board should follow the CPC and Evidence Act, as there were no specific provisions in the Company Law Board Regulations. The Board concluded that it is not bound by the CPC and Evidence Act but should follow principles of natural justice and its own regulations.4. Principles of natural justice in Company Law Board proceedings:The petitioners emphasized that the Company Law Board should be guided by principles of natural justice, allowing cross-examination to test the veracity of affidavits. The respondents argued that the Board should adhere to the CPC and Evidence Act. The Board reaffirmed that it is guided by principles of natural justice and has the discretion to regulate its own procedure, as provided under Section 10E(5) of the Companies Act. The Board emphasized that adherence to natural justice is sufficient for its decisions to be valid.5. Res judicata concerning previous applications for cross-examination:The respondents argued that the petitioners' application for cross-examination should be dismissed based on res judicata, as a similar prayer was made and not granted in an earlier application (C.A. No. 102 of 1993). The petitioners contended that the previous application was still pending and not disposed of. The Board observed that the petitioners had not reiterated their prayer for cross-examination over nearly two years, leading to the presumption that they had abandoned it. The Board decided not to entertain the application for cross-examination at this late stage.Conclusion:The Company Law Board dismissed the application for cross-examination and oral evidence, emphasizing that it is guided by principles of natural justice and has the discretion to regulate its own procedures. The Board noted that the extensive affidavits already provided sufficient material for consideration and that oral evidence is generally unnecessary in proceedings under Sections 397/398 of the Companies Act. The Board also highlighted that it retains the power to order discovery of documents and examine witnesses on oath if necessary.