Supreme Court intervenes in company mismanagement case, appoints CA for independent examination

The Supreme Court expressed concern over government inaction in addressing alleged mismanagement in a company's affairs. The Court appointed a Chartered Accountant to examine the company's accounts due to lack of action by government agencies. It emphasized the need for independent examination to address the mismanagement allegations. The Central Government was directed to provide details of any action taken. The Court invoked its jurisdiction under Article 32 and Article 142, expecting Executive action post-intervention. The Company was instructed to deposit funds for the examination, and alienation of assets was prohibited until the report submission. Further proceedings were scheduled post-report submission.

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Issues: Pending matter regarding mismanagement in a company's affairs, inaction by government agencies, appointment of a Chartered Accountant to examine company's accounts, direction for Central Government to provide details of action taken.

In this judgment, the Supreme Court expressed concern over the inaction of government agencies in addressing a matter of alleged mismanagement in a company's affairs. The Court highlighted that it is primarily the responsibility of the Executive to correct such aberrations and ensure wrongdoers are identified and dealt with in accordance with the law. Despite issuing notice to the Central Government, no significant steps had been taken by the agencies, prompting the Court to appoint a Chartered Accountant to examine the company's accounts. The Court emphasized the need for independent examination by the authorities concerned to address the allegations made in the writ petition regarding mismanagement in the company. The Court also directed the Central Government to provide details of any action taken in the matter.

The learned Additional Solicitor General informed the Court that government agencies had deferred taking any steps due to the pendency of the writ petition. The Court expressed surprise at this justification, emphasizing that the Executive authorities should have dealt with the matter without the need for judicial intervention. The Court invoked its jurisdiction under Article 32 and Article 142 of the Constitution to address the issue involving public interest and the adverse impact on a large number of individuals. The Court expected the Executive process to be activated after its intervention, reiterating the importance of government agencies taking necessary actions without specific directions from the Court.

In response to an affidavit filed by the Company and documents produced, which did not provide a clear picture as required, the Court appointed a Chartered Accountant to examine the company's accounts. M/s A.F Ferguson & Co., Delhi, was appointed for this purpose, with the fees and expenses to be borne by the Company. The Court directed the Company to deposit a sum of Rs. 5 lakhs within two weeks and instructed the Chartered Accountants to submit a report within 10 weeks, considering the contents of the writ petition, documents, and Court orders. Additionally, the Court prohibited the alienation or encumbrance of the company's fixed assets until the report is submitted.

The Court also directed the Central Government to file an affidavit detailing any action taken by the government or its agencies in the matter. The case was listed for further proceedings after the report was submitted by the Chartered Accountants, emphasizing the importance of a comprehensive examination of the company's accounts and actions taken by the authorities concerned.

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