1965 (7) TMI 36 - HC - Companies Law

Validity of private examination order upheld under Companies Act Section 477, director's request dismissed.

The court upheld the validity of the private examination order under Section 477 of the Companies Act, dismissing the applicant's request to vacate the ... Winding up – Power to summon persons suspected of having property of company, etc. Issues Involved:1. Validity of the order for private examination under Section 477 of the Companies Act.2. Alleged suppression of material facts by the official liquidator.3. Impact of the misfeasance summons on the private examination.4. Potential oppression and vexatious nature of the private examination.5. Concerns regarding self-incrimination during the private examination.Detailed Analysis:1. Validity of the Order for Private Examination under Section 477 of the Companies Act:The applicant sought to vacate the order for his private examination under Section 477 of the Companies Act, 1956. The court examined the provisions of Section 477, which allows the court to summon any officer of the company or person capable of giving information concerning the company's affairs. The applicant, being a director of the company during a crucial period, fell under the category of persons who could be summoned for examination. The court held that the scheme of Section 477 indicates that an officer of the company is presumed capable of furnishing relevant information unless proven otherwise. Thus, the order for the applicant's private examination was deemed valid.2. Alleged Suppression of Material Facts by the Official Liquidator:The applicant contended that the order dated 2nd March 1963 was obtained ex parte without disclosing two material facts: (1) the opinion of an eminent counsel obtained before the extraordinary general meeting, and (2) the dismissal of a shareholder's notice of motion for an injunction against the meeting. The court found that these facts were not essential for obtaining the order under Section 477. The primary fact that the applicant was a director was sufficient. The court also noted that the omission of these facts did not amount to deliberate suppression and would not have changed the outcome of the order.3. Impact of the Misfeasance Summons on the Private Examination:The applicant argued that the subsequent misfeasance summons under Section 543 of the Companies Act rendered the private examination under Section 477 unnecessary and oppressive. The court distinguished between the purposes of Sections 477 and 543. Section 477 is exploratory, aimed at gathering information, while Section 543 assesses the liability of delinquent directors. The court held that the pendency of a misfeasance summons does not preclude a private examination under Section 477, as both serve different procedural purposes. The court cited precedents indicating that private examination can proceed even if an action against the officer is pending.4. Potential Oppression and Vexatious Nature of the Private Examination:The applicant claimed that the private examination would be oppressive and vexatious, as it would force him to provide information that could be used against him in the misfeasance proceedings. The court rejected this argument, stating that the mere possibility of overlapping topics does not make the examination oppressive. The court emphasized that the purpose of the private examination is to gather information beneficial for the winding-up process and not solely to aid the misfeasance proceedings.5. Concerns Regarding Self-Incrimination During the Private Examination:The applicant expressed concerns about being compelled to give incriminating answers during the private examination. The court acknowledged that the examinee has the right to refuse to answer questions that may incriminate him or involve professional confidence. The court referred to authoritative texts and case law affirming this protection. The applicant could invoke the court's protection against such questions during the examination.Conclusion:The court concluded that no case had been made out by the applicant for vacating or modifying the order dated 2nd March 1963. The judge's summons was dismissed with costs to be taxed. The court reaffirmed the validity of the private examination under Section 477, the non-necessity of disclosing the alleged material facts, the distinct purposes of Sections 477 and 543, the non-oppressive nature of the examination, and the protection against self-incrimination.