Fit and proper assessment permits review of all relevant conduct, and government satisfaction remains judicially reviewable.

Government satisfaction under section 326(2)(b) of the Companies Act, 1956 must be formed on an objective appraisal of all relevant material. In assessing whether a proposed managing agent is a fit and proper person, past conduct, present conduct, and other relevant surrounding circumstances may all be considered; the inquiry is not confined to conduct immediately proximate to the application. The satisfaction is quasi-judicial in character and is open to judicial review if relevant material is ignored or extraneous material is relied on, although the court does not reweigh the sufficiency of the grounds. The appeals failed and the broader approach to relevant conduct was upheld.

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Issues: (i) Whether, under section 326(2)(b) of the Companies Act, 1956, the fitness and propriety of a proposed managing agent could be assessed by taking into account past conduct and activities as well as subsequent relevant conduct. (ii) Whether the Central Government's satisfaction under section 326(2) was a purely subjective and unreviewable determination, or whether it was open to judicial review for failure to consider relevant material or for reliance on irrelevant material.

Issue (i): Whether, under section 326(2)(b) of the Companies Act, 1956, the fitness and propriety of a proposed managing agent could be assessed by taking into account past conduct and activities as well as subsequent relevant conduct.

Analysis: The statutory requirement that the Government must be satisfied that the proposed managing agent is a fit and proper person is directed to the conditions existing at the time of decision, but the inquiry is not confined to conduct immediately proximate to the application. Past conduct, present conduct, and other surrounding circumstances having a bearing on fitness are relevant. The Board was therefore required to examine the full course of relevant acts and activities of the directors of the managing agent company.

Conclusion: Past and subsequent relevant conduct could properly be taken into account, and the Board was not confined to a narrow temporal segment of conduct.

Issue (ii): Whether the Central Government's satisfaction under section 326(2) was a purely subjective and unreviewable determination, or whether it was open to judicial review for failure to consider relevant material or for reliance on irrelevant material.

Analysis: The power under section 326(2) was held to be quasi-judicial in character. The satisfaction required by the provision had to rest on an objective appraisal of relevant materials and could not be formed by ignoring relevant circumstances or by relying on extraneous matters. Judicial review was available to examine whether the authority kept within the bounds of the statutory inquiry and acted on relevant considerations, though the court would not sit in appeal over the sufficiency of the grounds.

Conclusion: The satisfaction was not immune from judicial review, and the Board's decision was liable to be tested on the ground of relevant and irrelevant considerations.

Final Conclusion: The appeals were unsuccessful, and the High Court's approach requiring consideration of the entire relevant conduct was upheld.

Ratio Decidendi: Where a statute requires governmental satisfaction as to the fitness of a proposed appointee for approval, that satisfaction must be based on an objective consideration of all relevant materials, and the resulting decision is reviewable if relevant matters are ignored or irrelevant matters are taken into account.

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