1970 (7) TMI 43 - DSC - Companies Law

Court Upholds Inspectors' Actions, Directors Must Cooperate Fully

The court dismissed the appeal, upholding the inspectors' actions as proper and fair. The directors' requests for additional procedural rights were ... Power of inspectors to carry investigation into affairs of related companies Issues Involved:1. Right to see transcripts of evidence.2. Right to cross-examine witnesses.3. Right to see proposed findings before inclusion in the report.4. Application of natural justice principles to the investigation.5. Conduct and discretion of inspectors.6. Speed and confidentiality of the investigation.Issue-wise Detailed Analysis:1. Right to see transcripts of evidence:The directors, led by Mr. Maxwell, claimed the right to see the transcripts of the evidence given by witnesses adverse to them. The court held that this claim went too far, emphasizing that the investigation was not a judicial proceeding but an inquiry in the public interest. The inspectors were not bound by the rules of natural justice to the extent claimed by the directors. The court concluded that the inspectors must act fairly but are not required to allow the directors to peruse the transcripts.2. Right to cross-examine witnesses:The directors claimed the right to cross-examine witnesses. The court found this claim to be unjustified, stating that the investigation was not a court of law and did not necessitate such judicial procedures. The inspectors were not obligated to allow cross-examination, and the court emphasized that such a requirement would unduly hamper the investigation.3. Right to see proposed findings before inclusion in the report:The directors argued that they should be allowed to see any proposed findings against them before they were finalized in the report. The court held that while the inspectors must give the directors a fair opportunity to respond to allegations, they were not required to show the proposed findings. The inspectors should inform the directors of the general terms of the allegations but are not bound to draft passages of the report for their comments.4. Application of natural justice principles to the investigation:The court discussed whether the principles of natural justice applied to the inspectors' investigation. It held that although the inspectors were not a court of law, they must act fairly. This duty of fairness requires giving individuals an opportunity to correct or contradict adverse statements before making findings. However, the extent of fairness required does not equate to the procedures of a judicial inquiry.5. Conduct and discretion of inspectors:The court supported the inspectors' discretion in conducting the investigation. It emphasized that inspectors must be masters of their own procedure and should not be bound by rigid rules that could impede their work. The inspectors' duty is to act fairly, and the court found that the inspectors in this case had provided reasonable assurances of fair treatment.6. Speed and confidentiality of the investigation:The court highlighted the importance of speed and confidentiality in the investigation. It noted that the investigation was in the public interest and should not be delayed by the directors' demands. The inspectors were entitled to gather information confidentially and must balance the need for confidentiality with the requirement to act fairly. The court found that the directors' refusal to answer questions and their demands for additional assurances were unjustified and caused unnecessary delay.Conclusion:The court dismissed the appeal, emphasizing that the inspectors had acted properly and fairly. The directors' demands for additional procedural rights were deemed excessive and unjustified. The investigation should proceed with the utmost expedition, and the directors were expected to cooperate fully. The court underscored the need for flexibility and discretion in the inspectors' procedures to ensure a fair and efficient investigation.