Prior approval under Companies Act investment provisions cannot be imposed by notification where the statute does not require it.

Section 372(4) of the Companies Act, 1956 was construed as not requiring prior approval of the company in general meeting or of the Central Government before an investment could be made, because the provision omitted the word "previous" used elsewhere in the Act where advance approval was intended. A notification could not add a requirement not found in the statute, so refusal of approval on that basis was invalid. The power to direct sale of the investment under section 373 was also found inapplicable on the facts, leaving no authority to compel divestment. As section 372(4) did not impose a prior-approval condition, proceedings under section 374 for alleged non-compliance were unsustainable and were set aside.

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Issues: (i) whether section 372(4) of the Companies Act, 1956 required prior approval of the company in general meeting or of the Central Government before the investment could be made; (ii) whether the Central Government had power under section 373 to direct sale of the investment in the facts of the case; and (iii) whether proceedings under section 374 could be sustained for alleged non-compliance with section 372(4).

Issue (i): whether section 372(4) of the Companies Act, 1956 required prior approval of the company in general meeting or of the Central Government before the investment could be made.

Analysis: The provision did not use the word "previous", whereas other provisions of the Act expressly did so where prior approval was intended. That textual difference indicated that the legislature had not made prior approval a condition under section 372(4). The impugned notification could not impose a requirement inconsistent with the statute, and the refusal of approval on that basis was legally unsustainable.

Conclusion: Prior approval was not required under section 372(4), and the rejection of the application on the basis of the notification was invalid and against the petitioner.

Issue (ii): whether the Central Government had power under section 373 to direct sale of the investment in the facts of the case.

Analysis: The power to direct sale of investments was traced to section 373, but that provision was held to be inapplicable on the facts. In the absence of applicability of section 373, no authority existed to compel divestment of the shares purchased by the company.

Conclusion: The direction to sell the investments was without authority and was against the petitioner.

Issue (iii): whether proceedings under section 374 could be sustained for alleged non-compliance with section 372(4).

Analysis: Once it was held that section 372(4) did not require prior approval, the foundation of the complaint under section 374 disappeared. No default could be attributed to the petitioners on the alleged footing of want of such approval.

Conclusion: The proceedings under section 374 were not maintainable and were against the petitioner.

Final Conclusion: The impugned order and the criminal proceedings were set aside, and the challenge succeeded in full.

Ratio Decidendi: Where a statute does not expressly require prior approval and related provisions show that the legislature knew how to impose such a condition, the requirement cannot be imported by notification or administrative direction; proceedings founded on such an imported requirement are unsustainable.

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