TaxTMI 
TaxTMI 
1960 (8) TMI 24
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....nder section 137(5) of the said Act. This report showed that according to the Registrar the affairs of the company were carried on in fraud of contributories and they disclosed an unsatisfactory state of affairs. The report pointed out that the appellant was the managing agent of the company as well as its promoter, and that it was suspected that under a fictitious name of Bansilal Uchant account the company was advancing money to the several firms owned by the appellant which were ostensibly purchased from the company's funds. The report further stated that between the years ending in September, 1942, and 1951, about Rs. 19,200 were paid for Harpur Farm and Rs. 39,300 for Bhavanipur Farm, and accounts disclosed that the Uchant account was chiefly operated upon for purchasing such lands out of the funds of the company though the purchase in fact was for and on behalf of the appellant. The Registrar also added that he had reason to believe that the managing agent was utilising the property of the company in some cases for his personal gain, and concluded that, in his opinion, a case had been made out for an investigation under section 138. On receiving this report, on November 1, 1....
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....he proprietor of the firm of Narayanlal Bansilal. After this order was passed respondent No. 1 served upon the appellant the four impugned notices (exhibit E collectively) on May 9, 1957, May 16, 1957, May 29, 1957, and June 29, 1957, respectively. These notices are substantially identical in terms, and so it would be sufficient for our purpose to set out the purport of one of them. The first notice called upon the appellant to attend the office of respondent No. 1 on the date and at the time specified for the purpose of being examined on oath in relation to the affairs of the company, and to produce before respondent No. 1 all the books of accounts and papers relating to the said company as mentioned in the notice. The appellant was further told that in default of compliance with the requisition aforesaid necessary legal steps would be taken without further reference to him. The notice contains a list of twelve items describing the several documents which the appellant was required to produce before respondent No. 1. After these notices were served on the appellant he filed a petition (No. 201 of 1957) in the Bombay High Court and prayed that the High Court should issue a writ of....
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....e three points for our decision. Let us first examine the question whether or not the first respondent has jurisdiction to exercise the powers under the relevant provisions of the new Act. It is common ground that if respondent No. 1's powers to hold the investigation in question are to be found in the relevant provisions of the old Act and not those of the new Act the impugned notices issued by him would be without authority and jurisdiction. In dealing with this question it is necessary to examine the broad features of the relevant sections of the two Acts. We will begin with the old Act. Section 137 of the old Act deals with investigation by the Registrar. Section 137(1) provides that where the Registrar on perusal of any document which a company is required to submit to him is of opinion that any information or explanation is necessary in order that such document may afford full particulars of the matter to which it purports to relate he may, by a written order, call on the company to furnish in writing the necessary information or explanation within the time to be specified in the order. Section 137(5) requires the Registrar to make a report in writing to the Central Governm....
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...., 141 and 141A. Section 140(1) imposes upon all persons who are or have been officers of the company an obligation to produce before the inspectors all books and documents in their custody or power relating to the company. Section 140(2) empowers the inspector to examine on oath any such person, meaning a person who is or has been an officer of the company in relation to the business of the company and to administer an oath to him. Section 140(3) provides that if a person refuses to produce a book or a document or to answer any question he shall be liable to a fine not exceeding Rs. 50 in respect of each offence. Section 141 provides that on the conclusion of an investigation the inspectors shall report their opinions to the Central Government, and shall forward a copy of their report to the registered office of the company ; and it also provides that a copy of the said report can be delivered at their request to the applicants for the investigation. Then we have section 141A which deals with the institution of prosecutions. Section 141A(1) provides that if from any report made under section 138 it appears to the Central Government that any person has been guilty of any offence in ....
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....gation is authorised by section 239 to produce all books and papers and to give all assistance in connection with the said investigation ; that is the result of section 240(1). Section 240(2) empowers the inspector to examine on oath any of the persons referred to in sub-section (1) in relation to the relevant matters as specified. Section 240(3) deals with a case where a person refuses to comply with the obligation imposed on him by section 240(1) or (2); and it provides that in such a case the inspector may certify the refusal under his hand to the court, and the court may thereupon enquire into the case, hear witnesses who may be produced against or on behalf of the alleged offender, consider any statement which may be offered in defence, and punish the offender as if he had been guilty of contempt of the court. Section 240(4) deals with a case where the inspector thinks it necessary for the purpose of his investigation that a person whom he has no power to examine on oath should be examined, and it provides that in such a case he may apply to the court, and the court may, if it thinks fit, order that person to attend and be examined on oath before it on any matter relevant to t....
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....ect of the repeal of the old Act would have been governed by the provisions of section 6 of the General Clauses Act (10 of 1897) but in the case of the new Act the application of the said section is subject to the provisions of sections 645 to 657 of the Act; that is the effect of section 658 which provides that the mention of particulars in sections 645 to 657 or in any other provisions of this Act shall not prejudice the general application of section 6 of the General Clauses Act, 1897, with respect to the effect of repeals. In other words, though section 6 of the General Clauses Act will generally apply, its application will be subject to the provisions contained in sections 645 to 657 ; this position is not disputed. It is now necessary to consider section 645. It reads thus : "Nothing in this Act shall affect any order, rule, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, or thing done, under or in pursuance of any previous companies law; but any such order, rule, regulation, appointment, conveyance, mortgage, deed, document, agreement, fee, re....
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....ons 645 to 648 are the saving sections, and ordinarily and in the absence of any indication to the contrary these saving clauses should be read as independent of, and in addition to, and not as providing exceptions to, one another. It is significant that whereas section 646 provides for the continuance of the operation of section 138 it does not make a corresponding provision for the continuance of the operation of section 140 of the old Act which deals with the powers of the inspector to call for books and to examine parties. Besides, it may perhaps not be accurate to suggest that having regard to the provisions of section 645, section 646 is wholly redundant. It would be possible to take the view that cases falling under section 138(1) of the old Act are intended to be covered by section 646 as they would not be covered by section 645. In regard to the case of a banking company covered by section 138(1) section 646 will come into operation and that may be one of the reasons for which section 646 was enacted. It may be that the case of the banking company may also be covered by section 35 of the Banking Companies Act (10 of 1949), but since section 138(1) applied to the said case ....
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....ended that the words "person accused of any offence" should not receive a narrow or literal construction ; they should be liberally interpreted because the clause in which they occur enshrines a fundamental constitutional right and the scope and reach of the said right should not be unduly narrowed down. In support of this general argument Mr. Sastri has naturally relied on the historical background of the doctrine of protection against self-incrimination ; and he has strongly pressed into service the decisions of the Supreme Court of the United States of America dealing with the Fifth Amendment to the Constitution of the United States. The said Amendment inter alia provides that "no person shall be compelled in any criminal case to be a witness against himself". It would be noticed that in terms the amendment refer to a criminal case, and yet it has received a very broad and liberal interpretation at the hands of the Supreme Court of the United States of America. It has been held that the said constitutional protection is not confined only to criminal cases but it extends even to civil proceedings (vide McCarthy v. Arndstein 69 Law. Ed. 158). As observed by Mr. Justice Blatchford ....
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....t is that in construing article 20(3) we may take some assistance from the broad and liberal construction which has been placed on the apparently narrow and limited words used in the Fifth Amendment to the Constitution of the United States of America. Thus presented the argument is no doubt attractive, and its validity and effectiveness would have had to be fully and carefully examined if the question raised in the present appeal had been a matter of first impression; but the construction of article 20 in general and article 20(2) and (3) in particular has been the subject-matter of some decisions of this court, and naturally it is in the light of the previous decisions that we have to deal with the merits of the appellant's case in the present appeal. In Maqbool Hussain v. State of Bombay [1953] SCR 730 this court had occasion to consider the scope and effect of the constitutional guarantee provided by article 20(2). A person against whom proceedings had been taken by the sea customs authorities under section 167 of the Sea Customs Act and an order for confiscation of goods had been passed was subsequently prosecuted before the Presidency Magistrate for an offence under section 2....
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.... supporting the plea of double jeopardy. In the result the conclusion of this court was that when the customs authorities confiscated the gold in question the proceedings taken did not amount to a prosecution of the party nor did the order of confiscation constitute a punishment as contemplated by article 20(2). This decision has been affirmed by this court in the case of S.A. Venkataraman v. Union of India [1954] SCR 1150. In that case an enquiry had been made against the appellant, Venkataraman, under the Public Servants (Inquiries) Act, 1850 (XXXVII of 1850). On receiving the report of the enquiry commissioner opportunity was given to the appellant under article 311(2) to show cause, and ultimately after consultation with the Union Public Service Commission the appellant was dismissed by an order passed by the President. The order of dismissal was passed on September 17, 1953. Soon thereafter on February 23, 1954, the police submitted a charge-sheet against him charging him with having committed offences under sections 161/165 of the Indian Penal Code and section 5(2) of the Prevention of Corruption Act. The validity of the subsequent prosecution was challenged by the appellant....
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....d first information report the District Magistrate ordered investigation into the offences and issued warrants for simultaneous searches at as many as thirty-four places. By their petitions the petitioners contended that the search warrants were illegal and they prayed that the same may be quashed as being in violation of article 20(3). The plea thus raised by the petitioners was ultimately rejected on the ground that the impugned searches did not violate the said constitutional guarantee. Jagannadhadas J., who spoke for the court, observed that "since article 20(3) provides for a constitutional guarantee against testimonial compulsion its words should be liberally construed, and that there was no reason to confine the content of the said guarantee to its barely literal import". He, therefore, held that the phrase "to be a witness" means nothing more than to furnish evidence, and such evidence can be furnished through the lips or by production of a thing or of a document or in other modes. He also pointed out that the phrase was "to be a witness" and not "to appear as a witness", and so the protection afforded was not merely in respect of testimonial compulsion in the court room bu....
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....nvelope with a request that he might drop the action registered against him. The police officer threw the envelope at the appellant who took it up. While the appellant was still in the bungalow he was asked by the police officer to produce the envelope and he took out from his pocket some currency notes and placed them on the table without the envelope. The notes were then seized by the police officer and a rubber stamp of his office was placed on them. On these facts it was urged that in relying upon the evidence of compelled production of notes the prosecution had violated the provisions of article 20(3). In support of this contention the general observations made by this court in the case of M.P. Sharma [1954] SCR 1077, were strongly pressed into service. This court, however, rejected the appellant's arguments and held that the prosecution did not suffer from any infirmity. On the facts it was found that though the offence had in fact been already committed by the appellant, he had not been accused of it at the stage when the currency notes were produced by him ; it was also held that it could not be said that he was compelled to produce the said currency notes, because he might....
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.... section 234(7) if it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of the company is carried on in the manner specified in the said sub-section the Registrar proceeds to make the enquiry. Thus the scope of the enquiry contemplated by section 234 is clear; wherever the Registrar has reason to believe that the affairs of the company are not properly carried on he is empowered to make an enquiry into the said affairs. Similarly under section 235 inspectors are appointed to investigate the affairs of any company and report thereon. The investigation carried on by the inspectors is no more than the work of a fact-finding commission. It is true that as a result of the investigation made by the inspectors it may be discovered that the affairs of the company disclose not only irregularities and malpractices but also commission of offences, and in such a case the report would specify the relevant particulars prescribed by the circular in that behalf. If, after receiving the report, the Central Government is satisfied that any person is guilty of an offence for which he is criminally liable, it....
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....s in no sense a judicial proceeding for the purpose of trial of an offence; it is enough to point out that there are no parties before the inspector, that he alone conducts the enquiry, and that the power to examine on oath is confined to the officers, members, agents and servants of the company". We ought, however, to add that the last observation is no longer true about the inspector's powers under section 240 of the new Act. In the same case Lord Macmillan observed that "the object of the enquiry manifestly is that the Commissioner may either by himself directly or through the medium of a delegate obtain the information necessary to enable him to decide what action, if any, he should take. The cardinal words of the section are those which empower the Commissioner or his inspector to examine into and report on the affairs of the society". Thus it is clear that the examination of, or investigation into, the affairs of the company cannot be regarded as a proceeding started against any individual after framing an accusation against him. Besides it is quite likely that in some cases investigation may disclose that there are no irregularities, or if there are, they do not amount to th....
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.... may require a large number of persons to give evidence or produce documents but it cannot be said that any accusation is made against any of the said persons. In fact three persons have been served with similar notices in the present enquiry which shows that the inspector desires to obtain relevant evidence from them as from the appellant. How can it be said that an accusation has been made against the said three persons, and that incidentally helps to bring out the real character and scope of the enquiry. Therefore we do not think that the statements made in the Registrar's report on which Mr. Sastri relies can really assist us in deciding the question of the vires of section 240. It is also significant that the appellant has not challenged the validity of the impugned notices on any ground relatable to, or based on, the said report. The challenge is founded on the broad and general ground that section 240 offends against article 20(3). We may incidentally add that it was in support of his argument based on the Registrar's report that Mr. Sastri sought to rely on the decision of the Calcutta High Court in Collector of Customs v. Calcutta Motor and Cycle Co. [1958] AIR 1958 Cal. ....