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S.P. JaIn Vs. Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Judge
Reported in[1966]36CompCas712(Bom)
ActsCompanies Act 1956 - Sections 10B, 10C, 37, 388B, 388E, 396, 397, 398, 399, 400, 401, 402, 403 and 643; ;Supreme court Rules, 1959 - Rule 21
AppellantS.P. Jain
RespondentUnion of India and ors.
Appellant AdvocateJ.C. Bhat, ;M.R. Mody and ;R.J. Bhat, Advs.
Respondent AdvocateP.P. Khambatta and ;A.B. Diwan, Advs.
Excerpt:
company - dismissal - rule 21 of supreme court rules, 1959 - respondent filed petition for removing applicant from board of company and prayed for other reliefs - application filed before tribunal for dismissing such petition as affidavit verifying petition was defective - tribunal dismissed such application - appeal against such order - affidavit verifying petition and supplying further particulars have been sworn in accordance with provisions of rule 21 and form prescribed therein - requirements of law fulfilled - petition also not liable to be dismissed on merits at this stage merely on grounds above mentioned - tribunal rightly dismissed application on merits. - indian succession act (39 of 1925), section 63: [s.b. sinha & cyriac joseph, jj] will validity - deceased, was a very.....1. this appeal arises out of an order of the companies tribunal, new delhi (camp, bombay), dismissing application no. 37 of 1965 union of india v. benett coleman & co. ltd. (1965) 35 comp. cas. 673 (c.t.) made by the appellant (original respondent no. 2 to the petition) on 20th april, 1965. in this application, the appellant had prayed that petition no. 9 of 1964 be forthwith dismissed, or in the alternative, the said application be rejected and that all orders so far made in petition no. 9 of 1964 be vacated. 2. facts in brief are: by a petition under section 396 read with sections 401 and 403 of the companies act (1 of 1956) (hereinafter referred to as the act), the union of india filed a petition before the companies tribunal on 30th september, 1964. the respondents to this petition.....
Judgment:

1. This appeal arises out of an order of the Companies Tribunal, New Delhi (Camp, Bombay), dismissing Application No. 37 of 1965 Union of India v. Benett Coleman & Co. Ltd. (1965) 35 Comp. Cas. 673 (C.T.) made by the appellant (original respondent No. 2 to the petition) on 20th April, 1965. In this application, the appellant had prayed that Petition No. 9 of 1964 be forthwith dismissed, or in the alternative, the said application be rejected and that all orders so far made in Petition No. 9 of 1964 be vacated.

2. Facts in brief are: By a petition under section 396 read with sections 401 and 403 of the Companies Act (1 of 1956) (hereinafter referred to as the Act), the Union of India filed a petition before the Companies Tribunal on 30th September, 1964. The respondents to this petition were the Bennett Coleman & Co. Ltd. and nine other persons. Respondents Nos. 2,3,4,6,7,8,9 and 10 were either directors or ex-directors of the company. Respondent No. 5 was at the material time its general manager. It is not necessary to set out the various allegations of fraud, mismanagement, misconduct and misappropriation of the company's funds, on the part of the respondents. The petitioner, Union of India, had in the petition prayed for an order removing respondents Nos. 6,7,8,9 and 10 and all of then from the board of the company, for an order restraining respondent No. 3 and other respondents from interfering and intermeddling in the affairs of the company had its conduct and management; for an order removing respondent No. 5 from his employment and for a further direction to restrain him from acting in the course of his employment; for an order restraining respondent No 5. from acting or functioning in any capacity under the company and from interfering or intermeddling with the affairs of the company; and for an order directing the appointment of a special officer to manage and conduct the affairs of the company. The petitioner also prayed for certain interim reliefs pending the final disposal of the petition. This petition has been registered as Petition No. 9 of 1964, and it is relating to this petition that original respondent No. 2 had made the said Application No. 37 of 1965.

3. It is necessary to state a few facts relating to the period prior to the filing of the said Petition No. 9 of 1964. On 7th September, 1964, the Union of India filed a petition before the Companies Tribunal, praying that a finding be recorded that Shri Shanti prasad Jain (respondent No. 2 to Petition No. 9 of 1964) was not a fit person to act as a director of M/s. Bennett Coleman & Co. Ltd. or any other company. For the purposes of this appeal, it is not in dispute that the allegations, on the basis of which this finding was invited, were substantially identical with the averments made in Petition No. 9 of 1964. The aforesaid petition of 17th September, 1964 under section 388B was admitted on 18th September, 1964, and that has been registered as Case No. 1 of 1964. Within a short time, i.e., on 30th September, 1964, Petition No. 9 has been filed by the Union of India against the aforesaid respondents. The affidavit in verification of Petition No. 9 of 1964 has been sworn by one Mr. D.S. Dang, Deputy Secretary, Government of India, Ministry of Finance (Department of Revenue and Company Law). The verification is in the following terms:

'The statements made in paragraphs 1 to 5 (both inclusive), paragraphs 7 to 35 (both inclusive), paragraphs 39 and 40 are based on information which I believe to be true and those contained in paragraph 6, paragraphs 36 and 38 (both inclusive) and paragraph 41 and 46 (both inclusive) are submissions and prayers.'

4. The affidavit in verification further states that 'annexures to the petition marked with the letters `A' to `N' are true and correct copies of the originals.' It may be stated that three of the annexures are the interim reports made by inspector Chopra, who had been appointed and empowered under section 237 of the Act to investigate the affairs of the company. These three interim reports have been collectively marked as exhibit 'C'. Statements of M/s. T.P. George, P. L. Shah, K.C. Raman and Kolharkar, recorded during investigation, have been collectively marked as exhibit 'E'. On 12 the October, 1964, the Tribunal made an ex parte order admitting the said Petition No. 9 of 1964.

5. On 16th Octomber, 1964, the said Mr. S.P. Jain filed an application in Case No. 1 of 1964, praying that the Union of India be directed to furnish better particulars in respect of certain averments made in the petition under section 388B. This application has been numbered as Application No. 17 of 1964. Similarly, on 1st December, 1964, Shri S.P. Jain filed another application praying that the Union of India be directed to furnish further and better particulars in respect of certain averments made in Petition No. 9 of 1964. This application has been numbered as Application No. 38 of 1964. The Tribunal directed the Union of India to furnish the particulars. On 14th April, 1965, Mr.D.S. Dang filed an affidavit on behalf of the Union of India furnishing better particulars, both in Case No. 1 of 1964 and also in Petition No. 9 of 1964. The verification clause of the affidavit verifying the particulars is in the following terms:

'I verify the particulars in both exhibits `A' and `B' hereto and state that the statements made therein are based on information which I believe to be true. Without prejudice I also disclose the source of information and the basis on which the particulars are given.'

6. The affidavit then proceeds to detail the sources of information on which the particulars have been supplied. It may be stated that exhibits 'A' and 'B' contain various matters relating to which the particulars have been asked for by Shri Jain, and the respective particulars furnished by the Union of India relating to these matters. In paragraph 10 of the affidavit, it has been stated:

'I say that exhibit `A' hereto contains the best particulars the Union of India is able to give in regard to Application No. 38 of 1964, having regard to its present source of knowledge of transactions and matters specified in the petition.'

7. In paragraph 11 of the affidavit it has been further stated:

'I further state that at the hearing of the petition evidence will be led by the Union of India for the purpose of substantiating the statements made in the petition and the particulars furnished.'

8. Nearly a year after the affidavit furnishing the particulars had been filed, Shri Jain filed an application on 20th April, 1965, that petition No. 9 to 1964 be forthwith dismissed or in the alternative it be rejected. He also prayed that all interim orders passed in the said petition be vacated. The grounds on which these prayers have been founded and which are relevant for the purpose of this appeal are contained in paragraph 8 of the application and they are in the following terms:

'Your petitioner submits that an application under section 398 and 401 of the Companies Act, 1956, containing allegations of fraud, coercion, misrepresentation, misconduct, improper conduct and misappropriation is in law required to be duly verified. The application is in law required to be supported by an affidavit or affidavits of persons having personal knowledge. Your petitioner says that the material allegations in the said application numbered as Case No. 9 of 1964 are not verified or affirmed on personal knowledge as required in law and there is no supporting affidavit from any person having personal knowledge of the material facts alleged. Your petitioner submits that the said application numbered as Case No. 9 of 1964 and the supporting affidavit filed along with it, without any supporting affidavit affirmed on personal knowledge, do not disclose any ground at all to fulfil the requirement of he relevant sections of the Indian Companies Act under which the said application is filed. The aforesaid defects, the petitioner submits, according to well-settled law, are fatal and the defects cannot be cured nor the lacuna filled up by affidavits affirmed subsequently or by other evidence oral or documentary. Your petitioner submits that this hon'ble Tribunal should not have entertained or admitted the said application. Your petitioner further submits that this Hon'ble Tribunal has no jurisdiction to entertain., admit or proceed with the trial of an application which is not supported by an affidavit verified in accordance with the provisions of law. Your petitioner further submits that this Hon'ble Tribunal and no jurisdiction not has it any jurisdiction to make any order in a case initiated illegally by such an application except to reject and dismiss it. The petitioner submits that it was an error to have admitted the said application and that to right a wrong, it is incumbent upon this Hon'ble Tribunal to forthwith reject the said application numbered as Case No. 9 of 1964 and vacate all orders passed therein.'

9. In short, the case of the respondent, Shri Jain, had been that the relevant provisions of law required that an application under section 398 containing grave allegations of fraud, misconduct, misappropriation, etc., is required to be verified by an affidavit sworn on personal knowledge either by the petitioner or by the supporting affidavits of other persons. These affidavits must be filed at the time of the initiation of the proceedings, i.e., at the time of the fling of the petition. If the petitioner fails to do so, then the petition is liable to be dismissed in limine. At any rate, the petitioner by reason of this default having lost the right to lead any further evidence, the petition must, therefore, be dismissed on merits without calling upon the respondent to file his reply. After giving a notice to the Union of India to show cause why the aforesaid application of 20th April, 1965 should not be admitted, the Tribunal on 23rd April, 1965, made an order admitting the said application and issued a rule to the Union of India, and other parties thereto, returnable by a certain date, to show cause why the said application should not be granted in terms of prayers thereto. The tribunal further ordered that the main Petition NO. 9 of 1964 be also placed on board on the same date the said rule was made returnable. By its order dated 12th/13th May, 1965, the Tribunal has dismissed this application. It is against this order that Mr. S.P. Jain has appealed.

10. Mr. J.C. Bhat, learned counsel for the appellant, opened the appeal on the first day. He, however, had some personal difficulties and, with the leave of the court, Mr. Mody has virtually argued the appeal. We would, therefore, refer to Mr.Mody only. Mr. Khambatta, learned counsel for the Union of India, has argued on behalf of the Union of India. Mr. Diwan, who appears for respondents Nos. 2,6,8,9 and 10, stated before us that the respondents represented by him would abide by the orders of the court. They, however, submit that the point raised being of importance, it should be decided on merits. Other respondents, though served, have not appeared.

11. Mr. Mody has principally raised two contentions. It is his first contention that the petition is liable to be dismissed in limine, inasmuch as the affidavit in verification of the petition has not been sworn by Mr. Dang on his personal Knowledge, nor have the Union of India filed at the time of filing the petition supporting affidavits of other persons having personal knowledge relating to the averments of fraud, misconduct, misappropriation, etc. In the second instance, he contends that the Union of India now is not entitled in law to lead any further evidence in proof of the averments made by them in the petition either by filing further affidavits or by tendering documentary or oral evidence. The petition, therefore, at any rate, is liable to be dismissed on merits. The arguments advanced by Mr. Mody relate to the construction of the relevant provision of the Act, and principally rule 21 of the Companies (Court) Rules, 1959, farmed by the Supreme Court of India after consulting the High Courts, hereinafter referred to as 'rules' and Order 19, in general, and Order 19, rule 3, in particular. It would, therefore, be convenient at this stage to refer to the relevant provisions of the Act and the Rules as well as the regulations framed by the Tribunal in exercise of the powers conferred on it by sub- section (5)of section 10B introduced in the statute book by the Companies (Amendment) Act, 1963 (53 of 1963), which came into force on 30th December, 1963.

12. In the year 1956, Parliament, with a view to consolidate and amend the law relating to companies and certain other associations, passed on Act called 'The companies Act, 1956 (1 of 1956)'. It came into force on 18th January, 1956. The jurisdiction to deal with petitions under sections 397 and 398 was vested in the respective High Courts within whose jurisdiction the registered office of the particular company is situate. Section 397 relates to an application to court by any member of the company, who complains that the affairs of the company are being conducted in a manner oppressive to any member or members, for obtaining relief against oppression. Section 398 relates to applications for relief by members of the company who complain that the the affairs of the company are being conducted in a manner prejudicial to the interest of the company, or that a material change has taken place in the management or control of the company, and that by reason of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to the interest of the company. Section 399 prescribes the requisite qualifications of the members who are entitled to file an application under section 397 or section 398 of the Act. Section 400 requires the court to give notice of every application filed under section 397 or section 398 to the Central Government and provides that the court shall take into consideration the representations, if any, made by it before passing a final order under that section. Section 401 order under section 397 or section 398 or cause an application to be made to th court for such an order by any person authorised by it in this behalf. Section 402 enumerates the powers of the court exercisable on an application under section 397 and section 398. Section 403 empowers the court to make interim orders which it thinks fit for regulating the conduct of the company's affairs upon such terms and conditions as appear to it to be just and equitable. The sections fall under Chapter VI of the Act- 'Prevention of Oppression and Mismanagement'- of part VI. Chapter IV. A consisting of section 388B to 388E has been added by the aforesaid Companies (Amendment) Act (53 of 1963), and it relates to the powers of the Central Government to remove managerial personnel from office on the recommendation of the Tribunal. Section 388B empowers the Central Government to state a case against a person concerned in the conduct, management and affairs of company and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a finding as to whether or not such a person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company. Now, the amendments which are required to be noticed under the Amending Act are the amendments to section 397, 398, introduction of sections 10A and 10D on the statute book, and the introduction of sections 388B to 388E on the statute book. As a result of the amendments to sections 397 and 398, the powers of the court to grant relief under the said sections are enlarged. At the instance of the members who fulfil the requisite qualifications mentioned in section 399, or at the instance of the Union of India, the courts are empowered to grant relief in cases where the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner oppressive to any member or members of the company, or in cases where the affairs of the company are material change has taken place in the management or control of the company, and by reason of such change it is likely that the affairs of the company will be conducted in a manner prejudicial to the interests of the company. Section 10A empowers the Central Government to constitute a Tribunal to exercise and discharge the powers and functions conferred on the said Tribunal by or under the Act, and also to exercise and discharge certain powers and functions conferred on the court under certain sections mentioned therein. It is sufficient to state that powers conferred on the court under sections 397 and 398 have been made exercisable by the Tribunal. Sub-section (5) of section 10B provides:

'(5)subject to the provisions of this Act and the rules made thereunder, the Tribunal shall have power to regulate its own procedure and the procedure of benches thereof in all matters arising out of the exercise of its powers and the discharge of its functions, including the place at which the benches shall hold their sittings.'

13. Sub-section (1) of section 10C relates to the powers of the Tribunal, and the relevant portion thereof reads:

'The Tribunal shall have the powers which are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit, in respect of the following matters, namely:-

(a)......................

(b)enforcing the attendance of witnesses and requiring the deposit of their expenses,

(c)......................

(d)reception of evidence taken an affidavit,

(g)issuing commissions for the examination of witnesses, and summoning and examining suo motu any person whose evidence appears to the Tribunal to be material.'

14. Section 643 of the Act relates to the powers of the Supreme Court to make rules in respect of various matters. sub-clause (v)of clause (b) of sub-section (1)thereof empowers the Supreme Court, after consulting the High Courts, to make rules consistent with the Code of Civil Procedure, generally for all applications to be made to the court under the provisions of the Act. In exercise of this power, the Supreme Court has made rules in the year 1959. Clause (a)of rule 11 provides that certain applications mentioned in the said clause shall be made by petition. Applications under sections 397 and 398 are included as items (12) and (13) in this clause. Rule 17 provides that the forms set forth in Appendix I, where applicable, shall be used with such variations as circumstances may require. Clause (a) of rule 18 provides that :

'Every affidavit shall be drawn up in the first person and shall state the full name, age, occupation and the place of abode of the deponent. It shall be signed by the deponent and sworn to in the manner prescribed by the Code or by the rules and practice of the court.'

15. Rule 21 provides:

'21. Affidavit verifying petition.- Every petition shall be verified by an affidavit made by the petitioner or by one of the petitioners, where there are more than one, and in case the petition is presented by a body corporate, by a director, secretary or other principal officer thereof; such affidavit shall be filed along with the petition and shall be in Form No.3:

Provided that the Judge or Registrar may, for sufficient reason, grant leave to any other person duly authorised by the petitioner to make and file the affidavit.'

16. The manner in which the said affidavit verifying the petition is to be sworn has been stated in Form No. 3 in the following terms:

'The statements made in paragraphs....of the petition herein now shown to me and marked with the letter `A' are true to my knowledge and the statements made in paragraphs.....are based on information, and I believe them to be true.'

17. Rule 24 relates to advertisements of petitions. Rule 26 relates to the service of the petition on the respondents. Rule 34 requires every person who intends to appear at the hearing of a petition, whether to support or oppose the petition, to give notice of his intention to the petitioner within the time mentioned in the said rule, and further requires the person intending to oppose the petition, to furnish grounds of his opposition or a copy of his affidavit along with the notice of his intention to appear and oppose. Rule 36 relates to the procedure at the hearing of the petition, and it provides:

'At the hearing of the petition, the Judge may either dispose of the petition finally, or give such directions as may be deemed necessary for the filing of counter affidavits and reply affidavits, if any, and for service of notice on any person who, in his opinion, has been omitted to be served or has not been properly served with the notice of the petition and may adjourn the petition to enable the parties to comply with his directions. Except as otherwise ordered by the Judge, it shall not be necessary to give notice of the adjourned hearing to any person.'

18. It is convenient to read rule 9 along with rule 36 which provides that :

'Nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.'

19. After the constitution of the Tribunal in the year 1964, in exercise of the powers conferred by sub-section (5)of section 10B of the Companies Act, 1956, inserted by the Companies (Amendment) Act, (53 of 1963), and the Rules made thereunder, whenever applicable, the Tribunal has framed regulations to regulate its own procedure. It is not necessary to reproduce the regulations framed by the Tribunal. The material regulations are substantially similarly worded, if not identically worded, as the rules framed by the Supreme Court. It would be sufficient to state that regulation No. 4 of Chapter VII relating to affidavits verifying the petition corresponds with the provisions of rule 21 framed by the Supreme Court. In the form prescribed by regulation 4 for verifying the petition, the manner in which the affidavits are to be sworn is in identical terms with that of the form mentioned in rule 21. The provisions of regulation 10 correspond to Supreme Court rule 34; that of regulation No.9 corresponds to rule 36. Regulation 1 of Chapter 20 provides that the provisions of the Code of Civil Procedure, 1908, inter alia, as indicated below, including the forms appended thereto, shall be applicable, so far as may be, to all proceedings before the Tribunal in respect of the following matters :

'(ii)sections 28 and 32 and Order 16 in respect of enforcing the attendance of witnesses and requiring the deposit of their expenses; (iv) Order 18 in respect of examining witnesses on oath; (v)Order 17 in respect of granting adjournments;..... (vii)Order 26 in respect of issuing commissions for the examination of witnesses, and summoning and examining suo motu any person whose evidence appears to the Tribunal to be material.'

20. Provisions of this regulation correspond to the provisions of section 10C of the Act. Rule 1 of Order 19 of th e Civil Procedure Code enables the court to make an order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing on such conditions as the court thinks reasonable. Rule 2 of Order 19 provides :

'2. (1)Upon any application evidence may be given by an affidavit, but the court may, at the instance of either party, order the attendance for cross-examination of the deponent.

(2)Such attendance shall be in court, unless the deponent is exempted from personal appearance in court, or the court otherwise directs.'

21. Rules 3 of Order 19 provides:

'3. (1) Affidavits shall be confined to such facts as the deponent is able of his own knowledge to prove, except on interlocutory applications on which statements of his belief may be admitted : provided that the grounds thereof are stated.'

22. It is the argument of Mr. Mody that the petitioner has to show on the petition and on an affidavit verifying the petition or by supporting affidavits of other persons filed at the time of the institution of the petition that a case under section 398 is made out. An application under section 398 is not an interlocutory application, but is a substantive application. The said affidavits either verifying the petition or the supporting affidavits filed at the time of the presentation of the petition must, therefore, be on the personal knowledge of the deponent in conformity with the provisions of rule 3 of Order 19. Placing reliance on rule 2, Mr. Mody further argued that the normal procedure on tendering evidence in a proceeding initiated by an application is by fling affidavits of persons having personal knowledge relating to the matter in question. A party which flouts the aforesaid provisions of Order 19, rules 2 and 3, cannot at its sweet will decide to lead oral evidence. The only oral evidence which is receivable in a proceeding initiated by an application is summoning the deponents of the affidavits for cross-examination. The affidavit verifying the petition of the Union of India under section 398 is sworn by Mr. Dang on information. The petitioner has not filed any supporting affidavits of other persons who must have supplied the information to the Union of India. The Union of India, therefore, has failed to show on the petition and on the affidavits filed that a case under section 398 is made out. The petition, therefore, was liable to be dismissed in limine. the Tribunal had no jurisdiction to entertain it. Therefore, the Tribunal was in error in making an order admitting it. At any rate, the Union of India now has no right to tender any further evidence either by filing affidavits of other persons or by tendering documentary or oral evidence. The petition, therefore, even on merits is liable to be dismissed without calling upon the respondents to file their affidavits in reply. In support of his contention, Mr. Mody placed reliance, and a very strong reliance, on certain observations made by Mr. Justice B.C. Mitra in In re Clive Mills Co. Ltd. (1964) 34 Com. 731. and in In re Bengal Luxmi Cotton Mills Ltd. (1965) 35 Com 187. He has also referred to us observations in various English decisions to some of which Mr. Justice Mitra has referred in his judgments. He has also referred to us certain observations in Buckley on the Companies Acts (13th edition, at page 1029).

23. Mr. Khambatta, appearing for the Union of India, contended that there is no positive provision in law that an affidavit verifying a petition or a pleading must be on personal knowledge. On the other hand, there is a positive provision in the form prescribed that the affidavit in verification could be on information received and believed to be true. The petitioner has complied with the requirements of law, the affidavits sworn by Mr. Dang are in accordance with the forms prescribed by the Supreme Court Rules, and in the affidavit itself the sources of information and the grounds of belief have been fully stated. The petition under section 398 is nothing but a pleading, and, therefore, Order 6, rule 15 of the Code of Civil Procedure governs verification of a petition. Order 19 has no relevance to the manner in which an affidavit verifying the petition is to be affirmed. Order 19 has no application to the affidavits in verification of the petition. It has also been the argument of Mr. Khambatta that there is no provision either in the Act or in the Rules that a person who filed an application under section 398 must tendered all his evidence in support of the averments in the petition in the shape of affidavits at the time of institution of the petition, nor is there any provision of law that petitions under sections 397 and 398 have to be decided only on the evidence tendered on affidavits.

24. We find it difficult to accept the arguments of Mr. Mody. We have already referred to the relevant provisions, and it is abundantly clear that the proceedings before the Tribunal are civil proceedings. There is also hardly any doubt that the intention of the legislature as indicated in the various provisions of the Act is that the procedure that has to be followed by the Tribunal in dealing with the matters arising before it to make rules consistent with the procedure prescribed by the Civil Procedure Code.The power conferred on the Supreme Court to frame rules is to make rules consistent with the Code of Civil Procedure, and the powers conferred on the Tribunal to frame regulations has to be exercised subject to the provisions of the Act, and the Rules made thereunder by the Supreme Court. It would necessarily follow that the expressions used in the rules or regulations connote the same meaning as the respective expressions used in the Civil Procedure Code connote. Rule 21 has provided that the petition shall be verified by an affidavit. The purpose of the affidavit required to be filed under rule 21 in From No. 3 is nothing but verification of the averments made in the petition. The verification of the contents of a pleading and evidence in proof of allegations made in the pleading are two distinct and separate terms well understood in the Civil Procedure Code. The relevant rule relating to the verification of a pleading is contained in rules 15(1) and (2) of Order 6, and it provides :

'(1)Save as otherwise provided by any law for the time being in force, every pleading shall be verified at the foot by the party or by one of the parties pleading or by some other person proved to the satisfaction of the court to be acquainted with the facts of the case.

(2)The person verifying shall specify, by reference to the numbered paragraphs of the pleading, what he verifies of his own knowledge and what he verifies upon information received and believed to be true.'

25. The verification of a pleading is not confined only to fact within the personal knowledge of the person verifying the pleading. On the other hand, it is open to him to verify a pleading upon information received by him and believed by him to be true. It is true that the manner of verification of a pleading as prescribed in rule 15 is by signing the verification clause at the foot of the pleading. But the opening words of clause (1)of rule 15 contemplate making of a different provision in other Acts as regards the manner of verification. If Form No. 3 prescribed by rule 21 is compared with the provisions of clause (2)of rule 15 of Order 6, it would be apparent that they are worded practically in identical terms as regards the material in the basis of which verification could be made. Mr. Mody has no doubt referred us to Order 19 in support of his contention that though the manner of verification as prescribed in the form is in identical terms with the provisions of clause (2) of rule 15 of Order 6, there is a material difference. The verification of a pleading is required to be made at the foot of the pleading; the verification of a petition, however, is required to be made by7 an affidavit, and that, says Mr.Mody, would attract the provisions of rule 3 of Order 19. The argument is not well founded. It is true that the heading of Order 19 is 'Affidavits'. But, if the Order is read as a whole, it leaves no doubt that the provisions of Order 19 relate to affidavits ordered by court to be filed in proof of facts, or to the affidavits on record which not evidence within the meaning of the Evidence Act. The Evidence Act applies to all judicial proceedings in or before any court. Section 1 in express terms provides that the Evidence Act has no application to the affidavits presented to court or officer. 'Evidence' as defined in section 3 is confined only to oral evidence, that is, statements made by witnesses in court, and documentary evidence, that is, documents produced in court and proved in the manner prescribed by the Evidence Act. An affidavit thus in the strict sense in not evidence. Order 19 is an enabling provision, which enables a court to make an order that any particular fact or facts may be proved by an affidavit, or any affidavit already filed on the record may be read at the hearing as evidence.The order of the court, either explicit or implied, is a condition precedent to receive an affidavit in evidence at the trial of a suit. Rule 2 also is another enabling provision, providing that upon any application evidence may be given by affidavit. The court, however, if it makes such an order, has to direct the attendance of the deponent for cross-examination if the opposite party so desires. There is a difference of opinion as to the meaning of the word 'application' in rule 2 of Order 19. In some cases, it has been held that the expression 'any application' in rule 2 means 'interlocutory applications'; while in others the expression is held to be wide enough to include substantive applications also. However, it appears from a recent decision of the Supreme Court in Khandesh Spinning & Weaving Mills Co. Ltd. v. Rashtriya Girini Kamgar Sangh, Jalgaon : (1960)ILLJ541SC . that the expression 'application' includes a substantive application also. The question considered there was about the procedure that should be followed by the industrial courts constituted under the Bombay Industrial Relations Act, 1946. The question raised related to the procedure that should be followed in accepting evidence for determining the amount required for rehabilitation. It may be stated that section 118 of the said Act conferred on the Industrial court some of the powers as are vested in civil courts. The material part of the said section is identically worded as are the provisions of section 10C of the Companies Act which confers on the tribunal some of the powers which are vested in civil courts under the Civil Procedure Code when trying a suit, inter alia, in respect of examining witnesses on oath, reception of evidence taken on affidavit, and issuing commissions for examination of witnesses. After examining the provisions of rules 1 and 2 of Order 19, their Lordships observed:

'A combined effect of the relevant provisions is that ordinarily a fact has to be proved by oral evidence, but the courts, subject to the conditions laid down in Order 19, may ask a particular fact or facts to be proved by affidavits. Industrial courts may conveniently follow the said procedure.'

26. Their Lordships then pointed out the importance of the item of rehabilitation in the matter of arriving at the surplus available for fixing bonus, and then observed:

'If the parties agree, agreed figure can be accepted. If they agree to a decision on affidavits, that course may be followed. But, in the absence of an agreement, the procedure prescribed in Order 19 of the Code of Civil Procedure may usefully be followed by the Tribunals so that both the parties may have full opportunity to establish their respective cases.'

27. It follows from this decision of their Lordships that Order 19 relates to affidavits directed to be filed by court in proof of facts at the hearing. The provisions have application to substantive applications also, and that affidavits in absence of agreements between the parties either in suits or proceedings upon any applications are receivable in evidence only on an order to that effect having been made by the court or the Tribunal. Rule 3 of Order 19 provides that affidavits filed in proceedings other than interlocutory applications shall be confined to such facts as the deponent is able of his own knowledge to prove. There is, however, no such limitation on affidavits which are filed in proof of facts alleged in an interlocutory application. Affidavits which are filed in an interlocutory application can be verified by the deponent both on his own knowledge as well as on information received and believed by him to be true, provided that the grounds of belief are stated by him. From the aforesaid provisions of rule 3 of Order 19, it is not possible to inter that affidavits filed for any purpose whatsoever in proceedings other than interlocutory applications must be confined only to such facts as the deponent is able of his own knowledge to prove. On the other hand, it appears that verification of an affidavit simpliciter could be made by the deponent on his personal knowledge as well as on information received by him and believed by him to be true. An affidavit is only a written declaration on oath by the deponent. The position has been made clear even in the two decisions to which Mr. Mody has drawn our attention. In Padmabati Dasi v. Rasik Lal Dhar I.L.R(1909) Cal. 259. the question considered was whether the affidavit made in support of a petition by the respondent to the court of appeal for an order that the appellants should be directed to furnish security for the costs was sufficient. In the course of their judgment, Jenkins C.J. and Woodroffe J., after referring to the provisions of Order 19, rule 3, observed :

'...and every affidavit should clearly express how much is a statement of the deponent's knowledge and how much is a statement of his belief, and the grounds of belief must be stated with sufficient particularity to enable the court to judge whether it would be safe to act on the deponent's belief.'

28. These observations have been cited with approval by their Lordships of the Supreme Court in State of Bombay v. Purshottam Jog Naik : 1952CriLJ1269 . In considering the affidavit tendered by the Home Secretary in a matter relating to the detention of a detenu under the preventive Detention Act, their Lordships at page 681 of the report observed :

'Verifications should invariably be modelled on the lines of Order 19, rule 3, of the Civil Procedure Code, whether the code applies in terms or not. And when the matter deposed to is not based on personal knowledge, the sources of information should be clearly disclosed. We draw attention to the remarks of Jenkins C.J. and Woodroffe J. in Padmabati Dasi v. Rasik Lal Dhar I.L.R (1909) Cal. 259. and endorse the learned judges' observations.'

29. In Consolidated Foods Corporation v. Brandon & Co. Private Ltd. : (1960)62BOMLR799 . the question which was being considered was an affidavit in support of the statements made in the petition filed under the Trade Marks Act. After considering the provisions of rule 3 of Order 19, the aforesaid decisions of the Calcutta High Court and that of the Supreme Court, the learned judge observed :

'It is clear that when statements are made in an affidavit on information and belief 'the sources of information should be clearly disclosed' and the grounds of the belief also must be stated `with sufficient particularity to enable the court to judge whether it would be safe to act on the deponent's belief.' These are but the basic requirements of verifications of pleadings and the contents of affidavits and care must be taken to comply with the same.'

30. These decisions indicate that the limitation placed in Order 19, rule 3, that the affidavits must be confined to such facts which the deponent is able to prove on his personal knowledge, has application only to those affidavits must have been directed by a court to be filed in proof of the facts of the hearing of matters other than the hearing of interlocutory applications. Other affidavits could be on personal knowledge as well as on the information and the grounds of belief are stated with sufficient particularity. An affidavit which is required to be filed in verification of a petition under section 398 of the Act is not an affidavit directed by court to be filed under order 19 in proof of facts. There is therefore no warrant to hold that it must be confined only to such fact as are within the personal knowledge of the deponent. The object of requiring a pleading or the contents of a petitions to be verified is to ensure that false allegations are not freely and recklessly made therein. As pointed out by Mr. Justice Mody in Consolidated Foods Corporation's case : (1960)62BOMLR799 , the basic requirements of verification of a pleading is that the deponent must clearly disclose which of the statements in the affidavit are true to his knowledge and which of the statements are based on information and belief, disclosing the sources of his informations and the grounds of belief with sufficient particularity, so as to enable the court to decided whether is should proceed with the petition is required to enable the court to decide whether it should proceed with the petition or the plaint. All that is required at that stage is to ascertain that the allegations therein are not made recklessly but are made after due inquiry and with due care. That objective is achieved when the deponent clearly states the sources of information on the basis of which allegations in a plaint or a petition have been made. Assuming, therefore, that the provisions of Order 19 have any application to an affidavit in verification of a petition required to be made under rule 21, in our opinion, the3 affidavit filed by Mr. Dang in this case fulfil the general requirements of Order 19, rule 3. In our opinion, however, Order 19, rule 3, had no application in view of the express provision made in rule 21 and in the prescribed form of verification of an affidavit required to be filed under the said rule 21. We have already reproduced the relevant portion of the Form above, and it is apparent that it is open to a deponent of an affidavit in verification of a petition under section 398 to verify it on information received by him and believed to be true. Clause (b) (v) of sub-section (1) of section 643 of the Act empowers the Supreme Court to make rules generally for all applications to be made to the court under the rules must be consistent with the Code of Civil Procedure. Rule 21 and the form prescribed cannot be said to be in any manner inconsistent with the provisions of order 19, Rule 21 is bad in law because it is inconsistent with the provision of the Civil Procedure Code. Having regard to the provisions of section, 643, rule 21 and the Form prescribed, in our opinion, Order 19 has no application to affidavits verifying of the affidavits by Mr. Dang was in accordance with the said rule and the Form prescribed.

31. It is next argued by Mr. Mody that the scheme as disclosed by the provisions of the Act, rules and regulations considered as a whole is that the allegations made in petition should be verified by an affidavit in verification on personal knowledge and or by supporting affidavits of other persons on personal knowledge. The arguments has not impressed us. The intention of the legislature disclosed in the provisions of the Act and in particular in section 10c read together with the statutory rules framed by the Supreme Court and the regulations framed by the Tribunal appears to us to be that the procedure prescribed for hearing of applications by the Tribunal is in substance the same as is the procedure prescribed by the Civil Procedure Code for trial of civil suits. A plaint is required to be verified at the foot of a pleading as provided in rule 15 of order 6. A petition is required to be verified by an affidavit, but on the same basis as provided in rule 15. The mode of verification is different, but the quality of verification prescribed for a plaint as well as a petition is the same. After the plaint is received by court, a summons is issued to the other side. There is a similar provisions after admission of a petition. After service of the summons with a copy of the plaint, the defendant is required to file his written statement by way of reply to the allegations in the plaint. Rule 34 requires a persons who intends to oppose the petition to file his grounds in opposition or his affidavit in opposition within a certain time prescribed therein. It is thereafter that a suit or a petition comes up for hearing. Rule 34 relates to the powers as are vested in a court under the Civil Procedure Code when trying a suit. They include the power to summon and examine witnesses on oath, reception of evidence taken on affidavits, and issuing commissions for the examination of witnesses. The powers conferred on the Tribunal for hearing of a petition are thus in substance similar to the powers conferred on the court by the Code of Civil Procedure relating to the trial of suits. Whether at the trial evidence should be directed to be led by filing affidavits or not is a matter left to the discretion of the court, and that would depend on the circumstances of each case. It is, therefore, not possible for us to accept that contention.

32. The matter could be looked at from a different aspect. It would be seen that the affidavit verifying a petition has to be filed by the petitioner, or where there are more than one petitioner by one of the petitioners, and in the case of a petition presented by a body corporate, by a director, secretary or other principal officer thereof. Petitions under section 397 and 398 are filed either by members of a company or the Union of India, who complain that they are subjected to oppression by persons in management of a company, or who complain that the affairs of a company are conducted in a manner prejudicial to the public interest, or in a manner prejudicial to the interest of the company. It would necessarily follow that such members or the Union of India are unlikely to know all the material facts from their personal knowledge. Necessarily, the averments in a petition will have to be made by them on information received by them from various sources and believed by them to be true. To accept the argument of Mr. Mody that the affidavit varifying a petition under section 397 and 398 must be on personal knowledge could result in practically taking away the rights conferred by sections 397 and 398 on members in minority and the Union of India to get relief in cases of oppression and mismanagement. Mr. Mody further argued that it may be that a petitioner himself may not be able to verify all the allegations in a petition from his personal knowledge, but he may be able to procure and file along with the petition supporting affidavits of person from whom he had obtained the information. Those persons would certainly be in a position to verify the affidavits on their personal knowledge, and that according to Mr. Mody is the scheme of the Rules framed framed under the Companies Act in general and the import of rule 21 in particular. To accept the argument of Mr. Mody would necessarily involve reading more in rule 21 than it contains. The affidavit in verification had to be made by the petitioner, and , where there are more than one petitioner, by one of them. In the case of a corporate body being the petitioner, the affidavit is to be made either by a director or a secretary or other principal officer. The rule does not provide that in the event a petitioner is not able to verify the petition on personal knowledge, the petitioner should file supporting affidavits of persons having personal knowledge in respect of those facts. Further, the said provisions of section 10C and regulation (1) of Chapter 20, rule 1, empower of the Tribunal to receive evidence either on affidavits or by examination of witnesses on oath before it. There is, therefore, no warrant to hold that the scheme as disclosed by the relevant provisions is that the allegations in a petition under section 397 or section 398 alleging fraud, misconduct, misappropriation, etc., or, in the event the petitioner is unable to so verify, then by supporting affidavits of other persons having personal knowledge, and that if a petitioner fails to do so he is not entitled to lead oral evidence to prove the allegations.

33. Mr. Mody next contended that, at any rate, it is a long settled practice that in petitions under the Companies Act, where grave charges of fraud, misconduct, mismanagement and misappropriation are made, the petition have to be verified by the petitioner or personal knowledge or support be supporting affidavits filed at the time of filing of a petition, and if the petitioner fails to do so, the petition is liable to be dismissed in limine. Here the serious charges of fraud, misconduct, mismanagement and misappropriation, etc., have been made against the respondents, and , therefore, the petition will have to be decided in accordance with the settled practice.

34. And this brings us to the decisions on which Mr. Mody has places reliance. We have already stated that very strong reliance has been placed on the two decisions of the Calcutta High Court in clive Mills case [1964] 34 Com.731, and Bengal Luxmi Cotton Mills case [1965] 35 Com 187. We would first refer to the English decisions and also other authorities on which Mr. Mody as well as Mr. Khambatta have placed reliance.

35. It may be stated that Order 38, rule 1, of the Rules of Supreme Court of England, is the provision corresponding with Order 19, rules 1 and 2 of our Civil Procedure Code and Order 38, rule 3, corresponds with Order 19, rule 3. The question relating to the practice of accepting evidence on affidavits was considered in J.L.Young . [1900] 2 Ch. 753. One Ashford claimed to rank as a debenture holder in a limited company. The evidence tendered in the trial court for and against the claim consisted mainly of affidavits containing statements made in the common form 'information and belief' of the deponents, without indicating the source of the information and belief. The claim of Ashford was rejected by the trial court. Ashford appealed. Lord Alverstone C.J. in his judgment observed:

' In my opinion the so-called evidence on `information and belief' ought not to be looked at all, not only unless the court can ascertain the source of the information and belief, but also unless the deponent's statement is corroborated by some one who speaks from his own knowledge.'

36. Placing reliance on these observations, Mr. Mody has argued that the affidavit on information, even if the source has been disclosed, is no evidence at all even for the purpose of issuing a summons against the respondent. The argument overlooks that the learned Chief Justice was not considering the question of maintainability of the petition, but was considering the question as to whether the petitioner had proved his case at the trial after both the parties had tendered their evidence. However, it may be pointed out that the other two learned judges have not gone to the extent the learned Chief Justice has gone. Lord Justice Rigby in his judgment observed:

' I have pay the slightest attention myself to affidavits of that kind, whether they be used on interlocutory applications or on final ones, because the rule is perfectly general that, when a deponent makes a statement on his information and belief, he must state the ground of that information and belief.'

37. Lord Justice Vaughan Williams appears to have concurred with the view of Lord Justice Rigby.

38. Facts in Gilbert v. Endean (1878) 9 Ch. D. 259 were : A decree was made in favour of the plaintiff for a certain amount. Later, there was a compromise, and under the compromise, the plaintiff had agreed to accept a smaller sum in satisfaction of the decree. Later on, the plaintiff, however, moved the court to enforce the original decree notwithstanding the compromise, on the ground that he was induced to enter into the compromise by misrepresentation. In support of this, it was shown that, shortly before the compromise was signed, the defendant's father, who was believed by all parties to be a man of property and had refused to assist the defendant, had died, which fact was known to the defendant's solicitor, when the compromise was agreed to but was not known to the plaintiff's solicitor. The evidence tendered was on affidavits. The trail court gave the plaintiff liberty to enforce the decree notwithstanding the subsequent agreement of compromise. The defendant appealed. The learned Master of the Rolls, in considering the quality of evidence, observed:

' Then we come to the question as to the evidence in support of the motion. Here, I must say that in my opinion, a charge of misrepresentation or concealment ought not to be supported by affidavits on information and belief. No doubt, in the case of interlocutory applications the court as a matter of necessity is compelled to act upon such evidence when not met by denial on the other side. In application of that kind the court must act upon such evidence, because no other evidence is obtainable at so short a notice, and intolerable mischief would ensure if the court were not to do so.'

39. Lord Justice Cotton in his judgment ( at page 269 of the report ) observed:

' In my opinion, therefore, on such applications, if an affidavit on information and belief is made, the other side is not called upon to answer it under the peril of its being said to him, `You have in fact admitted this by not denying it, and , therefore, the court may act upon the admission.'

40. On these observations Mr. Mody had placed reliance in support of his argument that the petition verified by an affidavit on information is liable to be dismissed in limine. Now, it has to be noticed that the learned judges were not considering the question as to whether the application of the plaintiff was liable to be dismissed in limine. On the other hand, the learned judges were considering the question about the sufficiency of evidence tendered at the trial. It may also be pointed out that since such affidavits have been on the grounds of necessity held to be sufficient evidence to enable a court to grant reliefs, we fail to see such an affidavit then should not be sufficient to enable a court to admit a petition and call upon the respondent to file his reply.

41. Rule 30 of the Companies ( Winding-up ) Rules framed under the English Act is in the following terms:

' 30. Every petition shall be verified by an affidavit referring thereto. Such affidavit shall be made by the petitioner, or by one of the petitioners, if more than one, or in case the petition is presented by a corporation, by some director, secretary, or other principal officer thereof, and shall be sworn after and filed........after the petition is presented, and such affidavit shall be sufficient prima facie evidence of the statements in the petition.'

42. The form prescribed for this affidavit is Form No. 9. It is in the following terms:

' I, A. B., of......, make oath and say that such of the statements in the petition now produced and shown to me, and marked with the letter `A', as relate to (a) my own acts and deeds are true, and such of the said statements are relate to the acts and deeds of any other person or persons I believe to be true.'

43. Affidavit under the said rule 30 sworn according to the aforesaid form No.9 has been referred to in the English decisions as the 'statutory affidavit'. It may be noticed that the corresponding provision in the Indian Act is rule 21 and Form No. 3 prescribed by the Supreme Court, and regulation No. (4) and Form No.2 framed by the Tribunal.

44. Facts in Gold Hill Mines, In re (1883) 23 Ch. D. 240, were : A dismissed servant of a company claimed 15 for arrears of salary and 95 damages for alleged wrongful dismissal. The company disputed both the claims. The dismissed servant then filed a petition to wind up the company, alleging it to be insolvent. The only evidence tendered by the dismissed servant was the statutory affidavits sworn on information and belief. The company filed an affidavit in reply, disputed the claim, and denied that the company was insolvent. The trial court ordered that on payment by the company of 110 into court all proceedings should be stayed until an action to be brought by the petitioner (dismissed servant) had been tried. The company deposited 110 in court, and appealed. In the appeal court, it was contended on behalf of the company that the petition ought to have been dismissed. The appeal was allowed. Lord Justice Lindley in the court of his judgment observed:

' The statutory affidavit strictly is no proof of anything. It is hearsay as to almost everything alleged in it, but it is sufficient to require an answer. The company at once applied , not in terms to take the petition off the file or to dismiss it, but that the petitioner might be restrained form advertising the petition or taking any proceedings under it; and their applications is supported by the affidavit of the secretary that the company is perfectly solvent.'

45. Placing reliance on these observations, Mr. Mody contended that when a petition for winding up is supported by such a statutory affidavit it is liable to be dismissed in limine. We are unable to read in these observations any support to Mr. Mody's arguments. The learned judge has only stated as a fact what the company did. The learned judge has not held that had the company applied that the petition should be dismissed in limine, the petition would have been dismissed, because there was no affidavit on personal knowledge filed in support of the winding up petition. On the other hand, the earlier remarks of the learned judge ' but it is sufficient to require an answer' indicates that if a petition is verified by a statutory affidavit, then that calls for an answer to the petition by the respondent. Mr. Mody argued that that may be so, because the aforesaid rule 30 framed under the English Companies Act says that it is prima facie evidence. Rule 21 of the rules framed by the Supreme Court does not say that the statutory affidavit prescribed by it is prima facie evidence of the allegation verified by the affidavit. Formerly, the rules framed by some of the High Courts were in identical terms as those of rule 30 of the said English rules. The omission of the clause ' that it shall be prima facie evidence' is significant, and it indicates that no more a statutory affidavit on information only is sufficient to sustain the petition. The argument has little force. It is true that rule 21 framed by the Supreme Court does not say that, ' such affidavits shall be sufficient prima facie evidence of the statement in the petition.' But, if the rules are read as a whole, there is no doubt left that the procedure prescribed by the Supreme Court is that if the court finds that the petition is supported by a statutory affidavit, it has to admit it and issue a summons to the respondent. The summons issued has to be served on the respondent in the manner prescribed in the rules. After the summons is served on the respondent, the respondent has to give notice to the petitioner if he intends to appear at the hearing and oppose the petition. Rule 34 further requires the respondent to furnish a copy of his grounds of opposition to the petitioner within a certain time. The matter then comes up for hearing. There can hardly be any doubt that a petition verified by a statutory affidavit is sufficient to call for an answer by the respondent. Whether the statutory affidavit sworn on information only would at the trial be prime facie evidence in proof of the statements made in petition or not is a matter altogether different.

46. Facts in South Staffordshire Tramways Co., In re, [1894] 1 Mans. 292 were : A contributory had presented a winding-up petition to wind up an unregistered company. In support of the petition, no other evidence except the statutory affidavit had been filed. After the following question was put to the petitioner.

' Are you entitled to make all these allegations of personal fraud without any other evidence to support them than the statutory affidavit of opinion and belief?'

47. the court observed: ' That affidavit is always necessary but not always sufficient.' Counsel for the petitioner then undertook to file a further affidavit. The case was adjourned. It is on this question that Mr. Mody has placed reliance. With respect, we must confess we fail to appreciate how the question supports the principle contention of Mr. Mody. All that has been stated is that the statutory affidavit is not sufficient evidence to grant the relief claimed on the ground of fraud. The observation itself indicates that even when this defect was notices at the trial, it was within the power of the judge to allow the petitioner to tender further evidence and adjourn the case thereafter.

48. Facts in In re S.A. Hawken Ltd. [1950] 2 All E.R. 408, were : A question arose on taxation of costs on a petition under section 220(1) of the Companies Act, 1948 (the corresponding section in the Indian Companies Act is section 397). The taxing master having refused to allow costs on an affidavit supplementing the statutory affidavit, the case came up in appeal against the order of the taxing master. After examining certain decisions, Wynn-Parry J. at page 413 of the report observed:

' The result of the decided cases appears to be that, while the statutory affidavit is always necessary, it is not always sufficient........ and it is never sufficient where the petition is based on allegations of fraud. In such cases the facts of the alleged fraud must be stated on affidavit.......The court had never attempted to state exhaustively the circumstances in which, apart from cases based on allegations, of fraud, the statutory affidavit is to be regarded as insufficient. Each case must depend on its peculiar facts.'

49. The learned judge proceeded to examine the facts of the case before him, and then observed:

' On the other hand, where the petition is grounded on an allegation that the affairs of the company require investigation, then, though no not necessarily sufficient evidence. In proceedings on petition based on allegations of fraud, the statutory affidavit is never sufficient. In such cases, facts alleged should be stated on affidavits sworn on personal knowledge. The principle also has been extended in certain other cases where the petition makes grave charges and alleges that the affairs of the company require investigation. In a proper case, the necessity of receiving oral evidence has not been excluded. A recent decision of the English courts brought to our notice by Mr. Khambatta in In re A.B.C. Coupler and Engineering Co. Ltd., [1962] 3 all E.R.68: 33 com 207, indicates that in petitions alleging fraud and other charges, the proper course would be to examine the persons who are acquainted with the facts in court as witnesses, and the court should personally hear their evidence. This was a petition to wind up a company by the Board of Trade under section 169(3) of the Companies Act, 1948. Certain gave charges against the persons in management had been made. A statutory affidavit verifying the petition was sworn by an official of the Board of Trade. He also swore an affidavit exhibiting the report of the inspector saying that he believed the facts set out in the report to be true. The evidence tendered consisted only of the statutory affidavits and the reports of them are inspectors. We have already considered here-and after having considered the aforesaid passage from Buckley, the learned judge at page 73 of the report observed:

' That does not mean that he (petitioner) must prove fraud or misconduct or everything that he would have to prove in a case for dissolution of a partnership , but he must prove facts from which the court can infer that there is sufficient suspicion of fraud or misconduct or sufficient grounds for thinking that the parties have reached a stage at which they can no longer continue to be associated in the business with confidence in one may not be some sort of case in which the only evidence available to the petitioner is of a hearsay character. Perhaps in such a case the court would be satisfied with hearsay evidence. But where grave charges are involved the court should, if practicable, have the advantage of hearing evidence on which there can be effective cross-examination; the evidence of witnesses who have first hand knowledge of the matters on which they are giving evidence. And the evidence called before the court should, in my judgment, so far as the circumstances permit, within reason conform to the ordinary rules of admissibility. After all, the winding up of a company as a drastic remedy which may have far-reaching consequences, financial and commercial, and also consequences affecting not only the company but persons who have been concerned with the conduct of its affairs, and the court should act with caution in exercising its discretionary jurisdiction.'

50. These observations clearly indicate that in cases where allegations of fraud or other grave charges have been made, if possible, the court should examine witnesses who are acquainted with the facts of the case. These observations have been made in spite of the fact that the general practice upon petitions under the Companies Act was to tender evidence by affidavits. We are no doubt dealing here with a case arising out of the Companies Act, but not with the general practice hitherto followed by courts. We have to deal with the procedure which the Act has now prescribed for the Tribunal to adopt. We have already observed that by the amending Act of 1963, certain radical changes have been introduced. There is a departure from the normal rule of leaving the dispute between members to the domestic forum, the court stepping in only in exceptional circumstances. Under sections 397 and 398, powers have been conferred on courts to grant relief either at the instance of members in minority holding, certain percentage of shares or at the instance of the Union of India where the oppression of the minority was complained of, or where the complaint was that the affairs of the company were conducted or likely to be conducted in such manner as were prejudicial to the pubic interest or to the interest of the company. The Act has been further amended and trail of petitions under section 397 and 398 has now been transferred to the Tribunal . The Tribunal has now also been conferred with further powers under section 388B. Under that section, the Union of India could state a case asking the Tribunal to record a finding that a person is not fit to hold the post of a director in a particular company or any other company. Section 10C further confers on the Tribunal certain powers which are exercisable by a civil court. The reading of section 10C, which also has been brought on the statute book by the said amending Act, discloses that the Tribunal is clothed with powers of discovery and investigations of the documents, enforcing the attendance of the witnesses, compelling production, of documents, examining witnesses on oath, reception of evidence taken on affidavits and issuing commissions for examining witnesses. The Tribunal has also been empowered to frame regulations regulating its procedure. The regulations which the Tribunal is empowered to prescribe have to be in conformity with the Code of Civil Procedure and the rules framed by the civil courts. The regulations in Chapter 20 disclose that the Tribunal has been clothed with the powers which a civil court can exercise under Orders 18,19 and 26 of the Code of Civil Procedure. Reading of Order 18, which relates to the recording of oral evidence, shows that it confers a right on a party to apply to the court to issue summons to a witness it wants to examine. The provisions of law and the rules framed thereunder leave no doubt that the intention of the legislature is not that evidence on petition should be confined only to affidavits, but, on the other hand, the intention of the legislature as indicated in the amended provisions appears to be that in appropriate cases oral evidence should be recorded. Whether in a given case a party should be permitted to lead oral evidence or ordered to prove facts by filing affidavits would depend on the circumstances of that case.

51. And this brings us to the two Calcutta decisions on which strong reliance has been placed by Mr. Mody. In re Clive Mills Co. Ltd. [1964] 34 Com.731, the observations on which reliance has been places are at page 749:

' An application under section 397 and 398 of the Act is not interlocutory application. The matter is finally disposed of by the order made on the application itself. Nothing remains outstanding, unless orders are made keeping certain matters outstanding. The application is disposed of on the basis of the averments in the pleadings, unless the matter is directed to be tried on evidence. The pleadings, unless the matter is directed to be tried on evidence. The pleadings in the matter, including the petition and the affidavits are to be treated as evidence and, that being so, the rules of evidence must be strictly adhered to. The averments in the petition and in the affidavits, which are verified as based on information, are, by their very nature, hearsay evidence. And if such averments are the foundation of the case made out by the petitioner, or the foundation of the case made out by the petitioner, or the foundation of the defence made out by the respondents, the court should not rely or act upon the same. To do otherwise, would be to ignore the fundamental principles of the rules of evidence. If the averments in the pleadings are such that, but for them, an order cannot be made, persons who have personal knowledge of the fact stated must come forward and put what they have to say on affidavits. If other persons, having no personal knowledge of the facts, are set up to verify facts stated in petitions or affidavits, as being based on information supplied and believed to be true, the averments so verified cannot be relied on by the court. I must make it clear, however, that my views in this matter are confined to proceedings under section 397 and 398 of the Companies Act , 1956, in which orders are asked for on the basis of charge laid in the petition and affidavits. These views should not be taken to apply to other proceedings. In the petition and affidavits filed in proceedings under section 397 and 398 of the Act, the provisions of Order 19, rule 3, sub-rule (1), must be strictly complied with, when serious charges of fraud, collusion, mismanagement, misappropriation and misapplication of funds, violation of the provisions of the Companies Act or other similar charges are made or denied.'

52. These observations also do not fully support the appellant in his contention that in petitions founded on fraud, misappropriation, etc., all the material evidence has to be tendered in the shape of supporting affidavit of the petitioner or the supporting affidavits of other persons at the time of filing of the petition, and failure on the part of the petitioner to do so, would result in the dismissal of the petition in limine, or the contention of the appellant that the only oral evidence which could be accepted at the hearing of the petition is calling the deponents of the affidavits for cross-examinations. The learned judge was dealing with the question of the sufficiency of evidence tendered before him at the time of the disposal of the application finally. It may also be pointed out that the observations do not rule out the acceptance of oral evidence. The observations of the learned judge: ' The application is disposed of on the basis of the averments in the pleadings, unless the matter is directed to be tried on evidence' indicate that the reception of oral evidence in an appropriate case is not rules out.

53. The observation in Bengal Luxmi Cotton Mills Ltd. [1965] 35 Com. 187, on which reliance is placed, occur at page 218 of the report:

' I have already held that in an application under section 397 and section 398, if the petitioner has no personal knowledge of the charges made in the petition or of other material facts alleged therein, supporting affidavits from persons having personal knowledge of the facts should be filed along with the petition, in order to make out grounds for relief to the petitioner. But if the petition and other supporting affidavits filed along with it do not disclose sufficient ground to fulfil the requirement of section 397 and section 398, the court should not look into other evidence, either oral or documentary, or in the shape of affidavits affirmed subsequently. The petitioner must in his petition and the supporting affidavits, if any, make out a case for relief. If he has filed to do so, the defect cannot be cured nor the lacuna filled up by other evidence, oral or documentary. This is so even though the oppression complained of is a continuous course of oppression and continues even after the presentation of the petition. The act does not impose upon the court a duty to hold a rambling enquiry into allegations made in the petition and supporting affidavits, if any, which by themselves do not constitute grounds for relief under section 397 and section 398.'

54. It is indeed true that the aforesaid observations fully support the contention raised by Mr. Mody on behalf of the appellant. With utmost respect, and for the reasons already recorded, we find considerable difficulty in concurring with these observations or taking a similar view as is taken by the learned judge. None of the English decisions, on which Mr. Mody has placed reliance, has gone to the extent the learned judge has gone.

55. In this context we may point out that in two earlier Calcutta decisions, the view taken differs form that taken by the learned judge in Clive Mills's case [1964] 34 Comp. Cas. 731 and Bengal Luxmi Cotton Mills case [1965] 35 Com 187. In Sarkar Estates Private Ltd. v. Kusumika Iron Works Private Ltd. [1962] 32 Com 575, a Division Bench of the Calcutta High Court has held that:

' The Company Rules which govern the practice and procedure of the matters relating to companies, which are dealt with in the original side of the Calcutta High Court, override the general provisions of the Civil Procedure Code. Hence, a verification clause in the petition for winding up of a company cannot be ignored on the ground that it does not comply with the requirements of Order 19, rule 3, Civil Procedure Code, if it complies with the requirement of Form No. 13 of Appendix 7 of the Company Rules of the Calcutta High Court.'

56. There is no material difference between the said Form No. 13 of Appendix VII of the Company Rules of the Calcutta High Court and the Form prescribed in the Supreme Court Rules.

57. In In re Albert David Ltd. (1964) 68 C.W.N. 163. Mr. Justice Mallick held that :

' Order 19, rule 3, Civil Procedure Code, applies to affidavits simpliciter which can be used as evidence in suit. Unless the averments in the affidavit are true to knowledge, they cannot be treated as evidence being hit by hearsay rule. The position is different in the case of a petition, even if the petition initiates a proceeding. It must be verified as laid down in Order 6, rule 15. If Order 19, rule 3, is to be applied to a petition, then ' interlocutory matters' in order 19, rule 3, must be given a very extended meaning, so as to cover not only what is commonly understood as interlocutory application in a suit but also the original proceedings which are initiated by a petition. Such as original petition is required to be verified under the Code in Order 6, rule 15. To construe it otherwise would lead to impossible results.'

58. Both these decisions were brought to the notice of the learned judge deciding the Clive Mills case [1964] 34 Com. 731 and the Bengal Luxmi Cotton Mills case [1965] 35 comp. Cas. 187, and these decisions have been distinguished by him merely by saying that the decisions have no application where the allegations of fraud, misconduct or misappropriation have been made. The distinction drawn, appears to be that a petition not containing allegations allegation of fraud or other grave charges like misconduct or mismanagement, etc., can be verified by affidavits on information and belief, but a petition containing allegations of fraud or grave charge like misconduct, mismanagement etc., is required to be verified by an affidavit on personal knowledge or by supporting affidavits of other persons having personal knowledge. With respect we are unable to concur in this view, because it would involve reading the relevant rule 21 framed by the Supreme Court differently.

59. Turning to the facts of the case, it is not in dispute that the affidavit verifying the petition as well as the affidavit supplying further particulars have been sworn in accordance with the provisions of rule 21 of the Supreme Court Rules and the Form prescribed therein, as well as the Regulations and the Form prescribed therein. The source of information and the grounds of belief have been with sufficient particularity stated in the affidavit. The petitioner had thus fulfilled the requirements of law and the petition , therefore, for the reasons already stated, is not liable to be dismissed in limine. similarly, for reasons already stated the petition is not liable to be dismissed on merits also at this stage merely on the ground that the affidavit verifying the petition or the affidavit supplying particular have not been sworn on personal having personal knowledge of the fact alleged in the petition.

60. We have already reproduced paragraph 11 of the affidavit furnishing further particular, and in that affidavit Mr. Dang has stated that at the hearing evidence will be led in proof of the facts alleged in the petition. We have pointed out above the various provisions in the amended Act and the Regulations which empower the Tribunal to enforce the attendance of witnesses, examine witnesses on oath, or make orders relating to reception of evidence taken on affidavits. It would be for the Tribunal, after the reply of the respondents has been filed to decide whether it should record the evidence of these witnesses or order receiving evidence taken on affidavits. Mr. Mody however contended that as the Union of India did not state on affidavit that it was not possible for them to file affidavits of other persons who were acquainted with the facts, the Union of India should not now be allowed to lead oral evidence. According to Mr. Mody, the Union of India was flouting the provisions of law and deliberately avoiding filling of affidavits of persons acquainted with facts even though it was possible for them to do so. We are not impressed by this argument. Mr. Mody has not pointed out any express provisions of law or any decision except Bengal Luxmi Cotton Mills case [1965] 35 Com 187, which says that the failure on the part of the petitioners to file supporting affidavits of persons acquainted with facts disentitles him form leading evidence at the hearing of the petition. With the said decision, with respect we have been unable to concur. Further, there is no material on record form which it could be inferred that though it was possible for the Union of India to file affidavits of persons acquainted with the facts of the case, the Union of India is deliberately avoiding to file their affidavits. Mr. Khambatta on behalf of the petitioner had also argued that the appellant respondent No. 2 was not entitled to contend that the petition should be dismissed in limine inasmuch as respondent No. 2 himself has waived this defect in the affidavit in verification of the petition and has taken part in the proceedings of the petition since after its admission. It was urged that the petition was admitted on 12th October, 1964, and thereafter, respondent No. 2 appeared, filed affidavits for interim orders, and thus having taken part in the proceedings has submitted to the orders in applications for interim reliefs. Respondent No. 2 therefore is not entitled to raise the plea that the petition should be dismissed in limine because the affidavit verifying the petition was defective inasmuch as it was not based on personal knowledge. Mr. Mody on, the other hand, contended that the petitioner is not entitled to argue that respondent no. 2 had waived his right to claim that the petition should be dismissed in limine inasmuch as the plea of waiver had not been raised by the petitioner in any of the affidavits which have been allowed to be taken on record. It appears that the Tribunal has allowed the counsel for the petitioner to argue the point of waiver inasmuch as it was of the opinion that the plea of waiver was raised by the counsel on the basis of the records in the petition. In our opinion, Mr. Mody right in his contention that the plea , it should not be allowed to be raised in arguments. However, it is not necessary to go further in this mater inasmuch as the Tribunal has not decided this point, nor has the application been disposed of on his ground. On the other hand, the Tribunal has dismissed respondent No. 2 s' application on merits. For the reasons already stated, in our opinion, the Tribunal was right in dismissing respondent No. 2's aforesaid application NO. 37 of 1965.

61. In the result, for the reasons stated above, the appeal is liable to be dismissed and is hereby dismissed with costs in favour of respondent No. 1. No order as to costs of the other respondents. Interim stay orders are hereby vacated. No order as to costs thereon.

62. Appeal dismissed.


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