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N.P.S.N. Ramiah Nadar and ors. Vs. N.K.R. Amirtharaj - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai High Court
Decided On
Case NumberOriginal Side Appeal No. 48 of 1960
Judge
Reported inAIR1962Mad163
ActsCompanies Act, 1956 - Sections 242
AppellantN.P.S.N. Ramiah Nadar and ors.
RespondentN.K.R. Amirtharaj
Cases ReferredUnion of India v. Shanmugha Nadar
Excerpt:
.....order by court directing the government of india to appoint an inspector to investigate into the affairs of a company under the provisions of section 237 of t he indian companies act (i of 1956) will not amount to a judgment within the meaning of the term judgment in clause 15 of the letters patent so as to entitle an aggrieved party to appeal therefrom.; for the purpose of directing investigation under section 237 of the indian companies act, the court has to find certain preliminary facts. but the finding of the court is not a final one; it cannot affect either the company or its directors. a mere direction to investigate cannot give arise to legal grievance. an order directing investigation is something analogous to the issue of a commission for the purpose of looking into the..........interests of the company and its shareholders.(2) during the course of hearing of the petition the learned judge tenantively came to the conclusion that the materials on record make out an overwhelming prima facie case for ordering investigation into the affairs of the company by the machinery provided under the indian companies act. the learned judge, therefore, called for a report from the officers appointed by the central government under the provisions of s. 237 of the indian companies act. some of the directors of the company, feeling aggrieved by the order directing an investigation, have filed this appeal.(3) a preliminary objection to the maintainability of the appeal is taken on behalf of the respondent on the ground that the order of the learned judge does not amount to a.....
Judgment:
(1) This is an appeal from the order of Ramaswami J., in O. P. No. 272 of 1952, directing the Government of India to obtain one or more competent persons and inspectors to investigate into the affairs of the Nadar Press Ltd. Sivakasi and to report thereon for further action to be taken under S. 242 of the Companies Act of 1956, if it appears to the Central Government that such action should be taken thereunder. The substantive application, namely, O. P. No. 272 of 1952, was filed under S. 153-C of the Indian Companies Act, 1913 for obtaining an order appointing an administrator or receiver to take charge of the business, properties and assets of the company, for terminating the service of the managing director and other directors, who were in charge of the affairs of the company and for certain other reliefs on the footing that there was mismanagement of the company by the board of directors and that the affairs of the company were conducted in a manner detrimental to the interests of the company and its shareholders.

(2) During the course of hearing of the petition the learned Judge tenantively came to the conclusion that the materials on record make out an overwhelming prima facie case for ordering investigation into the affairs of the company by the machinery provided under the Indian Companies Act. The learned Judge, therefore, called for a report from the officers appointed by the Central Government under the provisions of S. 237 of the Indian Companies Act. Some of the directors of the company, feeling aggrieved by the order directing an investigation, have filed this appeal.

(3) A preliminary objection to the maintainability of the appeal is taken on behalf of the respondent on the ground that the order of the learned Judge does not amount to a judgment within the meaning of the term in Cl. 15 of the Letters Patent.

(4) In order to appreciate the contention, it is necessary first to ascertain the scope of S. 237 of the Act. That section provides for investigation of the company's affairs in certain cases and provides that the Central Government shall appoint one or more competent persons as inspectors to investigate the affairs of the company and to report thereon such manner as the Central Government may direct, if the court, by order declares that the affairs of the company ought to be investigated by an inspector appointed by the Central Government. The nature of the jurisdiction of the Government in an analogous case has been considered in the judgment of the Supreme Court in Narayanlal Bansilal v. Maneck Phiroz Mistry, . That case was

concerned with an equity under S. 234 of the Indian Companies Act. Their Lordships of the Supreme Court observed :

"Thus the scope of the enquiry contemplated by S. 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 S. 235 inspectors are appointed to investigate the affairs of any company and report thereon. The investigation carried on by the inspector is no more than the work of a fact-finding commission."

What the learned judge in the instant case should be held to have directed is the issue of a fact-finding commission in terms of Sec. 237 of the Act for the purpose of investigation. If on the basis of the report of the inspectors the Government come to the conclusion that any action should be taken in regard to the management of the company, the court would consider the same. If the Government do not consider that any further action is necessary, the appellant could have no grievance whatsoever.

(5) Mr. Thiagarajan appearing for the appellant contends that as sec. 237 speaks for a declaration by court, it should necessarily involve an adjudication, which would greatly or adversely affect the company's reputation and the direction contained in the order of the learned judge would have a wider significance than that of a mere fact-finding commission. We are unable to agree with the contention. For the purpose of directing an investigation under section 237 the court has to find certain preliminary facts. But the finding of the court is not a final one ; it cannot affect either the company or its directors. A mere direction to investigate cannot give rise to a legal grievance. In our opinion, the order of the learned judge directing the issue of investigation is something analogous to the issue of a commission for the purpose of looking into the accounts of the parties.

(6) In Tuljaram Rao v. Alagappa Chetti, ILR 35 Mad 1 it was observed that an order directing evidence to be taken on commission would not be a judgment so as to be appealable the characteristic of a judgment has been considered in detail by Govinda Menon, J., as he then was, inCentral Brokers v. Ramanarayana Poddar and Co. ILR (1954) Mad 1052 : (AIR 1954 Mad 1052) (FB). The learned judge laid down two tests to find out whether the adjudication in a particular case is a judgment within the meaning of clause 15 or not. The tests were: (1) whether the order terminates the suit or proceedings and (2) whether it affects the merits of the controversy between the parties in the suit itself. That view was followed in Union of India v. Shanmugha Nadar, , a judgment to which one of us was a party. It is sufficient for the purpose of this case to consider whether the second of the two tests has been satisfied.

(7) Mr. Thiagarajan for the appellant contends that in so far as the learned Judge has declared that there is a case for investigation, it must be held that the merits of the controversy have in a way been adjudicated upon. We have earlier pointed out that the learned Judge has merely stated that there is a prima facie case for further investigation, by the Government under the provisions of S. 237. It cannot obviously be said that the merits of the case have been finally disposed of. There is a possibility of the management being vindicated at the investigation; even otherwise the results of the investigation would lead only to the initiation of the appropriate proceedings. We are therefore not satisfied that the order of the learned Judge in this case fulfils the test laid down in the various cases as to what a judgment is. In our opinion, an order by court directing investigation under the provisions of S. 237 of the Indian Companies Act will not amount to a judgment within the meaning of the term judgment in Cl. 15 of the Letters Patent so as to entitle an aggrieved party to appeal therefrom.

(8) The appeal fails and is dismissed with costs.

(9) Appeal fails


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