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Ashoka Marketing Ltd. Vs. Company Law Board - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberT.C.C. No. 2 of 1967 and Appeal No. 10 of 1956
Judge
Reported in[1968]38CompCas519(Cal)
ActsCompanies Act, 1956 - Section 635B
AppellantAshoka Marketing Ltd.
RespondentCompany Law Board
Appellant AdvocateSomnath Chatterjee, Adv.
Respondent AdvocateB.C. Basak, Adv.
DispositionAppeal dismissed
Cases ReferredJagannath Kashinath Kavalekar v. Union of India
Excerpt:
- .....the matter of termination of the services of the said employee was referred to the company law board. the company made an application on 9th february, 1966, to the company law board for according approval to the proposed termination of the services of the said employee. on 8th march, 1966, the appellant-company received a letter dated, 5th march, 1966, giving notice of objection to the proposed action. it may be noted here that no grounds or reasons for the said objection was stated in the said notice. on 8th march, 1966, the appellant-company asked for grounds of such objection ; such grounds were supplied by the company law board by its letter dated, 4th april, 1966. the relevant portion of the said letter is set out hereunder :'tothe ashoka marketing limited, p. n. b. housep.b......
Judgment:

Ghose, J.

1. This is an appeal under Section 635B of the Companies Act, 1956. The appeal was filed before the Companies Tribunal. The said Tribunal was abolished by the Companies Tribunal (Abolition) Act, 1967, with effect from 1st July, 1967. Under the provisions of the said Act this appeal has been transferred to this court.

2. The appellant is a company having its registered office at 18A, Brabourne Road, Calcutta, but it has its regional offices at different places including Chandigarh in the State of Punjab. One K. S. Paul is a senior sales officer of the said company posted at Calcutta. On or about 15th January, 1966, the managing director of the appellant company transferred the said Mr. Paul to Chandigarh for a period of six months and directed him to report for duty at Chandigarh by 24th January, 1966. Mr. Paul applied for leave for 12 days with effect from 25th of January, 1966. The said leave was granted. The employee was directed to report for duty at Chandigarh on the expiry of the said leave,

3. On 7th February, 1966, Mr. Paul wrote to the managing director that his physician Dr. D. P. Basu, had advised him to stay in temparate climate and to have monthly check up of his heart-condition. He also informed the managing director that the employees' union of the appellant-company had raised dispute with regard to this transfer and conciliation proceedings had been started and the appellant-company was requested by the labour department to keep the order of transfer in abeyance pending the conciliation proceedings.

4. Mr. Paul joined the head office at Calcutta on 7th February, 1966, when the managing director of the appellant-company asked him immediately to contact the company's doctor, one Mr. Ganguly, so that electrocardiograph of his heart might be taken by a competent Cardiologist. Notwithstanding such requests and directions to get electrocardiograph of his heart done by Dr. A. K. Basu, who is a well-known heart specialist of Calcutta, Mr. Paul refused to go to the said Dr. A. K. Basu. Mr. Paul as a matter of fact refused to go to any other Cardiologist except his own Dr. D. P. Basu, mentioned above.

5. By letter dated, 8th February, 1966, the managing director of the appellant-company gave notice to the employee that since he had refused to submit to the medical examination for the purpose of ascertaining the true state of his health and his physical inability to go to Chandigarh and also because he had given 'categorical expression ' of his intention not to obey the company's directions, the company had no other alternative except to terminate the services of Mr. Paul, for the defiant attitude shown by him in the matter, according to the terms and conditions of the service rules.

6. Under Section 635B of the Companies Act, 1956, the matter of termination of the services of the said employee was referred to the Company Law Board. The company made an application on 9th February, 1966, to the Company Law Board for according approval to the proposed termination of the services of the said employee. On 8th March, 1966, the appellant-company received a letter dated, 5th March, 1966, giving notice of objection to the proposed action. It may be noted here that no grounds or reasons for the said objection was stated in the said notice. On 8th March, 1966, the appellant-company asked for grounds of such objection ; such grounds were supplied by the Company Law Board by its letter dated, 4th April, 1966. The relevant portion of the said letter is set out hereunder :

'To

The Ashoka Marketing Limited,

P. N. B. House

P.B. No. 2703,

18A, Brabourne Road, Calcutta-1.

Sub: Proposed termination of services of Shri R. S. Paul-approval sought for under Section 635B of the Companies Act, 1956.

Gentlemen,

I am directed to refer to your letter No. EST/8719 dated the 8th March, 1966, on the above subject and to say that the notice of objection to the proposed action against Shri R. S. Paul was given in the following circumstances :--

(a) It was represented to the Company Law Board that Shri R.S. Paul was sought to be transferred to Chandigarh despite the clear findings of the Industrial Tribunal, West Bengal, in their order No. 1556 dated April 16, 1963, that the services of Shri R. S. Paul are not liable to transfer out of Calcutta.

(b) It was further represented that the company's application for special leave to appeal in the Supreme Court in the above matter was dismissed.

(c) It was also represented that an industrial dispute had been raised by the Labour Commissioner and was pending before him.

(d) Having regard to (a), (b) and (c) above, the proposed punishment did not appear to be commensurate with the alleged misconduct on the part of Shri R. S. Paul.

(e) Shri R. S. Paul had rendered some assistance in the matter of investigation into the affairs of your company.

(f) It was also represented that the proposed action was with a view to victimization of Shri R. S. Paul for the assistance he had rendered in the investigation.

Yours faithfully,

Sd/-

(T. S. Kannan)

Secretary, Company Law Board'

7. Mr. Somnath Chatterjee, appearing in support of the appeal, has urged as follows:

(a) Notice of objection given by the Company Law Board was not in terms of Section 635B and as such was not a valid objection.

(b) Sub-section (b) (ii) to Section 635B of the Companies Act lays down that notice of any objection has to be given. That shows the notice must specify the grounds of objection. In the instant case the said notice does not specify the grounds of objection and as such is not a proper one and must be set aside. According to Mr. Chatterjee, the subsequent letter dated 4th April, 1966, received by the appellant from the Company Law Board, setting forth the grounds for the aforesaid objection was not given within thirty days of the receipt of the intimation of the proposed action to be taken by the company against the employee and as such could not be looked upon as the ground for objection to such proposed action.

(c) Lastly, Mr. Chatterjee contended that the letter dated, 4th April, 1966, which purports to set forth the grounds for such objection clearly shows that representations were made to and received by the Company Law Board behind the back of the appellant in arriving at their decision to object to the proposed action of appellant. That was, in any event, in violation of the principles of natural justice. In the premises the said objections must be quashed or set aside. Mr. Chatterjee relied on the case of Jagannath Kashinath Kavalekar v. Union of India, : AIR1967Delhi121 .

8. Mr. B. C. Basak, appearing on behalf of the Company Law Board submits that under Section 635B only a notice of objection has to be given by the Company Law Board ; thus no ground for such objection need be given. In any event since the appellants have appealed from the said objection they have to be deemed to have accepted the said objection as an objection within the meaning of the said section and now cannot be allowed to urge that the same is not an objection within the contemplation of the said section.

9. In the said case of Jagannath Kasinath Kavalekar v. Union of India it was held that the Central Board of Revenue, in an appeal under Section 188 of the Sea Customs Act, was bound to give reasons for its order in the order itself. The Central Government likewise in a revision from the aforesaid order of the Central Board of Revenue was bound also to give reasons for its decision.

10. It was held in the aforesaid case by Kapur J.:

' ...............that reasons were necessary as the power to decide without giving reasons may result in an abuse and the requirement as to the statement of reasons will prove an effective restraint on such an abuse. '

11. It was further held :

'The necessity to give reasons has been variously put, as requirement of natural justice, or to ensure that the concerned authority applies its mind to the matter or to prevent the provisions as to appeals and revisions being rendered nugatory by the authorities making out orders........................Moreover when an authority is required to decide some matter and the decision depends upon the existence or non-existence of certain facts, that authority must in its order show as to whether or not those facts exist. Jn the absence of reasons it is impossible by the courts exercising appellate powers, or the powers of superintendence, to see whether or not the authority was influenced by any extraneous considerations. The practice of making summary orders will, in effect, reduce the provisions as to appeal and revision to nullity. When the order of an authority is made subject to scrutiny by an appellate or revisional authority, the Legislature obviously intends to make that right effective. If the authority does not give reasons it amounts, in substance, to depriving the party of the right of appeal or revision. '

12. The Central Government by its order No. 2(5)-CL-1/63, dated 11th April, 1963, passed orders under sections 237 and 249 of the Companies Act, 1956, and appointed an Inspector to investigate the affairs of the appellant-company for the periods from April 1, 1958, to April 11, 1963, and even for a period prior to 1st April, 1958, if it was necessary, in the opinion of the inspector, to investigate as to whether the appellant was the associate of Sahu Jain Ltd. Since July 23, 1964, the aforesaid investigation remains stayed. From the said grounds set forth in the said letter dated 4th April, 1966, it appears that the aforesaid objection to the discharge or removal of the said R. S. Paul was taken by the Company Law Board since, in the opinion of the Company Law Board, the proposed action was, inter alia, by way of punishment or victimization of the said employee in view of his alleged assistance to the investigating inspector. In the case of Harinagar Sugar Mills Ltd. v. Shyam Sunder Jhunjhunwala, [1961] 31 Comp. Cas. 387. (S.C.) it was decided that the Central Government, in hearing an appeal from an order by a board of directors of a company refusing to register shares in the name of the transferees in respect thereof in exercise of jurisdiction under Section 111 of the Companies Act, 1956, acts as a judicial tribunal and is subject to the appellate jurisdiction of the Supreme Court under Article 136 of the Constitution.

13. Reference in this connection may be made to the case of Province of Bombay v. Khushaldas S. Advani, : [1950]1SCR621 wherein the Supreme Court considered the distinction between quasi-judicial decision and administrative or ministerial decision, Fazl, Ali J., at page 229 of the said report, observed as follows :

' The word ' decision ' in common parlance is more or less a neutral expression and it can be used with reference to purely executive acts as well as judicial orders. The mere fact that an executive authority has to decide something does riot make the decision judicial. It is the manner in which the decision has to be arrived at which makes the difference, and the real test is : Is there any duty to decide judicially ?'

14. In the said case the Supreme Court approved of the test suggested by Scrutton L. J. in King v. London County Council, [1931] 2 K.B. 215, 233:

' It is not necessary that it should be a Court in the sense in which this court is a court; it is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition......'

15. In the instant case, in my opinion, we have to consider, therefore, the manner in which the decision has to be arrived at by the Company Law Board in deciding to object to the proposal to discharge or remove an employee under Section 635B of the Companies Act, 1956, as amended up to date. We have to consider in particular as to whether Section 635B, Sub-section (b) (ii) cast upon the Company Law Board any duty to decide judicially as to whether it would object or not to the proposed dismissal of an employee as contemplated by the said section.

16. In my opinion, no duty is cast upon the Company Law Board in forming its opinion to object to the proposed discharge or removal of an employee under Section 635B of the Companies Act, to act judicially or quasi judicially. From a perusal of the section it is apparent that no proposal or opposition has to be considered by the Company Law Board after taking evidence or representation of both sides. Therefore, arriving at its opinion to object or not to object by the Company Law Board is not subjected to objective test. It should be noted that in the case of an administrative decision the person charged with the duty of reaching a decision is under no obligation to consider submissions or arguments or any evidence. The sole standard which is applicable to his decision is the standard of expediency. Thus, the Company Law Board has no procedural obligation as to forming its opinion under Section 635B. (See Franklin v. Minister of Town and Country Planning , [1947] 2 All E.R. 289. Patterson v. District Commissioner of Accra , [1948] A.C. 341, 350 R. v. Archbishop of Canterbury, [1944] 1 All E.R. 179 Radheshyam v. State of M.P., : [1959]1SCR1440

17. In the case of Hubli Electricity Co. Ltd. v. Province of Bombay . Section 4(1) of the Indian Electricity Act, 1910, came up for construction. The said section provided as follows :

' The Provincial Government may, if in its opinion, the public interest so requires, revoke a license, in any of the following cases, namely :--(a) where the licensee in the opinion of the Provincial Government makes wilful and unreasonably prolonged default........................'

18. It was held by the Privy Council that there was nothing in the said section to suggest that the opinion of the Government could be subjected to objective test:

' In terms the relevant matter is the opinion of the Government--not the grounds on which the opinion is based. The language leaves no room for the relevance of a judicial examination as to the sufficiency of the grounds on which Government acted in forming an opinion.'

19. It has been held that where a local authority makes an order granting local aid that is merely exercise of administrative act or making an administrative decision. (See R. v. Manchester Legal Aid Committee, [1952] 1 All E.R. 480), Similarly, a licensing authority issuing a licence, for an ordinary profession or business. (See R. v. London County Council, [1931] 2 K.B. 215 R. v. Bath Licensing Justices, [19521 2 All E.R. 700). See also in this connection the case of Labour Relations Board v. John East Iron Works, [1949] A.C. 134. Under Section 10(1) of the Industrial Disputes Act (14 of 1947) the Government may ' if any industrial dispute exists or is apprehended ' refer the dispute to a tribunal for adjudication. In making a reference under the said section of the said Act the Government does an administrative act although it has to form an opinion as to the factual existence of an industrial dispute. See Newspapers Ltd. v. State Industrial Tribunal, : (1957)IILLJ1SC .

20. In the instant case the right to appeal conferred by Section 635B, Sub-section (3), does not, in my opinion, cast any obligation upon the Company Law Board to act judicially, (see Hanumanbax Agarwalla v. Sub Divisional Officer, Sibsagar, A.I.R, 1952 Assam 115, 118 Lilawati v. State of M.B., A.I.R. 1952 M.B. 105) Nagendra Nath Bora v. Commissioner of Hills Division, : [1958]1SCR1240 . Reference in this connection may also be made to the abovernentioned case of Radheshyam v. State of M.P., : [1959]1SCR1440 .

21. There is, in my opinion, no statutory duty cast upon the Company Law Board under the said section to act judicially in arriving at the aforesaid opinion (see Nakkuda Ali v. Jayaratne, [1951] A.C. 66, 78). The Supreme Court has laid down in the case of Province of Bombay v. K. Advani, : [1950]1SCR621 that a decision would be quasi-judicial only if the obligation to act judicially is laid down in the statute which has established the authority whose decision is in question. In my opinion, the Companies Act, 1956, has not either in the said Section 635B or anywhere else laid down that the Company Law Board in arriving at or forming its opinion under Section 635B of the Companies Act, 1956, is to act judicially.

22. In the case of Sardar Govindrao v. State of Madhya Pradesh, : [1965]1SCR678 it was decided that an order made under Section 5(3) of the C.P. and Berar Revocation of Land Revenue Exemption Act (37 of 1948), the State Government acts in a quasi-judicial manner giving an opportunity to the claimants to state their case in the light of the report of the Deputy Commissioner and, therefore, the State Government must give reasons for the order made under the said section. In the case of Madhya Pradesh Industries Ltd. v. Union of India, 0044/1965 : [1966]1SCR466 it was held that the Central Government exercising powers of revision of orders of State Government under the Mines and Minerals (Regulation and Development) Act and the rules framed thereunder, specially under sections 30 and 13 of the said Act and the Rules framed under Section 13, that is, rule 55 of Mineral Concession Rules, 1960, acts as a judicial tribunal and, as such judicial tribunal, the Central Government must give reasons for its decision. In the case of Jagannath Kashinath Kavalekar v. Union of India, : AIR1967Delhi121 the Central Board of Revenue in an appeal under Section 188 of the Sea Customs Act was exercising the powers of a quasi judicial tribunal and as such it was held in that case that the said Central Board of Revenue was bound to give reasons for its decision in such an appeal.

23. But, in the instant case, as I have already said, the Company Law Board was not bound to form its opinion with regard to a particular proposal for discharge or dismissal of an employee under Section 635B(b)(i) and (ii) either in a judicial or quasi-judicial manner. The Company Law Board under that section is not bound to hear representations or evidence on behalf of the parties in arriving at its opinion. Moreover, the provision that the Company Law Board has to send by post notice of any objection to such proposal for discharge or dismissal within 30 days of the sending of the previous intimation of the action proposed against the employee clearly shows, in my opinion, that the Company Law Board has to form its opinion unilaterally and subjectively.

24. When this appeal was pending before the Company Law Board the parties with the leave of the Company Law Board filed affidavits in support of their respective contentions in the appeal. Such affidavits were filed in support of the appeal as well as in opposition to the said appeal. From the papers which were filed before the Tribunal it is apparent that the employee, R. S. Paul, was of assistance to the Company Law Board in its investigation under Sections 235, 237, 239, 247, 248 and 249 of the Companies Act, 1956. The protection under Section 635B of the Companies Act, 1956, as amended was introduced for preventing obstructions to such investigation under the aforesaid sections of the Companies Act, 1956, by removal of an employee who was or is of assistance to the Company Law Board in such investigation.

25. True, the investigation in the instant case stands stayed but it has not been finally quashed and is only in abeyance. Therefore, the assistance of Mr. R. S. Paul may be necessary to the Company Law Board if and when such investigation is resumed. In view of the aforesaid papers, and specially the affidavit of Manindra Krishna Baner jee filed in the appeal, I am unable to come to the conclusion that the objection to the proposed discharge or dismissal of the said R. S. Paul by the appellant was mala fide. Mala fide has also not been urged by the learned counsel for the appellant as a ground for setting aside the said objection.

26. I have already held that the Company Law Board was entitled to and as a matter of fact formed its aforesaid opinion to object to the proposed dismissal of R. S. Paul subjectively and as such this is an administrative decision. Principle of natural justice is not attracted or applicable to such a decision. This decision, in my view, could only be challenged on the ground of mala fide. In the absence of allegation or proof of mala fide, the decision of the Company Law Board must stand. For the reasons aforesaid, this appeal must fail and is dismissed. No order as to costs.


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