P.B. Mukharji, J.
1. This is an application by the Life Insurance Corporation of India under Sections 397, 398, 399 and 402 and 403 of the Companies Act, 1956, for an order that the Special Officer already appointed hereunder may be authorised to enter into an arrangement with the State Bank of India by which all the accounts now standing in the name of Richardson and Cruddas Ltd., may be consolidated into one account and to operate the said account or any other account that may be opened in the said Bank either himself or through a person or persons duly authorised and to execute all documents necessary for confirming the existing mortgage, hypothecation agreement and cash credit agreement with the said Bank and also to execute such other supplemental documents for the purpose of giving effect to the agreement by which the Government of India will guarantee the indebtedness of Richardson and Cruddas Ltd. to the said Bank to the extent of Rs. 95,00,000/-. There can be no objection to that order being made and I am making an order accordingly.
2. The next order that this application seeks is that in case of a dispute between the State Bank and the Special Officer regarding the form of the document or documents to be executed by the Special Officer, the Special Officer may be authorised to have the necessary document or documents settled by the Advocate General of West Bengal and to pay his fees out of the assets of the Company. To this order also there can be no objection and I am making an order accordingly.
3. The next order sought by this application is that the Special Officer may be authorised to constitute an Advisory Board.
4. Now the powers of the Court under Section 402 of the Companies Act are wide. In fact, the Court may make any order for the regulation of the conduct of the Company's affairs upon such terms and conditions as may, in the opinion of the Court, be just and equitable in all the circumstances of the case. Constitution of an Advisory Board by orders of Court in a proper case of Company management is therefore in my view within the competence of the Court under Section 402 of the Companies Act, 1956. The next question is to consider whether this is a proper case where an Advisory Board is useful. The Special Officer's appointment was confirmed by this Court on the 23rd April, 1958, In making that order, I directed the Special Officer to take charge of the affairs of the Company and manage the same and I removed all the members of the then Board of Directors and Managing Agents of the Company Richardson and Cruddas Ltd. on the ground of serious mismanagement. I did not make the order for winding up the Company because I thought that the Company was engaged in essential industries necessary for the implementation of the Second Five Years Plan for the country.
5. Since the appointment of the Special Officer attempts are being made by him to put the Company's administration on a sound basis. The Corporation now makes the application to have a Board of Advisors to assist the Special Officer of this Court in regulating and managing the Company's affairs and its business. The pattern of Court's powers of managing under Section 402 has to be worked out. The section is an innovation in Company administration by the Court. Having heard the learned Advocate General for the applicant on the point and other learned counsel appearing for the respondents, I venture to lay down a scheme which I hope will not only be useful for the purpose of the present case but also serve as a basis in appropriate cases.
6. I, therefore constitute in the best interest of the Company, a Board of Advisors on the following terms and conditions:
(1) There will be a Board of Advisors to assist the Special Officer, in managing the business of the Company by tendering advise in the manner and on the subjects specified, hereinafter.
(2) The Board of Advisors will consist of the following members:
(a) A representative of Messrs. Hindusthan: Steel (Private) Ltd.
(b) A representative of the Railway Board.
(c) A representative of the Ministry of Commerce and Industry, Government of India.
(d) A representative of the State Bank of India. The constitution of the Advisory Board follows the principle of associating institutions interested in the well-being and work of the Company.
I have, therefore, included the representatives of the major customers of the Company like Hindu-than Steel (Private) Ltd. and Railway. Board. They are in fact the biggest customers of the Company and the Hindusthan Steel (Private) Ltd. has advanced Rupees ten lakhs in order to enable the Company to execute its orders. I have included in the Board of Advisors a representative o the Ministry of Commerce and Industry as being the relative Ministry concerned with the industry of the Company and representative of the State Bank of India, which is concerned with the finances of the Company. I do not think there should be any representation from the share-holders having regard to the fact that the Board of Directors who are the representatives of the share-holders have already been removed on the ground of mismanagement. To represent the share-holders in the Board of Advisers will be to introduce the Directors again through the back door. It is also a fact that the shareholders are divided into factious cliques whose representation in the Board of Advisers will in the particular facts of this case be neither practicable nor desirable.
(3) The Board of Advisors may be called upon by the Special Officer to advise him on any matter relating to:
(i) Acceptance and execution of orders and their priorities.
(ii) Purchase of steel and other materials and their supply and stock.
(iii) Imports, exports and foreign exchange, and finance.
(iv) Margin of profit for a job or a contract.
(4) The Special Officer will be at liberty to seek advice from the Board of Advisors on any such subject as aforesaid provided he seeks the advice in writing on any of the specific points relating thereto. In seeking such advice, the Special officer may call a meeting of the entire Board of Advisors or may seek individual advice from the individual Advisors who may be concerned with any particular subject as within his particular competence, provided that any advice tendered by the Board of Advisors as such or by any individual adviser or advisors of such Board is always given in writing to the Special Officer on the specific point or points on which the advice is sought by the Special Officer.
(5) The Special Officer shall not be bound to act according to any advice that may be sought from and tendered by the Board of Advisers or any one or more Advisers as the case may be. The Special Officer will alone remain responsible to this Court for the conduct, regulation and administration of the Company notwithstanding the presence of the Board of Advisors or their advice.
(6) I, therefore, make an order constituting an Advisory Board on the terms and conditions set out above.
7. The other orders sought by the Special Officer on this summons is more or less administrative and there appears to be no objection to such orders. I, therefore, make an order in terms of Clause (d) that the remuneration will be Rs. 1,500/-per month and actual travelling expenses and hotel expenses, not exceeding Rs. 50/- per day, if incurred, from the 1st of August, 1958 and also Clause (e) of the summons.
8. The applicant and the Company will get their costs out of the assets. The State Bank will add its costs to its claim.
9. Certified for Counsel.