Calcutta High
Court Calcutta High Court
Uniworth Textiles Limited vs Asset
Reconstruction Company ... on 12 September, 2012 Author: Sanjib Banerjee ACO
No. 161 of 2012
APO No. 325 of 2012
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
UNIWORTH TEXTILES LIMITED
-Versus-
ASSET RECONSTRUCTION COMPANY (INDIA) LIMITED
For the Appellant: Mr S. N. Mookerjee, Sr Adv., Mr Debanshu Basak,
Adv.,
Ms Manju Bhuteria, Adv.
For the Respondent: Mr S. P. Sarkar, Sr Adv., Ms Tirtha Dey, Adv.,
Ms Suruchi Agarwal, Adv.
Hearing concluded on: September 6, 2012.
BEFORE
The Hon'ble Justice SANJIB BANERJEE Date: September
12, 2012.
SANJIB BANERJEE, J. : -
The authority of the Company Law Board (CLB)
to receive a stand-alone petition under Section 247(1A) of the Companies Act,
1956 has been called into question in this appeal under Section 10F of the Act.
Indeed, the interpretation hinges on the purport of the expression "in the
course of any proceedings before it" that appears in the relevant
provision. The CLB is of the opinion in the judgment and order impugned dated
May 29, 2012 that in the absence of the word "other" before the word
"proceedings" in the relevant expression, an independent petition
under Section 247(1A) may be carried before it for an order of investigation
thereunder.
Though the
facts are almost irrelevant in the quest for an answer to the pristine legal
issue, it may only be noticed that the petitioner before the CLB claimed to be
a creditor of the appellant company and alleged that the business of the
appellant company was being conducted to defraud the creditors of the company
and such conduct warranted an investigation to discover "the true and
actual persons behind the ... company" since "its control and its
policies" were not known and "corporate cross-holdings" were in
place to conceal the identities of those who were able to control or materially
influence the policy of the company. The opinion of the CLB was rendered on an
application in the nature of demurer filed by the company.
Uniworth
Textiles Limited vs Asset Reconstruction Company ... on 12 September, 2012
The respondent's petition before the CLB
referred, in its cause- title, to both Section 247 and Section 237(b) of the
Act and summarised the purport of the application in the following words:
"Petition under Sec 247 alongwith Sec
237(b) of the Companies Act for investigation of ownership of the Respondent
Company as well as appointment of inspectors to investigate the affairs of the
company."
The reliefs claimed by the respondent in its
petition before the CLB were: "(a) to appoint inspectors to investigate
the ownership of the Respondent Company to see who are really in control of the
Respondent Company,
(b)
to order investigation by the
Central Government into the affairs of the Respondent-companies and their
promoter directors,
(c)
to freeze and/or maintain the
accounts of the Respondent Company, (d) to make the present Board defunct and
appoint neutral directors and (e) pass such order and further orders, as this
Hon'ble Board may deem fit and proper in the facts and circumstances of the
present case."
It is necessary, at the outset, to refer to the provisions invoked
by the respondent before the CLB:
"237. Investigation of company's affairs
in other cases.-Without prejudice to its powers under section 235, the Central
Government -
(a)
shall appoint one ore more
competent persons as inspectors to investigate the affairs of a company and to
report thereon in such manner as the Central Government may direct, if-
(i)
the company, by special
resolution; or
(ii)
the Court, by order,
declares that the affairs of the company
ought to be investigated by an inspector appointed by the Central Government;
and
(b)
may do so if, in the opinion of
the Company Law Board, there are circumstances suggesting-
(i) that the business of the company is being conducted with intent to
defraud its creditors, members or any other persons, or otherwise for a
fraudulent or unlawful purpose, or in a manner oppressive of any of its
members, or that the company was formed for any
fraudulent or
unlawful purpose;
(ii)
that persons concerned in the
formation of the company or the management of its affairs have in connection
therewith been guilty of fraud, misfeasance or other
misconduct towards the company or towards any of its members; or
Uniworth Textiles Limited vs
Asset Reconstruction Company ... on 12 September, 2012
(iii)
that the members of the company
have not been given all the information with respect to its affairs which they
might reasonably expect, including information relating
to the
calculation of the commission payable to a
managing or
other director or the manager of the
company."
"247.
Investigation of ownership of company.- (1) ...
(1A) Without prejudice to its powers under this section, the Central
Government shall appoint one or more inspectors under sub-section (1), if the
Company Law Board, in the course of any proceedings before it, declares by an
order that the affairs of the company ought to be investigated as regards the
membership of the company and other matters relating to the company, for the
purpose of determining the true persons-
(a) who are or have been financially interested in the success or
failure, whether real or apparent, of the company; or
(b)
who are or have been able to
control or materially to influence the policy of the company.
(2) ...
The appellant shows that Sections 235 to 251
of the Act have been clustered in a separate segment entitled
"Investigation." The appellant advocates that the scope of the
provisions in such segment should be contextually interpreted. The appellant
submits that the powers conferred under these sections bunched together in the
statute at the end of the general provisions relating to the management and
administration of companies should be seen as a whole and no part thereof, or a
sub-section or clause from any section, be seen in isolation. The appellant
says that the nature of the petition carried by the respondent to the CLB and
the purport thereof have to be seen not in the light of the provisions invoked
at its head but by the spirit of the orders sought in its tail. The appellant
contends that notwithstanding Section 237(b) of the Act having been referred to
atop the respondent's petition, if the prayers made therein did not conform to
such provision, the mere reference to Section 237(b) of the Act would not make
such provision applicable to the matter. If then, the appellant submits, the
petition has to be regarded as one made only under Section 247(1A) of the Act,
it would be incompetent since the expression "in the course of any
proceedings before it" appearing in the relevant provision indicates to
the authority thereunder being exercised in any pending proceedings, whether
suo motu or upon an application by a party thereto, and the power thereunder
cannot be invoked by way of any stand-alone, independent petition which is
unconnected to any proceedings pending before the CLB.
In the alternative, the appellant argues, that the word
"proceedings" in Section 247(1A) of the Act would imply judicial
proceedings and not administrative matters; and, the power exercised under
Section 237(b) is purely administrative in nature. This alternative argument is
made upon the appellant's acceptance, without prejudice, that the respondent's
petition before the CLB may be seen to have been made both under Section 237(b)
and under Section 247(1A) of the Act. In other words, the appellant's
submission is that even if the respondent's petition before the CLB were
considered to have been made under Section 237(b) of the Act and Section
247(1A) invoked incidentally, that would be impermissible as the exercise of
the power to direct an investigation under Section 247(1A) would be in course
of judicial proceedings and not in course of any administrative matter.
In support of the argument that the authority
available under Section 237(b) of the Act is administrative in nature, the
appellant first refers to a Constitution Bench judgment reported at (1966)
Supp. SCR 311 (Barium Chemicals Ltd v.
Company Law Board). Paragraph 10 of the minority
view has been placed for the proposition that the discretion conferred by
Section 237(b) of the Act to order an investigation "is administrative and
not judicial since its exercise one way or the other does not affect the rights
of a company nor does it lead to any serious consequences as, for instance,
hampering the business of the company." Another judgment reported at
(1969) 1 SCC (Rohtas Industries Ltd v. S.D.
Agarwal) has next been cited. Paragraph 3 of the
concurring opinion is relied on for the observation therein that "Section
237(b) confers an administrative and not a judicial power ..." It may do
well to remember that prior to the 1988 Amendment to the Act (with effect from
May 31, 1991), Section 237(b) of the Act commanded the Central Government to
appoint inspectors to investigate into the affairs of a company in certain
cases; and, gave a discretion to the Central Government to cause such
investigation in other cases and no appeal lay from the Central Government's
direction for investigation.
A judgment reported at (1979) 4 SCC 729 (Mool
Chand Gupta v. Jagannath Gupta) has been placed by the appellant on the scope
of the powers under Sections 235 and 237 of the Act as they stood prior to the
said Amendment. A Division Bench judgment of the Madras High Court reported at
AIR 1962 Mad 163 (NPSN Ramiah Nadar v. NKRK Amirtharaj) has been relied on by
the appellant to demonstrate that an order under Section 237 of the Act was not
appellable, but that matter pertained to an order of court under Section 237(a)
of the Act. The appellant has referred to Section 10F of the Act to suggest
that such provision recognises the right of appeal of any person aggrieved by
any decision or order of the CLB. The appellant says that the expression
"decision or order" in Section 10F of the Act implies that the
decision embodying the outcome of any adjudicatory proceedings or the outcome
of any proceedings bearing a judicial flavour would only be appellable; and, in
the appeal provision not recognising merely an opinion rendered by the CLB
being capable of carried in appeal, it is plain to see that the exercise of the
jurisdiction by the CLB under Section 237(b) of the Act is not regarded to be a
function with any judicial tinge to it.
The appellant has placed a recent judgment of a Single Bench of this
court reported at 133 Comp. Cas 515 (Gouri Shankar Kayan v. East India
Investment Co. Pvt. Ltd). Paragraph 35 of the report sets out the essential
ingredients of Section 247(1A) of the Act, but does not spell out in so many
words that the power thereunder may only be exercised by the CLB in course of
some pending proceedings before the CLB and not invoked independently:
"The essential ingredients of sub-section (1A) of section 247 of the
Companies Act are : (i) there should be proceedings before the Company Law
Board; (ii) in course of those proceedings, the Company Law Board should form
an opinion that the "true persons" who are or have been financially
interested in the success or failure of the company, are different from the
persons who appear to be the members of the company; (iii) the "true
persons" who are or have been able to control or materially influence the
policy of the company, are different from the persons who appear to be in the
control of the company; and
(iv)
a probe into the company's
affairs is desirable in the interest of the company itself, and/or in public
interest."
The appellant has also relied on a judgment
of the CLB reported at 145 Comp Cas 44 (Rasoi Limited v. Jaideep Halwasiya).
The appellant says that though the view expressed in the Rasoi Limited case may
be completely disregarded by this court, it would do well to see what the CLB,
the quasi-judicial body empowered to exercise authority under Section 247 (1A)
of the Act, opined on the scope of the provision. There is a further undertone
to the appellant citing the decision as it says that such previous view of the
CLB should have persuaded the CLB to not depart from it in the impugned
judgment without finding it to be contrary to any dictum of a superior forum.
It does not, however, appear that Rasoi Limited was cited before the CLB in
course of the matter from which the present appeal arises and, in any event, in
the CLB's reliance in the impugned judgment on a Bombay High Court judgment
referred to later herein it is implicit that the view perceived to be taken in
Rasoi Limited was found to run contrary to the opinion expressed by the Bombay
High Court. In Rasoi Limited, the petitioner before the CLB had earlier filed a
petition under Section 111A of the Act seeking the rectification of the
register of members of a listed company on the ground that some of the
respondent members had acted in concert in acquiring shares in the relevant
company in violation of the provisions of the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The
subsequent plea was not carried only on the strength of Section 247(1A) of the
Act, but Section 250 thereof was also invoked. The CLB held, at paragraph 15 of
the report, that an investigation under Section 247(1A) was not an end in
itself but only the means for further action. The CLB did not expressly hold in
that case that an independent petition under Section 247(1A) was not
maintainable; its reasoning reflects that it declined to receive the subsequent
petition on the ground that wide inquisitorial powers had been vested in the
CLB under Section 111A of the Act and, in such circumstances, there was no
basis for invoking Section 247(1A) thereof. The other ground that weighed with
the CLB has more to do with the scope of Section 250 of the Act and is not
germane for the present purpose.
The more engaging submission on behalf of the
appellant is in its interpretation of the expression "in the course of any
proceedings before it" as it appears in Section 247(1A) of the Act. The
appellant says that the CLB fell into error in interpreting such expression on
the basis of the related provisions in the statute, not for the purpose of
deciphering the context of the authority conferred under Section 247(1A) of the
Act, but to ascertain the literal meaning of the expression with reference to
dissimilar expressions and situations.
The respondent has charted an altogether
different route to justify the CLB view from what is evident from the impugned
judgment itself. The respondent emphasises on the word "any" in the
relevant expression and cites the golden canon of statutory interpretation:
that the court may not add to or subtract from the literal meaning of the words
in the statute unless it leads to an absurd interpretation. The respondent
refers, in such context, to a judgment reported at (1975) AC 373 (Maunsell v.
Olins) and places a passage from the minority view therein which has been
lauded in subsequent authoritative texts on statutory interpretation. The
passage appears at page 391 of the report: "This "golden" canon
of construction has been so frequently and authoritatively stated that further
citation would be otiose. It is sometimes put that, in statutes dealing with
ordinary people in their everyday lives, the language is presumed to be used in
its primary ordinary sense, unless this stultifies the purpose of the statute,
or otherwise produces some injustice, absurdity, anomaly or contradiction, in
which case some secondary ordinary sense may be preferred, so as to obviate the
injustice, absurdity, anomaly or contradiction, or fulfil the purpose of the
statute: while, in statutes dealing with technical matters, words which are
capable of both bearing an ordinary meaning and being terms of art in the
technical matter of the legislation will presumptively bear their primary
meaning as such terms of art (or, if they must necessarily be modified, some
secondary meaning as terms of art)."
In Cross' Statutory Interpretation (2nd Ed, 1987), which the
respondent has cited, the author has quoted from several well known judgments
in the context of assessing the common legal phrase "intention of the
legislature." From the celebrated judgment in company jurisprudence of
Saloman v. Saloman and Co. Ltd [(1897) AC 22], where the phrase was noticed to
be common but slippery "which, popularly understood, may signify anything
from intention embodied in positive enactment to speculative opinion as to what
the legislature probably would have meant, although there has been an omission
to enact it" to Black- Clawson International Ltd v. Papierwerke
Waldhof-Aschaffenburg AG [(1975) AC 591], which said that the expression was
not quite accurate since it implied the attempt by judges only to seek the
meaning of the words which the legislature used ("We are seeking not what
Parliament meant but the true meaning of what they said."), the author
infers that there are three principal situations in which people in general and
judges in particular speak of the intention of the legislature. The following
passage, from pages 25-26 of the text, is instructive: "In the first
place, whenever the meaning of specific words is under consideration, the idea
that a particular meaning is that which would or would not have been attached
to a word or phrase by the average member of Parliament, sitting at the time
when the statue was passed, may be expressed or refuted by some such statement
as 'that is (or is not) what Parliament intended by those words'. Second, when
the consequences of a particular construction are under consideration, the idea
that a particular consequence might well have been in the mind of the average
member of Parliament is often expressed by some such statement as 'that was
likely (or unlikely) to have been the intention of Parliament'. Finally,
although it is impossible to identify the individual members whose purpose it
was, it is common to speak of the purpose, aim or object of a statute as the
intention of Parliament."
The respondent emphasises that the words used
in a statute cannot be ignored or the meaning of the statutory language
strained to prevent an injustice, or supposed injustice, in perceiving that
what has actually been said by the legislature is not what was intended to be
said. The respondent proclaims that the preponderant view in statutory
interpretation is that when a question arises whether the legislature did or
did not intend a particular result, the intention of the legislature has to be
seen as what the statutory words mean to the normal speaker of the language;
and, the fact that a Judge feels confident that, had the situation before him
been put to the members of the relevant legislature they would have voted for a
different meaning or for additional words, is immaterial. The respondent quotes
from elsewhere in the aforesaid text to emphasise that the statutory words are
of paramount importance.
It is in such vein that the respondent stresses on the word "any"
as it appears in the relevant expression in Section 247(1A) of the Act to
assert that such word would cover all proceedings, including any matter brought
solely for the purpose of invoking that provision. The respondent has referred
to a Full Bench judgment reported at AIR 1959 AP 413 (B. Veeraswamy v. State of
Andhra Pradesh) for the interpretation of the word "any" in the
context of whether a State Government could authorise a regional transport
officer to exercise the powers and discharge the functions of the state
transport authority under certain provisions of the Motor Vehicles Act, 1939.
The Full Bench held that the word "any" excluded limitation or
qualification. In that case the word "any" figured in the expression
"any officer subordinate" and the judges disagreed with the
interpretation of a Madras Full Bench that the word "subordinate" in
the relevant provision should be understood in the sense of statutory
subordination since, according to them, the word "any" connoted wide
generality.
The respondent has carried a more recent
judgment reported at (2002) 4 SCC 297 (Grasim
Industries Ltd v. Collector of Customs) for the
opinion therein, at paragraph 10 of the report, that no word or expression used
in a statute can be seen to be redundant or superfluous. It is of some
significance that in the following sentences in the passage placed by the
respondent, the court said, in the context of its observation that every
statute was an edict of the legislature, that in matters of interpretation one
should not concentrate too much on one word and pay too little attention to
another; and, that no provision and no word may be construed in isolation as
every provision and every word ought to be looked at generally and in the
context in which it has been used. The Supreme Court observed that the
"elementary principle of interpreting any word while considering a
statute" should be "to gather the mens or sententia legis of the
legislature."
The respondent has also referred to a
Constitution Bench judgment reported at (1975) 2 SCC 791 (Carew and Company Ltd v. Union of India). In a concurring judgment founded on a different strand of reasoning,
it was observed that if the language in a statute could be construed widely so
as to salvage the remedial intendment, the court must adopt it. Despite such
opinion cautioning that if the language of the statute did not admit of the
construction sought and wishful thinking was no substitute, it went on to
emphasise that when two interpretations were feasible, that which advanced the
remedy and suppressed the evil, as the legislature envisioned, ought to find
favour with the court. Such view was expressed after noticing the role of a
judge in the priceless words of Benjamin Cardozo:
"The Judge, even when he is free, is
still not wholly free. He is not to innovate at pleasure. He is not a
knight-errant roaming at will in pursuit of his own ideal of beauty or of
goodness. He is to draw his inspiration from consecrated principles. He is not
to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to
exercise a discretion informed by tradition, methodized by analogy, disciplined
by system, and subordinated to 'the primordial necessity of order in the social
life.' Wide enough in all conscience is the field of discretion that
remains."
(Benjamin
Cardozo: The Nature of the Judicial Process; 1921)
The respondent criticises the appellant's
approach as hyper-technical in the appellant's assertion that notwithstanding
Section 237(b) of the Act having been referred to at the head of the petition
before the CLB and regardless of the averments indicating the invocation of
such provision in the body thereof, it is the narrowness of the words used in
the prayer at the tail which ought only to be looked at to ascertain whether the
provision had at all been summoned. The respondent submits that the prayers in
the petition were capable of being tweaked at a subsequent stage to make them
conform to Section 237(b) of the Act, if it were found that in their original
form they did not; or, in the alternative, the prayers should be read more
charitably to assess whether the essence of invoking such provision was
contained therein. The respondent relies on another Constitution Bench judgment
reported at (2003) 3 SCC 272 (Sardar Amarjit Singh Kalra v. Pramod Gupta) in
its reiteration that procedure has always been viewed as the handmaid of
justice and not meant to hamper the cause of justice or sanctify miscarriage of
justice.
Though the respondent has not specifically
referred to the precedents on the related provisions of the statute referred to
in the impugned judgment, the appellant has sought to distinguish them. The CLB
judgment reported at 86 Comp. Cas 291 (Alaknanda Manufacturing and Finance Pvt.
Ltd v. Bahubali Services Ltd) has been referred to in the impugned judgment
only for the purpose of relying on the notes on clauses to the Bill that
culminated in the Companies (Amendment) Act, 1988 by which sub-section (1A) was
introduced in Section 247 of the Act with effect from May 31, 1991. But the
impugned judgment failed to recognise the import of the following passage in
the concluding paragraph of Alaknanda Manufacturing:
"... The wording in section 247(1A)
"in the course of any proceedings before it" makes it clear that the
declaration be made by the Company Law Board can be only during a proceeding
and not at the end of proceedings. Thus, if the main proceeding is concluded,
nothing survives and powers under section 247(1A) cannot be invoked by the
Company Law Board divorced of any proceeding before the Company Law Board
The impugned judgment has also referred to
another CLB judgment reported at 88 Comp. Cas 838 (Padma Taparia v. Assam Brook
Ltd) where Section 247(1A) of the Act was invoked in a complaint lodged before
the CLB under Section 250(1) of the Act. The CLB held in Padma Taparia that
independent proceedings could be received by it under Section 250(1) of the Act
and, in such light, proceeded to consider how the powers under Section 247(1A)
could be exercised. It concluded on facts that the circumstances necessary for
ordering an investigation under Section 247(1A) were absent in that case.
Again, in the impugned judgment, such aspect of the Padma Taparia decision
appears to have been overlooked.
Considerable weightage has, however, been attached in the impugned
judgment to a Single Judge decision of the Bombay High Court reported at 95
Comp. Cas 28 (Bakhtawar Construction Co. P Ltd v. Blossom Breweries Ltd) which
did not involve any consideration of Section 247(1A) of the Act and dwelt on
the meaning of the expression "in any proceedings before it" as it
appeared in Section 248 of the Act prior to the omission of such provision in
the year 2000. For a first, the CLB fell into error in the impugned judgment in
reading the expression "in any proceedings before it" in the then
surviving Section 248(1) of the Act as carrying the same meaning as the
expression "in the course of any proceedings before it" as it appears
in Section 247(1A) of the statute. Second, the authority of the CLB to declare
that the affairs of a company ought to be investigated into, and the
consequential obligation of the Central Government to appoint inspectors to
investigate into and report on the membership of the concerned company and
other matters relating to such company, were introduced by the insertion of
sub- section (1A) in Section 247 of the Act by the Companies (Amendment) Act,
1988 which also inserted the words "or to the Company Law Board in any
proceedings before it," in sub-section (1) of the existing Section 248 of
the Act. It may be out of place in the present context to assess the
correctness of the Bombay view, both because Section 248(1) of the Act is not
relevant in this case and it would be a futile exercise to posthumously
interpret an omitted provision. But so much must be seen: the amendment
introduced in 1988 used different expressions in the insertions introduced to
two consecutive sections of the Act. That, by itself may have had a story to
tell.
It is now necessary to see the several sections
bunched under the heading "Investigation" appearing in the first
chapter entitled "General Provisions" in Part VI of the Act that
covers management and administration of companies. Section 235 confers
discretionary powers on the Central Government to cause the affairs of a
company to be investigated into by an inspector or inspectors upon either the
receipt of a report from a registrar of companies under certain limbs of
Section 234 of the Act or an application by the specified number of members of
the concerned company. Section 236 is incidental to Section 235(2) of the Act
and could, ideally, have been incorporated in Section 235 either by way of a
proviso or as an additional sub-section. Section 237 of the Act, in its first
limb, obliges the Central Government to declare that the affairs of a company
ought to be investigated into in some circumstances and gives the Central
Government the discretion to make such declaration if in the opinion of the CLB
there are certain circumstances suggesting fraud, misfeasance or withholding of
information relating to the matters specified. Section 238 of the Act specifies
that no firm or body corporate or other association may be appointed as an
inspector under either relevant preceding provision providing for investigation.
Section 239 of the Act deals with the powers of inspectors to conduct
investigations into the affairs of related companies or persons. Section 240 of
the Act pertains to the production of documents and evidence before the
inspectors. Section 240A authorises the seizure of documents by inspectors.
Section 241 of the Act provides for the inspectors' report. Section 242 of the
Act envisages the prosecution of any person in pursuance of the report under
Section 241. Section 243 of the Act provides for the Central Government
applying for a company to be wound up if it is expedient so to do on the basis
of the inspectors' report. Section 244 of the Act allows the Central Government
to institute proceedings in the name of a company, as a consequence of the
inspectors' report, for the recovery of damages or the recovery of any
property. Section 245 of the Act relates to the expenses of the investigation.
Section 246 of the Act makes the inspectors' report admissible in evidence in
legal proceedings. Section 247 of the Act covers matters warranting
investigation into the ownership of a company. Deleted Section 248 of the Act
pertained to information regarding persons, inter alia, having an interest in a
company. Deleted Section 249 of the Act covered investigation of associateship
with managing agents of companies. Section 250 of the Act records the interim
powers conferred on the CLB in connection with any investigation under Section
247 of the Act on either a reference made to the CLB by the Central Government
or on a complaint made by any person in such regard. Section 250A of the Act
clarifies that an investigation may be initiated or continued notwithstanding
proceedings relating to the concerned company pending under Section 397 or 398
of the Act and despite a special resolution for the voluntary winding-up of
such company. Section 251 of the Act exempts legal advisors and bankers of
companies from being obliged to make disclosures, save the excepted matters, in
course of an investigation. That completes the full complement of the bouquet
of sections under the heading "Investigation."
The expression "in the course of any
proceedings before it" would, loosely, imply "during any
proceedings". If Section 247(1A) is read as giving the CLB unfettered
authority in all circumstances to declare by an order that the affairs of a
company ought to be investigated as regards the matters specified in such
provision, it would result in the expression "in course of any proceedings
before it" being rendered otiose. That would be impermissible by any rule
of construction. The expression "in course of", according to the
respondent, would cover the entire lifetime of the proceedings from its
inception to its conclusion and would admit of a situation where proceedings
are launched solely for the purpose of invoking Section 247(1A) of the Act. But
the expressions "in course of" and "in the course of" would
generally imply "concurrently with an activity or event." The
expression "in the course of any proceedings before it", in the context
of its use in Section 247(1A) of the Act, has to be seen to limiting the time
or the circumstances when the authority conferred thereunder may be exercised;
or else, it would be meaningless since if the opinion thereunder could be
rendered at any stage, the operative words in the sub-section would have read
"if the Company Law Board declares by an order that the affairs of the
company ought to be investigated ..." Though it may not be necessary, now
that Section 248 has been omitted from the Act, the fundamental distinction
between Sections 247 and 248 of the Act as they stood side by side cannot be
missed. Section 248 dealt with information, Section 247 provides for
investigation. While the collection of the information under Section 248 of the
Act may have been an end by itself, the conduct of the investigation,
considering the gravity of the matters covered by Section 247 of the Act, has
necessarily to be in aid of something else. Jurisprudentially, the authority to
call for information and the authority to require the conduct of an
investigation cannot be treated on an equal footing. The right to seek
information by any person ought to be seen to have been completely exercised
upon the information being obtained; the right to have an investigation conducted
is but a step in a larger scheme of things. Seen in such light, the authority
to direct an investigation being conducted cannot be exercised if there is no
sequitur to it. It would follow then that any independent petition seeking
investigation into the matters specified in Section 247(1A) of the Act would be
impermissible if the matters thrown up upon the investigation being conducted
cannot be dealt with. Section 247(1A) does not indicate how the report upon the
investigation ought to be followed up. The absence of such authority would tend
to show that a direction to conduct the investigation cannot rationally be made
at the conclusion of any proceedings. If the larger exercise contemplated by
Section 247(1A) of the Act is not brought to its logical conclusion merely upon
a direction for the conduct of an investigation thereunder being issued, a
petition seeking only an investigation under Section 247(1A) of the Act would
not be maintainable. If, however, there are other proceedings pending before
the CLB, an application under Section 247(1A) of the Act would be permissible
by such person as the CLB may consider desirable in the context of the pending
proceedings; for, the report of the investigation may be dealt with, to the
extent relevant, in the pending proceedings.
The authority under Section 247(1A) of the Act can, doubtless, be
exercised suo motu by the CLB. But the caveat that the expression "in the
course of any proceedings before it" introduces in the provision, mandates
that the suo motu authority be exercised only during the pendency of any
proceedings before the CLB. If the appropriate interpretation of Section
247(1A) of the Act is that the authority to direct an investigation thereunder
may be exercised by the CLB suo motu or at the instance of any other person, in
the absence of any express provision making a distinction between the two
situations, the expression "in the course of the proceedings before
it" would apply to either; and, as a corollary, it would carry the same
meaning in either case. Though the word "any" in the relevant
expression would exclude any limitation or qualification, such word cannot be
read in isolation of the words "in course of" appearing in the same
cluster of words. The words "in course of" govern the words "any
proceedings" and imply that the nature of the proceedings would be
irrelevant as long as the authority is invoked or exercised in course of such
proceedings. The extent of exercise of the authority will, however, be guided
by the nature of the pending proceedings.
Though the words of a statute have generally
to be understood to convey the meaning that they would bear in their ordinary
sense, literal construction and contextual construction may not be seen to be
mutually exclusive. A word or an expression has to be seen against the backdrop
of the company that it keeps. If a word or an expression is capable of several
sets of meaning in its literal import, the one best suited to the context would
be the most acceptable. But a word or an expression in a statute cannot be
given a meaning that it would ordinarily not bear only by referring to the
context and the perception of what it ought to have implied. Language is, at
best, an imprecise form of communication which is even more inexact when in
cold print. The spoken word has the advantage of the accompanying tone or
gesture to convey a more specific meaning of that which is being communicated.
The interpretation of that which is communicated in writing should lend more
towards how it is capable of being understood rather than how it was intended
to be perceived. The true meaning of a written word is as it ought to appear to
a reasonable reader. The fundamental tenets of statutory interpretation
recognise the gulf between the words in a statute and the varied understanding
thereof and attempt to bridge the gap.
There are lesser reasons for discerning that
Section 247(1A) of the Act does not contemplate a stand-alone petition for
invoking the authority prescribed thereunder. In several provisions, or clusters
of provisions, in the Act which are capable of being directly invoked without
reference to any other, the circumstances giving the right to apply thereunder
are generally specified. For instance, Section 433 of the Act may be invoked by
such classes of persons as recognised in Section 439 thereof; Sections 397 and
398 of the Act may be cited by such persons mandated to apply thereunder by
Section 399 of the Act; Sections 111 and 111A of the Act may be taken recourse
to by the persons specified therein; and, the related provision permitting
investigation of the affairs of a company under Section 235 of the Act may be
summoned before the CLB by the classes of persons enumerated in such section.
In this context, the seemingly concurrent jurisdiction of the CLB, alongside
that of the Central Government, under Section 237 of the Act has to be seen in
the light of the discretion reserved unto the Central Government
notwithstanding the opinion of the CLB of the circumstances detailed in clause
(b) thereof. Since Section 247(1A) of the Act was not meant to be directly
invoked - or such provision being taken recourse to only for the purpose of an
investigation being directed thereunder - it does specify who may apply
thereunder or who may be heard in course thereof. In the absence of the
guidelines in the provision itself as to when and how the authority thereunder
may be invoked or exercised - the two inevitable questions on the bounds of
authority in any judicial or quasi-judicial jurisdiction, where limitlessness may
not be presumed unless expressly specified or by unavoidable implication - the
answers to the questions have necessarily to be found in the expression
"in the course of the proceedings before it" in Section 247(1A). The
clue to when such power may be exercised is in the understanding of the
expression to imply "during any pending proceedings"; which, in turn,
will bring the scope of the pending proceedings into play to provide a key to
how the authority may be exercised. Section 247(1A) of the Act provides for
wide inquisitorial powers being exercised by the CLB. Ordinarily, such a
provision has to be strictly construed and, apart from the fact that it is
undesirable to merely direct an investigation for investigation's sake without
the result of the investigation being dealt with under such provision, the
expression "in the course of the proceedings before it" has to be
seen in proper perspective as a check on the otherwise unbridled authority
thereunder.
The character of any pleadings has to be
assessed on the basis of what it seeks or what it professes to achieve.
Notwithstanding the reference to section 237(b) at the head of the respondent's
petition before the CLB and the general averments in the body thereof hinting
at the invocation of Section 237(b) of the Act, since it did not seek any
relief under Section 237(b) of the Act, the prayer in the tail has per force to
be seen as the only guide to the purpose of the petition. The order sought were
only in furtherance of the investigation under Section 247(1A) of the Act. That
is not to suggest that Section 247(1A) of the Act could have been invoked only
on the strength of a prayer under Section 237(b) of the Act being carried in
the same petition, but that is an altogether different matter.
The appeal and the application, APO No. 325
of 2012 and ACO No. 161 of 2012, are allowed; the judgment and order impugned
dated May 29, 2012 is set aside; and, CP No. 3 of 2010 instituted by the
respondent before the CLB is dismissed as not maintainable. Since it does not
appear that the respondent's endeavour to invoke the authority of the CLB was
ignoble, there will be no order as to costs.
Urgent certified photocopies of this judgment, if applied for, be
supplied to the parties subject to compliance with all requisite formalities.
(Sanjib
Banerjee, J.)
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