Madras High Court
Church Of South India Trust ... vs The Union Of India on 1 February, 2021
W.A.Nos.1003 & 1324 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on : 26.11.2021
Delivered on : 14.12.2021
CORAM :
THE HONOURABLE MR. JUSTICE PARESH UPADHYAY
AND
THE HONOURABLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
W.A.Nos.1003 and 1324 of 2021
and C.M.P.Nos. 6296,7651 and 18875 of 2021
W.A.No.1003 of 2021
Church of South India Trust Association
Rep. By its Honorary Treasurer
Mr.C.Robert Bruce,
5, Whites Road, Royapettah,
Chennai- 600 014. .. Appellant
vs
1.The Union of India
Rep. By the Secretary to Government,
Ministry of Corporate Affairs,
New Delhi – 110 001.
2.The Regional Director
Office of the Regional Director
Southern Region, Chennai.
Ministry of Corporate Affairs,
Government of India,
5th Floor, A Wing, Shastri Bhavan,
26, Haddows Road,
Chennai – 600 006.
3.The Registrar
Office of the Registrar of Companies,
Tamil Nadu, Chennai
Shastri Bhavan, 2nd Floor,
26, Haddows Road,
Chennai – 600 006. ..Respondents
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W.A.Nos.1003 & 1324 of 2021
W.A.No.1324 of 2021
David Chellaraj .. Appellant
th
/8 Respondent
vs
1.Church of South India Trust Association
Rep. By its Honorary Treasurer
Mr.C.Robert Bruce,
5, Whites Road, Royapettah,
Chennai- 600 014.
2.The Union of India
Rep. By the Secretary to Government,
Ministry of Corporate Affairs,
New Delhi – 110 001.
3.The Director,
Serious Fraud Investigation Officer,
2nd Floor, Pryavaran Bhavan,
C.G.O. Complex, Lodhi Road,
New Delhi – 110 003.
4.The Regional Director,
Office of the Regional Director,
Southern Region, Chennai,
Ministry of Corporate Affairs,
Government of India,
5th Floor, A Wing,
Shastri Bhavan, Chennai – 600 006.
5.The Registrar
Office of Registrar of Companies,
Tamilnadu, Chennai,
Shastri Bahvan, 2nd Floor,
26, Haddows Road,
Chennai – 600 006.
6.Assistant Registrar of Companies,
Office of Registrar of Companies,
Tamilnadu, Chennai.
Shastri Bhavan, 2nd Floor,
26, Haddows Road, Chennai – 600 006.
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7.Joint Director,
Ministry of Corporate Affairs,
5th Floor, A Wing,
Shastri Bhavan,
Dr.Rajendra Prasad Road,
New Delhi – 110 001.
8.E.Premkumar .. Respondents
Prayer in W.A.No.1003 of 2021: Appeal preferred under Clause 15
of Letters Patent against the common order dated 01.02.2021 in
W.P.No.32587 of 2019.
Prayer in W.A.No.1324 of 2021: Appeal preferred under Clause 15
of Letters Patent against the order passed in W.P.No.25236 of 2018
dated 01.02.2021.
For Appellant : Mr.V.Prakash, Sr. Counsel
for Mr.Adrian D.Rozario
in W.A.No.1003 of 2021
Mr.T.R.K.Kumara Singh
in W.A.No.1324 of 2021
For Respondents : Mr.R.Sankaranarayanan,
Additional Solicitor General of India
assisted by
Mr.Venkataswamy Babu
for R1 to R3 in W.A.No.1003 of 2021
for R2 to R7 in W.A.No.1324 of 2021
Mr.V.Prakash, Sr. Counsel
for Mr.Adrian D.Rozario
for R1 in W.A.No.1324 of 2021
Mr.R.Sreedhar
for R8 in W.A.No.1324 of 2021
and for proposed party
in W.A.No.1003 of 2021.
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COMMON JUDGMENT
(Per: PARESH UPADHYAY, J.)
Both these appeals arise from the common order dated
01.02.2021 recorded on three writ petitions being W.P.Nos. 25236
and 25419 of 2018 and 32587 of 2019.
2. The appellant in W.A.No.1003 of 2021 is the original writ
petitioner of W.P.Nos. 25236 of 2018 and 32587 of 2019 and the
appellant in W.A.No.1324 of 2021 is the 8th respondent in
W.P.No.25236 of 2018 (who was joined as party respondent, on his
impleadment application vide order dated 20.12.2018).
3. While issuing notice on W.A.No.1003 of 2021, this Court
had, on 29.03.2021 passed an order, the relevant part of which
reads as under:-
“ ....
3. The short grievance of the appellant is
that though the order and the action taken by
the Registrar and the Central Government were
quashed by the judgment and order impugned
dated February 2, 2021 (read February
1,2021) on the grounds of breach of the
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principles of natural justice, the final order
passed by the Registrar of Companies has been
directed to be treated as a notice under Section
206 (4) of the Companies Act, 2013 for the
appellant-company to respond thereto. The
appellant says that a final order, which reveals
the conclusions apparently arrived at, cannot be
treated as a show-cause notice. The appellant
also says that the nature of the order is such
that it indicates findings and a closed mind and
the same cannot be appropriately responded to
on behalf of the appellant.
x x x
6. Subject to hearing all parties to the three writ
petitions who were before the Writ Court, the
order impugned may be modified by requiring a
fresh show-cause notice to be issued, whether
under Section 206 (1) or under Section 206 (4)
of the Act of 2013, within a specified time for the
appellant to respond thereto within a time-frame
that may be fixed and for the Registrar and the
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Union being left free to deal with the matter in
accordance with law thereupon.”
4. Heard learned advocates for the respective parties.
5. Learned senior advocate for the appellant (original writ
petitioner Company) has submitted that though the writ court
accepted the grievance of the petitioner Company that the action of
the authorities was illegal, while moulding relief error has crept up
and that needs to be corrected in this appeal. Specific reference is
made to the interim order of this Court dated 29.03.2021. It is
noted that learned senior advocate for the appellant – the original
writ petitioner Company has addressed the Court at length, the
substance of which is as noted in order dated 29.03.2021, the
relevant of which is quoted in para 3 above. Reliance is placed on
the decision of the Supreme Court of India in the case of Oryx
Fisheries Private Limited v Union of India and others reported in
(2010) 13 SCC 427, to point out what parameters need to be met
with while treating some document to be as show-cause notice. It is
submitted by him that the impugned order of learned Single Judge
be quashed and set aside and full relief be granted by allowing the
writ petition intoto.
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6. Learned advocate for the appellant in W.A.No.1324 of
2021, in substance in the cross-appeal has submitted that not only
no interference is required in the impugned order as desired by the
original writ petitioner Company but interference therein is required
to the extent that no relief could have been granted to the writ
petitioner. It is submitted that W.A.No.1324 of 2021 be allowed by
setting aside the order of learned Single Judge by dismissing the
writ petition filed by the Company.
7. Learned Additional Solicitor General for the respondent
authorities (of the Central Government) has extensively taken this
Court through the provisions of law with specific reference to each
sub-section of Sections 206 and also other sections of the Act. It is
submitted that the action(s) of the authorities, were in accordance
with law and in any case, the powers under Section 206(4) are
independent of powers / duties contemplated / flowing from Section
206(1) (2) and (3) of the Act. It is noted that learned Additional
Solicitor General has grouped sub-sections of each section
particularly Section 206 of the Act to contend that no interference is
required in the impugned order. It is submitted that these appeals
be dismissed.
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8. Having heard learned advocates for the respective parties
and having considered the material on record, this Court finds that
the point at issue in these appeals (as noted in order dated
29.03.2021 relevant of which is quoted in para 3 above) is whether,
the inquiry should start from Section 206(4) of the Act as directed
by learned Single Judge or it should start from Section 206(1) of the
Act, as desired by the original petitioner Company and further
whether any fresh notice is required to be issued to the petitioner
Company. For this purpose, it may also be required to examine
whether the investigation / inquiry / scrutiny by the Government /
Registrar, into the affairs of the petitioner Company, on the basis of
the information / material available with it, in the facts of the case,
is sustainable, and if yes, whether the petitioner Company can have
any say, as to its affairs can be inquired into by the authorities
under which Section(s) of the Act.
9.1 The cause of action for the writ petitioner Company was
the action initiated by the Central Government vide its order dated
07.05.2018 under Section 212(1)(a) of the Act. It was based on
the report of the Registrar dated 13.12.2017. Learned Single Judge,
while setting aside the order dated 07.05.2018, has directed that let
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the report dated 13.12.2017 be treated as notice and let the
proceedings start from the stage of Section 206(4) of the Act. The
insistence on behalf of the writ petitioner Company is that, that
inquiry should start from the stage of Section 206(1) of the Act. The
Company can not have any say that, that inquiry should start in
exercise of which power of the concerned authority. Any action that
may be taken by the Government needs to be in accordance with
law, on that point, there can not be any dispute, however the
insistence of the petitioner Company that, that inquiry needs to
start from the stage of Section 206(1) of the Act needs to be
examined vis-a-vis the impugned judgment i.e., whether the
proceedings, if instituted under Section 206(4) of the Act, as
ordered by learned Single Judge, can be said to be illegal or
unjustified in any manner.
9.2 A question may also crop up whether the order of the
Central Government dated 07.05.2018 could be termed to be illegal
in any manner, however, while recording this, it is also noted that
the said order dated 07.05.2018 is already set aside by learned
Single Judge on the ground that it was based on the report of the
Registrar of the Companies dated 13.12.2017, which was in
violation of principles of natural justice. That part of the judgment of
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learned Single Judge (of setting aside order dated 07.05.2018) is
not challenged by the Government / Registrar and to that extent,
the controversy can be said to have been put at rest, at least by the
Government. While recording this, we also note that in W.A.No.1324
of 2021 even that part of the impugned order is challenged,
contending that even that interference should not have been made
by learned Single Judge. That is examined in the latter part of the
judgment, since the Government is not in appeal to that extent.
9.3 In view of the above, it needs to be examined (i) whether
the direction of learned Single Judge to start proceedings against
the petitioner Company from the stage of Section 206(4) of the Act
can be said to be illegal or un-sustainable in any manner and (ii)
whether the report of the Registrar dated 17.12.2017 could be
permitted to be treated as notice under Section 206(4) of the Act by
directing the petitioner Company to respond to it. These aspects
being interconnected, they need to be and are considered together.
10.1 For the above purpose, reference needs to be made to
Section 206 of the Companies Act, which reads as under:-
“(1) Where on a scrutiny of any document
filed by a company or on any information
received by him, the Registrar is of the opinion
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that any further information or explanation or
any further documents relating to the company
is necessary, he may by a written notice require
the company—
(a) to furnish in writing such information or
explanation; or
(b) to produce such documents, within such
reasonable time, as may be specified in the
notice.
(2) On the receipt of a notice under sub-
section (1), it shall be the duty of the company
and of its officers concerned to furnish such
information or explanation to the best of their
knowledge and power and to produce the
documents to the Registrar within the time
specified or extended by the Registrar:
Provided that where such information or
explanation relates to any past period, the
officers who had been in the employment of the
company for such period, if so called upon by
the Registrar through a notice served on them
in writing, shall also furnish such information or
explanation to the best of their knowledge.
(3) If no information or explanation is furnished
to the Registrar within the time specified under
sub-section (1) or if the Registrar on an
examination of the documents furnished is of
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the opinion that the information or explanation
furnished is inadequate or if the Registrar is
satisfied on a scrutiny of the documents
furnished that an unsatisfactory state of affairs
exists in the company and does not disclose a
full and fair statement of the information
required, he may, by another written notice,
call on the company to produce for his
inspection such further books of account,
books, papers and explanations as he may
require at such place and at such time as he
may specify in the notice:
Provided that before any notice is served under
this sub-section, the Registrar shall record his
reasons in writing for issuing such notice.
(4) If the Registrar is satisfied on the basis of
information available with or furnished to him
or on a representation made to him by any
person that the business of a company is being
carried on for a fraudulent or unlawful purpose
or not in compliance with the provisions of this
Act or if the grievances of investors are not
being addressed, the Registrar may, after
informing the company of the allegations made
against it by a written order, call on the
company to furnish in writing any information
or explanation on matters specified in the order
within such time as he may specify therein and
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carry out such inquiry as he deems fit after
providing the company a reasonable
opportunity of being heard:
Provided that the Central Government may, if it
is satisfied that the circumstances so warrant,
direct the Registrar or an inspector appointed
by it for the purpose to carry out the inquiry
under this sub-section:
Provided further that where business of a
company has been or is being carried on for a
fraudulent or unlawful purpose, every officer of
the company who is in default shall be
punishable for fraud in the manner as provided
in Section 447.
(5) Without prejudice to the foregoing
provisions of this section, the Central
Government may, if it is satisfied that the
circumstances so warrant, direct inspection of
books and papers of a company by an inspector
appointed by it for the purpose. - (Notification
dated on 29th April, 2014.)
(6) The Central Government may, having
regard to the circumstances by general or
special order, authorise any statutory authority
to carry out the inspection of books of account
of a company or class of companies.
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(7) If a company fails to furnish any information
or explanation or produce any document
required under this section, the company and
every officer of the company, who is in default
shall be punishable with a fine which may
extend to one lakh rupees and in the case of a
continuing failure, with an additional fine which
may extend to five hundred rupees for every
day after the first during which the failure
continues.”
10.2 On reading the above, with specific reference to the
grouping of sub-sections (1) (2) and (3) on one hand and sub-
section (4) of Section 206 on the other hand, we find substantial
force in the submission of learned Additional Solicitor General of
India that, the power of the Registrar to carry out inquiry under
sub-section (4) of Section 206 of the Act on the basis of the
information available with him is independent of his powers to call
for information from the Company under sub-section (1) of Section
206 of the Act. The starting point of sub-section (1) which leads to
sub-section (2) and (3) of Section 206, is one part of the procedure
and what is contemplated under sub-section (4) does not
necessarily follow what is done from sub-section (1) - up to sub-
section (3) of Section 206 of the Act.
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10.3 We also find that the material referred to in the report
dated 13.12.2017 satisfies the test of Section 206(4) of the Act. The
finding recorded by the Registrar in the said report which is held to
be in violation of principles of natural justice, and since the
sustainability thereof is not being examined in absence of any
challenge thereto by the Government, we find that independent of
the conclusion arrived at by the Registrar in the report dated
13.12.2017, the material referred therein can not be said to be alien
to the requirement under Section 206(4) of the Act. Though sub-
section (4) of Section 206 necessarily comes after sub-section (1), it
would be erroneous to read that, exercise of powers under sub-
section (4) can be only after the stage of completing procedure /
exercise under Section 206(1) (2) and (3) of the Act.
10.4 On conjoint consideration of the complaints and other
material against the petitioner Company, which are taken note of by
the Registrar while preparing the report dated 13.12.2017 can not
be said to be irrelevant for initiating proceedings under Section
206(4) of the Act. The decision relied by the learned Senior
Advocate for the appellant in the case of Oryx Fisheries (supra)
would not help the petitioner Company under these circumstances.
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10.5 The challenge by the original writ petitioner Company to
the impugned judgment, that the report of the Registrar dated
13.12.2017 and the material referred therein could not have been
directed to be treated as notice to the petitioner Company under
Section 206(4) of the Act is unsustainable. Challenge by the writ
petitioner to the impugned judgment, therefore needs to be
rejected.
11. So far the appeal filed by the third party - being
W.A.No.1324 of 2021 is concerned, we find that the said litigant
may be justified to an extent that the writ petitioner Company was
selecting forum for its convenience (from one High Court to
another) with specific reference to the earlier proceedings before
the Andhra Pradesh High Court in W.P.No. 38841 of 2016, and
therefore was not entitled to any relief from this Court. This may
have its own force. It may also lead to a situation where it may be
necessary to examine whether the order of learned Single Judge
interfering in the order of the Government dated 07.05.2018, which
was under Section 212 of the Act, was justified or not, however
since the dispute principally is between the petitioner Company and
the authorities of the Government and since that part of the
judgment is not challenged by the Government, we do not consider
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it proper to examine it at the hands of the third party, whose status
is of an informant / complainant. Had the grievance voiced by the
said complainant, being voiced by the Union of India, it would have
assumed different dimension. As the petitioner Company can not
have any say that the authorities should exercise which power to
initiate inquiry / proceedings against it, the same way, the
complainant can also not be permitted to dictate that the petitioner
Company needs to be prosecuted by the authorities under particular
Section(s) of the Act. For these reasons W.A.No. 1324 of 2021
needs to be dismissed.
12. For the above reasons, we arrive at the conclusion that no
interference is required in the impugned order. At this juncture,
reference needs to be made to the order dated 29.03.2021 on this
appeal, which is already noted above. At the first instance, taking
note of the grievance of the original writ petitioner Company, this
Court had, while staying the order of learned Single Judge noted
that the point at issue is whether the inquiry should start from
Section 206(4) of the Act as directed by learned Single Judge or it
should start from Section 206(1) of the Act, as desired by the
original petitioner Company. After hearing the contesting parties, we
have arrived at the conclusion that, no interference is required in
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the impugned order. The point formulated by this Court vide order
dated 29.03.2021 having been answered as above, the interim
protection granted also needs to be vacated.
13. For the above reasons, the following order is passed.
13.1 Both these appeals are dismissed.
13.2 No costs. Consequently, connected C.M.P.s are closed.
13.3 Interim stay granted earlier needs to be vacated,
however with a view to see that, challenge if any to this order
remains meaningful to the appellant Company, it is ordered that the
said interim protection shall continue for a period of eight weeks
from today.
(P.U., J.) (S.S.K., J.)
14.12.2021
Index:Yes
ssm/1
To
1.The Secretary to Government
Union of India,
Ministry of Corporate Affairs,
New Delhi – 110 001.
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W.A.Nos.1003 & 1324 of 2021
2.The Director,
Serious Fraud Investigation Officer,
2nd Floor, Pryavaran Bhavan,
C.G.O. Complex, Lodhi Road,
New Delhi – 110 003.
3.The Regional Director,
Office of the Regional Director,
Southern Region, Chennai,
Ministry of Corporate Affairs,
Government of India, 5th Floor, A Wing,
Shastri Bhavan, Chennai – 600 006.
4.The Registrar
Office of Registrar of Companies,
Tamilnadu, Chennai,
Shastri Bhavan, 2nd Floor,
26, Haddows Road,
Chennai – 600 006.
5.The Assistant Registrar of Companies,
Office of Registrar of Companies,
Tamilnadu, Chennai.
Shastri Bhavan, 2nd Floor,
26, Haddows Road,
Chennai – 600 006.
6.The Joint Director,
Ministry of Corporate Affairs,
5th Floor, A Wing,
Shastri Bhavan,
Dr.Rajendra Prasad Road,
New Delhi – 110 001.
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W.A.Nos.1003 & 1324 of 2021
PARESH UPADHYAY, J.
and
SATHI KUMAR SUKUMARA KURUP, J.
(ssm)
W.A.Nos.1003 & 1324 of 2021
14.12.2021
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