RAJA NARAYANLAL BANSILAL versus MANECK PHJHOZ MISTHY AND ANOTHER.

1 S.C.R. SUPREME COURT REPORTS

RAJA NARAYANLAL BANSILAL

MANECK PHJHOZ MISTHY AND ANOTHER.

(B. P. SINHA, .. J., P. B. GAJENDRAGADKAR,

K. N. \;VANCHOO, K. C. DAs GUPTA and

DAs J. c. SHAH, JJ.)

Company-Investigation into affairs of-Inspector appoi11tcd 11nder olcf Act, if can exercise po<ecrs"under ·new Act-Constitution--Testimonial compulsion-Trhether provisions for production of docu-ments and evidence offend guarantee-Equal protection of the lm<'--If provisions for investigation and production of evidence offend g·uarantcr-Indian Companies Act, r913 (VII of I9IJ), s. I JS--Indian Companies Act, I956 (I of I95fi), ss. 235, 239, 240, 645 and 646, Constitution.of India, Arn. I4 and 20(3).

On November 15, 1954, the Registrar wrote to the company of which the appellant was the Managing Agent under s. 137, Indian Companies Act, -1913, that it had been represented to him that the business of the company was carried on in fraud and called upon it to furnish certain information. On April 15, 1955, the Registrar made report to the Central Government under s. 137(5) to the effect that in his opinion the affairs of the company were carrie<l on in fraud of co11ntrihutories and they disclosed an unsatisfactorv state of affairs and that case had been n1ade out for an investigation under .s. 138. Thereupon, the Central Government, on November I, 195j, appointed an Inspector to investigate the affairs of the company and to report thereon. The Inspector \Vas authorised under s. 140 to examine any person on oath, and he wrote to the appellant that he would examine him on oath in relation to the business of the company. On April 1, 1956, the Indian Companies Act, 1913, was repealed. by the Indian Companies Act, 1956, which conferred wider and more drastic powers o( investigation. On July 26, 1956, .the Central Government accorded apprornl under s. 239(2) of the new Act to the Inspector exercising his powers of investigating into ancl reporting on the affairs of the company. In May 1957 the Ins-pector served notices upon the appellant calling upon him to attend his office on the date and the time specified for the pur-pose of being examined on oath and to produce certain account books and papers relating to the company. The appellant chal-lenged the investigation and contended: (i) that since the Inspector was appointed under the old Act he had no jurisdiction to exercise the po\vers referable to the provisions of the new Act, (ii) that s. 240 of the new Act which provided !or the production of documents and evidence at such investigations offended Art. 20(3) of the Constitution, and (iii) that s. 239.of the new Act which conferred po\vers on inspectors for investigation antis. 240 offended Art. 14 of the Constitution.

,-l11g11st 3r.

[ J!)(\J]

1960 Held, that the Inspector appointed under s. 138(4) of the old Act must be deemed tn ha,·e been appointed under s. 235 of the Uaja .\'aruya11lal nt\V Act and had authority and pov;er to issue notices under Ra,,<ilal s. 240 of the new Act. Section 645 of the new Act provided that "· the appointment of an Inspector under the old Act shall, on repeal ff/a,,rck Pliiiv:: of the old :\ct and cin coming into force of the nc\v ,\ct, have 1\fistry (. .. Anvtlur effect as if it was n1a<le under the nc\v Act. Section 646 '''hich provided that not.hi:1g in the new Act shall affect the O]'eration of s. 138 of the old Act as respects inspectors was not an exception or proviso to s. 645 <ind the l\\'O se:ctions being saving sections had to be read as independent of and in atldition to, and not as exceptions to, each other.Hdd, further thats. 240 of Indian Companies Act, HJ56, did not offend Art. 20(3) of .the Constitution. For invoking the con-stitutional right again5t testimunial compulsion guaranteed un.ler Art. 20(.1) there must !Jc at the relevant stage formal accusation against the party pleading the guarantee relating to the commission of an offence which rnay result in prosecution. The enquiry undertaken under s. 240 by the Inspector was in substance an enquiry into the affairs of the company; at this stage there \Vas no accusation, formal or other\l.·ise, against any specified individual. The mere fact that prosecution may utli-mately l>e launched against the alleged offenders would not fl~trospecti\'ely cliangc the complexion or character of tlu~ proceedings held by the Inspector when he makes the im·estiga-tion.

Maqbool lltissaii; v. The Sta"' of liomlay, [1953] !'.C.K 730, S. A. Vc11k<1laraman '" The l..'nio11 of India, [1954] S.C.R. u50, ~f. P. Sliar1110 v. 3olid1 Cha11<ira, District Magistrale, /Je/hi, [1954] S.C.K 1077, Thomas Dana'" S/af,; of Punjab, [1959] Supp. l S.C.I{. 274 anu ,\fohammcd Dastagir '" Fhe Slate of Madras, [ 1960] 3 S.C.R. u6, relied on.

Jldd, further that ss. 239 and 240 of the fndian Companies Act, 1951>, <lid not violate Art. 14 of the Constitution. Thes" sec-tions dPnied the company and persons in charge of the man;1ge-1nent of such co1npanir~s the ordinary protection afforde<l to \Vit-nesses under s. 132 of the Evidence Act and under s. 161(1) and (2) of the Criminaf Procedure Code. As they were entrusted with the financial interests of large number of citiz~ns it \vas li:>giti-rnate to treat such cornpanies ancl their rnanagers as class hy themsel\'es and to provide for necessary safeguards and checks against abuse of p0\\·1~r by the managers. The basis of the classitiratinn is founc'.ed rJn 311 inteJligibJc differentia \Vhich has. rational relation to the object sought to be achicvell.

Sltri Ram /(ris/11111 Da!mia v. ju.1tirr Toidol/;ar, [1959] S.C.R. 297, applied.

CIYII. APPELi.A TE JURISDICTION : Civ ii ppea.l No. 268 of 1959.

Appeal froru the judgment and decree dated Sep-

tember 3, 1958, of the former Bombay High Court in R . N-a1a ppea I I N O. 28/1958 • 1

a1a . arayan 1 1 Bansilal

A. V. Viswanatha Sastri, Ganpat Rai and I. N.

M anec Phiroz kv. . Mistry & Another

II Sh roJJ, [,ff ]!Of [c ]the appe ant.

JJf. C. Setalvad, Attorney.General for India, B. Sen

and T. M. Sen, for the respondents.

1960. August 31. The Judgment of the Court was delivered by

GAJENDRAGADKAR J.-The appellant Raja Nara- Gajendragadkar ]. yanlal Bansilal of Bombay is the Managing Agent of Limited Company named the Harinagar Sugar Mills Limited. By virtue of the power conferred on him by s. 137 of the Indian Compl~nies Act, 1913 (VII of 1913), the Registrar wrote to the mills on November 15, 1954, that it had been represented to him under s. 137(6) that the business of the company was carried on in fraud, and so he called upon the company to furnish the information which he required as set out in part of his letter (Ex. A). On April 15, 1955, the Begistrar made a. report (Ex. AA) to the Central Government under s. 137(5) of the said Act. This re-port showed that according to the Registrar the affairs of the company were carried on in fraud of contribu-tories and they disclosed an unsatisfactory state of affairs. The report pointed out that the appellant was the Managing Agent of the company as well as its promoter, and that it was suspected that under fictitious name of Bansilal Uchant Account the com-pany was advancing money to the several firms own-ed by the appellant which were ostensibly purchased from the company's funds. The report further stated that between the years ending in September, 1942 and 1951 about Rs. 19,200 were paid for Harpur Farm and Rs. 39,300 for Bhavanipur Farm, and accounts disclosed that the Uchant Account was chiefly operat-ed upon for purchasing E:mch lands out of the funds of the company though the purchase in fact was for and on behalf of the appellant. The Registrar also added that he had reason to believe that the Managing

'9[[60 ]]Agent was utilising the property of the company in Raia .~-,,-;;,,.,,,,;,. 1 some cases for his pers011al gain, and concluded that, · n.,.,;z.1 in his opinion, case had liecn ma.de out for an invcs-"· tig<ition under s. 138.

On receiving this report, on ~ovembcr l, 1955, the l, 1955, the 1955, the

Mai"'k Phi•w On receiving this report, on ~ovembcr l, 1955, the l, 1955, the 1955, the M"''·'· "'-[11]''"'"" Centrnl Government passed an order under s. 138(4) Gajrnd"''"d""' 1_ of t.he said Act (Ex. B) appointi11g the first respondent · t.faneck P. Mistry, who is Chartered Accountant., as an inspector to investigate the affairs of the company from the date of its incorporation. The said inspec-tor was asked to point out all irregularities and con-traventions of the provisions of tho said Act or any other law, and make full report as indicated in communication which was separately sent to him. This separate communic<!.t.ion (Ex. llBJ prescribes thti mode of enquiry whieh should be adopted by inspec-tors. It requires th:~t while i11vestigating the affairs of companies the inspectors should liear in mind that for successful prosecution the evidence in support of •L charge must be clear, tangible and cogent, and that their reports should specify with reference to t.he evidence collected during the investigations the points specified under paragraph 2(a) to (e). ln the course of their inHstig1~tion the inspectors are asked LO make use of the powers availablo to them under s. 140 of the said Act including the right to examine per-son on oath. The investigation should be conducted in. private and the inspect-0rs a.re not Plltitled to make public the information received by them during the course of thejnvestigation. Pursuant· to the powers conferred on him by the said order n•spondent 1 wroto to the appellant inti· mating to him that he would examine him on oath in relation to the business of the company under s. 140(2) of the said Act (Ex. C). Meanwhile on April I, 1956, the Companies Act of 1913 (Vll of 1913) was repealed by the Companies Act of 1956 (I of 1956). For the sake of convcnienee we would hereafter refer to the repealed ~\ct as tho old Act and the Act which came imo force ou April 1, 1956, as the new Act. On July 26, 1956, the Contra! Government purported to exor-cise its power undor s. 239(2) of the new Act andaccorded approval to respondent 1 exercising his 1960 powers of investigating into, and reporting on, the• . -affairs of the appellant including his personal books RaJa Narnanlal Bansi 1[y]1of accounts as well as the airs o the three concerns ff [, ]v, specified in the order. These three concerns are M/s. Man.ch Phiroz Narayanlal Bansilal, who are the Managing Agents Mistry & Another of Harinagar Sugar Mills, the Shangrila Food Pro-. ·-· ducts Limited and Harinagar Cane Farm. It appears Ga1endragadkar ]. that the appellant is the proprietor of the firm of · N arayanlal Bansilal. After this order wa.s passed respondent 1 served upon the appellant tho four im-pugned notices (Ex. collectively) on May 9, 1957, May 16, 1957, May. 29, 1957 and June 29, 1957, res-pectively. These notices are substantially identical in terms, and so it would be sufficient for our purpose to set out the purport of one of them. The first notice called upon the appellant to attend the office of res-pondent 1 on the date and at the time specified for the purpose of being examined on oath in relation to the affairs of the company, and to ·produce before respon-dent 1 all the books of accounts and papers relating to the sajd company as mentfo'ned in the notice. The appellant was further .told that in default of compli-ance with the requisition. aforesaid necess!Lry legal steps would be taken without further reference to him. The notice contains list of twelve items des-cribing the several documents which the appellant was required to produce before respondent 1. After these notices were serv.ed on the appellant he filed petition (N"o. 201 of 1957) in the Bombay High Court and prayed that the High Court should issue writ of certiorari or any other appropriate direction, order or writ under Art. 226 of the Constitution call-ing upon respondent 1 to produce the records of the case relating to the notices in question and to set aside the said notices, the proposed examination of the appellant and the interim report made by him. It fu!'ther prayed for writ of prohibition or any other appropriate direction, order or writ restraining respon-dent 1 from making any investigation under the said notices and from exercising any powers of in vestiga-tion under s. 239 and/or s. 240 of the new Act and/or196o from investigating into the affairs of any persons or Raia 8 . [•]\[-:--]11araya" [,,]1[•]1 1 1 [C'onr.crns ]c l . am1e t ese writs mam [specified in ]• · 1 [the ]y on two groun [petition. Tho petitioner ]d s. fi rst v alleged that since respondent l had been appointed Ma11eck l'M•o• under the old Act he had no jurisdiction to exercise Mist'Y & A[11]oth" powers referable to the relevant provisions of the new . -Act. This ground assumed t·hat the sn.id relevant Ga;rndo-agadq"' J. prov1s10ns o t new . . 1 \ ct arc va 1 , l .d ut 1t . . 1s urge that the powers rcferablo to the said provisions are not available to respondent I since he was appointed under the old Act. The other ground on II' hich the lrrits wer11 claimed challenges tho vircs of ss. 23!J and 240 of the new Act. This challenge assumed an aller-nat.ive form. It is argued thats. 240 offends against the constitutional guarantee provided by Art. 20(3) of the Constitution and it is also urged that certain por-tions of ss. 239 and 240 offend against another constitu-tional guarantee prnvided by Art. 14 of the Constitu-tion. It is thus on these three contentions that the petitioner claimed appropriate writs by his petition bt'fore the Bombay High Court. These pleas wern resisted by the Union of India which had been joined to the proceedings as respondent 2. '.\Ir. ,Justice K. T. Desai, who heard the petition, rejected the conten-tions raised by the petitioner, and held that no case had been made out for the issue of any writ. This decision was challenged by the appellant beforo the Court of Appeal in the Bombay High Court; the Court of Appeal agreed with the view taken by DPsai, J., and dismissed the appeal. Thereupon the 1ippella.nt applied for and obtained certificate from the High Court, and it is with the said certilicato that he has come to this Court by his present appeal. On his behalf :\Ir. Viswanatha Sastri has raised the same three point.s for our decision.

Lot us first examine the question whether or not the first respondent has jurisdiction t-0 exercise the powers under the relevant provisions of the new Act. It is common ground that ff respondent 1 's powers to hold the investigation in question are to be found in the relevant provisions of the old Act and not those of the .new Act tbe impugned notices issued by him would be

'9[[60 ]]Bansilal ·v.

without authority and jurisdiction. In dealing with '9[[60 ]]this question it is necessary to examine the broad fea. Raja Narayanlal tures of the relevant sections of the two Acts. Bansilal

We will begin with the old Act. Section 137 of the

old Act deals with investigation by the Registrar. Maneck Phiro• Section 137(1) pr0vides that where the Registrar on M"[1]'Y &- Another perusal of any document which company is required Gajendragadkar J. to submit to him is of opinion that any information or explanation is necessary in order that such document may afford full particulars of the matter to which it purports to relate he may, by written order, call on the company to furnish in writing the necessary infor. mation or explanation within the time to be specified in the order. Section 137(5) requires the Registrar to make report in writing to the Central Government if no information is supplied to him within the speoi· lied time, or if the information supplied to him appears to him to disclose an unsatisfacto.ry state of affairs, or does not disclose full and fair statement of the rele-vant matters. Thus s. 137(1) to (5) deal with the investigation which the Registrar is empowered to make on persual of the document submitted to him by .a company under the provisions of this Act. Sec-tion 137(6) deals with case where if it is represented to the Registrar on materials placed before him by any contributory or creditor that the business of com-pany is carried on in fraud or in fraud of its creditors or in fraud of persons dealing with the company or for fraudulent purpose, he may, after following the procedure prescribed in that behalf, call for informa-tion or explanation on matters to be specified in his order within such time as he may fix, and when such an order is passed the provisions of s. 137(2) to (5) would be applicable. This sub-section provides that if at the end of the investigation the Registrar is satis-fied that the representation on which he took action was frivolous or vexatious he shall disclose the iden. tity of the informa.nt to the company. This provision is obviously intended as safeguard against frivolous or vexatious representations in respect of the affairs of any company. The provisions. of this section 8.fe substantially similar to the provisions of s. 234 of the-new Act. ·

'9"" Section 138, which drals with inveatigation of R a;a n ... • \[-:-]·11rn1·n11 [ --],.1~1 1 fl! [. ]1[a.fTa.irs ]., _-cntra 1,overnme11t l [of ],.., [companies ]t•) [bv ]appoint • [inHpcotorn, 1rnthori8rH ]orrn or more compet-[the ]'" ent inspectors to investignte thn affair; of any com-"'"'"'k l'h"o: pany and report thereon in ;uch manner <\S tho said ~fosrry <:- .4notlu'Governrucnt may direct. The 11ppointment of com---d' petent inspectors ca;n he made hy thn C'~nt.ral Govern-G •1••draga [. ]""' · I nwnt rn 1our asses o cases , r 1 as ~pec1l;cu , ' ;i in , s. 138( I ) to (4). It would be relevant to refer to t-"·o of tlwse cases. Under s. 138(1) compet.cnt insp•:ctor r1t11 bo appl)inted in tho o,ase of hanking compn.11y havin~ sham capital on the application of memliern holding not less than one-fifth of the shares issued, and under s. 138(4) in the case of any company 011 report hy the Registrar under s. l:l7(5). This sectio11 substanti-ally corresponds t•) s. 233 of the new Act.The other sections of tho old Act to whiclo reference must be marle r.re ss. 140, 141 · a11d 141 A. Sec-ti•m 140( I) imposes upon n.11 persons who are or have been officers of the company an obligation tu produce before the inspectors all books and documents in their custody or power relating to the company. Sec-tion 140(2) empowers the inspector to ex:i.mine on oath any such person, meaning person who is or hns heen an officer of the company in relation to thP busiJJess of the eompany and t.o administ€r an oath to him. Sec-tion 140(3) pro\' ides that if peri;on refuses tu produce Look or document or to answrr uny questio11 lw sbfall be liable to fine not. exceeding Hs. 50 ill res-pe0t of each offo11ce. Section 141 pruYides tha.t on the conclusion of an invcstigntion the inspect.ors shall· report their opinions to the Central Government, and shall forward copy ,,f their report to the registered office of the company; and it also provides that ti eopy of the said report. can be delivered at their requ. est to tho applicants for the im·estigation. Thon wo haves. 141A which deals with the institution oJf pro. sec11t10ns. Section 14lA(l) provides that if from 1rn~· report made under s. 138 it appears to the CPntral GoYcrnment th11t any person has been guilty of any offence in relation t•J the company for which he is cri-minally liable the Central Government shall refer the

matter to the Advocate.General or the Public Prose-cutor. Section 141A(2) lays down that if the law offi- Raja Narnyanlal cer who is consulted under (I) considers that there is Ba11silal case in which prosecution ought to be instituted he v. . shall cause proceedings to be instituted accordingly. Maneck Phiroz Th at m · · · r1e 1s t sc eme o t re 1 evan t prov1s10ns · · Mistry & Another of the old Act. -Gajeadragadkar j. We will now examine the scheme of the relevant provisions of the 1iew Act. It has already .been notic-ed that ss. 234 and 235 of the new Act arc substanti-ally similar to ss. 137 and 13.8 of the old Act. Sec-tion 239 of the new Act provides for the powers of the inspectors to carry on investigation into the affairs of related companies or of managing agent or associate. 'l'he sweep of the enquiry authorised by this section is 'very mnch wider than that under the corresponding section of the old Act. Sub-section (1) of this section authorises an inspector to investigate the affairs of a· company and also the-affairs of any other body cor-pornte or person specified in els. (a) to (d) if he thinks it necessary so to do. These clauses include several cases of body corporate which may have any connec-"ti<>n direct or indirect, immediate or remote, with the dfairE of the company whose affairs are under inves-t igatiou. IL is unnecessary for our purpose in the present appeal to enumerate the Raid cases serially or exhaustively. It is conceded that the three other persons who have been called "upon by respondent 1 to prodµce documents and give evidence fall within the purview of s. 239. As result of the 'provisions of s. 239(1) the inspector has to report not only on the affairs of the company under investigation but also on the affairs of other bodies or persons who have been compelled to give evidence and produce documents during the couri;e of the enquiry. The only safeguard provided against possible abuse of these extensive powers is that in the case of any body corporate or person rderred to in els. (b)(ii), (b)(iii), (c) or (d) of sub-s. (1) the inspector shall not exercise his relevant power without first having obtained the prior appro-val of the Central Government thereto. Section 240 of the n·ew Act imposes an obligation

[ l!J!il J

'9"° on the corporate bodies and persons in respect of ~-R a1a [. ]ivar11ya11 1 1 [which or whum ill\·estigation ][is ][authorised ][bys. ][239 ][to ]H<omlal produce all books and papers and to gi~·e all assistance v. in connection with the said investigation ; that is tho Ala""" Phi>or result of s. 240(1). Section 240(2) empowers th0 ins-M"1'Y 6· A"°'"" pector t.o examine 011 oa.t.h any of the persons referred c.,,,,d,:~:dka' J. to i1_l. sub-s. (I~ iu rela.tion to the. relevant matters as spec1h8d. Sect10n 240;3) deals with case where person refuses to comply with the obligation imposed on him by s. 240(1) or (2); and it provides that in such case tho inspector may certify the refusal under his hand to tho court, and tho court may there-upon <'nquiro into the case, hear witnesses who may be produced against or on behalf of the alleged offen-der, consider any statement which may Le offered in defence, and puni~h the offender as if he had been guilty of contempt oft.he court. Section 240(4) deals with case where the inspector thinks it necp;·sary fur the purpose of his investigation that person w horn ho has no power to examine on oath shoulrl ho cxaminod, and it provides that in such a. case he may apply to the court, and the court may, if it thinks tit, order that person to attend and be examined on oath before it on any m1ttt-0r relevant to the invest.i-gation. This sub-section provides for the procrdure to be followed in examining such witness. Sec-tion 240(.'i) lays down that notes of any examination under sub-s. (2) or (4) ohall be ta.ken down in writing, and shall be read over to or by, and signed by, the persan examined, and may thereafter be used as evidence against him. Having thus made elaborate prol'isions for tho production of documents and evidence in the course of the investigation by the inspect-Or, s. 241 deals with the inspectors' report and provides that inspectors may, and if su directed by the Cemml Govemment sh.'\11, make interim reports to that. Government, and on the conclusion of the investi-"at1on shall make final report to it. SecLion 241(2) provide• for the supply of the copy of tho said mport to the several parties concerned as specified in els. (a) to (e). That takes us to s. 242 which deals with prosecu-tion. Section 242(1) provides inter alia that if from

any report made under s. 241 it appears to the r96o Central Government that any . person cc has in relation ,, h' R a;a1 . ,-, nrayana -1 1 to the· company been gmlty o any ouence 1or w JC Bansital he is criminally liable, the Central Government may, v. after taking such legal advice as it thinks fit, prosecute Maneck Phiro: such person for the offence, and it imposes on all officers Mistry <> Another and agents of the company, except those prosecuted, . d--dk to give t . entra l overmrient assrntance m con-ll . , a;en rnga ar 1 . nection with the prosecution which they are reason-ably able to give. That broadly stated.is the position with regard to the relevant provisions of the new Act. Mr. Sastri has drawn our pointed attention to the fact that the scope and nature of the enquiry authori-sed by the new Act are very much wider than under the old Act, and he has characterised the relevant powers conferred on the investigating inspectors as draconian. He, therefore, contends that unless it is established that these powers are available to the inspector appointed under the relevant provisions of the old Act the impugned notices must be set aside; and his argument is that these powers are not available to the inspector appointed under the old Act. The deci. sion of this question will depend mainly on the con-struction of ss. 645 and 646 of the new Act.Section 644 provides for the repeal of the enact-ments mentioned in Schedule XII; the old Act is one of the enactments thus repealed. Ordinarily the effect of the repeal of the old· Act would have been governed by the provisions of s. 6 of the General Clauses Act (10 of 1897), but in the case of the new Act the aµpli-cation of the said section is subject to· the provisions of ss. 645 to 657 of the Act ; that is'\he effect of s. 658 which provides that the mention of particulars in ss. 645 to 657 or in any other provisions of this Act shall not prejudice the general application of s. 6 of the General Clauses Act, 1897, with respect to the effect of repeals. In other words, though s. 6 of the General Clauses Act will generally apply, its appli-cation will be subject to the provisions contained in ss. 64~ to 657; this position i~ not disputed. It 1s now necessarv. to consider s. 645. It reads thus: · -

'9[60 ]"~othing in this Act shall affect any order, rule, Raja Xarnyonlol regulation, appointment, conveyance, mortgage, deed, llansilal document or agreement made, fee directed, resolution v. passed, dirrction given, proceeding ta.ken, instrument Monrc• P""[0 ]' executed or issued, or thing done, under or in pursu-~"'''Y 1~ Anotha a.nee of any previous companies law; but any such c.1,,.,1,.,.dkor ;. order, rule, regulation, appointment, conveyance, · mortgage, deed, document, agreement, fee, res(>lution, direction, proceeding, instrument or thing shall, if in force at the commencement of this Act, continue to I.Jo in forct1, and so far as it could have been made, direc-ted, passed, given, ta,ken, executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act."

The effect of this section is clear. If an i11spector has been a.ppointed under the relevant section of the old Act, on repeal of the old Act and on coming into force of the new Act, his appointment shall have effect a.s if it wao made under or in pursuance of the new Act. Indeed it is common ground that if s. 645 had stood a.lone and had not been followed by s. 646 there would have been no difficulty in holding that the inspector appointed under the old Act could exercitie his powers and authority under the relevant provisions of the new Act, and the impugned notices would then be perfectly \'a.lid. Incidentally we may rofor to the 'provisions of s. 652 in this connection. Under this section any pernon appointed to any oflice under or by virtue of any previous company law shall be deemed to have been appointed to that office under this Act. It is, however, urged that the authority of the inspector which is in dispute is governed by s. 646. This section provides :

" Nothing in this Act shall affect tbe operation of section 138 of the Indian Companios Act, Hll3 (Vll of 1913), as respects inspectors, or as respects the con-tinuation of an inspection begun by inspectors, app•Jinted before the commenccmont of this Act ; and tho provisions of this A.ct shall apply to or in relation to report of inspectors a.ppointod under the said ~cction 138 as thoy apply to or in relation to report

of inspectors appointed under section 235 or 237 of this Act.''

Ra1a N'arayanlal ;ansital v. Maneck P~ii-oz & Another . d--dk a1en raga ar 1 .

The argument is that the expression "nothing in ;ansital this Act" includes s. 645 and so s. 646 should be read v. as an exception or proviso to s. 645; and if that is so, Maneck P~ii-oz all matters covered by s. 138 of the old Act must con- Mistry & Another tirrne to be governed bv the said Act and not by any . d--dk of the provisions of the new Act. • W are una to ·bl a1en raga ar 1 . accept this argument. In appreciating the effect of the provisions of s. 646 it is necessary to bear ill mind that it occurs in that part of the new Act which deals with repeals.and savings. Sections 645 to 648 are the saving sections, and ordinarily and in the absence of any indication to the contrary these saving clauses should be read as independent of, and in addition to, and not as providing exceptions to, one another. It is significant that whereas s. 646 provides for the con-tinuance of the operation of s. 138 it does not make corresponding provision for the continuance of the operation of s. 140 of the old Act which deals with the powers of the inspector to call for books and to ex11-mine parties. Besides, it may perhaps not be accurate to suggest that having regard to the provisions of s. 645, s. 646 is wholly redundant. It would be possi-ble- to take the view that cases falling under s. 138(1) of the old Act are intended to be covered by s. 646 as they would not be covered by s. 645. In regard to the case of banking company coveted by s. 138(1) s. 646 will come into operation and that may be one of the reasons for which s. 646 was enacted. It may be that the case of the banking company may also be covered by s. 35 of the Banking Companies Act 10 of 1949, but since s. 138(1) applied to the said case until the old Act was repealed the Legislature may have, as matter of caution, thought it necessary to provide for the continuance of the operation of s. 138 by enacting s. 646. However that may be, we feel no difficulty in holding that s. 646 should not be constru-ed as proviso to s. 645 but as an additional saving provision. The words used iri s. 645 are so clear, and the .policy and object of enacting the said provision are in our opinion so emphatically expressed, that it

would be unr<'asonable to hold thats. 646 was intend-

R "'· [. ]0 n,..,,,-\~. "' 101 0 •""1 1 0 cd \\"J · · 1erc t-0 provide for t L . 1 cg1s ature such enacts radical exception to saving section s. 645. as "· runlter of abundant caution the argument that the Ma .. cck pi,,,,, eun.ctmcnt of the said Hect.ion was not wholly neces-Mi•1'.Y "- Ano11,., sary cannot be treatBd as decisive or even d'fective. ---Therefore, in our opinion, the High Court was right in a~ettrlragadkar [. ]J . l J • , · · conung to tie cone us10n that the mspoctor appointed under s. 138(4) of tl1e old Act mtrnt hy legal fiction, which ·is aut.horised by s. 645, be deemed to have been appointed un<lor s. 23.i of tho new Act, and if that is so, respondent. I had R nt.bority and power to issue the impugned notices under s. 240 of the new Act. The challenge to the validity of the impugned notices on tho ground that respondcnt I bad no authority to issue the said notices must, the·refore, fail.

That takes us to the question as to whether the relevant provisions of s. 240, which empower respon-dent I t-0 issue the relevant notices by which the appellant was called upon to givo evidence and to produce documents, offend against the fundamental constitutional right guaranteed by Art. 20(3). It has ooen strenuously urged before us that the mn,in object of lhe present investigation is to diseo-rrr whether the appellant has commit.ted any offences, and so by com-pelling him to give oddenco and produce documents he is denied the constitutional protection against sC'!f-incrimination.Art.icle.20(3) provides that " no person accused of any offence shall he compelled to be witness against himsolf". It may be assumed that the appellant is being compelled to be witness againRt himself in the prrnent proceedings; but even so the question which a.rises for our decision is whcthor the appellant can be said to be person who is accused of any offence as required by Art. 20(3). Mr. Sastri has contended that the words " person accused of any offence" should not rect·h·e narrow or literal const.n1ction; they should be liberally in!Npreted because the clause in which they occur Pnshrines fundamental constitutional right R-nd the scope and reach of the said right should not be unduly narrowed down. In support of this

general argument Mr. Sastri has naturally relied on I96o t?e hist?rical b~ckwo?nd .of the doctrine of protea- Roja ,,:-;,-:;,yon/al t1on agamst self-nicr1mmat10n; and he has strongly Bansilot pressed into service the decisions of the Supreme v. Court of the United States of America dealing with Maneck Phfroz the Fifth Amendment to the Constitution of the Mistry & Another United States. The said Amendment inter alia pro-. -dk v1 'd es t at " no person s II compe IJ · rn any cri-· Ga1endraga ar 1 . minal case to be witness against himself". It would be noticed that in terms the Amendment refer to criminal case, and yet it has received very broad and liberal' interpretation at the h0,nds of the Supreme Court of the United States of America. It has been held that the said constitutional protection is not con-fined only to criminal cases but it extends even to civil proceedings (Vide: McCarthy v. Arndstein(') ). As observed by Mr. Justice Blatchford in Charles Counselman v. Frank Hitchcock(') "it is impossible that the meaning of the constitutional provision can only be that person shall not be compe!led to be witness against himself in criminal prosecution against himself. It would doubtless cover such cases but it is not limited to them. The object was to insure that person should not be compelled, when acting as witness in any investigation, to give testi-mony which might tend to show that he himself had committed crime. The privilege is limited to crimi-nal matters, but it is as broad as the mischief against which it seeks to guard".

In support of his plea that liberal interpretation should be out on an article which enshrines funda-mental co11stitutional right Mr. Sastri bas also invited our attention to the observation made by Mr. Justice Bradley in Edward A. Boyd and George H. Boyd v. United States('). Says Bradley, J., "illegitimate and unconstitutional practices get their first footing in that way, namely by silent approaches and slight deviations from legal modes of procedure. This can· only be obviated by adhering to the rule that con-stitutional provisions for the security of person and (1) (1924) 6n L. Ed. 158. (2) (1892) 35 L. Ed. I!ro. (3) (1886) 29 L. Ed. 746, 7 52.

property should oo liberally construed ''. The learned

r96o property R"J" _;,;;.,"'"!a! judge has also _added that ,any compulsory dis-/Jo.,,.1;,1 covery by extort mg thu party s oath, or compelling '"· the production of his private books and papers, to ,ir.,,,.,1. Plii•oz convict him of crime or to forfeit his prop0rty, is con-Mimy [0]- A"'""'t.ra.ry to the principles of free government, and is . . --dk 01 abhorrent to the instinct.a of an American. It may c.;"[1]'"baga ' ·snit the purposes of despotic power; hut it cannot abide the pure atmosphere of political liberty and per-sona.I freedom". In regard to this eloquent statement of the law it may, however, be permissible to state that under the English Law the doctrine of protection against self-incriminativn ha8 never been applied in the departmC'nts of Company Law and Insolvency Law. There is !lo doubt that undr,r s. 15 of the Eng-lish Bankruptcy Act when public examination of debtor is held he ia compelled to answer all ques-tions as the court may put, or allow to be put to him, and that the answers given have to be signed by him and can be used against him in evidence (Vide: In Re: Atherton(')); similar is"tht' position under s. 270 of the English Compani•)S· Act. However, the general argument for the appellant is that in construing rt. 20(3) we may take some assiRta.nce from the broad and libcra.I conAtr11ction which has been placed on the apparent.Iy narrow and limited words used in tho Fifth Amendmout to the ConHtitution of the Unit-ed StalM of America.

Thus presented the argument is no doubt at.tractive, and its validitv ancl effr-ctivene~s would have had to be fully and carefully examined if the question raised in the present appeal had been a. matter of first im-pression; hut the const.ruction of Art. 20 in genera.I and Art .. 20(2) and (3) in particular has been the subject-matterof some decisions of this Court, and naturally it is in the light of the previous decisions that we have ({> dPal with the merits of the appdlant's case in tho present appeal. In 1\faqbool Hus.ooin ,., 'l'he State of Bombay (') this Court had occasion to consider the scope and effect oft he constitutional guarantee provi-ded by Art. 20(2). person against whom proceedings (1) 11912) 2 K.B. 251. (2) [1953] S.C.R. 730.

had been taken by the Sea Customs Authorities under z96.o s. 167 of the Sea Customs Act and an order for confis. R . N cation o goo s , f. een passe was su sequen y . ti a;a Bansilal aray...in 1 1 prosecuted before the Presidency Magistrate for an v. offence under s. 23 of the Foreign Exchange Regula-Maneck Phiroz tions Act in respect of the same act. It was urged on Mistry G> Another his behalf that the proceedings taken against him -before the Sea Customs Authorities was prosecution Gajendragadkar f. and the order of confiscation passed in the said pro-ceedings was punishment, and so it was argued that the constitutional guarantee afforded by Art. 20(2) made his subsequent prosecution under s. 23 of the Foreign Exchange Regulation Act invalid. This, plea was rejected. In deitling with the merits of the plea this Court had to consider the meaning of the words. " prosecuted and punished " used in Art. 20(2). Arti-cle 20(2) provides that no person shall be prosecuted and punished for the same offence more than once, and the question raised was whether the proceedings before the Sea Customs Authorities constituted prosecution, and whether the order of confiscation was punishment under A/rt. 20(2). In construing .Art. 20(2) this_Court considered Art. 20 as whole and examined the inter-relation of the relevant terms used in the three clauses of the said article. " The very Wording of Art. 20 ", observed Bhagwati, J., "and the words used therein-" convicted"," commission of the act charged as an offence"," be subjected to penalty", "commission of the offence", "prosecuted and punished", "accus-ed of any offence" would indicate that the proceed-ings therein contemplated are of the nature of crimi-nal proceedings before court of law or judicial tribunal and the prosecution in this context would m~ai;i an initiation or starting of proceedings of cnmmal nature before court of law or judicial tribunal in accordance with the procedure prescribed in the statute which creates the offence and regulates the.procedure''. Having thus construed Art. 20(2) in the light of the relevant words used in the different clauses of the said article, this Court naturally pro-ceeded to enquire whether the Sea Customs Authorities acted as judicial tribunal in holding proc~dings

1960 against the person. The scheme of the relevant pro-/1 [. " ]1 1 [visions of the ][Ac't ][was ][then ][examined, and it was ]a;a Bansilal ·'"'"Y"" Id t at the sa1 "d aut · ' ont10s are not judicial tribu-v. nal with the result that the "adjudging increased Maneck Phi•oz rate of duty nr penalty and confiscation" 1mder the Mist•y & Anotlm provisions of the said act did not constitute judg-G a;en raga [. ][J--d' ]l'lar 1 . [ment or order ]f [of ][a court or judicial tribunal necns-]f . sary or the purpose o supportmg the plea of double jeopardy. In the result tho oonclusion of this Court was that when the Customs Authorities confiscated the gold in question the proceedings taken did not amount. to prosecution of the party uor did the order of confiscation constitute punishment as contem-plated by Art. 20(2).

This decision has been affirmed by this Court in the

case of S. A. Venkataraman v. 'l'he Union of India('). In that case an enquiry had been made against the appellant Venk1Ltaraman under the Public Sern111ts (Inquiries) Act, 1850 (Act XXXVII of 1850). On receiving the report of the enquiry commissioner oppor-tunity was given to the appellant under Art. 311(2) to show qause, and ultimately after consultation with the Union Public Service Commission the appellant was dismissed by an order p11.ssed by the President. The order of dismissal was passed on September 17, 1953. Soon thereafter on February 23, 1954, the polico sub-mitted charge-sheet against him charging him with having committ{'d offences under ss. 161/165 of the Indian Penal Code and s. 5(2) of the Prevention of Corruption Act. The validity of the subsequent prose-cution was challenged by the appellant on the ground that it contravened the · constitutional guarantee enshrined in Art. 20(2). The appellant's plea was, howe,·er, rejected on the ground that the proceedings taken against him before the commissioner under the Inquiries Act did not a.mount to prosecution. The relevant provisions of the said a.ct were examin-ed, and it was held that in an inquiry under the said Act t.here is neither any question of investigating au offenc:e in tho sense of an act or omission punishable by any law for the time "being in force nor is there (1) [1954J S.C.R. u50.

any question of imposing punishment prescribed by r96o the law which makes that act or omission an offence. R . N-M u kh erJea, [. ]J ., as . et en was, w o 1vere t l' , JU g-a1a Bans.ilal arayan 1 1 meut of the Court, has referred to the earlier decision v. in the case of Maqbool Hussain ([1]), and has observed Maneck Phiroz that " the effect of the said decision was that the pro- Mistry & Another ceedings in connection with the prosecution and . d-dk pums · ment o person must · m t nature o a;en raga ar 1 . criminal proceeding before court of law or judicial tribunal, and not before tribunal which entertains departmental or an administrative enquiry even though set up by statute but which is not required by law to try matter judicially and on legal evidence". Thus these two decisions can be said to have considered incidentally the general scope of Art. 20 though both of them were concerned directly with the construction and application of Art. 20(2) alone.

Article 20(3) was considered by the Full Court in M. P. Sharma v. Satish Chandra, District Magistrate, Delhi ([2]). The question about the scope and effect of Art. 20(3) was raised in that .case by petition filed under Art. 32 of the Constitution. It appears that the Registrar of the Joint Stock Companies, Delhi State, lodged information with the Inspector.General, Delhi Special Police E>tablishment, against the petitioners alleging that they had committed several offences punishable under the Indian Penal Code. The lodging of.this information was preceded by an investigation into the affairs of the petitioners' company which had been ordered by the Central Government under s. 138 of the old Act, and the report received at the end of the said investigation indicated that well-planned and organised attempt had been made by the peti-tioners to misappropriate and embezzle the funds of the company by adopting several ingenious methods. On receipt of the said First Information Report the District Magistrate ordered investigation into the offences and issued warrants for simultaneous searches at as many as thirtyfour places. By . their petitions the petitioners contended that the search warrants (1) [1953) S.C.R. 730. (2) [1954) S.C.R. 1077. 561960 wl're illegal and they prayed that the same may be -, -quashed as being in violation of Art. 20(3). The plea Ra1a · .\ arayanlal .1 1 t us rarne · y t put1t10ners was u t1mate y rciecte · · 1 · 1 · ••:'.' • on the ground that the impugned searches did not Manech Phiro: violate the S•~id constitutional guarantee. Jagannadha-Mistry 6- Arwthudas, ,T., who spoke for the Court, observed that" since -article 20(3) provides for constitutional guarantee Ga1endrag,ulkar J. against testimonial compulsion its words should he liberally construed, and that there was no reason to confine the content of the said guarantee to its barely literal import". He, therefore, held that the phrase "to be witness" means 11othing more than to furnish evidence, and such evidence can be furnished through the lips or by production of thing or of document or in other modes. He also pointed out that the phrase was "to be witness" and not "to appear as ·witness" and so the protecti6n aff()rded was not mert>ly in respect of test.imonial compulsion in the court room but may well extend to compel testimony previously obtained from him. The conclusion of the Court on this part of the construction was t bus stated. The constitutional guarantee "is available t-0 person against whom formal accusation relating to the com· mission of an offence has been levelled which in the normal course may result in prosecution ; whether it is available to other persons in other situations does not call for decision in this case". Since the First Infor-mation Heport hacl been recorded against the peti-tioners in that case it followed that the first test that formal accusation relating to the commission of an offence must have been levelled was satisfied. The question which was then considered was whether there was any ha.sis in the Indian Law for the assumption that a. search or seizure of a. thing or document is in itself to be treated as compelled production of the same; and it was held that there would be no ju8tifica-tion for treating tho said search or seizure a.s compelled production; that is why the challenge to the validity of the search warrants issued against the petitioners was repelled. The effect of this decision thus appears to be that one of the essential conditions for invoking the constitutional guarantee enshrim·d in Art. 20(3)is that formal accusation relating to the commission 196° of an offence, which would normally lead to his pro-. · R a;a . N-arayan 1[· ]1 secution, must have been levelled agamst t party Bansilal who is being compelled to give evidence against him-v, self; and this conclusion, in ·our opinion, is fully con-Man"k Phfroz sistent with the two other decisions of this Court to Mistry &- Another which There are two we have already' referred. ot er su sequent ec1s10ns [. . ]o th• 1s a1en . raga dk ar 1 . Court to which reference may be made. In Thomas Dana v. State of Punjab (1), according to the majority decision" prosecution " in Art. 20(2) means proceed-ing either by way of indictment or information in criminal court in order to put an offender upon his trial. It would be noticed that this conclusion is wholly consistent with the view taken by this Court in the case of M aqbool Hussain (') and S. A. Venkata-raman ('). In Mohammed Dastagir v. The State of Madras(') this Court had to consider Art. 20(3). The appellant in that case had gone to the bungalow of the Deputy Superintendent of Police to offer him bribe which was covered in closed envelope with reqmst that he might drop the action registered against him. The police officer threw the envelope at the appellant who took it up. While the appellant was still in ''the bungalow he was asked by the police officer to produce the envelope and he took out from bis pocket some currency notes and placed them on the table without the envelope. The notes were then seized by the police officer and rubber stamp of his office was placed on them. On these facts it was urged that in relying upon the evidence of compelled production of notes the prosecution had violated the provisions of Art. 20(3). In support of this contention the general observations ma.de by this Court in the case of M. P. Sharma('), were strongly pressed into service. This Court, however, rejected the appellant's argu-ments and held that the prosecution did not suffer from any infirmity. On the facts it was found that thou,gh the offence had in fact been already committed

(1) [1959] Supp. 1 S.C.R. 274. (2) (1953] S.C.R. 730.

(3) [1954] S.C.R. 1150. (4) A.LR. 1960 S.C. 756.

(S) [1954] S.C.R. 1077.

i96o by the appellant, he ha.d in fact not been accused of it R a;a [. ]Bansilal .-arayania [::--]. 1 at y the stage when the currency notes were produced h" 1m ; 1t . was I so } 1e Id t at 1t . cou Id not said t . } iat v he was compelled to produce the said currency notes, Manuk l'hiro• because he might easily have refused to produce them, Mistry 6- Another and so there was no occasion for him to invoke the . -constitutional protection against self-incrimination. Ga;tndragadkar J. Wb at t en 1s • t resu t o t ese 1 · · cc1s10ns? Th ey show that in determining the complexion and reach of its respective sub-clauses the genera.I scheme of Art. 20 a.s a. whole must be considered, and the effect of the inter-action of the relevant words used in them must be properly'apprecia.ted. Thus considered the cons-titutional right guaranteed by Art. 20(2) against double jeopardy ca.n be successfully invoked only whf're the prior proceedings on which reliance is plac-ed must be of a. criminal nature instituted or continu-ed before a. court of law or a. judicial tribunal in accor-dance with the procedure prescribed in the statute which creates tho offence and regulates the procedure. It would be noticed that the cba.ract.er of the said proceedings as woll as the character of the forum before which the proceedings are initiated or conduct-ed ltre treated as decisive in the matter. Similarly, for invoking the constitutional right against testimo-nial compulsion guaranteed under Art. 20 (3) it must appear that 11 formal accusation has been made against the party plea.ding the guarantee and that it relates to the commission of an offence which in the normal course may result in prosecution. Here a.gain the nature of the accusation and its probable sequel or consequence a.re regarded.as important.

Thus we go ha.ck to the question which we ha.v<• already posed : . was the appellant · accused of any offence at the time when the impugned notices were served on him? Jn answering this question in the light of the tests to which we have just referred ~t will be necessary to determine the scope and nature of the enquiry which the inspector undertakes under s. 240; for, unless it is shown that an accusation of a. crime can be made in such an enquiry, the a.ppella.l)t's plea. under Art. 20(3) cannot succeed. Section 240shows that the enquiry which the inspector under-1960 takes iB in substance an enquiry into . the affairs of . the Ra;a . N-arayan 1 1 company concerned. Certam documents are reqmre Bansilal to be furnished by company to the Registrar under v. the provisions of the new Act. If, on examining the Maneck i'hiroz said documents, the Registrar thinks it nece.ssary to Mistry & Another -call for information or explanation he is empowered · to take the necessary action under s. 234(1). Similarly, Gajendragadkar J. under s. 234(7) if it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the busi, ness of the company is carried on in the manner speci-fied in the said sub-section the Registrar proceeds to make the enquiry. Thus the scope of the enquiry con-templated by s. 234 is clear; wherever the Registrar has reason to believe that the affairs of the company are not properly carried on he is empowered to make an enquiry into the said affairs. Similarly under s. 235 inspectors are appointed to investigate the affairs of any company and, report thereon. The investigation carried on by the inspectors is no more than the work of fact-finding commission. It is true that as result of the investigation made by the inspectors it may be discovered that the affairs of the company disclose not only irregularities and malprac-tices but also commission of offences, and in such case the report would specify the relevant particulars prescribed by the circular in that behalf. If, after receiving the report, the Central Government is satis-fied that any person is guilty of an offence for which he is criminally liable, it may, after taking legal advice, institute criminal proceedings against the offending person under s. 242(1); but the fact that prosecution may ultimately be launched against the alleged offender will not retrospectively change the complexion or character of the proceedings held by the inspector when he makes the investigation. Have irregularities been committed in managing the affairs of the company; if yes, what is the nature of the irregularities? Do they amount to the commission of an offence punishable urider the criminal law ? If they do who is liable for the said offence? 'These and

such other questions fa.II within the purview of the ins-

r96o R . t.-:-"1 "8.;;,~;;n 1 1 • sections [pector's invoHtigation. The scheme· ]is that the investigation begins broadly with [of ][the relevant ]a. v. view to examine the management of the affairs of the Maneck Phim company to find out whether any irregularities have Mistry r~ Another been committed or not. In such case there is no accusation, either formal or otherwiRe, against any [. ][d-]•J"' ragodkar . f. spec1 'fi m ' d' 1v1 'd ua. l ; t ere may a. ger.era I a. ]] ega.t1on · that the affairs a.re irregularly, improperly or illegally managed; but who would be responsible for the affairs which a.re reported to be irregularly managed is matter which would be determined at the end of the enquiry. At the commencement of the enquiry and indeed throughout its proceedings there is no accused person, no accuser and no accusation against anyone that he has committed an offence. In our opinion general enquiry and investigation into the affairs of the company thus contemplated cannot be regarded as an investigation which starts with a.n accusation contemplated in Art. 20(3) of the Constitution. In this connection it ia necessary to remember that the rele-vant sections of the Act appear in Part VI which generally deals with management and administration of the companies.It is well-known that the provisions of the Act are modelled on the corresponding provisions of the English Companies Act. It would, therefore, be use. fol to refer to the observations made by the House of Lords in describing the character of the enquiry held under the corresponding provisions of the English Act in tho case of Hearts of Oak Assurance Co. v. Attorney. General('). In that case Lord Thankerton said "it appears to me to be clear that the object of the exa-mination is merely to -recover information as to the company's affairs and that it is in no sense a. judicial proceeding for the purpose of trial of an offence; it is enough to point out ·that there a.re no parties before the inspector, that he a.lone conducts the enquiry, and that the power to examine on oath is confined to tho officers, members, a.gents and servants of the com-pany". We ought, however, to add that the 11\st (1) 1932 A.C. 392.

observation is no longer true about the inspector's r96o powers under "11 s. 240 of the new Act. In • the same case . R a;a . N-arayan 1 1 Lord Macqu an o serve t at "t o 3eot o t en-Bansizaz quiry manifestly is that the Commissioner may either v. by himself directly or through the medium of dele-Maneck Phiroz gate obtain the information necessary to enable him Mistry & Another to decide what action, if any, he should take. Thee . d- k car dma [. ][1 ]wor s o th sec t" 10n are th ose w h" ic em-a;en ragad ·ar 1 . power the Commissioner or his inspector to examine into and report on the affairs of the society ". Thus it is clear that the examination of, or investigation . into, the affairs of the company cannot be regarded as proceeding started against any individual after framing an accusation against him. Besides it is quite likely that in some cases investigation may disclose that there are no irregularities, or if there are they do not amount to the commission of any offence ; in such cases there would obviously be no occasion for the Central Government to institute .criminal proceedings under s. 242(1). Therefore, in our opinion, the High Court was right in holding that when the inspector issued the impugned notices against the appellant the appellant cannot be said to have been accused of any offence; and so_ the first essential condition for the application of Art. 20(3) is absent. We ought to add that in the present case the same conclusion would follow even if the clause " accused of any offence " is interpreted more libera.lly than was done in the case of M. P. Sharma('), because even if the · expression "accused of any offence" is interpreted in very broad and liberal way it is clear that at the relevant stage the appellant has not been, and in law cannot be, accused of any offence. Thus the tests about ·the character Qf the proceedings and the foruru where the proceedings are initiated or intended to be taken are also not satisfied; but, as we have already indicated, such broad and liberal interpretation of the relevant expression does not appear to be consis-tent with the tenor and effect of the previous decisions of this Court.

It is true that in his report the Registrar has ma.de

(1) [1934] S.C.R. 1077.

r9oo certain allPga.tions on whic~ ~Ir. Sastri has relied. He /laia ,-:;,-;.,,.,,1"1 contends ~hat the st11te.m;-nts in the report do a.mount • Ransilai t-0 allegat1011s of comm1sswn of oflences b.i; the appel-"· la.nt. What the RPgistra.r has stated in his report in Manech Phi.oz this particular case cannot be relevant or material in M"''Y G- A'"''"" deciding the vires of the impugned section. Tho vires of the section can be determined only by examining iljtll [_ ][d--· ],agadr.tu [, ]J. l t re evant scheme of the Act, nnd we h11.ve already seen that such an examination d(){'s not assist the appellant's contention that Art. 20(3) is contravened. Besides, what the Hegistra.r has stated in his report can hardly amount to an accusation against the appellant; it is report submitted by him t-0 the Cer!trnl Government, and it is only intended to enable tho Central GovcrnmPnt to decide whether it should appoint a.n inspector. It is not as if the investigation before tho inspector begius on the basis tha.t tho Hegis-tra.r is the complainant who has ma.de a.n a.ccu8ation against the appellant, or that the function of the investigation is to tiud out whether the sa.id accusa-tion is proved or not.. As we have already seen an enquiry under s. 240 may require large number of persons to give evidence or produce documcnll! but it cannot be said that any accusation is ma.de against any of the said persons. In fact three persons have been served with similar notices in the present en-quiry which shows that the inspector desires to obtain rellwant e\•idenco from them as from the appellant. How can it be said that an accusation has been ma.de against the sa.id three persons, and that incidentally holps to bring out the real character and scope of the enquiry. Therefore we do not think that the state-ments made in the Registrar's report on which .\Ir. Sastri relies can really assist us. in deciding the ques-tion of the vires of s. 240. It is also significant that the a.ppella.ut has not challenged the va.hdity of the impugned notices on any ground relatable to, or based on, the sa.id report. The challenge is founded 011 tho broad and genera.I ground that s. 240 offends against Art. 20(3).

Wo may incidentally a.dd tha.t it was in support of his argument based on the Registrar's report that

Mr. Sastri sought to rely on the decision of the Cal-

· cutta High Court in Collector of Customs ~· Calc1;1tta Raja Narayan/al Motor and Cycle Co. ([1]). In that case cer~am notwes Bansilal had been issued under s. 171A of the Sea Customs Act v. to certain persons to appear before the customs offici-Maneck Phiroz a.ls and to produce certain documents. The High Mistry & Another Court took the view that "it appeared from the accu- . d-dk . . . a;en raga ar 1 . sat10ns made m t searc warrants at t mstance of the customs authorities and those made in one of the notices by the customs authorities themselves, that the accusations of criminal offences could not be excluded " ; and so it was held that the requirements of Art. 20(3) were satisfied and the protection under the said article was available to the persons concerned. In our opinion this decision does not assist the appel-lant. It proceeded on the finding that accusations of criminal offences could be held in substance to have been made against the persons concerned, and it dealt with the other points of law on that assumption. That being so, we think it unnecessary to discuss or consider the said decision. Our conclusion, therefore, is that s. 240 does not offend against Art. 20(3) of the Constitution.

That still leaves the challenge to the vires of the

said section under Art. 14 of the Constitution, though we ought to add that Mr. Sastri did not seriously press his case under Art. 14, and we think rightly. The argument under Art.· 14 proceeds on familiar lines. It is urged that the ordinary protection afford-ed to witnesses under s. 132 of the Indian Evidence Act as well as the protection ll.fforded to accused per-sons under s. 161(1) and (2) of the Criminal Procedure Code, have been denied to the appellant in the investi- · gation which respondent 1 is carrying on in regard to the affairs of his company, and that violates equality before the law. The scope and effect of Art. 14 have been considered by this Court frequently. It has been repeatedly held that what Art. 14 prohibits is class legislation; it does not, however, forbid reasonable classification for the purpose of legislation. If the classification on which legislation is based is founded

(t) A.l.R. 1958 Cal. 682.

r96o on an intelligible differentia which distinguishes per-/I [. ][.-, ][-]1 1 [sons ][or ][tbingH ][that ][arc ][grouped ][together ][from ][others ]a;a 8 ""'"Y"" [• ][.,,,]1[" ]1 I et outo t egroup,and 1fthe · dtffcrentta · · has rat10n-· v. al relation to the object sought to be achieved, then the Ah>1«ck Phnoz classification does not offend Art. 14 (Vide: Shri Ram Mfr1ry & A>1othrr Krishna Dalmia v. Justice Tendolkar (1)). Now in the -. light of this test how can it be said that the classifi-Ga;endragadka• ]. · cat10n ma y ss. 239 and 240 ouen s Art. 14 o t Constitution? company is creature of the statute. There can be no doubt that one of the objects of tho Companies Act is to throw open to all citizens the privilege of carrying on business with limited liability. Inevitably tho business of the company has to be carried on through human agency, and that some-times giYes rise to irregularities and malpractices in th•l management of the affairs of the company. If persons in charge of the management of companies abuse thAir position and make personal profit at the cost of the creditors, contribut.ories and others interes-ted in the company, that raises problem which is very much different from the problem of ordinary misappropriation or breach of trust. The interest of the company is tho interest of several persons who constitute tho company, and thus persons in manage-mtJnt of tho affairs of such companies can be classed by themHelves as distinct from other individual citizens. citizen can and may protect his own interest, but where the financial interest of large number of citiz-ens is loft in charge of persons who manago the affairs of the companies it would be legitimate to treat such com pauies and their managers as class by them-selves and to provide for necessary safoguards and checks against possible abuse of power vesting in the managers. If the relevant provisions of tho Act dealing with enquiries and investigations of the affairs of the companies are considered from this.point of view there would be no difficulty in holding that Art. 14 is not violated either by s. 239 or s. 240 of the new Act.. The result is the appeal fails and is dismissed with cost.s.

Appeal dismissed.

'"' r .. ,. .. ,., C: r. ~ .,,.,.