R.V. Mohammed vs Trichur Heart Hospital Ltd. and Others

K.A. Abdul Gafoor, J.—This is a petition u/s 237(a)(ii) of the Companies Act, 1956. The petitioner, a contributory of the first respondent-company seeks a declaration that the company affairs are in such a position that it requires investigation by an inspector appointed by the Central Government in that regard. It is submitted that the company is not keeping proper accounts and it had done several business activities without obtaining the statutory sanction from the Central Government as enjoined by the law. The directors of the company including respondents Nos. 2 and 3 are now mismanaging the affairs of the company. Therefore, the entire affairs of the company require investigation and this court has power u/s 237(a)(ii) of the Companies Act to order so. If such an order is issued, necessarily, the Central Government will be bound by that order to investigate it. It is submitted, relying on the decision in Kumaranunni v. Mathrubhumi Printing and Publishing Co. Ltd. [1981] KLT (ShN) 88 (Case No. 159) that when it is prima facie satisfied, such a declaration can be issued.

Of course, the company court has got power to exercise in terms of Section 237(a)(ii) of the Act. But Section 237(b) empowers the Company Law Board, if there are circumstances necessitating investigation to order accordingly. This power has been granted to the Company Law Board, in terms of the amendment effected in the Companies Act in 1988. Before the amendment sanction had to be given in terms of Sub-clause (b) by the Central Government. When the power vested in the Executive Government is invoked, one incumbent may perhaps feel that justice may not be meted out. But now, after the amendment in 1988 the power vested with the Central Government had been taken away and vested with the Company Law Board. When the power is conferred on the Company Law Board, it is incumbent on the petitioner to approach that statutory Board which shall examine and do justice, as the circumstances demand. In such circumstances, there arises no reason for exercising the discretionary power vested in this company court to direct such investigation or declare that it needs investigation by the Central Government. Accordingly, the company petition fails and is dismissed without prejudice to the right of the petitioner to move the Company Law Board in terms of Section 237(b) of the Companies Act.