Central Tipperah Tea Co Limited v. State — 1966 DIGILAW 81 (CAL)

JUDGMENT 1. THIS matter has been set down for consideration of the report of the Official Liquidator under section 519 of the Companies Act, 1956, (hereinafter referred to as the Act). On June 18, 1963, an order was made by this Court ex parte on the application of the Official Liquidator for public examination of the Directors of lohan Valley Tea Co. Ltd. On January 25, 1964, four of the Directors of that company took out a summons for an order that the order made on June 18, 1963, be discharged, and the said directors be exculpated from all charges made against them. On this application an order was made discharging the previous order made on June 18, 1963, and leave was granted to the liquidator and the Directors of Lohar Valley tea Co. Limited to file affidavits with regard to the Report filed by the liquidator for consideration of this Court. 2. THE facts in this case and the circumstances leading up to the submission of the Report by the Official liquidator of this Company are identical with the facts of the Lohar Valley tea Co. Limited, in liquidation. The directors of this Company are the same as the Directors in the Lohar Valley tea Co. Limited. Both the Companies carried on business as tea planters and in both cases the tea estate of the company was sold to the same company, namely, M. Chatterjee and Co. Private limited. The order made on June 18. 1983, in Lohar Valley Co. Limited was followed by an application by the official Liquidator of that Company for setting aside or recalling the order discharging the order dated June 13, 1963. On this application an order was made by this Court on May 4, 1964, dismissing the application for recalling or setting aside the order made on June 18, 1963. I held in the judgment reported in (1) 68 C. W. N. 938 that the said Directors would be entitled to file affidavits setting cut their contentions therein challenging the jurisdiction of this Court to make an order for public examination of the Directors of that company and that such affidavits and also any affidavit by the Liquidator should be taken by this Court into consideration, at the time when the report would be considered by this Court. In terms cf this order, three of the directors of this Company and the liquidator filed affidavits with regard to the Report which is now before me for consideration. 3. THE Central Tipperah Tea Co. Limited (hereinafter referred to as the company) was incorporated as a public company in 1918. This Company was all along managed by the Aryan planters Agency, of which the sole proprietor was one Sachindranath Chatterjee, who became a Director of the Company on January 27, 1956. On March 26, 1957, a special resolution was passed at an extraordianry general meeting of the Company, for voluntary winding up of the Company. The said sachindranath Chatterjee, one of the Directors of the Company, was appointed the voluntary Liquidator. Subsequently the Official Liquidator of this Court was appointed the Liquidator of the company. 4. THE Company owned a tea estate known as Debendianagar Tea estate in the district of Tripura and carried on the business of tea planters. In the Report prepared by the Official liquidator under Section 519 of the Act, which is now under my consideration, several specific charges have been made, which in the opinion of the Liquidator constitute fraud. Three of the Directors of the company, namely, Sachindranath chatterjee, Jitendra Mohan Mukherjee and kalikesh Mukherjee have filed an affidavit affirmed by them on august 4, 1964, in which they have denied the charge of fraud made by the Official Liquidator in the report. In this affidavit, they contend that all that has been done by and on behalf of the Company has been done in due course, and in conformity with the provisions of the statute. 5. MR. S. Sen, learned counsel for the said three Directors of the Company contended that on the materials disclosed in the affidavit filed by the three directors, it could not be said that a, fraud had been committed either in carrying en the business of the Company, or in the sale of the Tea Estate. He; contended that, J. Thomas and Co. had made a valuation of the garden and such valuation was placed between Rs, 3,00,000/- and Rs. 4,00,000/ -. On the basis of this valuation, Mr. S. Sen argued, the garden was sold at a value which was higher by Rs. 1,25,000/ -. The earnest money of Rs. 1,15,000/- was duly paid by M. Chatterjee and Co. had made a valuation of the garden and such valuation was placed between Rs, 3,00,000/- and Rs. 4,00,000/ -. On the basis of this valuation, Mr. S. Sen argued, the garden was sold at a value which was higher by Rs. 1,25,000/ -. The earnest money of Rs. 1,15,000/- was duly paid by M. Chatterjee and Co. Private limited by debiting the Company and crediting M. Chatterjee and Co., Private limited with a sum of Rs. 1,13,758/14/10, as the purchaser was a creditor of the company in the said sum. The balance of Rs. 1499/1/2 was paid by the purchaser and the Company's books were duly credited with Rs. 113,758/14/113. Therefore, it was argued, the Company received the earnest money from the purchaser. 6. THE next contention of Mr. S. Sen was that it was true that it was agreed that the shareholders would 'be paid at the rate of Rs. 4/- per share. But this payment could not be made to the shareholders, as demands for income tax and land revenue to the extent of Rs. 65,000/- came up for payment and this demand had to be met by the Company. Regarding suppression of books and failure to maintain records of the garden. Mr. S. Sen submitted that all books had been duly maintained and the garden books were lying at the garden and were now in the possession of the purchaser of the garden. With regard to the transactions in Export Quota rights, Mr. S. Sen argued, that these transactions were quite regular as the tea Board accepted or approved the returns that were filed by the Company regarding transactions in Export Quota rights. 7. IT was next argued by Mr. S. Sen that there was no substance in the allegations made against the Directors in the Report prepared by the Official Liquidator and there was no justification or foundation for the conclusion of the Official liquidator that the Directors of the company were guilty of fraud. Mr. S. Sen, therefore, submitted that no order should be made for the public examination of the Directors of the Company. 8. MR. S. Sen next argued that the Official Liquidator must make a judicial determination of the question namely that a fraud had been committed by the persons sought to be publicly examined. Mr. S. Sen, therefore, submitted that no order should be made for the public examination of the Directors of the Company. 8. MR. S. Sen next argued that the Official Liquidator must make a judicial determination of the question namely that a fraud had been committed by the persons sought to be publicly examined. He argued that as the official Liquidator had in this case become a litigant and had launched several proceedings against the Directors of the Company, he was incapable of making a judicial determination of the question of fraud alleged to have been committed by the Directors. The next contention of Mr. S. Sen was that before an order for public examination could be made, the directors must be found guilty of fraud. It was argued that fraud was a false statement deliberately made, knowing it to be false, with the object of inducing the other party to act upon such a statement. Before a finding of fraud was made by the Official Liquidator, he must satisfy the Court, Mr. S. Sen argued, that the Directors had made false statements, knowing such statements to be false or in wilful or reckless disregard of the truth or falsity of the statements made, and intending that such statements should be acted upon by the shareholders and creditors of the company. An element of deceit, Mr. S. Sen argued, must be there in order to enable the Official Liquidator to make a finding of fraud. The statements in the report, it was argued, did not disclose an element of deceit on the part of the Directors of the Company and, therefore, no finding of fraud could be made against the Directors. In support of this contention, Mr. S. Sen relied upon several decisions which I will now proceed to discuss. 9. THE first decision relied upon by Mr. S. Sen is a decision of the House of Lords in (2) Ex parts George stapylton Barnes, 1896 A. C. 146. In that case the Official Receiver had made a report under Section 8 (1) of the companies (Windng up) Act, 1890. 9. THE first decision relied upon by Mr. S. Sen is a decision of the House of Lords in (2) Ex parts George stapylton Barnes, 1896 A. C. 146. In that case the Official Receiver had made a report under Section 8 (1) of the companies (Windng up) Act, 1890. The provisions in that Sub-section dealt with (a) the question of the capital issued, subscribed and paid up and the estimated amount of assets and liabilities ; (b) the causes of failure of the company ; and (c) the question whether in the opinion of the official receiver further enquiry was desirable relating to the promotion, formation or failure of the company or the conduct of the business. It was on this report that the official receiver asked for public examination of certain persons. Vaugham Williams, J., refused to make the order. Against that order the official receiver preferred an appeal and the Court of Appeal affirmed the decision of the trial Court, and thereupon an appeal was preferred to the House of Lords. Lord Halsbury, L. C., after referring to the provisions of the english Act held that the statute required that the persons who had been reported as guilty of fraud were to be examined and for that purpose to be summoned to answer the charge. If such persons were exculpated they were to get the costs and if they were not, they were to bear their own expenses. But it was held that in order to give the Court jurisdiction to make an order, there must be a finding of fraud and a finding of fraud against an individual who was made subject to being summoned before the Court and was compelled to answer, whether the answer incriminated him or not ; on being exculpated, the was to receive his costs. But for such examination, fraud must be found and it was not necessary that the word 'fraud' should be used, but facts must be found to suggest fraud against the persons incriminated. In the event of there being no fraud found, or in the event of there being no individual pointed out as being guilty of fraud, the court would have no jurisdiction to make an order for public examination. Lord Herschell held that no person could be ordered to attend and be examined except those who were prima facie inculpated. In the event of there being no fraud found, or in the event of there being no individual pointed out as being guilty of fraud, the court would have no jurisdiction to make an order for public examination. Lord Herschell held that no person could be ordered to attend and be examined except those who were prima facie inculpated. But if they were exculpated, they were saved from injustice by the provision that if they were exculpated the Court could give them their costs. This decision, however, is of no assistance to Mr. S. Sen. There was no report made by the official receiver under Section 8 (2) of the english Act, which is pari materia with sections 478 and 519 of the Companies act, 1956. No report was made by the official receiver in that case, that in his opinion fraud had been committed by any person and the English Courts were not considering a report as required by section 8 (2) of the English Act. But the report as mentioned earlier was made under Section 8 (1) of the English act, and it was for that reason that the English Courts concurrently held that an order for public examination could not be made. 10. THE next case relied upon by Mr. S. Sen was also a decision of the house of Lords in (3) Bradford Third equitable Benefit Building Society v. Borders, (1941) 2 A. E. R. 205. That was: a common law action for deceit and. Viscount Maugham held at page 211 of: the report that four things were required to be established in an action for deceit. Firstly a representation of fact made by words or conduct, secondly the representation must be made with a knowledge that it was false, thirdly it must be made with the intention that, it should be acted upon by the plaintiff, and fourthly it must be proved that the plaintiff acted upon the false statement and had sustained damages by so doing. Relying upon these observations, Mr. S. Sen argued that these four elements must be present before a finding of fraud could be made by the Official liquidator. But in my opinion, this decision again does not assist Mr. Relying upon these observations, Mr. S. Sen argued that these four elements must be present before a finding of fraud could be made by the Official liquidator. But in my opinion, this decision again does not assist Mr. Sen, because this is not an action for deceit in which the Official Liquidator is required to prove, as a plaintiff in an action for deceit, that damages have been suffered by the Official Liquidator toyreason of the fraud of the Directors of the Company who are in the position of defendants in an action for deceit. There is no question of damages being awarded to the Official Liquidator on account of the fraud of the Directors. The only question is whether an order should be made for the public examination of the Directors having regard to the finding of fraud made by the official Liquidator in his report. The next case relied upon by Mr. S. Sen was a decision of the judicial Committee in (4) North West transportation Company Limited v. Henry Beatty and others, (1887) 12 A. C. 589. In that case the directors of the company had entered into a contract, which though fair in its terms was voidable, the vendor being one of the directors himself. It was held that the vendor who was a director and had large voting power was entitled to exercise this voting power as a shareholder in the general meeting to ratify the contract and this exercise of voting power by the vendor-director could not be deemed to be oppressive for his possessing a majority of votes acquired in a manner authorised by the articles of the company. Reliance was placed on this decision by Mr. S. Sen in support of his argument that even if one of the directors was present at the meeting of the shareholders and had exercised his voting rights in support of the transaction of sale of the tea garden to the purchaser company of which this director was also a director, the transaction could not be held to be illegal. S. Sen in support of his argument that even if one of the directors was present at the meeting of the shareholders and had exercised his voting rights in support of the transaction of sale of the tea garden to the purchaser company of which this director was also a director, the transaction could not be held to be illegal. But in this case now before me, I am not concerned with the question of the validity or legality of the transaction of sale of the tea garden, nor with the right of one of the directors of the vendor-company to exercise his voting rights to support the sale to the purchaser company in which also he was a shareholder and director. The question before me is, if having regard to the nature of the transaction a prima faice case of fraud has been made out in the report and if the Official liquidotor had sufficient materials before him to make a finding of fraud. I am not concerned in this matter with the validity of the sale of the tea garden and for that reason this decision is of no. assistance to Mr. S. Sen. 11. IN support of his argument that the Directors were entitled to use their voting power in support of the sale of the garden, reliance was placed by Mr. S. Sen on another decision of the judicial Committee in (5) Burland and Ors. v. Earle and Ors., (1902) A. C. 83, in which it was held that unless otherwise provided by the regulations of a company, a shareholder was not debarred from using his voting power to carry a resolution by reason of his having a particular interest in the subject-matter of the voting. But as I said earlier, I am not concerned in this matter with the right of the shareholders to use their voting power in favour or against a transaction in which he was interested, nor with the validity or legality of the transaction itself. Those are matters which might arise for consideration in other proceedings, and the only matter before me is whether on the basis of the report of the Official liquidator an order for public examination ought to be made. 12. THE next case relied upon by Mr. Those are matters which might arise for consideration in other proceedings, and the only matter before me is whether on the basis of the report of the Official liquidator an order for public examination ought to be made. 12. THE next case relied upon by Mr. S. Sen is a well known decision of the House of Lords in (6) Derry v. Peek, (1889) 14 A. C. 337. That again was a common law action of deceit and it was held that in such an action the plaintiff must prove actual fraud, which could be proved only when it was shov/n that a false representation had been made knowingly, or without, belief in its truth or recklessly without caring it to he true or false Such a false statement, it was held, made through carelessness and without reasonable ground for believing it to be true, might be evidence of fraud, but did not necessarily amount to fraud. Again if such a false statement was made in the honest belief that it was true, it was held not to be fraudulent and did not render the person making it liable to an action of deceit. This decision, to my mind, again does not assist Mr. S. Sen as this is not an action for damages for deceit. It is not necessary for the Official Liquidator to prove that damages have been suffered by the shareholders and the creditors of the company by reason of the fraud of the directors, nor is he claiming a decree for damages against the Directors. All that is necessary for the purpose of making an order under Section 519 is, if the Official Liquidator is justified in making a finding of fraud against the directors, or any of them, on the materials in the report prepared by him. Consideration of a report under Section 519 of the Act by the Court should not be confused or compared with an action for damages for deceit. The only question before me is if the report contains sufficient facts to justify the conclusion drawn by the Official liquidator of the finding of fraud made by him. This is not a forum for denial of the charges made by the Official liquidator in the report. The only question before me is if the report contains sufficient facts to justify the conclusion drawn by the Official liquidator of the finding of fraud made by him. This is not a forum for denial of the charges made by the Official liquidator in the report. If indeed an order for public examination is made, the persons who are directed to be so examined, would get ample opportunity of denying or disputing the charges made against them. If they are exculpated of the charge of fraud they would be compensated by the award of costs, which is the solatium which the law provides. But it is not open to them, to come and say at this stage, that the charges made against them in the report are false or cannot be sustained. The whole object of examination of the Directors, either private or public would be defeated, if the court was to held at this stage that no order caught to be made for their examination as the charge of fraud could not be sustained. An investigation by public examination of Directors is necessary as the charges cannot be adjudicated upon by statements in affidavits, and the lav; for that reason provides for an examination of the Directors. Indeed if it were held that the Court should determine the question if the directors are liable to be publicly examined, on the basis of the statements made by them in affidavits, in no case an order for public or private examination of Directors could be made, because in every case where such an examination is sought, for, the Directors would come forward with affidavits and deny or dispute the charges and then claim that no order ought to be made against them because the charges are false. That is not what I conceive to be the object of the Act in providing for the examination of the Directors of a Company which is being wound up. That is not what I conceive to be the object of the Act in providing for the examination of the Directors of a Company which is being wound up. If there is a prima facie case of fraud, or if there are materials which justify the Liquidator in making a finding of fraud in the Report, the Court should not at the stage of consideration of the report for the purpose of making an order for public examination of the directors, adjudicate upon or express any opinion on the merits of the Report of the Liquidator on the question of fraud or on the contentions raised by the Directors denying or disputing the charges of fraud. The only material which the Court can go into at this stage, is, the question of jurisdiction to make the order for the public examination of the Directors. If the charge of praud is false, and if the Directors are exculpated, as they should be if the charges are false, they would get the costs of the public examination as compensation for the examination which was not justified. The Directors would get the opportunity of denying or disputing the charge of fraud made against them at their public examination. But the question whether they are guilty of fraud cannot, in my view, be determined on affidavits filed on behalf of the Directors at the stage of consideration of the Report. The next case relied upon by Mr. S. Sen was (7) Ex parte Burrell. In re. Robinson, (1876) 1 Ch. D. 537. That was a case of acceptance of a composition by the creditors of a debtor, the amount due to the creditors being payable in three instalments, the third of which was guaranteed by a surety. Unknown to the creditors, the debtor had agreed to indemnify the surety against any liability which he might incur under his guarantee. The question was whether the agreement between the debtor and the surety was valid. In dealing with the question of the validity of this agreement, Mellish, l. J., held that when an alleged ground of false representation was set up, it was necessary to distinguish between a representation of an existing fact, which was untrue and a promise to do something in future, and to consider what the bargain was. In dealing with the question of the validity of this agreement, Mellish, l. J., held that when an alleged ground of false representation was set up, it was necessary to distinguish between a representation of an existing fact, which was untrue and a promise to do something in future, and to consider what the bargain was. As the representations to the creditors in that case were correct, and the only question was what was the bargain that was made between the creditors, the debtor and the surety, the debtor was prefectly at liberty to agree to indemnify the surety and for that purpose deposit goods with the surety. Relying upon these observations, Mr. S. Sen contended that the representations made by the directors as to existing facts relating to the present liabilities of the Company were true and that the fact that subsequent to the agreement for sale, the liabilities due to the Income Tax Department and other creditors came to light, did not make the earlier representation made by the Directors regarding the liabilities of the Company fraudulent. This decision, to my mind, is of no assistance to Mr. S, Sen. It is not known if the representation made by the Directors with regard to the existing liability of the company before the agreement for sale was a truthful representation. It is yet to be seen if they were aware of the liabilities in the sum of Rs.61,885-9-6 to the Income Tax department and various other creditors, whose names are set out in the resolution passed by the Board of Directors of the company on February 15, 1957, or if they were completely in the dark of the Company's liabilities in the large sum of Rs. 61,885-9-6. This is a matter which can, and which should be cleared up, in the public examination of the directors if the same is directed. 13. MR. S. Sen next relied upon the well-known observations of Lord selborne, L. C., in (8) John Wallingford v. The Directors of the Mutual Society, 5 A. C. 685 to the effect that with regard to fraud, if there was any principle which was perfectly well settled, it was that general allegations, how ever strong might be the words in which they were couched, were insufficient even to amount to an averment of fraud of which any Court ought to take notice. These observations, to my, mind, are hardly of any assistance in this case. The question before me is not whether there is sufficient pleading of fraud, nor whether the Directors can be held liable on a charge of fraud. It should not be overlooked that the observations mentioned above were made in a common law action based on fraud and the question before the Court was whether there was a sufficient pleading of fraud. For the same reason, the observations of the Judicial Committee in (9) Balgangadhar Tilak and others v. Shriniwas Pandit and another, L. R. 42 LA. 135, on which reliance was placed by Mr. S. Sen, are of no assistance to the respondents in this case. 14. THE next contention of Mr. S. Sen was that the Liquidator was not entitled to an order for public examination as he had an ulterior object, namely, that he intended to utilise the evidence of the Directors in the misfeasance proceedings which were pending. Therefore, it was submitted that the object of a public examination of the Directors was not a bonafide object, as the object of the Liquidator was to obtain evidence in support of the case made out by him in the misfeasance summons. In support of the above contention, Mr. S. Sen relied upon the decision in (10) In. re. Metropolitan Bank, (1880) 15 Ch. D. 139. In that case a voluntary liquidator commenced an action for damages against a Director of the Bank for having made a false representation to the Bank regarding the position and credit of a customer whereby the Bank lost about 3000. In this action, the liquidator served interrogatories on the defendants which were fully answered and thereafter the liquidator applied for a public examination of the Director. It was in these facts that it was held that the liquidator had already obtained from the defendants the answers to the interrogatories and thereafter he had sought to enforce further answers which was refused, and it was then that he came to take advantage of what was described as inquisitorial powers conferred by the companies Act. It was, therefore, held that having subjected the defendants to searching interrogatories, the plaintiff must be content with the answers he obtained. It was, therefore, held that having subjected the defendants to searching interrogatories, the plaintiff must be content with the answers he obtained. These observations again are of no assistance to the respondents, firstly, because they were made in a common law action based on fraud and secondly, because the liquidator had already obtained answers from the director to the interrogatories served upon him, 15. THE next decision relied upon by Mr. S. Sen on this aspect of his argument was (11) In re. Imperial continental Water Corporation, (1886) 33 ch. D. 314. In that case an application for public examination of the directors of a company was made pending an action against the company and its directors, by a creditor, who claimed to enforce his mortgage on calls and also to enforce an agreement one term of which was that the creditor who was also a shareholder would be entitled to have his shares cancelled and to removal of his name from the register of the shareholders and the list of contributories. The English Court of Appeal upheld the decision of Chitty, J., postponing the examination till after the trial of the action and held that the powers of public examination were given for more beneficial winding up of the company and ought not to be used for the purpose of giving to a plaintiff in an action brought to enforce his own individual rights and the exercise of such powers would not be for the benefit of the company. This decision again is of no assistance to the Directors in the case now before me, as in this case a creditor who was the plaintiff in an action was seeking to obtain an order for public examination of the directors of the company in aid of his action. But it is to be noticed that in this case Lindley, l. J., held at page 321 of the report: -"it cannot be said as a general proposition that the power given to the Court by section 115 can never be exercised while there is a pending action between some contributory and the directors. One must look at the object of the action, and look at the object of the section which gives these powers and having regard to the object of the section it is not in my opinion to be applied to an action brought by Mr. One must look at the object of the action, and look at the object of the section which gives these powers and having regard to the object of the section it is not in my opinion to be applied to an action brought by Mr. Punchard for his own individual benefit apart from that of the contributories generally. To help such an action is not the object of this section. An action might in substance be an action by a contributory for the benefit of himself and the other contributories, having for its object the getting in the assets of the company. That would be a totally different action, and the judge would probably in such a case take a different view of the propriety of making an order under this section. " it will thus be clear that the Court rejected the attempt by an individual creditor to obtain an order for public examination in aid of an action which was filed for his own personal benefit and it was made clear that if the action was not only for the benefit of an individual creditor who had brought the action, but also for the benefit of the general creditors and the contributories, an order for public examination of the directors could be made. In this case no action has been brought by individual creditor, but the Official liquidator has taken out a misfeasance summons, and even if the object of the public examination of the Directors is to obtain materials to support the case of a misfeasance summons, it cannot be held that an order for public examination ought not to be made. The misfeasance summons has, without a doubt been taken out, for the benefit of the general body of creditors of the company, and if in aid of this summons the liquidator seeks a public examination of the Directors, I should hesitate to hold that the object of the Liquidator is improper or that an order for public examination ought not to be made. 16. THE next case relied upon by Mr. S. Sen was (12) In re. North australian Territory Co., (1890) 45 Ch. EX 87. 16. THE next case relied upon by Mr. S. Sen was (12) In re. North australian Territory Co., (1890) 45 Ch. EX 87. In that case the liquidator of a company brought an action against another company and obtained an order for affidavit of documents, but the court declined to make an order for production of documents or the examination of the company's secretary on interrogatories on the ground that no defence having been filed, discovery was premature in that stage of the action. The liquidator thereafter obtained an order for the examination of the secretary before an examiner. In such examination the seceretary refused to answer a question relating to the matters in issue in the action. It was held that the liquidator had shown no reason for seeking discovery except to assist him in the action and thereby to evade the order of the Court postponing the discovery in the action and for that reason the witness was justified in refusing to answer the question This decision also, to my mind, does not assist the Directors in this case, as there was no question involved of evading any order of Court already made postponing discovery in a pending action. Mr. S. Sen next relied upon a decision of the Supreme Court in (13)Satis Churn Law v. H. K. Ganguly, (1962) 2 S. C. A. 498. In that case an order was made under Section 477 of the act for public examination of a director. This was followed by an application by the director concerned for an order recalling, vacating, setting aside or modifying the order directing his public examination. This application was rejected by the trial Court, but was modified in appeal and the order for public examination of the director was upheld. Against this order an appeal was preferred to the Supreme Court and it was held that in a proper case the Court had jurisdiction, if it was satisfied that the order of examination was vexatious or oppressive, or other grounds existed, to discharge the order for public examination of the director and the appeal was dismissed. This decision is of no assistance to Mr. S. Sen's client as the question before the supreme Court was whether it had jurisdiction to discharge an order for public examination. This decision is of no assistance to Mr. S. Sen's client as the question before the supreme Court was whether it had jurisdiction to discharge an order for public examination. In the instant case now before me no such question has arisen yet as the order for public examination has not been made so far. 17. THE next contention of Mr. S. Sen was that an order for examination of all the Directors could not be made, and that only those Directors against whom a finding of fraud had been made by the Liquidator in the Report should be examined. In support of this contention Mr. S. Sen firstly relied upon the decision in Ex parte George stapylton Bernes, (supra), discussed earlier in this judgment. Mr. S. Sen also relied upon a decision of the Kerala high Court in (14) Official Liquidator v. Krishna Kamath and others, (1959)29 Company Cases 171, in which it was held that where in the winding up of a banking company, the liquidator's report, while alleging acts and omission in general, many of which amounted to fraud, did not attempt to attribute acts or omissions to any individual person or to say that the act or omission of particular persons caused loss to the company, the Court would not order public examination of the directors and officers of the company. Relying upon these observations, Mr. S. Sen argued that the Liquidator in any event could not obtain an order for public examination of all the Directors unless he could establish in his Report that he had come to a finding of fraud against the directors sought to be examined. It was argued that a general averment of fraud against all the Directors was not enough to obtain an order for examination of the Directors. 18. IN my view this contention of Mr. S. Sen is well founded. In order to get an order for public examination of the Directors of the Company a finding of fraud has to be made by the liquidator in the Report against the individual Directors sought to be examined. A general finding that all the directors had participated in the management of the affairs of the Company, in my view, is not enough to obtain an order for examination of all the directors. A general finding that all the directors had participated in the management of the affairs of the Company, in my view, is not enough to obtain an order for examination of all the directors. It has to be seen what the findings of fraud against the individual director are, and on what materials they are based, before an order for examination of the Directors can be made. But where particular Directors have came forward at the stage of consideration of the Report by the Liqiuidator, and have filed affidavits taking responsibility for the acts or omissions of the company, different considerations would apply. If the Court finds that certain Directors have stated on affidavit that they are responsible for the acts or omission, the Court may in a proper case direct their examination as well, even if the Liquidator has not furnished sufficient materials in his report. The Liquidator may not have all the materials in his possession in making the Report, as it may be that the Company's books, documents and record have not been properly maintained. If for that reason he fails to furnish sufficient materials in the report for examination of some of the directors, and if such Directors file affidavit contesting the claim of the liquidator to an order for their examination and if in such affidavits they take responsibility for the acts or omissions, the Court cannot overlook or ignore the conduct of such Directors in the management of the affairs of the Company. Mr. M. M. Sen, learned counsel for the Official Liquidator, contended on the other hand that the Directors have no right at this stage to controvert or challenge the finding of fraud made by his client in the Report. It was argued that it was not for the court at this stage to adjudicate upon the facts contained in the Report. If, Mr. M. M. Sen argued, the respondents wished to deny or controvert the facts stated in the Report, they would get the opportunity to do so at the public examination. It was not for this Court it was further argued, to hold a trial on the merits of the case made out by the Official Liquidator in the Report or to come to a finding whether the facts stated in the Report were true or false. It was not for this Court it was further argued, to hold a trial on the merits of the case made out by the Official Liquidator in the Report or to come to a finding whether the facts stated in the Report were true or false. It is true that the Directors had been given the opportunity to file affidavits to show why an order for public examination should not be made, but such an opportunity obtained by the directors could not be utilised, Mr. M. M. Sen argued, for the purpose of controverting the statements in the Report. 19. IT was next argued by Mr. M. M. Sen that the only question that the court could go into at this stage was if there was jurisdiction to make an order for public examination of the directors of the Company, and for determination of this question, the only matter that could be gone into by the court are the four questions quoted from Buckley in the judgment of this court reported in 68 C. W. N. 938, at page 946. These four matters are :- (a) that the Official Liquidator should make a further report, (b) that such report must contain a finding of fraud, (c) that the finding of fraud must be against the person against whom an order for public examination is sought, and (d) that the individual must be one who has taken part in the promotion or formation of the company or who has been an officer of the Company. 20. IN this case the question of making a further report by the Official liquidator does not arise as the public examination is sought for under section 519 of the Act. The only questions that the Court should go into are the matters referred to in Clauses (b), (c) and (d) set out above. It was argued by Mr. M. M. Sen that if the report contained a finding of fraud against the Directors, who were sought to be examined, and these Directors have taken part in the promotion or formation of the Company, or were Directors at the time when the fraud was committed, the Court should make an order for their public examination. It was not for the Court, Mr. It was not for the Court, Mr. M. M. Sen submitted, to go into the controversy raised by the three Directors in the affidavit filed by them, nor is the Court called upon to express any opinion on the merits of the finding of fraud. Mr. M. M. Sen next argued that there was no escape from the conclusion that the Directors of the company were guilty of fraud. The sale of the garden by the Company to M. Chatterjee and Co. Private Limited, Mr. M. M. Sen argued, was clear proof of fraud by the Directors. It was argued that according to the Directors, as stated in the affidavit-in-opposition, the company suffered loss in 1953, 1954 and 1955. The balance sheet of the company for the year ending December 31, 1955, showed that besides other ismall liabilities, the Company was indebted to the bank in the sum of Rs. 2,48,071-14-4 and in a sum of Rs. 1,13, 758-14-10 to the Managing Agent. Quite plainly, therefore, it was argued, the company was in a bad way and on the basis of the balance-sheet the prospect of future prosperity seemed bleak. Yet m. Chatterjee and Co. Private Limited of which S. Chatterjee and his son Mukul chatterjee were Directors, purported to make an offer and thereafter purchased the garden for the sum of Rs. 5. 25,000/-, and this price was paid by the purchaser company although both S. Chatterjee and Mukul Chatterjee who were directors of the Company knew that j. Thomas and Co. Limited by their letter dated March 9, 1956, had expressed the view that the valuation of the garden should be between Rs. 3,00,000/-and Rs. 4,00,000/ -. This opinion of J. Thomas and Co. Limited is according to the Directors of the Company valuation report of the garden. Mr. M. M. Sen argued that it was strange that the directors of the purchaser company who knew that the Company was running at a heavy loss, and had large liabilities and also that in the opinion of J. Thomas and Co. Limited the value of the garden could not exceed Rs. 4,00,000/-, agreed to pay the large sum of Rs. 1,25,000/- in excess of the valuation made by J. Thomas and Co. Limited. Then again, Mr. M. M. Sen argued, that it was equally strange that the purchaser company came forward to pay the large sum of Rs. Limited the value of the garden could not exceed Rs. 4,00,000/-, agreed to pay the large sum of Rs. 1,25,000/- in excess of the valuation made by J. Thomas and Co. Limited. Then again, Mr. M. M. Sen argued, that it was equally strange that the purchaser company came forward to pay the large sum of Rs. 5,25,000/- for the garden although the garden was running at a loss and there were large liabilities to be cleared off. It was argued by Mr. M. M. Sen that these facts, which could not be disputed by the directors, were clear indication of the fraud perpetrated by the Directors. 21. THEN again, Mr. M. M. Sen argued that at the ordinary general meeting of the Company held on June 29, 1956, a resolution was passed confirming the sale of the garden to M. Chatterjee and Co. Pvt. Ltd. It was not disclosed to the shareholders that Mr. Chatterjee and Co. Private Limited was a family concern of S. Chatterjee and that two of the Directors of the Company, namely, S. Chatterjee himself and his son Mukul Chatterjee were the directors of the purchaser company. Mr. M. M. Sen submitted that if this disclosure was made, as should have been made under the Act, the Directors of the Company would have been required to explain why two of the Directors were purchasing the garden at a value higher than the valuation made by J. Thomas and Co. Limited although the garden was not only running at a loss for three years previously, but had heavy liabilities to be cleared off. 22. THEN again, Mr. M. M. Sen argued that when the ordinary general meeting of the Company was held on June 29, 1956, the Companies Act, 1956, had already come into force and the resolution whereby the sale of the garden at Rs. 5,25,000/- was confirmed must be deemed to be a special business for which an explanatory statement as provided in Section 173 (2) of the Act should have been furnished to the shareholders. But no such explanatory statement was given, obviously because the Directors intended to avoid disclosing that the garden was being sold to M. Chatterjee and Co. Private Limited of which both S. Chatterjee and Mukul chatterjee were Directors. It was further argued by Mr. But no such explanatory statement was given, obviously because the Directors intended to avoid disclosing that the garden was being sold to M. Chatterjee and Co. Private Limited of which both S. Chatterjee and Mukul chatterjee were Directors. It was further argued by Mr. M. M. Sen that it was not only a case of violation of the statute, but clear evidence of fraud as the Directors deliberately and wilfully withheld from the shareholders all knowledge and information of the fact that the garden was being sold to a domestic concern of two of its directors, namely, S. Chatterjee and M. Chatterjee. There was suppression of the fact that the garden was being sold to a private company of which two of the directors of the Company were the directors. It was next argued by Mr. M. M. Sen that a false representation was made to the shareholders at the extraordinary general meeting held on March 28, 1956, that a surplus would be available out of the sale proceeds of the garden for distribution among the shareholders of the Company. 23. RELIANCE was placed upon para. 27 of the affidavit-in-opposition in which it was admitted that it was agreed that the shareholders would be paid at the rate of Rs. 4/-per share. The consent of the shareholder to the transaction was obtained by a representation that a surplus would be available for distribution to the shareholders. But in fact no such distribution was made and in paragraph 27 of the affidavit-in-opposition it is alleged that demands for income tax and land revenue for Rs. 65,000/-came up and for that reason the shareholders could not be paid. It appears from the minutes of the meeting of the Board of Directors of the company held on Feb. 15, 1957, that the purchaser company demanded a sum of Rs. 61,885-9-6 for payment to it on account of further liablities of the company which were not included in the list of liabilities disclosed at the time of agreement for sale. A list of such liabilities has been set out in the resolution itself. No particulars have been furnished of the demand for income tax liabilities for the year 1952-55 and also for the other liabilities set cut in the resolution. Mr. A list of such liabilities has been set out in the resolution itself. No particulars have been furnished of the demand for income tax liabilities for the year 1952-55 and also for the other liabilities set cut in the resolution. Mr. M. M. Sen argued that no materials have been disclosed by the Directors to support the demand for the additional liabilities and the justification for payment of the same by the Directors of the company to the purchaser company. The promise to distribute the surplus assets out of the sale proceeds, Mr. M. M. Sen argued, was a false statement deliberately and wilfully made, knowing that such distribution would never be made as the surplus, if any, would be wiped out by false demand of additional liabilities of the company. The shareholders of the company were thus induced, Mr. M. M. Sen argued, to agree and to confirm the sale upon the promise of a distribution of the surplus that would be available out of the consideration paid for the garden. It seems to me that there is considerable force in the contentions of Mr. M. M. Sen, 24. IN support of the above contentions, Mr. M. M. Sen firstly relied upon a decision of the Allahabad High court reported in A. I. R. (1933) All 366. (15) In re. Indian Stale Bank Limited. In that case the Court was considering an application under Section 198 of the companies Act, 1913. The Liquidator applied to Court, for public examination of the persons mentioned in the application, on the ground that in his opinion fraud was committed by those persons. It was contended on behalf of the persons sought to be examined that where a charge of fraud was made, the person sought to be examined, was entitled to have notice of the charge, in the same way as he would have notice under the Indian Penal Code. It was held that an order for public examination could not be made on a general allegation of fraud in the management of the Company for examination of persons not directly implicated in the application of the Official liquidator. It was held that an order for public examination could not be made on a general allegation of fraud in the management of the Company for examination of persons not directly implicated in the application of the Official liquidator. It was also held that the persons sought to be examined on allegations of fraud should be clearly named and facts stated in the application to show that a prima facie case existed against such person, and once a prima facie case of fraud was made, the examination was not to be confined to the particular fraud alleged It was further held that the only objection which the persons sought to be examined could raise was one of jurisdiction. Such persons were not entitled at that stage to show that the charge of fraud was incorrect. Such persons could substantiate their objection if they could, under Sub-section (6) of Section 196 and if they could so substantiate their objections, the Court would award them costs. It was also held that the Court should consider judicially the application of the Official Liquidator and an order should be passed only if the Court was satisfied that there was reasonable ground for the allegation of fraud. It was not necessary to specify the charge of fraud with the same particularity as would be necessary in a criminal charge under the Indian Penal Code. The next case relied upon by Mr. M. M. Sen was a decision of the supreme Court in (16) Official liquidator, The Popular Bank Limited v. K. Madhava, Naik and others, A. I. R. 1965 s. C. 654, in which it was held that an order under Section 45g of the Banking companies Act, 1949, was not void on the ground that it violated Article 20 (3)of the Constitution, as there was no accusation in a proceeding under Section 45g resulting in an order for public examination. This decision is of no assistance to the Official Liquidator in this case as it had not been argued by Mr. S. Sen that an order under Section 519 of the Companies Act, 1956, would be void on the ground of violation of article 20 (3) of the Constitution. 25. MR. M. M. Sen next relied upon a passage in Halsbury, 3rd Ed. Vol. 14, page 474, para. S. Sen that an order under Section 519 of the Companies Act, 1956, would be void on the ground of violation of article 20 (3) of the Constitution. 25. MR. M. M. Sen next relied upon a passage in Halsbury, 3rd Ed. Vol. 14, page 474, para. 901, in which it was stated that actual fraud took either the form of a statement of what was false or a suppression of what was true. The withholding of information, suppressioveri, was not in general fraudulent, unless there was a special duty to disclose it. Relying upon these observations, Mr. M. M. Sen submitted that in this case Section 173 (2) imposed upon the Directors the duty to disclose all material facts concerning the sale of the garden. This duty the Directors failed to discharge and thereby withheld from the shareholders the information to which they were entitled regarding the sale of the garden. Therefore, Mr. M. M. Sen submitted, the directors were guilty of fraud. 26. RELIANCE was also placed on another passage in Halsbury, 3rd Ed. Vd. 26, page 822, para. 1519, for the proposition that with regard to statements that something should or should not, be done in the future, though a party used words expressive of intention, it might be apparent from other expression or the surrounding circumstance that what he really meant and the other party understood to be conveyed was a promise or offer and nothing else. Mr. M. M. Sen submitted that at the meeting of the Board of Directors held on May 10, 1956, a resolution was passed, that the surplus of the sale proceeds was to be distributed to the shareholders, at the rate of Rs. 4/- per share, as soon as the sale was complete. This resolution, Mr. M. M. Sen argued, was a statement of something that was going to be done in the future and in the background of the events, the shareholders clearly understood that they would be paid at the rate of Rs. 4 - per share. But the Directors had already made up their mind not to pay the shareholders anything at all, and to wipe out the surplus by setting up alleged liabilities of the Company which were not disclosed before the agreement for sale was made, and were brought up for the first time at the meeting of the Board on February 25, 1957. Mr. Mr. M. M. Sen next relied upon a decision of the Supreme Court in (17) K. Joseph Augusthi and others v. M. A. Narayanan, A. I. R. 1964 S. C. 15152. In that case the Supreme Court was considering the question of public examination under Section 45g of the banking Companies Act, 1949. It was held that when an order for public examination was made upon the report of the Official Liquidator that loss had been caused to the banking company by the acts of omissions of the persons sought to be examined, a prima facie case existed for their public examination, and it could not be said that by such an order the accused persons were held guilty of an offence, and that the whole object of the enquiry was to collect evidence and decide whether any acts or omissions caused loss to the banking company. The contention on behalf of the Directors, that before making the order for public examination, the Directors should be allowed to agitate that the allegations in the report were untrue, was rejected by the Supreme Court and it was held that in exercising the powers under Section 45g (2) the Court considered the report made by the liquidator and decided whether it could reasonably entertain the opinion that any person who had taken part in the promotion, formation or conduct of the banking company should be publicly examined. It was further held that the consideration of the report was a preliminary stage of the enquiry, and at that stage all that the Code had to consider was whether a prima facie case had been made out to hold a public examination of the person concerned. It was further held that the consideration of the report by the Court could not be developed into a full-fledged enquiry, as that would defeat the very object of a limited enquiry at the initial stage. It was further held that the consideration of the report by the Court could not be developed into a full-fledged enquiry, as that would defeat the very object of a limited enquiry at the initial stage. As to what should be done at the stage of consideration of the report by the official Liquidator, the following observations of Gajendragadkar, C. J., at page 1557, of the report are very apposite : - "what the Court can and should do in such cases is to read the report submitted by the Official liquidator, consider whether the opinion expressed in the report appears to be, prima jade, reasonable; hear the explanation of the person concerned; and find out prima, facie whether the explanation tendered by the person is sufficient to reject the Liquidator's request for such person's public examination and whether, on the whole, it is just and beneficial to the interest of the banking company that public examination should be held. The subject-matter of this preliminary investigation is not the whole of the enquiry on the merits ; it is enquiry as to whether the director or the auditor should be publicly examined. " Relying upon these observations Mr. M. M. Sen contended that the same principle should apply in the case of a report by the Official Liquidator and consideration of the same by the Court for public examination under Sections 478 and 519 of the Companies Act, 1956. The purpose of the consideration of the report by the Court, Mr. M. M. Sen argued, was not to see if there were grounds made out in the report for holding the Directors guilty of fraud, but only to see if a prima facie case of fraud has been made out to justify an order for public examination. It seems to me that there is good deal of force in this contention of Mr. M. M. Sen. Although the observations of the supreme Court were made in connection with a report made by the Official liquidator under Section 45g of the banking Companies Act, 1949, under which the question is if loss has been caused to the banking company, I do not see why the same observation should not be applied to the report made by the Official Liquidator as provided in sections 478 and 519 of the Companies act, 1958. It is not for the Court, at the stage of consideration of the report by the Official Liquidator, to see if the official Liquidator has rightly or properly held the Directors guilty of fraud in his report. The consideration of the report by the Court is, as was pointed out by the Supreme Court, a preliminary stage, when the Court should only see if a prima facie case has been made out for public examination on the ground that fraud has been committed by the Directors. 27. THE next case relied upon by Mr. M. M. Sen is a decision of this court in (18) Joychandra Banerjee v. Srinath Chatterjee, I. L. R. 32 Cal. 357, in which a Division Bench of this Court held that silence amounted to fraud, for which a Court would grant relief only when it was the non-disclosure of those facts and circumstances which one party was legally bound to communicate to the other. Relying upon this decision, it was argued, that the Directors of the company were bound to disclose in law the fact that the garden was being sold in effect and in substance to S. Chatterjee and Mukul Chatterjee, though in form it was being sold to a private company. 28. A reference was made by Mr. M. M. Sen to Kerr on Fraud and mistake, 7th Ed. page 1, for the meaning and definition of fraud. But I do not think that for the purpose of this matter it is necessary for me to enter into an elaborate discussion of what constitutes fraud. The next case relied upon by Mr. Ml. M. Sen was a decision of the Madras high Court reported in (19) A. I. R. 1944 Madras 87 (Chokkalingam Chettiar v. Official Liquidator ). In that case, the Court was considering the scope of section 202 of the Companies Act 1913. It was held that it was not necessary for the Court to see, in considering the report of the Official Liquidator, that there was proof of fraud and that it was enough if there were sufficient facts stated in the report to suggest fraud and such a suggestion of fraud would justify an order for public examination of the Directors. The next case relied upon by Mr. M. M. Sen was a decision of the house of Lords in (20) Gluckstein v. Barnes, 1900 A. C. 240. The next case relied upon by Mr. M. M. Sen was a decision of the house of Lords in (20) Gluckstein v. Barnes, 1900 A. C. 240. In that case the trustees of a syndicate formed to buy a property and resell it to a company, of which they were the directors, made a profit of 20. 000 which they had not disclosed. It was held that the appellant who was one of the trustees was bound to replace that portion of 20,000 which had been paid to the trustees as their share. Although this decision discusses the law relating to the duty to disclose secret profit made by persons who are involved in the formation of the company, it is of no assistance to Mr. M. M. Sen as the question of public examination of the Directors on the basis of the report of the Official Liquidator was not considered at all. 29. MR. M. M. Sen next relied upon a statement of the law regarding fraud committed by withholding of facts, in Halsbury, 3rd. Ed., Vol. 6, page 191, para. 389. The proposition relied upon by Mr. M. M. Sen was that a true statement of fact, might by withholding of other facts be itself absolutely false relying upon this proposition of law, it was argued, that the Directors of the company had withheld from the shareholders, the fact that the garden was going to be sold to two of the Directors in substance. This suppression, Mr. M. M. Sen argued, was deliberately made to mislead the shareholders and obtain their approval to the sale of the garden it seems to me that there is good deal of force in this contention of Mr. M. M. Sen. 30. THE next contention of Mr. M. M. Sen was that there was no force in Mr. S. Sen's contention that the public examination of the Directors of the Company was sought for, in order to obtain materials and evidence to be used in the misfeasance application which is now pending. It was argued that the statute itself provided that the evidence could be used against the directors who were examined. Sub-section (8) of Section 478 of the Act, Mr. M. M. Sen contended, clearly provided that the evidence obtained at a public examination of a Director might thereafter be used against him. It was argued that the statute itself provided that the evidence could be used against the directors who were examined. Sub-section (8) of Section 478 of the Act, Mr. M. M. Sen contended, clearly provided that the evidence obtained at a public examination of a Director might thereafter be used against him. It was also argued that the public examination was provided for in order to obtain materials and evidence, to enable the liquidator, to take such further action against the delinquent Directors as might be necessary. It was also argued that if it was held that a public examination could not be directed, because of the pendency of the misfeasance proceedings, the object and purpose of such public examination itself, would be defeated. In support of this contention, Mr. M. M. Sen relied upon the decision in (21) In re. Metropolitan (Brush)Electric Light and Power Co. Limited, (1885) 51 L. T. 817, in which it was held that the pendency of an action against an officer of a company in course of being wound-up was not sufficient to justify his refusal to be examined under section 115 of the Companies Act, 1862, and that the Official Liquidator might properly apply under Section 115 of the act for the purpose of ascertaining whether proceeding should be continued or not against an officer of the company or against any other person. Relying upon this decision, Mr. M. M. Sen submitted that the pendency of the misfeasance proceedings was no bar to an order for a public examination of the directors and indeed, he argued, such an examination would be necessary, to enable the Liquidator to decide if the misfeasance proceedings against the directors or any one of them should be continued. In my opinion, this contention of Mr. M. M. . Sen also appears to be well-founded. Section 478 (8) of the Act plainly provides for the use of the evidence in subsequent proceedings and it is not open to a Director, having regard to the terms of that Sub-section, to contend that an order for public examination should not be made, merely because the evidence obtained at such examination might be used in the misfeasance proceedings which were pending. The last case relied upon by Mr. M. M. Sen was a Bench decision of the madras High Court reported in (22)A. I. R. 1955 Mad. The last case relied upon by Mr. M. M. Sen was a Bench decision of the madras High Court reported in (22)A. I. R. 1955 Mad. 30 (N. Swaminatha iyer v. Brahmayya and Co.), in which rajamannar, C. J., held that there was nothing in Section 196 of the Indian companies Act, 1913, to indicate that once a misfeasance application had been filed against a director, the Court would be divested of the power of directing a public examination of such a person. In that case also the misfeasance application had already been taken out, when the Liquidator renewed his application under Section 196 of the Act for public examination of the directors, the earlier application having been postponed. It was held that the pendency of the misfeasance proceedings was no bar to an order for public examination of the directors under Section 196. 31. I have discussed the several authorities, relied upon by learned counsel for both the parties, on the question whether an order for public examination should be made. In my opinion, the law on this question is well settled namely that where a prima facie case of fraud has been made out by the Liquidator in the Report, the court should make an order for public examination. It is not necessary at this stage to adjudicate upon the question if the Directors of the Company are guilty of the fraud alleged. The rule as to pleadings in an action for fraud and the rule as to proof of fraud in an action for deceit have no application, in a case such as this, where the only question is if a prima facie case of fraud has been made out in the Report, to warrant an order for the public examination of the Directors under the provisions of the Companies Act, 1956. If the Directors wish to deny the charge of fraud brought against them by the liquidator in the Report, which no doubt they do, they would get ample opportunity to dispute or deny such charge in course of their examination. 32. IT is not for the Court to express its views on the merits of the contentions of the Directors, at this stage. The Directors would get ample opportunity of controverting or denying the allegations in the Report, if these allegaions are untrue, during and in course of their public examination. 32. IT is not for the Court to express its views on the merits of the contentions of the Directors, at this stage. The Directors would get ample opportunity of controverting or denying the allegations in the Report, if these allegaions are untrue, during and in course of their public examination. In my opinion, it is not for the Court to adjudicate upon the contentions raised on behalf of the Directors, in considering the report prepared by the Official liquidator. The only question that the court can go into at this stage is if the court has jurisdiction to make an order for a public examination of the directors and in determining this question of jurisdiction, the Court is to be satisfied that the Report of the Official liquidator contains a rinding of fraud, and that such a finding of fraud is against the directors against whom an order for a public examination is sought for, and finally that the Directors sought to be examined are shown to have taken part in the business of the Company or in other transactions from which a finding of fraud has been made. If these three conditions are satisfied, the Court has jurisdiction to make an order for public examination of the Directors. In my view the Court is not called upon at this stage to express its views, and indeed the Court should not express any views at this stage, on the finding of fraud by the Official Liquidator or on the allegations made by the Directors denying the fraud alleged by the official Liquidator. If the Court is to express any opinion on the rival contentions contained in the Report of the official Liquidator and in the affidavit filed on behalf of the Directors, such a finding would seriously prejudice the public examination of the Directors, if such an examination is directed by the court and also subsequent proceedings. The Court should not, therefore, in considering the Report of the Official liquidator under Section 519 of the Act deal with the merits of the controversy, if such a controversy is raised by the directors by statements made in affidavits. In my view in the facts of this case the Court has jurisdiction to make the order and an order for public examination ought to be made. The next question is who among the six Directors should be directed to be examined. In my view in the facts of this case the Court has jurisdiction to make the order and an order for public examination ought to be made. The next question is who among the six Directors should be directed to be examined. The learned counsel for the Liquidator had at first argued that an order for public examination of all the Directors ought to be made. In the Report submitted by the Official liquidator the charge of fraud has been made against Sachindra Nath chatterjee, in particular, though there is a general charge against all the directors. But if the Report alone is considered there are not sufficient materials to warrant an order for public examination of all the Directors mentioned in Clause (3) of the Report. It is true that there are general allegations of fraud against the Directors of the company, but this in my view, is not enough to sustain or warrant an order for public examination of all the Directors of the Company. But in this case the report is not the only material before me. As I have noticed earlier, an affidavit has been affirmed by three of the directors, namely, Sachindra Nath chatterjee, Jiteridra Mohan Mukherjee and Kalikesh Mukherjee. In this affidavit these three Directors have taken upon themselves the responsibility of all that was done by the Board of directors of the Company. They say that they had scrutinised the tenders submitted for the purchase of the garden, they support and approve of the adjustments of the earnest money of Rs. l,15,000/- payable by the. purchaser. Besides Sachindra Nath Chatterjee, jitendra Mohan Mukherjee and kalikesh Mukherjee appear to have been aware of the sale of the garden to M. Chatterjee and Co. Private Limited of which Sachindra Nath Chatterjee and mukul Chatterjee were Directors. They also admit that it was agreed that the shareholders would be paid Rs. 4/-per share but this payment could not be made as demands for income tax and land revenue for Rs. 65,000/- came up. They further say that after the conveyance was executed further liabilities in the sum of Rs. 61,885-9-6 came to light which was not included in the list of liabilities of the Company and for that reason the said sum was paid to m. Chatterjee and Co. Private Limited. 65,000/- came up. They further say that after the conveyance was executed further liabilities in the sum of Rs. 61,885-9-6 came to light which was not included in the list of liabilities of the Company and for that reason the said sum was paid to m. Chatterjee and Co. Private Limited. This payment, according to them, was made in pursuance of the resolution passed in the meeting of he Board of directors of the Company held on February 15, 1957. In their admission in the affidavit, Jitendra Mohan Mukherjee and Kalikesh Mukherjee besides sachindra Nath Chatterjee appear to have participated in all that was done by the company regarding the sale of the garden, adjustment of the accounts, payment of consideration and earnest money and the payment of the liabilities alleged to have become known only after the convenyance of the garden to the purchaser. Mukul Chatterjee, one of the Directors of the Company, is also a Director of M. Chatterjee and Co. Private Limited. He is the son of sachindra Nath Chatterjee, the other Director of the Company who also is a Director of M. Chatterjee and Co. Private Limited. As a Director of the Company and also of the purchaser company he must have participated in all that was done regarding the sale and purchase of the garden and also payment and adjustment of the consideration and the earnest money. 33. THERE will, therefore, be an order under Section 519 of the companies Act, 1956, for the public examination of the following Directors of the company, namely, Sachindra Natn chatterjee, Jitendra Mohan Mukherjee, kalikesh Mukherjee and Mukul chatterjee, on a date to be fixed for that purpose. The substance of this order for public examination of the Directors is to be published once in Amritabazar patrika and once in Anandabazar patrika. Such publication is to be made three weeks before the date fixed for the examination of the Directors. Leave is given to the Official liquidator to pay out of the assets of the company, in the first instance, the costs and expenses necessary for advertisement and for service of the order on the directors who have been directed to be examined and also the fees paid in having the Report settled by counsel. Leave is given to the Official liquidator to pay out of the assets of the company, in the first instance, the costs and expenses necessary for advertisement and for service of the order on the directors who have been directed to be examined and also the fees paid in having the Report settled by counsel. The Official Liquidator is also given leave to engage a solicitor on usual terms and a counsel at a fee not exceeding 10 GMs with a junior at a fee not exceeding 5 GMs and necessary fees for consultation. The costs of and incidental to the filing of this Report may be retained by the Official Liquidator out of the assets of the Company in his hand. The costs of the public examination of the Directors should be borne by the Official Liquidator out of the assets of the Company in the first instance. The final order for the costs of the public examination is reserved. The costs of consideration of the report in this proceeding should be paid to the Official Liquidator by Sachindra nath Chatterjee, Jitendra Mohan mukherjee, Kalikesh Mukherjee and mukul Chatterjee. The Official Liquidator will be entitled to retain the costs of the consideration of the Report by the court in the first instance as between attorney and client out of the assets of the Company in his hands. Certified for two Counsel.