Heilgers Ltd. v. Company Law Board — 1980 DIGILAW 83 (CAL)

Judgment Heilgers Limited, the petitioner No.1, is an existing company within the meaning of the Companies Act, 1956. The petitioner No.2 claims to be a share-holder or the petitioner No.1 Company. The Company Law Board, the respondent No.1, in exercise of the powers conferred by clause (b) of Section 237 of the Companies Act, 1956 read with Section 10E(1) of the said Act appointed three person named in the said order as Inspection to investigate into the affairs of the petitioner No. 1 Company in respect of the year 1969 onward and to report to the Company Law Board pointing out, inter alia, all irregularities and contraventions made by the Company of the provisions of the Companies Act, 1956 and/or any other law and the person or persons responsible for such irregularities and contraventions. On 22nd August, 1977 the petitioner obtained the present Rule, inter alia, praying for cancellation, withdrawal and revision of the laid order dated 10th August, 1977 and for commanding the respondent to forbear from giving effect or further effect to the same. The respondents 1, 2 and 3 have filed an affidavit-in-opposition contesting the petitioners' case. The petitioners have tiled an affidavit-in-reply to the same. The respondent have also produced true copies of a note of Sri N. D. Bhatia, the Additional Director (I&I), suggesting investigation and appointment of Inspector under Section 237(b) of the Companies Act, 1956 and also of the minutes of the 18th Meeting or the Company Law Board dated 30th of July, 1977 end the same have been collectively marked 'X' and have been kept with the records of this Rule. 2. Mr. B.N. Son, the learned advocate for the petitioners, has submitted that the aforesaid order dated 10th August, 1977 Under Section 237(b) of the Companies Act, 1956 is illegal, perverse and has been made without any application of mind and it is based on collateral ground extraneous to Section 237(b) of the Companies Act, 1956. Mr. Sen has strongly relied upon the majority decision in (1) Barium Chemicals Ltd. v. Company Law Board, AIR 1967 SC 295 , and has submitted that the impugned investigation against the petitioner company under Section 237(b) of the Companies Act should be quashed. 3. Mr. Sen has strongly relied upon the majority decision in (1) Barium Chemicals Ltd. v. Company Law Board, AIR 1967 SC 295 , and has submitted that the impugned investigation against the petitioner company under Section 237(b) of the Companies Act should be quashed. 3. The petitioners have not, however, disputed that the Central Government had delegated its Power under Section 237 in favour of the Company Law Board, the respondent No.1, which purported to pass the impugned order under sub-clauses (i) and (ii) of clause (b) of Section 237 of the Companies Act, 1956. I may now proceed to examines the question whether or not the Company Law Board bad exercised the said Powers after bonafide forming their opinion that there wert circumstances suggesting existence of any of the facts specified in sub-clauses (i) and (ii) or Section 237 (b) of the Companies Act, 1956. 4. The petitioners have themselves stated that on or about 6th October, 1973 the Registrar of Companies, West Bengal, had issued an order under Section 234(1) of the Companies Act, 1956 to the petitioner company asking, for the particulars of the Investments made by the petitioner company and the names of the persons who made those investments etc. The petitioners have claimed that by the letter dated 29th December, 1973 the said Information were supplied. Thereafter the Joint Director (Investigation), Department of Company Affairs, Government of India, by his latter dated 20th December, 1973 had informed the company that it was proposed to take inspection of books of accounts, document., statutory registers, record and other papers of the petitioner company under Section 209 (4) or the Companies Act, 1956. In the meantime, on 30th of January, 1974 the Registrar of Companies had asked the petitioner company to furnish certain information’s. The petitioner company alleged sent replies to the said letter. There will further correspondence between the petitioner company and the Registrar of Companies, West Bengal. In course of one of his communications the Registrar has pointed out about the alleged irregularity in the matter of maintenance of the Direction minute book of the petitioner company. The Registrar had also sought information from the petitioner company about certain Investments, balance-sheet and the profit and loss accounts of the petitioner company and further correspondence had followed. In course of one of his communications the Registrar has pointed out about the alleged irregularity in the matter of maintenance of the Direction minute book of the petitioner company. The Registrar had also sought information from the petitioner company about certain Investments, balance-sheet and the profit and loss accounts of the petitioner company and further correspondence had followed. The laid proceeding under Section 234 of the Companies Act arc not the subject-matter of challenge in the present Rule and, therefore, I need not decide the correctness or otherwise of the claim of the petitioner company that inspite of inspection of the books of account of the company no fault could be detected and that on the part of the Company there bad been no violation of the provisions of the Companies Act, 1956 or any other enactments. It may be noted that the respondent 1, 2 and 3 in their affidavit-in-opposition affirmed by Sri Jyoti Prasad Mukherjee has disputed these assertion of the petitioners and in paragraph (11) of their affidavit-in-opposition have set out the alleged contravention a by the petitioner company of the different provisions of the Companies Act, 1956. 5. Pendency of the aforesaid proceedings It the instance of the Registrar of Companies was not a bar to the Company Law Board considering relevant circumstances and bonafide forming their opinion under Sec. 237 (b) of the Companies Act and ordering investigation in respect of the petitioner company. There is no foundation for the contention that the Company Law Board had invoked their power under section 237 (b) for the same purpose for which the Registrar of Companies, West Bengal under section 234 (1) of the Act had liked the petitioner Company to furnish certain particulars. 6. In the instant case, the Company Law Board had purported to form their opinion that there existed circumstances suggesting commission of the acts mentioned in sub-clause (i) and (ii) of clause (b) of Section 237. 6. In the instant case, the Company Law Board had purported to form their opinion that there existed circumstances suggesting commission of the acts mentioned in sub-clause (i) and (ii) of clause (b) of Section 237. While-directing investigation against the petitioner and other companies the Company Law Board in their minutes dated 20th July, 1977 had recorded that it had considered the Brief placed before them and they were of the opinion that the materials brought out in the Brief were sufficient to suggest that the business of the companies had been conducted with the intent to defraud the members and the persona concerned in the management were guilty of fraud, misfeasance and other misconduct towards the said companies end their member. The said Brief consisted of a lengthy note of Sri N.D. Bhatia, Additional Director, (I&I) on the subject of M/s. Bird and Heilgers Group of Companies suggesting investigation and appointment of Inspection under Section 237(b) of the Companies Act, 1956. Therefore, I set out below the following extracts from the said note of the Additional Director, (I&I) on the bam of which the Company Law Board formed their impugned opinion under Section 237(b). 7. In his laid note the Additional Director, inter-alia, stated that, "M/s. Bird & Co. Ltd. Originally belonged to the Bird & Heilgers Group of Companies. This Group was being managed by the Britishers till 1965 when the management changed hands and passed on to the Indian management consisting of Senior Executives under the Chairmanship of Sri Pran Prasad. The total subscribed and paid up capital of M/s. Bird & Co. Ltd. Amounts to Rs. 70.50 lakhs divided into 45,000 ordinary shares of Rs. 100/- each and Rs. 25,500, 63/4% cumulative preference shares of Rs. 100/- each. Of these 22,412 equity shares are held by the Savings Trust which works out to about 49.8% of the equity capital of M/s. Bird & Co. Ltd. In addition, the Trust aha holds 7135 preference shares of the company. 8. The Saving Trust was originally formed in 1940 and founded by the contributions from the Senior Executives in terms of the Special Commissions granted to them from the profits of Bird & Heilgers. This arrangement continued upto 31st December, 1964. In 1965, after the British management had been brought out in the light of the difficulties they were facing. 8. The Saving Trust was originally formed in 1940 and founded by the contributions from the Senior Executives in terms of the Special Commissions granted to them from the profits of Bird & Heilgers. This arrangement continued upto 31st December, 1964. In 1965, after the British management had been brought out in the light of the difficulties they were facing. Shri Pran Prasad, the then Chairman of Bird & Heilgers Group of Companies, entirely changed the method of funding of the Savings Trust by abolishing the provision of special commissions to Senior Executives out of the profit of then two companies Bird and Heilgen) by introducing a service condition for an Executives of Bird & Heilgers and Group Companies to contribute out of their taxed income a specified amount to the Fund baaed on their pay range. This arrangement was applied retrospectively, though introduced in 1966 with effect from 1.1.65. The very nature of the method of funding the Savings Trust underwent a radical change, though the Director of Bird & Heilgers continued to have a right to decide to how the funds be invested in the various Group Companies to maintain the control of Such Group Companies. Considering the radical change in the fund, it was appropriate that the relevant rules of the Saving Trust relating to purchase and late of the Investment, should have been amended so that the Members of the Saving Trust, who were contributing their own money to the Fund, had the right to exercise full control ever the investment as may have bean made by the Fund. But this was not done and the right continued to vest with the Direction of the Bird & Heilgers by which they had the authority to instruct the trustees on the Fund as to the manner in which investments would be made, including the right of pre-emption for purchase of shares in case the Fund desired to sell such shares. But this was not done and the right continued to vest with the Direction of the Bird & Heilgers by which they had the authority to instruct the trustees on the Fund as to the manner in which investments would be made, including the right of pre-emption for purchase of shares in case the Fund desired to sell such shares. Further, in 1967, at the instances of the Directors of Bird & Heilgers, the purpose for which the Trust was originally formed in 1940 was expanded in that the Trust Rules were amended to permit It to borrow loans against interest to be utilised for the purpose of giving loans to Bird & Heilgers as well as the Group Companies, for investment in shares of Bird & Heilgers and the Group Companies, This virtually meant that the Trust would be utilised as vehicle for transaction of loans between different companies within the Group, which may not have been to the benefit of the member of the Trust, whose money, as they were not making the contributions, was at a stake. Subsequently, in anticipation of the break-up of Bird & Heilgen, the Trust Rules were further amended in October, 1971, so as to value the ordinary shun of Bird & Heilgers at 'break-up value' instead of 'fair value'. It appears that the was a calculated move on the part of the then managements of Bird & Heilgers so as to pass on substantial undue financial benefit to the Heilgers Group at the cost of the members of the Savings Trust and the Bird Group in the event of partitioning of the laid Bird & Heilgers. This arrangement, therefore, as is seem., was an arrangement of manipulation with a view to ensure that when Bird and Heilgers were separated, the person a who got the control of Heilgers under such separation would derive the maximum benefit at the cost of the members of the Savings Trust find the Bird Group. 9. The sorry state of train of the Saving Trusts as obtaining today arose from the fact that at that time when the Bird & Heilgers were divided in 1973, the Trust was forced to make large-scale purchase of Bird's ordinary share at a fabulous price of Rs. 202/. 9. The sorry state of train of the Saving Trusts as obtaining today arose from the fact that at that time when the Bird & Heilgers were divided in 1973, the Trust was forced to make large-scale purchase of Bird's ordinary share at a fabulous price of Rs. 202/. per share (break-up-value) out of the funds party borrowed from Group Companies and partly derived by depositing of profitable shares of Heilgers companies at a low price of Rs. 78/- per share, though at the time Heilgers were earning handsome dividend while Bird's were earning either marginal dividend or no dividend at all. As already stated above, this was done by manipulating, the break-up value of the share of these two companies. Moreover, in the light of the Trust Rules being amended from early 1967 onwards to expand its borrowing power between 31.3.66 and 31.3.73, the year in which Bird & Heilgers were separated. Members balance increased by only Rs. 22.88 lakhs but the Investment increased by Rs. 56.09 lakhs the gap or Rs. 33.80 lakhs having been made mostly from borrowings which went upto as high as 29.53 lakhs. This increase in investment resulted directly from the fact that the Bird’s ordinary shares were dumped at a high value in the Saving Trust by the Heilgers Group, though the return on such shares was totally uncertain. It is therefore, apparent that the affairs of the Fund had been observed. 10. In this connection, it is interesting to note that further materials are available on record to indicate that during the period when the affairs of Bird Heilgers were under the control a Shri Pran Prasod, the latter arranged for the Bird & Heilgers shares to be sold by the pension Fund of these companies to himself, his family members and a Trust the beneficiary of which was his minor son and the Group investment companies lent him a cash loan to enable him to buy these sharers for himself and his family. It also appears that Shri Pran Prasad Bold the Bird's shares to the Savings Trust in 1972 find at a profit as the shares had been over-valued. As per information available, the increase in valuation was from Rs. 125/- to Rs. 202/- as already stated above. At the same time, the Heilgers share were under-valued by doctoring the balance shuts and their value was brought down to Rs. As per information available, the increase in valuation was from Rs. 125/- to Rs. 202/- as already stated above. At the same time, the Heilgers share were under-valued by doctoring the balance shuts and their value was brought down to Rs. 78/- at which shri Pran Prasad acquired such shares from the Trust. It is alleged that virtually the acquisition of Heilgers was financed by the Savings Trust. It would, therefore, follow that Shri Pran Prasad utilized his position as the Chairman or Bird and Heilgers Group and manipulated the affairs of these companies and the Saving Trust in such a manner that he wall able to gain full control over the Heilgers Group of Companies to the detriment of the Bird and the member of the Savings Trust. 11. The Additional Director in his said note also referred to the complaint received from one of the Trustees of the Savings Trust appointed by the Calcutta High Court, individual members of the Trust and certain information which had come to its notice. The Additional Director also referred to the order or the Company law Board dated 12th June, 1976 to the appointment of five Government Directors to the Board of M/s. Bird and Co. Ltd. Sri J. G. Kumarmangalam who was appointed as the Managing Director of Bird and Company Ltd. In accordance with the directions of the Company law Board dated 12th November, 1976 had submitted a detailed report dated 8th February, 1977 regarding the history or the Saving Trust and its present position Including the manner in which the Savings Trust was utilized by Sri Pran Prasad, the then Chairman of M/s. Bird and Heilgers Group of Companies to partition the two companies and to gain full control of Heilgers after partition. According to the note, Sri Kumarmangalam in his said report had observed that considering the funds of the Savings Trust were manipulated with a view to divide M/s. Bird and Heilgers, It might be examined whether action could be taken again him on the ground of conspiracy or manipulation. 12. According to the note, Sri Kumarmangalam in his said report had observed that considering the funds of the Savings Trust were manipulated with a view to divide M/s. Bird and Heilgers, It might be examined whether action could be taken again him on the ground of conspiracy or manipulation. 12. The Additional Director, N.D. Bhatia, mentioned about the representation by Sri Samar Mukherjee, M.P. and Sri Purna Narayan Sinha alleging that by manipulating the Saving Trust Sri Pran Prasad who wall the Chairman of M/s. Bird and Heilgers till 1972 had acquired for himself and his family all the assets of the Heilgers Group of Companies amounting to about Rs. 10 crores. The Government had also received representation from Sri Jyotirmoy Basu enclosing a copy of a memorial from the Bird and Heilgers Employees' Union regarding the management of M/s. Titagurh Paper Mills Co. Ltd. 13. Sri N. D. Bhasia, Additional Director in his note observed "In view of what has been dated above, it is amply clear that the business of the Bird and Co. Ltd. and Companies belonging to Heilgers Group was mismanaged and was conducted with the Intent to defraud its member by the then management headed by Sri Pran Pruad and that by his deliberate fraudulent acts and manipulations, the Saving Trusted - a major shareholder of M/s. Bird and Company Ltd. Was made to part with valuable share of Heilgers Group of Companies and to acquire shares of M/s. Bird and Co. Ltd. which were either yielding marginal dividend or no dividend at all. As pointed out earlier, Sri Pran Prasad utilised his petition in acquiring profitable shares of Heilgers Group or Companies from the Savings Trust at a low price. He also played a substantial role in making the Group Companies to lend moneys to the Saving Trust for purpose of investment of shares in Birds." The Additional Director, (I&I) had recommended investigations into the affairs of Bird find Co. Ltd. and the Companies belonging to Heilgers Group and M/s. Titagurh Paper Mills Co. Ltd. under the provisions of Section 237 (b)(i) and (ii) of the Companies Act, 1956. 14. Mr. Ltd. and the Companies belonging to Heilgers Group and M/s. Titagurh Paper Mills Co. Ltd. under the provisions of Section 237 (b)(i) and (ii) of the Companies Act, 1956. 14. Mr. B.N. Sen, the learned advocate for the petitioners, submitted that these aforesaid allegations against Sri Pran Prasad and others were in relation to the Savings Trust and not in respect of the formation or conducting the business of the petitioner company and the laid allegation also did not even prima facie show that the persons concerned were guilty or fraud, misfeasance or other misconduct towards the petitioner company or towards any of its members. According to Mr. Sen, the Saving Trust was a separate juristic entity and therefore, in case fraud, misfeasance or misconduct had been committed in respect of the sale and purchase of the share-holding of the Saving Trust, the same could not be relevant circumstances for ordering investigation against the petitioner company under sub-clauses (i) and (ii) of clause (b) of Section 237 of the Companies Act. Mr. Sen has further submitted that in fact no fraud, misfeasance or misconduct were committed against the Saving Trust because before the. Trustee, of the Saving as Trust decided to sell the shares of M/s. Heilgers Group of Companies and to purchase the shares of the M/s Bird & Company Ltd. etc., the said shares were valued by a well-known firm of Chartered Accountant and then the Trustees with full knowledge of the facts had voluntarily made the said decision. Therefore there was no question of Sri Pran Prasad or any other persona concerned in the management of Bird Heilgers Group of Companies committing any fraudulent act misfeasance or other misconduct towards Heilgers & Co. Ltd. or toward, any of its members. 15. Before I examine the correctness of the above submissions it is necessary to point out that at this stage while ordering investigation under Section 237 (b) of the Companies Act, the Company Law Board was required to form their opinion whether circumstances existed suggesting the commission of any of the acts specified in sub-clauses (i) and (ii) of clause (b) of the said Section. The (expression "circumstances existed suggesting" means that the fact, which might have come to the knowledge of the Board imply a possibility or reasonable chance that anyone or more of the acts specified in sub-clauses (i) and (ii) had been committed and, therefore, the Board forms an opinion that there should be an investigation under Section 237 (b) of the Act. Thus the Board was required to form their opinion whether the allegations made against the then management of the Heilgers & Company railed hypotheses that the business or the petitioner company was being conducted with the intent to defraud the creditors of the company, its members or any other person or otherwise for a fraudulent or unlawful intention or that the persona concerning the management of the company were guilty of fraud, misfeasance or other misconduct towards the said company or any of its members. Thus, the Board was required to apply its mind to the totality of the relevant facts and to form its opinion whether the same implied that the aforesaid acts had been committed in conducting the business of the Company or In connection with the management of the same. When the Board formed their opinion that there was a case for investigation under Section 237 into the allegations or insinuations against the management of the petitioner company the Board did not record any finding as to whether the said allegation or insinuations wore true or not. 16. Hidayatullah. J. (as he then was) in Barium Chemical Company’s case (supra), had tabulated the circumstances which must be before the Central Government before it forms its opinion under clause (b). But the distinction between the sub-clause (i) and (ii) was not brought out in detail by the learned Judge presumably because the same was not necessary for the decision in the said case. The sub-clause (i) has the following parts: (a) The company was formed for any fraudulent or unlawful purposes ; (b) the business of the company is being conducted- (i) with Intent to de-fraud its creditors or member or any other persons, . (ii) otherwise for a fraudulent or unlawful purpose, (iii) in a manner oppressive of any of its members. The sub-clause (i) has the following parts: (a) The company was formed for any fraudulent or unlawful purposes ; (b) the business of the company is being conducted- (i) with Intent to de-fraud its creditors or member or any other persons, . (ii) otherwise for a fraudulent or unlawful purpose, (iii) in a manner oppressive of any of its members. The expression 'otherwise' in sub-clause (i) indicates that investigation under section 237(b) may be ordered when the business of the company is being conducted for a fraudulent or unlawful purpose other than with the intent to defraud its creditors, members or any other person, i.e. the circumstances suggest that the conduct of the business of the company is fraudulent or unlawful in any other way [see (2) Lilabati v. Bombay State, AIR 1957 SC 521 ]. Thus, sub-clause (i) should be attracted when in the matter of formation of a company or in course of conducting its business the circumstances specified in sub-clause (i) prima facie exist. The sub-clause (ii) has following parts: (a) The person I against whom the circumstances mentioned in sub-clause (ii) are suggested are concerned in the formation or the management of the company in question, and (b) In connection' with such formation or management the laid persons arc guilty of fraud, misfeasance or other misconduct towards the company or toward I any of the member of the company. "Persons concerned" in the context mean those who are engaged or involved either in the formation of the company or its management. Directors of a limited company are undoubtedly concerned in the management of the said company. 17. The Central Government or the Board which exercises the delegated authority of the former under section 237 (b), has been conferred a discretion to order investigation in a number of circumstances specified in sub-clauses (1) and (ii) of clause (b) of Section 237. The sub-clause (i) having dealt with the circumstances suggesting fraud, unlawful acts etc. in the matters of formation and of conducting the business of a company, the sub-clause (ii) obviously deals with other circumstances suggesting inferences of fraud, misfeasance or other misconduct by the persons con corned in the formation or the company or its management. The expression "being conducted" in sub-clause (i) means the actual management or administration. in the matters of formation and of conducting the business of a company, the sub-clause (ii) obviously deals with other circumstances suggesting inferences of fraud, misfeasance or other misconduct by the persons con corned in the formation or the company or its management. The expression "being conducted" in sub-clause (i) means the actual management or administration. The legislature has purposely used the expression "in connection therewith" in sub-clause (ii) to include within the scope of an investigation under section 237 (b) the acts of the persons concerned other than those directly, involved in the matters of formation of a company or conducting its business. Any other view of sub-clause (ii) would make the said clause almost a surplusage. In the context of two sub-clauses of clause (b) of Section 237, the said expression "in connection therewith" a should be given a wide construction in order to include other ach of alleged fraud, misfeasance or misconduct of persons involved in the formation or management of a company toward the company or its members. 18. The learned advocate for the respondent, in this connection have referred to the decision of the Queen's Bench Division in (3) Bull House v. City Wall Properties, (1965) 3 All ER 427 (439). With reference to a memorandum of association of a company Mocatta J. referred to several earlier reported decisions in (4) A.G. v. Great Eastern Rly. Co. (1910) 5 AC 437 (478), Lord Selbourne CJ. had interpreted the said expression as whatever may fairly be regarded as incidental to or consequent upon. The decision in (5) London County Council v. A.G., (1902) AC 165 (6) A.G. v. Mefsey Rly. Co. (1907) AC 415 and (7) Dundu Harbone Trusties v. Nocol, (1915) AC 550, were referred to Mocatta J. in Bell Houses' Case (supra), observed. "It is not easy, therefore to ace how the words in sub-clause (c) or sub-clause (u) add nothing to what the law imply without them or to Hive any meaning to "in connection with" or "as ancillary to" which would be included within "incidental". The learned Judge observed that "in connection with" was perhaps the widest in meaning of these various words and phrases (vide page 439 of the reports). 19. Mr. The learned Judge observed that "in connection with" was perhaps the widest in meaning of these various words and phrases (vide page 439 of the reports). 19. Mr. Das learned advocate for the respondents, has also placed before me the decision of the Court of Appeal in (8) Clarke Chapman John Thompson Ltd. v. Inland Revenue Commissioners, (1975) 3 All England Reports 701 at page 705. While deciding the question whether relief from duty on statements of loan capital issued by the appellant company in exchange for the loan capital of another company was afforded by the Finance Act, 1967 Section 28(5), the Court considered whether the said loan capital was issued "in connection with" a scheme for amalgamation of the two companies which qualified for relief from capital and transferred duty. Russell, LJ. who delivered the judgment of the Court of Appeal held that the said expression "in connection with" a scheme had wider meaning and not only a restricted meaning equivalent to as part of. The ordinary meaning of "in connection with" in the context such as a scheme referred to matters outside but connected with the whole. 20. The decision of Goff, J. in (9) S.B.A. Properties Ltd. v. Cradock and others, (1967) 2 All England Reports 610, which was relied upon by Mr. Sen, learned advocate for the petitioners, is distinguishable on facts. In the said case, the Board of Trade brought an action in the name of the plaintiff company against three individuals and the defendant bank. Claiming declaration that the payment to the defendant B of a sum standing to the credit of the plaintiff company that the defendant bank was a misapplication of the plaintiff company's money. There was a consequential claim for damages in respect of the alleged misapplication and as against the defendant bank a further claim of damages for negligence. There was also an alternative claim against the bank for a sum allegedly due to the plaintiff company on current account. The action was brought in pursuance of section 169(4) of the Companies Act, 1948. A petition for winding up of the plaintiff company was due to be heard within a few days. The defendant bank had prayed for a stay of all further proceedings and for dismissing the action for want of authority to sue in the plaintiff company's name. The action was brought in pursuance of section 169(4) of the Companies Act, 1948. A petition for winding up of the plaintiff company was due to be heard within a few days. The defendant bank had prayed for a stay of all further proceedings and for dismissing the action for want of authority to sue in the plaintiff company's name. A Judge of the Chancery Division held that the words "other misconduct" in Section 169(4) should be construed ejusdem generis with reference to fraud and misfeasance immediately proceeding them in sub-section (4), but no moral turpitude was alleged against the bank. Secondly, the learned Judge held that the words "in connection with" the management of the plaintiff company's affairs in Section 169(4) were too narrow to include merely acting as the plaintiff company's bankers and accordingly the neglect alleged against the defendant bank was not within the scope of the said section. It is unnecessary to refer to the other portions of the said decision in S.B.A. Properties Ltd.'s case (supra) which is distinguishable on facts. In the instant case the Boards of Directors of Bird & Co. and of Heilgers & Co. under the Press and Rules of the Savings Trust exercised inter alia control over the investment of the Savings Trust which was at the relevant time a share-holder and therefore, a member of the Bird Heilgers Group of Companies. Reference may be made to the Rules of the Savings Trust as amended upto 31st December, 1977 which have been annexed to the A/R of the petitioner dated 11th February 1980. The report of the Joint Director (I & I) to the Company Law Board contained references to the said Rules and their subsequent amendments. The Direction of these companies in connection with the management of Bird & Co. Ltd. and Heilgen & Co. (Pvt.) Ltd. used to exercise these powers of control over the Savings Trust. The persons who managed these companies, incidental to their management of the companies concerned had allegedly perpetrated the said acts. At the time of the separation of the said Group of Companies, the Director of Heilger & Company had advised the Savings Trust to sell the shares if Bird Co. Such advice was not divorced from the acts of the management of the companies concerned. At the time of the separation of the said Group of Companies, the Director of Heilger & Company had advised the Savings Trust to sell the shares if Bird Co. Such advice was not divorced from the acts of the management of the companies concerned. The Board of Directors-qua-Directors had given the said directions, advice to the Trustees of the Savings Trust. According to the respondents, the prices of the shares of Bird & Co. acquired by the Savings Trust were inflated to cause wrongful gain by Sri Pran Prasad and his associates. Similarly, the Savings Trust was allegedly made to part with the shares of Heilgers & Company to those persons for inadequate prices. 21. According to the respondents these allegations required to be investigated. No finding has been yet made of fraud, misfeasance or other misconduct but according to the respondents, the circumstances attendant on the sale and purchase of the shares of the Savings Trust according to the Company Law Board suggested that the business of the Heilgers & Co. was being conducted with the intent to defraud the Savings Trust which was one of the share-holders and that in connection with the management of the affairs of Heilgers & Co. Sri Pran Prasad and others were guilty of fraud, misfeasance and other misconduct towards the company and the Savings Trust. 22. In their writ application and also in their A/R the petitioners have denied these allegations, and they have asserted that the persons managing these companies has acted bona fide and in due discharge of their duties. The petitioners have produced copies of the said valuation reports dated 12th July, 1972 of M/s. Lovelock and Lewes. According to the petitioners, after separation of Bird & Heilgers, the Savings Trust held the shares only in Bird and in some of its Group Companies. Heilgers by a letter dated 30th November, 1972 had notified the Trustees of their completes disassociation from the affairs and the running of the trust fund and also proposed that all restrictive provisions contained in the rules of the trust requiring their consent be deleted. The members of the Savings Trust at a general meeting of the Savings Trust excluded F.E. Heilgers and Co. and its connected companies from the scope of the Savings Trust. The members of the Savings Trust at a general meeting of the Savings Trust excluded F.E. Heilgers and Co. and its connected companies from the scope of the Savings Trust. The petitioners have disclosed that a suit is pending in the Original Side of this Court regarding the management and functioning of the Savings Trust. 23. At this stage, I need not also determine whether conducting the business of the companies or in connection with its management, Sri Pran Prasad and others had utilised their petitions as Directors of Bird and Heilgers Group of Companies and had manipulated the affairs of she said companies and those of the Savings Trust in such a manner that they wereable to gain full control over the Heilgers Group of Companies to the detriment of the interests of Bird and of the Savings Trust as alleged. 24. Mr. Sen, learned advocate for the petitioners, has placed before me the guidelines for taking action under Sections 285, 237 and 247 (if the Companies Act indicating at page 150 of the book "Clarifications and Circulars on Company Law" published by the Ministry of Law, Justice and Company Affairs, Department of Company Affairs, Government of India. These directions are administrative in nature. Secondly, the aforesaid Brief of the Company Law Board indicated the circumstances which warranted investigation under Section 237(b). These cannot be termed unsubstantial or worthless. Therefore, it cannot be also said that the Company Law Board had contravened the said administrative guidelines. 25. Therefore, I conclude that the above circumstances were relevant for the purpose of formation of an opinion under Section 237 and accordingly the investigation ordered against the petitioner company under section 237 cannot be said to be invalid in law. The petitioners have not also established that the Company Law Board did not act bonafide. Mr. Sen, learned advocate for the petitioners, has submitted that the Board by its impugned minutes date 30th July, 1977 had ordered investigation not only against the petitioner company but against 20 other companies belonged to erstwhile Bird & Heilgers Group. Therefore, Mr. Sen, learned advocate for the petitioner company, contended that the Board did not apply their mind to the cases of individual companies and accordingly the order for investigation should be struck down. Therefore, Mr. Sen, learned advocate for the petitioner company, contended that the Board did not apply their mind to the cases of individual companies and accordingly the order for investigation should be struck down. It is unnecessary for the purpose of disposal of this Rule to consider whether or not the order for investigation in respect of any other company mentioned in the said minutes dated 30th July, 1977 was invalid. I have already set out in extense the note of the Additional Director (I & I) which form part of the Brief of the Company Law Board. The said note contained allegations of alleged acts of fraud, misfeasance and other misconduct by persons who were conducting and managing the companies belonging to the aforesaid Group. Therefore, it cannot be said that the Board did not apply its mind before ordering investigation against the petitioner company. 26. It is also unnecessary to consider whether or not the Trustees of the Savings Trust had committed any breach of their duties in the matter of sales and purchases of the shares held by the Savings Trust. The same if necessary, may be adjudicated in any other proceedings according to law. According to the minutes of the Company Law Board mentioned above, circumstances existed from which it could be inferred that the persons while conducting the business of the petitioner company and/or in connection with the management therewith were prima facie guilty of the acts specified in sub-clauses (i) and (ii) towards the company and the Savings Trust which used to be a share-holder of the petitioner company. 27. I accordingly conclude that the Company Law, Board has not acted in violation of Section 237(b) of the Companies Act and, therefore, this Court at this preliminary stage would not interfere. I, however, make it clear that I have not recorded any finding about the truth or otherwise of the allegations on the basis of which the impugned investigation has been ordered. I, therefore, discharge this Rule without any order as to costs. Let the operation of this order be stayed for a period of six weeks hence.