Judgment Ravi S.Dhavan, J. 1. The two matters before the Court reflect a very sad stale of affairs on the manner in which the public sector undertakings in Bihar, particularly companies incorporated under the Indian Companies Act under the label Government Companies (under Section 617) have been managed. 2. There are two options before the Court. Piece by piece and for each act on default this Court could require the Registrar of Companies to examine the details and furnish information. If it was a matter of one or two or three defaults in one or two companies the Court could have required the Registrar of Companies to make out a report and furnish it before the Court. But, the situation before the Court as is being noticed on a preliminary report filed by the Registrar of Companies is scandalous. Though, the report of the Registrar of Companies is at present brief, certain facts highlighted by the Registrar of Companies are sensational. 3. In the matter of Bihar State Pharmaceuticals and Chemical Development Corporation Ltd. the Registrar of Companies reports that even 24 years after its formation this company has not commenced its business in terms of its main objects. There have been changes in the Board of Directors periodically without following the procedure, as prescribed under the Companies Act. The Court inquired from the Registrar of Companies as to why he has not placed the resolution by which the Board of Directors may see a change. His answer was very logical. He submitted that from the report the Court will notice that the Company hardly called any meetings so as to have a consistent policy for the functioning of the Board of Directors or, for that matter, induct them by a resolution as prescribed by law. In the absence of any exercise as provided by law, he was hardly in a position to place such resolutions in a report because there are no records of meetings and resolutions nor were reports filed before the Registrar of Companies. In addition, the Registrar of Companies reports that misutilisation of powers to induct Directors on the Board and flush them out is at the will and pleasure of the State Government. 4. In addition, the Registrar of Companies reports that misutilisation of powers to induct Directors on the Board and flush them out is at the will and pleasure of the State Government. 4. The Registrar of Companies reports that the entire funds which were received from the Bihar Government were utilised in investments into shares of subsidiary companies and other companies by way of giving loans and advances to subsidiary companies and to others, and that the Company has not earned anything from its loans and investments except some normal earning. The subsidiary companies have been named. The other companies have also been named. 5. The Registrar of Companies also reports that since the company has not carried out any business activity there is not much scope to discuss its working. Since its incorporation in 1978, that is, 24 years ago the company has filed only five annual returns and one balance sheet. After 1984-1985 the company obtained an audited report by internal Auditors. But such internal Audit report is not available after 1994-95. No cost audit has been done in respect of the company An employees provident fund trust was created without obtaining approval from an appropriate authority. Travelling vouchers are not supported by air tickets and tour diary and shares invested in subsidiary companies were not produced before the auditors. Rent paid to private landlord was contrary to government circular and directives. Government funds received for particular projects were diverted to other projects. Balance confirmation certificates or statements of accounts on loans and advances, unsecured loans and other debit/credit balances were not made available to the auditor for verification. Particulars of rate of interest and terms and conditions of loans given to other companies were not produced before the auditor. Bank accounts remained un-reconciled. There is no staff advance register maintained. 6. The Registrar of Companies reports violation of the following provisions of Companies Act, 1956: 1. Section 97. Notice of increase of share capital or of members, 2. Section 159. Annual return to be made by company having a share capital, 3. Section 166. Annual general meeting, 4. Section 209(1). Books of accounts to be kept by company, 5. Section 210. Annual accounts and balance-sheet, 6. Section 211(1). Form and contents of balance-sheet and profit and loss account, 7. Section 212(2). Balance-sheet of holding company to include certain particulars as to its subsidiaries, 8. Section 372(6). Section 166. Annual general meeting, 4. Section 209(1). Books of accounts to be kept by company, 5. Section 210. Annual accounts and balance-sheet, 6. Section 211(1). Form and contents of balance-sheet and profit and loss account, 7. Section 212(2). Balance-sheet of holding company to include certain particulars as to its subsidiaries, 8. Section 372(6). Purchase by company of shares, etc., of other companies. The penalties attached on violations of these provisions are attracted. The Registrar of Companies also reports that the following registers were not maintained: (i) Register of contracts in which directors are interested required to be maintained under Section 301 of the Companies Act, 1956. (ii) Register of directors shareholding required to be maintained under Section 307 of the Companies Act, 1956. (iii) Register of loans given required to be maintained also under Section 370 of the Act. (iv) Register of loans and investments required to be maintained under Section 372 of the Act. There has been a default in holding Board meeting since 1980, i.e., the last twenty two years. 7 Bihar Insecticides Limited. The State of affairs of Bihar Insecticides Limited is again a matter of concern regarding the manner in which the Government companies have been run. This company was incorporated in 1982. The Registrar of Companies reports that this company has no business activity at all. Since its incorporation in 1982, that is to say, 20 years ago the company has filed only 5 annual returns and 3 balance sheets. The last annual return was filed in 1990 twelve years ago. The last balance sheet was filed as on 31 March, 1985, seventeen years ago. No cost audit of the company was done. Monies were advanced to parties but the company did not mention it nor had any audit conducted. 8. The Registrar of Companies reports that there is hardly anything to discuss about the Companys result on the basis of the last audited and filed profit and loss accounts for financial year 1984-85. The violation of the law by the Company in similar terms as the Bihar State Pharmaceutical and Chemical Development Corporation Ltd. have been noticed by the Registrar of Companies. The report which the Registrar of Companies has filed is upon visitation and access to records as provided to him by law under Section 209A of the Act. 9. The violation of the law by the Company in similar terms as the Bihar State Pharmaceutical and Chemical Development Corporation Ltd. have been noticed by the Registrar of Companies. The report which the Registrar of Companies has filed is upon visitation and access to records as provided to him by law under Section 209A of the Act. 9. The Registrar of Companies further reports that there are other companies in Bihar which are registered as government companies under Section 617. Seventeen government companies which have violated provisions of the Companies Act, which violations are serious, have been named. These are : 1.Bihar State Hydro Electric Power Corporation Limited. 2.Bihar Police Building Construction Corporation Limited. 3.Bihar State Credit & Investment Corporation Limited. 4.Bihar Hill Area Lift Irrigation Corporation Limited. 5.Bihar State Tourism Development Corporation Limited. 6.Bihar State Sugar Corporation Limited. 7.Bihar State Export Corporation Limited. 8.Bihar State Forest Development Corporation Limited. 9.Bihar State Dairy Corporation Limited. 10. Bihar State Small Industries Corporation Limited. 11. Bihar State Mineral Development Corporation Limited. 12. Bihar State Text Book Publishing Corporation Limited. 13. Bihar State Panchayati Raj Finance Corporation Limited. 14. Bihar State Construction Corporation Limited. 15. Bihar State Minority Financial Corporation Limited. 16. Bihar State Textile Corporation Limited. 17. Bihar State Film Development & Finance Corporation Limited. 10. The affairs which the Registrar of Companies is pointing out to the High Court are not such which could be passed off as inadvertent slips or mistakes so as to ignore the lapses. These matters have been reported nation wide by the newspapers and the media. 11. Basically the defaults by the government companies, as public sector undertakings with retired employees coming to the High Court seeking their unpaid salaries, pension and provident funds are dockets of the "under dog." It reveals to the High Court situations created within these public sector undertakings and management without responsibility. The bureaucrat managers managed these companies as their fiefs. These companies were not managed in a fiduciary capacity to protect public monies on public confidence. 12. Now there is another aspect which is going unnoticed. If for the last 22 years these government companies have shown such serious violation of the Companies Act, 1956, a question does arise why the Registrar of Companies did not file the statutory reports under the Act which he was otherwise obliged to under the law. 12. Now there is another aspect which is going unnoticed. If for the last 22 years these government companies have shown such serious violation of the Companies Act, 1956, a question does arise why the Registrar of Companies did not file the statutory reports under the Act which he was otherwise obliged to under the law. What exactly did the previous Registrar of Companies do in not making these continuous violations by government companies a matter of normal monitoring, visitation and reports year to year, to the Company Law Board. The establishment of the Registrar of Companies, in the normal course of its business of administration has also been slack to permit these defaults to continue. This may not be misunderstood as any reflection on the present Registrar of Companies. 13. As this matter has now come up before the High Court, action must be taken without any loss of time. The defaults which have taken place and continue, partake the nature of economic crimes, in the corporate world of government companies in Bihar, except that white collar dramatis personae are bureaucrats who did not function by the corporate law. They unmade it. Thus, these government companies were grounded and this also otherwise than in accordance with law. Even liquidation of a company has to be in accordance with law. 14. The state of affairs of the defaulting government companies, in context, and named by the Registrar of Companies will be submitted as a report to the Company Law Board, Government of India, forthwith. 15. The Registrar General of Patna High Court, also, will send a copy of this order to the Chairman, Company Law Board; for such immediate action which is warranted under the law. A copy of this order will be given to the Registrar of Companies. 16. Put up after one month in the supplementary list with further report from the Registrar of Companies.