Ramesan Maithiyeri v. Union of India, Ministry of Corporate Affairs, represented by Regional Director, Southern Region
2017-07-19
DEVAN RAMACHANDRAN
body2017
DigiLaw.ai
JUDGMENT : 1. The petitioner has filed this writ petition faced with a rather unusual situation, wherein, even though he is not the share holder or the Director of the third respondent - Business India Shares and Insurance Ltd., his name has been featured as a Director of the said company in the annual returns filed by them for the years 2005 to 2014. Interestingly, the petitioner says, his name was deleted as the Director of the said Company from the year 2015 onwards and that too not on his application but suo motu by the Company. The petitioner says that his inclusion as a Director of the Company for the period 2005 to 2014 is irregular, improper and illegal and that it is inscrutable as to why he had been so included. The petitioner alleges that the action of the Directors of the Company in including his name as a Director of its Board for the period from 2005 to 2014 is confutative and he apprehends that he will be liable for any misdemeanor of the Board of the Company for this period. He has, therefore, filed this writ petition praying that directions be issued to the Registrar of Companies, the second respondent herein, to initiate action against the Company under Section 234 of the Companies Act, 1956, which corresponds to Section 206 of the Companies Act, 2013, for correction of the Books of the said Company. 2. I have heard Sri. P.K. Rakesh Kumar, learned counsel for the petitioner and the learned Central Government Counsel for respondents 1 and 2. 3. When hearing of this writ petition commenced, learned Central Government Counsel submits that, even as per their enquiry and investigation, the petitioner has never been a share holder or a Director of the Company. The learned Central Government Counsel says that inclusion of the petitioner in the list of Directors of the Company for the period from 2005 to 2014 is completely mysterious and that a proper investigation will have to be conducted to unearth the reason why such an illegal inclusion was made. The submission made on behalf of respondents 1 and 2 obviously go completely in support of the allegations made by the petitioner in this writ petition.
The submission made on behalf of respondents 1 and 2 obviously go completely in support of the allegations made by the petitioner in this writ petition. It is the singular case of the petitioner and that he has never been a share holder of the Company and that he had only invested in the shares of another company by name Business India Builders & Developers Pvt. Ltd. and that he had made further payments in favour of the said company for the purchase of a flat for his own residence, which they were constructing at that time. The learned counsel for the petitioner asserts that the Directors of these two companies are common and that it is obvious that the investments made by his client in Business India Builders & Developers Pvt. Ltd. has been manipulated and misappropriated by the Directors of these two companies and that he has been illegally and wrongfully shown as the Director of the Company. As I have already recorded above, the submissions made on behalf of respondents 1 and 2 go completely in support of the allegations made by the petitioner. The credence and veracity of the case of the petitioner in this writ petition is above board since even the second respondent in their preliminary investigation has found in favour of the petitioner. 4. In such circumstances and in view of above, it is only appropriate that the second respondent immediately cause an enquiry and inspection into the affairs of the Company, invoking the powers in vested in him under Section 234 of the Companies Act, 1956, which corresponds to Section 206 of the Companies Act, 2013. The powers contained there are plenary and its full reading would be beneficial. The relevant provisions are, therefore, extracted as under: “234. Power of Registrar to call for information or explanation.- (1) Where, on perusing any document which a company is required to submit to him under this Act, the Registrar is of opinion that any information or explanation is necessary with respect to any matter to which such document purports to relate, he may, by a written order call on the company submitting the document to furnish in writing such information or explanation, within such time as he may specify in the order.
(2) On receipt by the company of an order under subsection (1), it shall be the duty of the company, and of all persons who are officers of the company, to furnish such information or explanation to the best of their power. (3) On receipt of a copy of an order under sub-section (1), it shall also be the duty of every person who has been an officer of the company to furnish such information or explanation to the best of his power. xxxx xxxx xxxx (7) If it is represented to the Registrar on materials placed before him by any contributory or creditor or any other person interested that the business of a company is being carried on in fraud of its creditors or of persons dealing with the company or otherwise for a fraudulent or unlawful purpose, he may, after giving the company an opportunity of being heard by a written order, call on the company to furnish in writing any information or explanation on matters specified in the order, within such time as he may specify therein; and the provisions of sub-sections (2), (3), (3A) and (4) and (6) of this section shall apply to such order. If upon inquiry the Registrar is satisfied that any representation on which he took action under this sub-section was frivolous or vexatious, he shall disclose the identity of his information to the company.” 5. The ambit of the above provision clearly invests the second respondent with the obligation to cause a scrutiny into the books and documents maintained by the Company on information received by him and if after such scrutiny he gathers an opinion that further information and explanation is required, he will be competent by issuing a written notice, to require the Company to furnish such information and to produce such documents. These provisions are intended and designed to clothe the second respondent with the power of inspection, enquiry and investigation into the affairs of the Company and to rectify mistakes or deliberate entries in the books and documents maintained by it. 6. Further, Regulation No.17 of the Companies Regulations, 1956 also empowers the second respondent to examine the documents and to direct the Company to rectify the defects and additionally mandates that no document of the Company can be taken on record unless the defects are rectified.
6. Further, Regulation No.17 of the Companies Regulations, 1956 also empowers the second respondent to examine the documents and to direct the Company to rectify the defects and additionally mandates that no document of the Company can be taken on record unless the defects are rectified. The operational sweep of this Regulation is wide as one will gather from its reading, for which I place it herein as under: “17(1) The Registrar shall examine, or cause to be examined, every document received in his office which is required or authorised by or under the Act to be registered, recorded or filed by or with the Registrar. (2) If any such document is found to be defective or incomplete in any respect, the Registrar shall give notice in writing to the company to rectify the defect or complete the document or to file a revised document complete in all respects, within 15 days from the date of such notice. (3) In case of failure on the part of the company to rectify the defect or to complete the document within 15 days after giving notice to the company, the document shall be registered, recorded or filed as the case may be, by the Registrar and the company shall be informed accordingly.” 7. The submissions made on behalf of respondents 1 and 2 herein, recorded above, would clearly indicate that the allegations of the petitioner that large scale manipulations have been done in the records of the Company appear to be more or less established. It is, therefore, up to the second respondent now to cause such scrutiny and enquiry, as is warranted under the Companies Act and Regulations, to ensure that such mistakes and deliberate manipulations are rectified and unearthed in and from the books and documents of the Company. 8. In such circumstances, I direct the second respondent to take immediate action to cause a scrutiny and an enquiry into the statutory books and documents of the Company and to issue such orders as may be warranted for rectification of the same and to follow up with all appropriate action as is warranted under the mandate of law. The exercise as directed herein shall be completed by the second respondent as expeditiously as possible but not later than four months from the date of receipt of a copy of this judgment. 9.
The exercise as directed herein shall be completed by the second respondent as expeditiously as possible but not later than four months from the date of receipt of a copy of this judgment. 9. Needless to say, merely because the petitioner's name has been included as a Director in the Company's records between 2005 and 2014, no action will be taken against him in such capacity until such time as the scrutiny and enquiry as ordered herein is completed by the second respondent and any such action, if required, will adhere to the order to be issued by the second respondent after such an exercise. The writ petition is thus ordered.