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PETITIONER: RAJA NARAYANLAL BANSILAL

       Vs.

RESPONDENT: MANECK PHIROZ MISTRY AND ANOTHER.

DATE OF JUDGMENT: 31/08/1960

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. SINHA, BHUVNESHWAR P.(CJ) WANCHOO, K.N. GUPTA, K.C. DAS SHAH, J.C.

CITATION:  1961 AIR   29            1961 SCR  (1) 417  CITATOR INFO :  R          1964 SC1552  (10)  R          1967 SC 295  (10,72)  RF         1969 SC 707  (42)  RF         1970 SC 940  (13,14)  F          1973 SC1196  (19)  R          1978 SC1025  (34,35)  RF         1981 SC 379  (67)  D          1988 SC 113  (5)

ACT: Company-Investigation  into affairs  of-Inspector  appointed under  old  Act,  if  can exercise  powers  under  new  Act- Constitution-Testimonial  compulsion-Whether Provisions  for Production of documents and evidence offend  guarantee-Equal protection  of the law-If provisions for  investigation  and Production  of  evidence offend  guarantee-Indian  Companies Act,  1913 (VII of 1913), S. 138 Companies Act, 1956  (1  of 1956),  SS.  235,  239, 240, 645 and  646,  Constitution  of India, Arts. 14 and 20(3).

HEADNOTE: On November 15, 1954, the Registrar wrote to the company  of which  the  appellant was the Managing Agent under  s.  137, Indian Companies Act, 1913, that it had been represented  to him that the business of the company was carried on in fraud and called upon it to furnish certain information.  On April 15,  1955,  the  Registrar  made a  report  to  the  Central Government under s. 137(5) to the effect that in his opinion the  affairs  of  the company were carried on  in  fraud  of contributories and they disclosed an unsatisfactory state of affairs   and  that  a  case  had  been  made  out  for   an investigation   under  s.  138.   Thereupon,   the   Central Government,  on November 1, 1955, appointed an Inspector  to investigate  the  affairs  of  the  company  and  to  report thereon.   The  Inspector  was authorised under  s.  140  to examine  any person on oath, and he wrote to  the  appellant that  he  would  examine  him on oath  in  relation  to  the business  of  the  company.  On April 1,  1956,  the  Indian Companies  Act, 1913, was repealed by the  Indian  Companies

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Act, 1956, which conferred wider and more drastic powers  of investigation.   On  July 26, 1956, the  Central  Government accorded  approval  under s. 239(2) of the new  Act  to  the Inspector  exercising his powers of investigating  into  and reporting  on the affairs of the company.  In May  1957  the Inspector served notices upon the appellant calling upon him to attend his office on the date and the time specified  for the purpose of being examined on oath and to produce certain account  books  and  papers relating to  the  company.   The appellant  challenged the investigation and contended :  (i) that since the Inspector was appointed under the old Act  he had no jurisdiction to exercise the powers referable to  the provisions  of the new Act, (ii) that s. 240 of the new  Act which provided for the production of documents and, evidence at   such   investigations  offended  Art.  20(3)   of   the Constitution,  and  (iii) that S. 239 of the new  Act  which conferred powers on inspectors for investigation and S.  240 offended Art. 14 of the Constitution. 418 Held,  that the Inspector appointed under S. 138(4)  of  the old  Act must be deemed to have been appointed under s.  235 of the new Act and had authority and power to issue  notices under  S.  240 of the new Act.  Section 645 of the  new  Act provided that the appointment of an Inspector under the  old Act shall, on repeal of the old Act and on coming into force of  the new Act, have    effect as if it was made under  the new Act.  Section 646 which provided that nothing in the new Act  shall affect the operation of S. T38 of the old Act  as respects  inspectors was not an exception or proviso  to  S. 645  and  the two sections being saving sections had  to  be read  as  independent  of and in addition  to,  and  not  as exceptions to, each other. Held, further that S. 240 of Indian Companies Act, 1956, did not offend Art. 20(3) of the Constitution.  For invoking the constitutional   right   against   testimonial    compulsion guaranteed  under Art. 20(3) there must be at  the  relevant stage  a  formal accusation against the party  pleading  the guarantee relating to the commission of an offence which may result  in a prosecution.  The enquiry undertaken  under  S. 240  by the Inspector was in substance an enquiry  into  the affairs  of  the  company;  at  this  stage  there  was   no accusation,  formal  or  otherwise,  against  any  specified individual.  The mere fact that a prosecution may ultimately be   launched  against  the  alleged  offenders  would   not retrospectively  change the complexion or character  of  the proceedings  held  by  the  Inspector  when  he  makes   the investigation. Maqbool  Hussain v. The State of Bombay, [1953] S.C.R.  730, S.   A.  Venkataraman v. The Union of India,  [1954]  S.C.R. 1150, M.  P. Sharma v. Satish Chandra, District  Magistrate, Delhi, [1954] S.C.R. 1077, Thomas Dana v. State  of  Punjab, [1959]  Supp.   1 S.C.R. 274 and Mohammed  Dastagir  v.  The State of Madras, [1960] 3 S.C.R. 116, relied on. Held,  further that SS. 239 and 240 of the Indian  Companies Act,  1956,  did not violate Art. 14  of  the  Constitution. These  sections denied the company and persons in charge  of the  management  of such companies the  ordinary  protection afforded  to witnesses under S. 132 of the Evidence Act  and under S. 161(1) and (2) of the Criminal Procedure Code.   As they were entrusted with the financial interests of a  large number of citizens it was legitimate to treat such companies and  their managers as a class by themselves and to  provide for  necessary safeguards and checks against abuse of  power by the managers.  The basis of the classification is founded on an intelligible differentia which has a rational relation

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to the object sought to be achieved. Shri Ram Krishna Dalmia v. justice Tendolkar, [1959]  S.C.R. 297, applied.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 268 of 1959.                             419 Appeal from the judgment and decree dated September 3, 1958, of the former Bombay High Court in Appeal No. 28/1958. A.   V. Viswanatha Sastri, Ganpat Rai and I. N. Shroff,  for the appellant. M.   C. Setalvad, Attorney-General for India, B. Sen and  T. M. Sen, for the respondents. 1960.   August 31.  The Judgment of the Court was  delivered by GAJENDRAGADKAR J.-The appellant Raja Narayanlal Bansilal  of Bombay is the Managing Agent of a Limited Company named  the Harinagar  Sugar  Mills  Limited.  By virtue  of  the  power conferred on him by s. 137 of the Indian Companies Act, 1913 (VII of 1913), the Registrar wrote to the mills on  November 15,  1954,  that  it had been represented to  him  under  s. 137(6)  that the business of the company was carried  on  in fraud,  and  so he called upon the company  to  furnish  the information  which he required as set out in a part  of  his letter  (Ex.  A).  On April 15, 1955, the Registrar  made  a report  (Ex.  AA) to the Central Government under s.  137(5) of  the said Act.  This report showed that according to  the Registrar  the  affairs of the company were  carried  on  in fraud of contributories and they disclosed an unsatisfactory state of affairs.  The report pointed out that the appellant was  the  Managing  Agent  of the company  as  well  as  its promoter, and that it was suspected that under a  fictitious name  of Bansilal Uchant Account the company  was  advancing money to the several firms owned by the appellant which were ostensibly  purchased from the company’s funds.  The  report further  stated that between the years ending in  September, 1942 and 1951 about Rs. 19,200 were paid for Harpur Farm and Rs.;.  39,300  for Bhavanipur Farm, and  accounts  disclosed that  the  Uchant  Account was  chiefly  operated  upon  for purchasing such lands out of the funds of the company though the purchase in fact was for and on behalf of the appellant. The Registrar also added that he had reason to believe  that the Managing 54 420 Agent  was  utilising the property of the  company  in  some cases  for  his personal gain, and concluded  that,  in  his opinion, a case had been made out for an investigation under s. 138. On receiving this report, on November 1, 1955, the  ’Central Government  passed an order under s. 138(4) of the said  Act (Ex.   B) appointing the first respondent Maneck P.  Mistry, who   is  a  Chartered  Accountant,  as  an   inspector   to investigate the affairs of the company from the date of  its incorporation.   The said inspector was asked to  point  out all  irregularities and contraventions of the provisions  of the  said  Act or any other law, and make a full  report  as indicated  in a communication which was separately  sent  to him.   This separate communication (Ex.  BB) prescribes  the mode  of enquiry which should be adopted by inspectors.   It requires  that while investigating the affairs of  companies the  inspectors  should bear in mind that for  a  successful prosecution  the  evidence in support of a  charge  must  be

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clear,  tangible and cogent, and that their  reports  should specify with reference to the evidence collected during  the investigations the points specified under paragraph 2(a)  to (e).   In the course of their investigation  the  inspectors are asked to make use of the powers available to them  under s. 140 of the said Act including the right to examine a per- son  on  oath.   The investigation should  be  conducted  in private  and the inspectors are not entitled to make  public the  information received by them during the course  of  the investigation. Pursuant  to the powers conferred on him by the  said  order respondent  1 wrote to the appellant intimating to him  that he would examine him on oath in relation to the business  of the  company  under  s. 140(2) of the  said  Act  (Ex.   C). Meanwhile  on April 1, 1956, the Companies Act of 1913  (VII of  1913) was repealed by  the Companies Act of 1956  (1  of 1956).  For the sake of convenience we would hereafter refer to  the repealed Act as the old Act and the Act  which  came into  force on April 1, 1956, as the new Act.  On  July  26, 1956, the Central Government purported to exercise its power under s. 239(2) of the new Act and 421 accorded  approval to respondent 1 exercising his powers  of investigating  into,  and reporting on, the affairs  of  the appellant  including his personal books of accounts as  well as the affairs of the three concerns specified in the order. These three concerns are M/s.  Narayanlal Bansilal, who  are the Managing Agents of Harinagar Sugar Mills, the  Shangrila Food Pro ducts Limited and, Harinagar Cane Farm.  It appears that  the  appellant  is  the  proprietor  of  the  firm  of Narayanlal Bansilal.  After this order was passed respondent 1  served upon the appellant the four impugned notices  (Ex. E  collectively) on May 9, 1957, May 16, 1957, May 29,  1957 and   June  29,  1957,  respectively.   These  notices   are substantially  identical  in  terms’  and  so  it  would  be sufficient for our purpose to set out the purport of one  of them.  The first notice called upon the appellant to attend the  office  of  respondent 1 on the date and  at  the  time specified  for  the  purpose of being examined  on  oath  in relation  to  the  affairs of the company,  and  to  produce before  respondent  1 all the books of accounts  and  papers relating  to  the said company as mentioned in  the  notice. The appellant was further told that in default of compliance with  the requisition aforesaid necessary legal steps  would be  taken  without  further reference to  him.   The  notice contains  a  list  of twelve items  describing  the  several documents which the appellant was required to produce before respondent 1. After these notices were served on the appellant he filed a, petition  (No.  201 of 1957) in the Bombay  High  Court  and prayed that the High Court should issue a writ of certiorari or any other appropriate direction, order or writ under Art. 226 of the Constitution calling upon respondent 1 to produce the records of the case relating to the notices in  question and to set aside the said notices, the proposed  examination of  the  appellant and the interim report made by  him.   It further  prayed  for  a writ of  prohibition  or  any  other appropriate direction, order or writ restraining  respondent 1  from making any investigation under the said notices  and from  exercising  any powers of investigation under  s.  239 and/or s. 240 of the new Act and/or 122 from  investigating  into  the affairs  of  any  persons  or concerns specified in the petition.  The petitioner  claimed these  writs mainly on two grounds.  He first  alleged  that

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since  respondent 1 had been appointed under the old Act  he had  no  jurisdiction to exercise powers  referable  to  the relevant  provisions  of the new Act.  This  ground  assumed that the said relevant provisions of the new Act are  valid, but  it  is  urged that the powers  referable  to  the  said provisions  are not available to respondent 1 since  he  was appointed under the old Act.  The other ground on which  the writs  were claimed challenges the vires of ss. 239 and  240 of the new Act.  This challenge assumed an alternative form. It is argued that s. 240 offends against the  constitutional guarantee provided by Art. 20(3) of the Constitution and  it is  also  urged  that certain portions of ss.  239  and  240 offend against another constitutional guarantee provided  by Art.  14  of the Constitution.  It is thus  on  these  three contentions that the petitioner claimed appropriate writs by his petition before the Bombay High Court.  These pleas were resisted by the Union of India which had been joined to  the proceedings  as respondent 2. Mr. Justice K. T.  Desai,  who heard  the petition, rejected the contentions raised by  the petitioner, and held that no case had been made out for  the issue  of  any writ.  This decision was  challenged  by  the appellant  before  the Court of Appeal in  the  Bombay  High Court;  the  Court of Appeal agreed with the view  taken  by Desai,   J.,  and  dismissed  the  appeal.   Thereupon   the appellant  applied for and obtained a certificate  from  the High Court, and it is with the said certificate that he  has come to this Court by his present appeal.  On his behalf Mr. Viswanatha  Sastri has raised the same three points for  our decision. Let  us first examine the question whether or not the  first respondent has jurisdiction to exercise the powers under the relevant  provisions  of the new Act.  It is  common  ground that  if respondent 1’s powers to bold the investigation  in question  are to be found in the relevant provisions of  the old  Act and not those of the new Act the  impugned  notices issued by him would be                             423 without  authority and jurisdiction.  In dealing  with  this question  it is necessary to examine the broad  features  of the relevant sections of the two Acts. We will begin with the old Act.  Section 137 of the old  Act deals  with investigation by the Registrar.  Section  137(1) provides  that  where  the  Registrar  on’  perusal  of  any document which a company is required to submit to him is  of opinion that any information or explanation is necessary  in order that such document may afford full particulars of  the matter  to which it purports to relate he may, by a  written order,  call  on  the  company to  furnish  in  writing  the necessary  information or explanation within the time to  be specified  in  the  order.   Section  137(5)  requires   the Registrar  to  make  a  report in  writing  to  the  Central Government  if no information is supplied to him within  the specified  time,  or  if the  information  supplied  to  him appears  to  him  to disclose  an  unsatisfactory  state  of affairs,  or does not disclose a full and fair statement  of the  relevant matters.  Thus s. 137(1) to (5) deal with  the investigation which the Registrar is empowered to make on  a persual of the document submitted to him by a company  under the  provisions  of this Act.  Section 137(6) deals  with  a case  where  if  it  is  represented  to  the  Registrar  on materials placed before him by any contributory or  creditor that the business of a company is carried on in fraud or  in fraud  of its creditors or in fraud of persons dealing  with the  company  or  for a fraudulent purpose,  he  may,  after following the procedure prescribed in that behalf, call  for

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information or explanation on matters to be specified in his order within such time as he may fix, and when such an order is  passed  the  provisions of s. 137(2)  to  (5)  would  be applicable.  This sub-section provides that if at the end of the  investigation  the  Registrar  is  satisfied  that  the representation  on  which he took action  was  frivolous  or vexatious he shall disclose the identity of the informant to the  company.   This provision is obviously  intended  as  a safeguard against frivolous or vexatious representations  in respect  of the affairs of any company.  The  provisions  of this section are substantially similar to the provisions  of s. 234 of the new Act. 424 affairs  of companies by inspectors, authorises the  Central Government  to appoint one or more competent  inspectors  to investigate the affairs of any company and report thereon in such  manner  as  the  said  ,Government  may  direct.   The appointment  of  competent  inspectors can be  made  by  the Central Government in four classes of cases as specified  in s.  138(1) to (4).  It would be relevant to refer to two  of these  cases.  Under s. 138(1) a competent inspector can  be appointed  in the case of a banking company having  a  share capital on the application of members holding not less  than one-fifth  of the shares issued, and under s. 138(4) in  the case  of any company on a report by the Registrar  under  s. 137(5).  This section substantially corresponds to s. 235 of the new Act. The other sections of the old Act to which reference must be made are ss. 140, 141 and 141A.  Section 140(1) imposes upon all persons who are. or have been officers of the company an obligation  to produce before the inspectors all  books  and documents in their custody or power relating to the company. Section 140(2) empowers the inspector to examine on oath any such person, meaning a person who is or has been an  officer of  the company in relation to the business of  the  company and  to administer an oath to him.  Section 140(3)  provides that if a person refuses to produce a book or a document  or to  answer  any question he shall be liable to  a  fine  not exceeding  Rs. 50 in respect of each offence.   Section  141 provides  that  on the conclusion of  an  investigation  the inspectors  shall  report  their  opinions  to  the  Central Government, and shall forward a copy of their report to  the registered office of the company ; and it also provides that a copy of the said report can be delivered at their  request to  the applicants for the investigation.  Then we  have  s. 141A  which  deals  with the  institution  of  prosecutions. Section 141A(1) provides that if from any report made  under s. 138 it appears to the Central Government that any  person has  been guilty of any offence in relation to  the  company for  which  he is criminally liable the  Central  Government shall refer the                             425 matter  to  the Advocate-General or the  Public  Prosecutor. Section  141A(2)  lays down that if the law officer  who  is consulted under (1) considers that there is a case in  which prosecution   ought   to  be  instituted  he   shall   cause proceedings to be instituted accordingly-, That in brief  is the scheme of the relevant provisions of the old Act. We will now examine the scheme of the relevant provisions of the  new Act.  It has already been noticed that ss. 234  and 235 of the new Act are substantially similar to ss. 137  and 138 of the old Act.  Section 239 of the new Act provides for the powers of the inspectors to carry on investigation  into the  affairs  of related companies or of managing  agent  or associate.   The  sweep of the enquiry  authorised  by  this

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section is very much wider than that under the corresponding section  of  the old Act.  Sub-section (1) of  this  section authorises  an  inspector to investigate the  affairs  of  a company and also the affairs of any other body corporate  or person  specified  in  cls.  (a) to  (d)  if  he  thinks  it necessary so to do.  These clauses include several cases  of body  corporate  which  may have any  connection  direct  or indirect,  immediate  or  remote, with the   affair  of  the company  whose  affairs  are  under  investigation.   It  is unnecessary  for  our  purpose  in  the  present  appeal  to enumerate  the said cases serially or exhaustively.   It  is conceded  that the three other persons who have been  called upon by respondent 1 to produce documents and give  evidence fall  within  the  purview of s. 239.  As a  result  of  the provisions of s. 239(1) the inspector has to report not only on  the affairs of the company under investigation but  also on  the  affairs of other bodies or persons  who  have  been compelled to give evidence and produce documents during  the course of the enquiry.  The only safeguard provided  against a  possible abuse of these extensive powers is that  in  the case  of  any body corporate or person referred to  in  cls. (b)(ii),  (b)(iii),  (c) or (d) of subs. (1)  the  inspector shall  not exercise his relevant power without first  having obtained  the  prior  approval  of  the  Central  Government thereto. Section 240 of the new Act imposes an obligation 426 on  the corporate bodies and persons in respect of which  or whom  investigation is authorised by s. 239 to  produce  all books  and papers and to give all assistance  in  connection with  the  said  investigation ; that is the  result  of  s. 240(1).  Section 240(2) empowers the inspector to examine on oath  any  of  the  persons referred to  in  sub-s.  (1)  in relation  to  the relevant matters  as  specified.   Section 240(3)  deals with a case where a person refuses  to  comply with the obligation imposed on him by s. 240(1) or (2) ; and it  provides that in such a case the inspector  may  certify the  refusal under his hand to the court, and the court  may thereupon  enquire into the case, hear witnesses who may  be produced  against  or  on behalf of  the  alleged  offender, consider any statement which may be offered in defence,  and punish the offender as if he had been guilty of contempt  of the  court.   Section  240(4) deals with a  case  where  the inspector  thinks  it  necessary  for  the  purpose  of  his investigation that a person whom he has no power to  examine on oath should be .examined, and it provides that in such  a case  he  may apply to the court, and the court may,  if  it thinks  fit, order that person to attend and be examined  on oath before it on any matter relevant to the  investigation. This  sub-section provides for the procedure to be  followed in examining such a witness.  Section 240(5) lays down  that notes  of any examination under sub-s. (2) or (4)  shall  be taken down in writing, and shall be read over to or by,  and signed  by, the person examined, and may thereafter be  used as  evidence  against  him.   Having  thus  made   elaborate provisions  for the production of documents and evidence  in the  course  of the investigation by the inspector,  s.  241 deals   with  the  inspectors’  report  and  provides   that inspectors may, and if so directed by the Central Government shall,  make interim reports to that Government, and on  the conclusion of the investigation shall make a final report to it.   Section 241(2) provides for the supply of the copy  of the  said  report  to  the  several  parties  concerned   as specified in cls. (a) to (e). That  takes  us  to s. 242  which  deals  with  prosecution.

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Section 242(1) provides inter alia that if from                             427 any  report  made  under a. 241 it appears  to  the  Central Government  that any person has in relation to  the  company been  guilty  of  any offence for  which  he  is  criminally liable, the Central Government may, after taking such  legal advice  as  it  thinks fit, prosecute such  person  for  the offence,  and it imposes on all officers, and agents of  the company,  except  those  prosecuted,  to  give  the  Central Government all assistance in connection with the prosecution which they are reasonably able to give.  That broadly stated is  the position with regard to the relevant  provisions  of the new Act. Mr. Sastri has drawn our pointed attention to the fact  that the  scope and nature of the enquiry authorised by  the  new Act  are very much wider than under the old Act, and he  has characterised   the  relevant  ,powers  conferred   on   the investigating  inspectors  as  draconian.   He,   therefore, contends that unless it is established that these powers are available  to  the inspector appointed  under  the  relevant provisions  of the old Act the impugned notices must be  set aside;  and  his  argument  is that  these  powers  are  not available to the inspector appointed under the old Act.  The decision  of  this question will depend mainly on  the  con- struction of ss. 645 and 646 of the new Act. Section  644  provides  for the  repeal  of  the  enactments mentioned  in  Schedule  XII;  the old Act  is  one  of  the enactments  thus  repealed.  Ordinarily the  effect  of  the repeal  of  the  old Act would have  been  governed  by  the provisions of s. 6 of the General Clauses Act (10 of  1897), but  in the case of the new Act the application of the  said section  is subject to the provisions of ss. 645 to  657  of the  Act; that is the effect of s. 658 which  provides  that the mention of particulars in ss. 645 to 657 or in any other provisions  of  this  Act shall not  prejudice  the  general application  of s. 6 of the General Clauses Act, 1897,  with respect to the effect of repeals.  In other words, though s. 6  of  the  General Clauses Act will  generally  apply,  its application  will be subject to the provisions contained  in as. 645 to 657; this position is not disputed. It is now necessary to consider s. 645.  It reads thus: 55 428 "Nothing   in  this  Act  shall  affect  any  order,   rule, regulation, appointment, conveyance mortgage, deed, document or   agreement  made,  fee  directed,   resolution   passed, direction  given, proceeding taken, instrument executed  or issued, or thing done, under or in pursuance of any previous companies  law;  but  any  such  order,  rule,   regulation, appointment,    conveyance,   mortgage,   deed,    document, agreement,    fee,   resolution,   direction,    proceeding. instrument  or thing shall, if in force at the  commencement of this Act, continue to be in force, and so far as it could have  been made, directed, passed, given,  taken,  executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act." The  effect of this section is clear.  If an inspector  has. been appointed under the relevant section of the old Act, on repeal  of the old Act and on coming into force of  the  new Act,  his  appointment shall have effect as if it  was  made under  or in pursuance of the new Act.  Indeed it is  common ground  that  if  s. 645 had stood alone and  had  not  been followed  by s. 646 there would have been no  difficulty  in holding that the inspector appointed under the old Act could

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exercise  his  powers  and  authority  under  the   relevant provisions  of the new Act, and the impugned  notices  would then  be perfectly valid.  Incidentally we may refer to  the provisions of a. 652 in this connection.  Under this section any person appointed to any office under or by virtue of any previous company law shall be deemed to have been  appointed to that office under this Act. It  is, however, urged that the authority of  the  inspector which is in dispute is governed by s. 646. This section provides: "Nothing  in this Act shall affect the operation of  section 138  of  the Indian Companies Act, 1913 (VII of  1913), as respects  inspectors, or as respects the continuation of  an inspection   begun  by  inspectors,  appointed  before   the commencement  of  this Act; and the provisions of  this  Act shall  apply  to or in relation to a  report  of  inspectors appointed under the said section 138 as they apply to or  in relation to a report                             429 of  inspectors  appointed under section 235 or 237  of  this Act." The argument is that the expression " nothing in this Act  " includes s. 645 and so s. 646 should be read as an exception or proviso to s. 645; and if that is so, all matters covered by  s. 138 of the old Act must continue to be governed  by the  said Act and not by any  of the provisions  of  the new Act.    We   are  unable  to  accept  this   argument.    In appreciating  the effect of the provisions of s. 646  it  is necessary to bear in mind that it occurs in that part of the new Act which deals with repeals and savings.  Sections  645 to  648 are the saving sections, and ordinarily and  in  the absence  of  any  indication to the  contrary  these  saving clauses  should be read as independent of, and  in  addition to, and not as providing exceptions to, one another.  It  is significant that whereas s. 646 provides for the continuance of the operation of s. 138 it does not make a  corresponding provision for the continuance of the operation of a. 140  of the old Act which deals with the powers of the inspector  to call  for  books and to examine parties.   Besides,  it  may perhaps not be accurate to suggest that having regard to the provisions of s. 645, s. 646 is wholly redundant.  It  would be  possible  to take the view that cases falling  under  s. 138(1)  of the old Act are intended to be covered by s.  646 as  they would not be covered by s. 645.  In regard  to  the case of a banking company covered by s. 138(1) s. 646   will come into operation and that may be one of   the reasons for which s. 646 was enacted.  It may be    that the case of the banking company may also be covered by s. 35 of the  Banking Companies Act 10 of 1949, but since a. 138(1) applied to the said  case  until the old Act was repealed  the  Legislature may-have,  as a matter of caution, thought it  necessary  to provide  for the continuance of the operation of s.  138  by enacting s. 646.  However that may be, we feel no difficulty in holding that s: 646 should not be construed as a  proviso to  s.645 but as an additional saving provision.  The  words used  in s. 645 are so clear, and the policy and  object  of enacting   the  said  provision  are  in  our   opinion   so emphatically expressed, that it 430 would  be unreasonable to hold that s. 646 was  intended  to provide  for such a radical exception to s. 645.  Where  the Legislature enacts a saving section as a matter of  abundant caution the argument that the enactment of the said  section was  not wholly necessary cannot be treated as  decisive  or even  effective.  Therefore, in our opinion, the High  Court

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was  right  in coming to the conclusion that  the  inspector appointed  under  s.  138(4) of the old Act  must  by  legal fiction,  which is authorised by s. 645, be deemed  to  have been  appointed under s. 235 of the new Act, and if that  is so,  respondent  1  had authority and  power  to  issue  the impugned notices under s. 240 of the new Act.  The challenge to  the validity of the impugned notices on the ground  that respondent  1  had no authority to issue  the  said  notices must, therefore, fail. That  takes  us to the question as to whether  the  relevant provisions  of s. 240, which empower respondent 1  to  issue the relevant notices by which the appellant was called  upon to  give evidence and to produce documents,  offend  against the  fundamental  constitutional right  guaranteed  by  Art. 20(3).   It  has been strenuously urged before us  that  the main  object  of the present investigation  is  to  discover whether the appellant has committed any offenses, and so  by compelling him to give evidence and produce documents he  is denied   the   constitutional   protection   against    self incrimination. Article  20(3)  provides  that " no person  accused  of  any offence  shall be compelled to be a witness against  himself ".  It may be assumed that the appellant is being  compelled to  be witness against himself in the  present  proceedings; but  even so the question which arises for our  decision  is whether  the  appellant can be said to be a  person  who  is accused  of  any  offence as required by  Art.  20(3).   Mr. Sastri has contended that the words " person accused of  any offence   "   should  not  receive  a  narrow   or   literal construction; they should be liberally interpreted  because. the  clause,  in which they occur  enshrines  a  fundamental constitutional  right  and the scope and reach of  the  said right  should  not be unduly narrowed down.  In  support  of this                             431 general  argument  Mr. Sastri has naturally  relied  on  the historical background of the doctrine of protection  against self-incrimination; and he has strongly pressed into service the  decisions of the Supreme Court of the United States  of America dealing with the Fifth Amendment to the Constitution of  the  United  States.   The  said  Amendment  inter  alia provides that " no person shall be compelled in any criminal case to be a witness against himself ". It would be  noticed that  in terms the Amendment refer to a criminal  case,  and yet it has received a very broad and liberal  interpretation at  the hands of the Supreme Court of the United  States  of America.   It  has been held that  the  said  constitutional protection  is  not confined only to criminal cases  but  it extends  even  to  civil  proceedings  (Vide:  McCarthy   v. Arndstein(1)).   As  observed by Mr. Justice  Blatchford  in Charles Counselman v. Frank Hitchcock (2) " it is impossible that the meaning of the constitutional provision can only be that a person shall not be compelled to be a witness against himself in a criminal prosecution against himself.  It would doubtless  cover such cases but it is not limited  to  them. The  object  was  to  insure that a  person  should  not  be compelled, when acting as a witness in any investigation, to give testimony which might tend to show that he himself  had committed  a  crime.  The privilege is limited  to  criminal matters, but it is as broad as the mischief against which it seeks to guard ". In support of his plea that a liberal interpretation  should be   put  on  an  article  which  enshrines  a   fundamental constitutional  right  Mr.  Sastri  has  also  invited   our attention to the observation made by Mr. Justice Bradley  in

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Edward  A.  Boyd and George H. Boyd v.  United  States  (3). Says  Bradley,  J.,  "  illegitimate  and   unconstitutional practices  get  their first footing in that way,  namely  by silent approaches and slight deviations from legal modes  of procedure.   This  can only be obviated by adhering  to  the rule  that  constitutional provisions for  the  security  of person and (1) (1924) 69 L. Ed. 158.     (2) (1892) 35 L. Ed. 1110. (3) (1886) 29 L. Ed. 746,752. 432 property should be liberally construed ". The learned  judge has  also added that any compulsory discovery  by  extorting the  party’s  oath,  or compelling  the  production  of  his private  books  and papers, to convict him of  crime  or  to forfeit  his  property, is contrary to the principles  of  a free  government,  and is abhorrent to the instincts  of  an American.   It may suit the purposes of despotic power;  but it cannot abide the pure atmosphere of political liberty and personal freedom".  In regard to this eloquent statement  of the law it may, however, be permissible to state that  under the  English  Law the doctrine of protection  against  self- incrimination  has never been applied in the departments  of Company  Law’  and Insolvency Law.  There is no  doubt  that under  s.  15 of the English Bankruptcy Act  when  a  public examination  of a debtor is held he is compelled  to  answer all  questions as the court may put, or allow to be  put  to him, and that the answers given have to be signed by him and can  be used against him in evidence (Vide: In Re:  Atherton (1));  similar is the position under s. 270 of  the  English Companies  Act.   However,  the  general  argument  for  the appellant is that in construing Art. 20(3) we may take  some assistance from the broad and liberal construction which has been placed on the apparently narrow and limited words  used in  the  Fifth Amendment to the Constitution of  the  United States of America.. Thus presented the argument is no doubt attractive, and  its validity  and effectiveness would have had to be  fully  and carefully  examined  if the question raised in  the  present appeal  had  been  a matter of first impression  ;  but  the construction of Art. 20 in general and Art. 20(2) and (3) in particular has been the subject matter of some decisions  of this Court, and naturally it is in the light of the previous decisions  that  we  have to deal with  the  merits  of  the appellants  case in the present appeal.  In Maqbool  Hussain v.  The  State  of Bombay (2) this  Court  had  occasion  to consider   the  scope  and  effect  of  the   constitutional guarantee  provided  by Art. 20(2).  A person  against  whom proceedings (1) (1912) 2 K.B. 251. (2) [1953] S.C.R. 730. 433 had  been taken by the Sea Customs Authorities under s.  167 of  the  Sea Customs Act and an order  for  confiscation  of goods had been passed was subsequently prosecuted before the Presidency  Magistrate  for-an offence under s.  23  of  the Foreign Exchange Regulations Act in respect of the same act. It  was  urged  on, his behalf that  the  proceedings  taken against  him  before  the  Sea  Customs  Authorities  was  a prosecution and the order of confiscation passed in the said proceedings wag a punishment, and. so it was argued that the constitutional  guarantee  afforded by Art. 20(2)  made  his subsequent  prosecution under s. 23 of the Foreign  Exchange Regulation Act invalid.  This plea was rejected.  In dealing with  the merits of the plea this Court had to consider  the meaning  of  the words " prosecuted and punished "  used  in

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Art. 20(2).  Article 20(2) provides that no person shall  be prosecuted and punished for the same offence more than once, and  the question raised was whether the proceedings  before the  Sea  Customs Authorities constituted  prosecution,  and whether the order of confiscation was punishment under  Art. 20(2).  In construing Art. 20(2) this Court considered  Art. 20 as a whole and examined the interrelation of the relevant terms used in the three clauses of the said article.  "  The very wording of Art. 20 ", observed Bhagwati, J., " and  the words  used  therein" convicted ", " commission of  the  act charged  as an offence ", " be subjected to a penalty  ",  " commission of the offence ", " prosecuted and punished ",  " accused of any offence " would indicate that the proceedings therein   contemplated  are  of  the  nature   of   criminal proceedings  before a court of law or a  judicial  tribunal. and the prosecution in this context would mean an initiation or  starting  of proceedings of a criminal nature  before  a court  of law or a judicial tribunal in accordance with  the procedure  prescribed  in  the  statute  which  creates  the offence and regulated the procedure ". Having thus construed Art.  20(2) in the light of the relevant words used  in  the different clauses of the said article, this Court  naturally proceeded  to  enquire whether the Sea  Customs  Authorities acted as a judicial tribunal in holding proceedings 434 against the person.  The scheme of the relevant pro. visions of the Act was then examined, and it was held that the  said authorities are not a judicial tribunal with the result that the  "I  adjudging  increased rate of duty  or  penalty  and confiscation"  under the provisions of the said act did  not constitute  a  judgment  or order of  a  court  or  judicial tribunal necessary for the purpose of supporting the plea of double jeopardy.  In the result the conclusion of this Court was  that when the Customs Authorities confiscated the  gold in  question  the  proceedings taken did  not  amount  to  a prosecution  of the party nor did the order of  confiscation constitute a punishment as contemplated by Art. 20(2). This decision has been affirmed by this Court in the case of S. A. Venkataraman v. The Union of India (1).  In that  case an enquiry bad been made against the appellant  Venkataraman under the Public Servants (Inquiries) Act, 1850 (Act  XXXVII of   1850).   On  receiving  the  report  of   the   enquiry commissioner  opportunity was given to the  appellant  under Art.   311(2)   to  show  cause,   and,   ultimately   after consultation  with the Union Public Service  Commission  the appellant was dismissed by an order passed by the President. The  order  of dismissal was passed on September  17,  1953. Soon thereafter on February 23, 1954, the police submitted a charge-sheet against him charging him with having  committed offenses under ss. 161/165 of the Indian Penal Code ’and  s. 5(2)  of the Prevention of Corruption Act.  The validity  of the  subsequent prosecution was challenged by the  appellant on  the  ground  that  it  contravened  the   constitutional guarantee  enshrined  in Art. 20(2).  The  appellant’s  plea was,  however, rejected on the ground that  the  proceedings taken   against  him  before  the  commissioner  under   the Inquiries Act did not amount to a prosecution.  The relevant provisions  of the said act were examined, and it  was  held that  in an inquiry under the said Act there is neither  any question of investigating an offence in the sense of an  act or  omission  punishable by any law for the  time  being  in force nor is there (1) [1964] S.C.R. 1150.                             435 any  question of imposing punishment prescribed by  the  law

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which makes that act or omission an offence.  Mukherjea, J., as he then was, who delivered the judgment of the Court, has referred  to  the earlier decision in the  case  of  Maqbool Hussain (1), and has observed that " the effect of the  said decision  was  that the proceedings in connection  with  the prosecution and punishment of a person must be in the nature of a criminal proceeding before a court of law or a judicial tribunal,  and  not  before a tribunal  which  entertains  a departmental or an administrative enquiry even though set up by  a  statute  but which is not required by law  to  try  a matter  judicially and on legal evidence ". Thus  these  two decisions  can be said to have considered  incidentally  the general scope of Art. 20 though both of them were  concerned directly with the construction and application of Art. 20(2) alone. Article  20(3)  was considered by the Full Court  in  M.  P. Sharma  v. Satish Chandra, District Magistrate,  Delhi  (2). The  question about the scope and effect of Art.  20(3)  was raised in that case by a petition filed under Art. 32 of the Constitution.   It appears that the Registrar of  the  Joint Stock  Companies, Delhi State, lodged information  with  the Inspector-General,  Delhi  Special  Police Establishment, against  the  petitioners alleging that they  had  committed several  offenses  punishable under the Indian  Penal  Code. The   lodging  of  this  information  was  preceded  by   an investigation  into the affairs of the petitioners’  company which  had been ordered by the Central Government  under  a. 138  of the old Act, and the report received at the  end  of the  said  investigation indicated that a  well-planned  and organised  attempt  had  been made  by  the  petitioners  to misappropriate  and  embezzle the funds of  the  company  by adopting several ingenious methods.  On receipt of the  said First  Information  Report the District  Magistrate  ordered investigation  into  the offenses and  issued  warrants  for simultaneous searches at as many as thirty four places.   By their  petitions the petitioners contended that  the  search warrants (1) [1953] S.C.R. 730.        (2) [1954] S.C.R. 1077. 56 436 were  illegal and they prayed that the same may be  quashed as  being in violation of Art, 20(3).  The plea thus  raised by  the  petitioners was ultimately rejected on  the  ground that  the  impugned.  searches did  not  violate  the’  said constitutional guarantee.  Jagannadha das, J., who spoke for the Court, observed that " since article 20(3) provides  for a  constitutional guarantee against  testimonial  compulsion its words should be liberally construed, and that there  was no  reason to confine the content of the said  guarantee  to its  barely literal import ". He, therefore, held  that  the phrase  "  to  be a witness " means  nothing  more  than  to furnish evidence, and such evidence can be furnished through the lips or by production of a thing or of a document or  in other  modes.  He also pointed out that the phrase was "  to be a witness " and not " to appear as a witness " and so the protection afforded was not merely in respect of testimonial compulsion  in the court room but may well extend to  compel testimony  previously obtained from him.  The conclusion  of the Court on this part of the construction was thus  stated. The  constitutional  guarantee " is available  to  a  person against whom a formal accusation relating to the  commission of  an offence has been leveled which in the  normal  course may result in prosecution ; whether it is available to other persons in other situations does not call for a decision  in this  case  ". Since the First Information Report  bad  been

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recorded  against the petitioners in that case  it  followed that the first test that a formal accusation relating to the commission  of  an  offence  must  have  been  leveled   was satisfied.   The  question  which was  then  considered  was whether  there  was  any basis in the  Indian  Law  for  the assumption  that a search or seizure of a thing or  document is  in itself to be, treated as compelled production of  the same;  and it was held that there would be no  justification for  treating  the  said  search  or  seizure  as  compelled production; that is why the challenge to the validity of the search warrants issued against the petitioners was repelled. The  effect of this decision thus appears to be that one  of the.  essential conditions for invoking  the  constitutional guarantee enshrined in Art. 20(3)                             437 is that a formal accusation relating to the commission of an offence, which would normally lead to his prosecution,, must have  been leveled against the party who is being  compelled to  give evidence against himself; and this  conclusion,  in our opinion is fully consistent with the two other decisions of this Court to which we have already referred. There  are two other subsequent decisions of this’ Court  to which  reference may be made.  In Thomas Dana v.  State  of Punjab (1), according to the majority decision " prosecution "  in  Art.  20(2)  means a  proceeding  either  by  way  of indictment  or information in a criminal court in  order  to put  an offender upon his trial.  It would be  noticed  that this conclusion is wholly consistent with the view taken  by this  Court  in the case of Maqbool Hussain (2)  and  S.  A. Venkataraman  (3).   In Mohammed Dastaqir v.  The  State  of Madras  (4)  this  Court had to consider  Art.  20(3).   The appellant  in  that  case had gone to the  bungalow  of  the Deputy  Superintendent of Police to offer him a bribe  which was  covered  in a closed envelope with a  request  that  he might  drop  the action registered against him.  The  police officer threw the envelope at the appellant who took it  up. While  the appellant was still in the bungalow he was  asked by  the police officer to produce the envelope and  he  took out  from his pocket some currency notes and placed them  on the table without the envelope.  The notes were then  seized by  the police officer and a rubber stamp of his office  was placed on them.  On these facts it was urged that in relying upon  the  evidence  of compelled production  of  notes  the prosecution had , violated the provisions of Art. 20(3).  In support of this contention the general observations made  by this  Court in the case of M. P., Sharma(5),  were  strongly pressed  into  service.  This Court, however,  rejected  the appellant’s arguments and held that the prosecution did  not suffer  from any infirmity.  On the facts it was found  that though the offence had in fact been already committed (1)  [1959] Supp. 1 S.C.R. 274. (2)  [1953] S.C.R. 730. (3)  [1954] S.C.R. 1150. (4)  A.I.R. 1960 S.C. 756. (5) [1954] S.C.R. 1077. 438 by  the appellant, he had in fact not been accused of it  at the  stage when the currency notes were produced by him;  it was  also  held  that  it could not  be  said  that  he  was compelled  to  produce the said currency notes,  because  he might easily have refused to produce them, ,and so there was no occasion for him to invoke the constitutional  protection against self-incrimination. What then is the result of these decisions ? They show  that in  determining the complexion and reach of  its  respective

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sub-clauses the general scheme of Art. 20 as a whole must be considered,  and  the  effect of  the  inter-action  of  the relevant  words used ’in them must be properly  appreciated. Thus considered the constitutional right guaranteed by  Art. 20(2)  against double jeopardy can be  successfully  invoked only where the- prior proceedings on which reliance is plac- ed  must  be of a criminal nature  instituted  or  continued before  a court of law or a judicial tribunal in  accordance with  the procedure prescribed in the statute which  creates the  offence  and  regulates the  procedure.   It  would  be noticed that the character of the said proceedings as  well as  the character of the forum before which the  proceedings are  initiated or conducted are treated as decisive  in  the matter.   Similarly, for invoking the  constitutional  right against testimonial compulsion guaranteed under Art. 20  (3) it  must  appear  that a formal  accusation  has  been  made against the party pleading the guarantee and that it relates to  the commission of an offence which in the normal  course may  result  in prosecution.  Here again the nature  of  the accusation  and  its  probable  sequel  or  consequence  are regarded as important. Thus we go back to the question which we have already posed: was  the appellant accused of any  offence at the time  when the impugned notices were served on him ? In answering  this question  in  the light of the tests to which we  have  just referred  it  will be necessary to determine the  scope  and nature  of the enquiry which the inspector undertakes  under s.  240  ; for, unless it is shown that an accusation  of  a crime  can be made in such an enquiry, the appellant’s  plea under Art. 20(3) cannot succeed.  Section 240                             439 shows that the enquiry which the inspector undertakes is  in substance  an  enquiry  into  the  affairs  of  the  company concerned.   Certain documents are required to be  furnished by  a company to the Registrar under the provisions  of  the new Act.  If, on examining the said documents, the Registrar thinks  it necessary to call for information or  explanation he  is  empowered  to take the  necessary  action  under  s. 234(1).  Similarly, under s. 234(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 the company is carried on  in  the  manner specified in the-said sub-section the Registrar proceeds  to make  the  enquiry.   Thus the scope  of  the  enquiry  con- templated  by  s. 234 is clear; wherever the  Registrar  has reason  to believe that the affairs of the company  are  not properly carried on he is empowered to make an enquiry  into the  said  affairs.  Similarly under s. 235  inspectors  are appointed  to  investigate’ the affairs of any  company  and report  thereon.   The  investigation  carried  on  by   the inspectors  is  no  more than the  work  of  a  fact-finding commission.    It   is  true  that  as  a  result   of   the investigation  made by the inspectors it may  be  discovered that   the  affairs  of  the  company  disclose   not   only irregularities  and  malpractice  but  also  commission   of offenses,  and in such a case the report would  specify  the relevant.  particulars  prescribed by the circular  in  that behalf   If,  after  receiving  the  report,   the   Central Government  is  satisfied  hat any person is  guilty  of  an offence  for  which he is criminally liable, it  may,  after taking legal advice, institute criminal proceedings  against the  offending person under s. 242(1); but the fact  that  a prosecution  may ultimately be launched against the  alleged offender  will not retrospectively change the complexion  or character  of the proceedings held by the inspector when  he

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makes the investigation.  Have irregularities been committed in managing the affairs of the company ; if yes, what is the nature  of  the  irregularities ? Do  they  amount  to  the- commission of an offence punishable under the criminal law ? If they do who is liable for the said offence?  These and 440 such  other  questions fall within the purview of  the  ins- pector’s investigation.  The scheme of the relevant sections is  that  the investigation begins broadly with  a  view  to examine  the  management of the affairs of the   company  to find  out whether any irregularities have     been committed or  not.   In  such a case there is  no  accusation,  either formal  or  otherwise, against  any   specified  individual; there  may  be  a general allegation that  the  affairs  are irregularly, improperly or illegally managed; but who  would be  responsible  for the affairs which are  reported  to  be irregularly managed is a matter which would be determined at the end of the enquiry.  At the commencement of the  enquiry and  indeed throughout its proceedings there is  no  accused person, no accuser and no accusation against anyone that  he has committed an offence.  In our opinion a general  enquiry and  investigation  into  the affairs of  the  company  thus contemplated  cannot be regarded as an  investigation  which starts with an accusation contemplated in Art. 20(3) of  the Constitution.   In  this  connection  it  is  necessary   to remember  that  the relevant sections of the Act  appear  in Part   VI   which  generally  deals  with   management   and administration of the companies. It  is  well-known,  that  the provisions  of  the  Act  are modeled  on  the  corresponding provisions  of  the  English Companies  Act.  It would, therefore, be useful to refer  to the  observations made by the House of Lords  in  describing the  character of the enquiry held under  the  corresponding provisions  of the English Act in the case of Hearts of  Oak Assurance  Co. v. Attorney General (1).  In that  case  Lord Thankerton  said  " it appears to me to be  clear  that  the object  of the examination is merely to recover  information as  to  the company’s affairs and that it is in no  sense  a judicial proceeding for the purpose of trial of an  offence; it  is enough to point out that there are no parties  before the inspector, that he alone conducts the enquiry, and  that the  power to examine on oath is confined to  the  officers, members,  agents  and servants of the company ".  We  ought, however, to add that the last (1)  1932 A.C. 392.                             441 observation  is no longer true about the inspector’s  powers under  s.  240  of  the new Act.   In  the  same  case  Lord Macmillan  observed  that  "  the  object  of  the   enquiry manifestly  is that the Commissioner may either  by  himself directly  or  through the medium of a  delegate  obtain  the information necessary to enable him, to decide what  action, if  any, he should take.  The cardinal words of the  section are those which empower the Commissioner or his inspector to examine  into  and report on the affairs of the  society  ". Thus  it is clear that the examination of, or  investigation into,  the  affairs of the company cannot be regarded  as  a proceeding  started against any individual after framing  an accusation against him.  Besides it is quite likely that  in some  cases  investigation may disclose that  there  are  no irregularities,  or if there are they do not amount  to  the commission  of  any  offence;  in  such  cases  there  would obviously  be  no  occasion for the  Central  Government  to institute criminal proceedings under s. 242(1).   Therefore, in  our  opinion, the High Court was right in  holding  that

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when  the inspector issued the impugned notices against  the appellant the appellant cannot be said to have been  accused of any offence; and so the first essential condition for the application  of Art. 20(3) is absent.  We ought to add  that in the present case the same conclusion would follow even if the  clause  "accused of any offence " is  interpreted  more liberally  than  was done in the case of M. P.  Sharma  (1), because  even if the expression ’accused of any offence"  is interpreted in a very broad and liberal way it is clear that at the relevant stage the appellant has not been, and in law cannot be, accused of any offence.  Thus the tests about the character  of  the  proceedings  and  the  forum  where  the proceedings  are initiated or intended to be taken are  also not  satisfied;  but, as we have already indicated,  such  a broad and liberal interpretation of the relevant  expression does  not appear to be consistent with the tenor and  effect of the previous decisions of this Court. It is true that in his report the Registrar has made (1)  [1954] S.C.R. 1077. 442 certain  allegations  on which Mr. Sastri  has  relied.   He contends  that  the statements in the report  do  amount  to allegations  of  commission of offenses  by  the  appellant. What  the  Registrar  has  stated  in  his  report  in  this particular  case cannot be relevant or material in  deciding the vires of the impugned section.  The vires of the section can be determined only by examining ’the relevant scheme  of the  Act, and we have already Been that such an  examination does not assist the appellants contention that Art. 20(3) is contravened.  Besides, what the Registrar has stated in  his report  can  hardly  amount to  an  accusation  against  the appellant;  it is a report submitted by him to  the  Central Government,  and it is only intended to enable  the  Central Government to decide whether it should appoint an inspector. It  is  not  as if the investigation  before  the  inspector begins  on the basis that the Registrar is  the  complainant who  has made an accusation against the appellant,  or  that the function of the investigation is to find out whether the said  accusation is proved or not.  As we have already  seen an  enquiry  under  s. 240 may require  a  large  number  of persons to give evidence or produce documents but it  cannot be said that any accusation is made against any of the  said persons.   In  fact  three persons  have  been  served  with similar notices in the present enquiry which shows that  the inspector  desires to obtain relevant evidence from them  as from  the appellant.  How can it be said that an  accusation has  been  made  against the said three  persons,  and  that incidentally helps to bring out the real character and scope of  the enquiry.  Therefore we do not think that the  state- ments  made in the Registrar’s report, on which  Mr.  Sastri relies can really assist us in deciding the question of  the vires of s. 240.  It is also significant that the  appellant has  not challenged the validity of the impugned notices  on any ground relatable to, or based on, the said report.   The challenge  is founded on. the broad and general ground  that S. 240 offends against Art. 20(3). We  may  incidentally  add that it was  in  support  of  his argument based on the Registrar’s report that 443 Mr.  Sastri sought to rely on the decision of  the  Calcutta High  Court  in Collector of Customs v. Calcutta  Motor  and Cycle Co. (1).  In that case certain notices had been issued under  s. 171A of the Sea Customs Act to certain persons  to appear  before the customs officials and to produce  certain documents.  The High Court took the view that " it  appeared

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from  the  accusations made in the search  warrants  at  the instance"  of the customs authorities and those made in  one of  the notices by the customs authorities themselves,  that the accusations of criminal offenses could not be excluded " ;  and  so it was held that the requirements of  Art.  20(3) were satisfied and the protection under the said article was available  to  the persons concerned.  In our  opinion  this decision does not assist the appellant.  It proceeded on the finding that accusations of criminal offenses could be  held in   substance  to  have  been  made  against  the   persons concerned, and it dealt with the other points of law on that assumption.   That  being  so, we think  it  unnecessary  to discuss  or  consider the said  decision.   Our  conclusion, therefore, is that s. 240 does not offend against Art. 20(3) of the Constitution. That  still  leaves the challenge to the vires of  the  said section  under Art. 14 of the Constitution, though we  ought to  add  that Mr. Sastri did not seriously  press  his  case under  Art.  14, and we think rightly.  The  argument  under Art.  14 proceeds on familiar lines.  It is urged  that  the ordinary  protection afforded to witnesses under s.  132  of the  Indian Evidence Act as well as the protection  afforded to  accused persons under s. 161(1) and (2) of the  Criminal Procedure  Code,  have been denied to the appellant  in  the investigation which respondent 1 is carrying on in regard to the  affairs  of  his company, and  that  violates  equality before  the law.  The scope and effect of Art. 14 have  been considered by this Court frequently.: It has been repeatedly held  that what Art. 14,prohibits is class  legislation;  it does not, however,, forbid reasonable classification for the purpose  of  legislation.  If the  classification  on  which legislation is based is founded 57 444 on  an intelligible differentia which distinguishes  persons or things that are grouped together from others left out  of the group, and if the differentia has a rational relation to the  object sought to be achieved, then  the  classification does  not offend Art. 14 (Vide: Shri Ram Krishna  Dalmia  v. Justice  Tendolkar (1)).  Now in the light of this test  how can  it be said that the classification made by ss. 239  and 240  offends  Art. 14 of the Constitution ? A company  is  a creature of the statute.  There can be no doubt that one  of the  objects  of the Companies Act is to throw open  to  all citizens the privilege of carrying on business with  limited liability.  Inevitably the business of the company has to be carried  on through human agency, and that  sometimes  gives rise to irregularities and malpractice in the management  of the  affairs  of the company.  If persons in charge  of  the management  of  companies  abuse  their  position  and  make personal profit at the cost of the creditors, contributories and others interested in the company, that raises a  problem which  is very much different from the problem  of  ordinary misappropriation  or breach of trust.  The interest  of  the company  is the interest of several persons  who  constitute the  company, and thus persons in management of the  affairs of  such companies can be classed by themselves as  distinct from  other  individual  citizens.  A citizen  can  and  may protect his own interest, but where the financial  interest of  a large number of citizens is left in charge of  persons who  manage  the  affairs  of  the  companies  it  would  be legitimate  to treat such companies and their managers as  a class by themselves and to provide for necessary  safeguards and checks against a possible abuse of power vesting in  the managers.   If  the relevant provisions of the  Act  dealing

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with  enquiries  and investigations of the  affairs  of  the companies are considered from this point of view there would be  no  difficulty in holding that Art. 14 is  not  violated either by s. 239 or s. 240 of the new Act. The result is the appeal fails and is dismissed with costs.                             Appeal dismissed. (1)  [1959] S.C.R. 297. 445