M.M.Kumar, President - (1.) This petition has been filed under Section 213(b) of the Companies Act, 2013 with a prayer to order investigation into the alleged mis-management of affairs in respect of M/s. Himalya Simplot Pvt. Ltd. (for brevity 'Himalya Simplot') committed by or at the instance of respondents. A further prayer has also been made that Board meetings held on 18.10.2016, 24.10.2016 and 09.12.2016 at Seattle, USA in respect of 'Himalya Simplot' respondent No. 3 be declared illegal and void. In one of the meetings where Mr. Richard Charles Nelson has been appointed as an additional Director of 'Himalya Simplot'. It has also been prayed that an order be issued for refund of US$ 2 million equity alongwith 18% interest per annum in favour of the petitioners and against the respondents.
(2.) Before we embark upon examination of facts, it would be first appropriate to preface this order by noticing the law on investigation into the affairs of the company. The object of an investigation under Section 213(b) of 2013 Act is to unearth something which is hidden and is not apparent or invisible to the naked eye. In cases where the facts are apparent from the perusal of the record or are otherwise in public domain having been communicated to the Registrar of Companies or posted on the portal of the MCA website, then investigation need not be ordered. Investigation is ordinarily ordered in cases where funds of the company have siph oned of in a manner shrouded in mystery or accounts of the company or its management have been conducted in a manner which is shrouded in a mystery. Therefore, at least a prima facie evidence must exist with regard to existence of such circumstances which would lead to the conclusion that an investigation is imperative and must be ordered. In that regard, we place reliance on a judgment of Hon'ble Delhi High Court in the case of Delhi Flour Mills Co. Ltd., In Re., 1975 45 CompCas 33 (Del.). For a similar view, we also place reliance on the observations made by the Hon'ble Supreme Court in the case of Barium Chemicals Ltd. v. CLE, 1966 36 CompCas 639 and Rohtas Industries Ltd. v. Agarwal (S.D.),1969 37 CompCas 781. A Five Judge Bench in Barium Chemicals Ltd. , after making a reference to Section 237(b) of the erstwhile Companies Act, 1956 has held that the exercise of power to order investigation is discretionary and it depends upon the honest formation of an opinion that an investigation is necessary. The next requirement is that circumstances must exist suggesting certain inferences to be drawn. Referring to such inferences, the majority view has noted as under: 'In dealing with this problem the first point to notice is that the power is discretionary and its exercise depends upon the honest formation of an opinion that an investigation is necessary. The words "in the opinion of the Central Government" indicate that the opinion must be formed by the Central Government and it is of course implicit that the opinion must be an honest opinion. The next requirement is that "there are circumstances suggesting etc." These words indicate that before the Central Government forms its opinion it must have before it circumstances suggesting certain inferences. These inferences are of many kinds and it will be useful to make a mention of them here in a tabular form:- (a) that the business is being conducted with intent to defraud- (i) creditors of the company, or (ii) members, or (iii) any other person; (b) that the business is being conducted- (i) for a fraudulent purpose or (ii) for an unlawful purposr; (c) that persons who formed the company or manage its affairs have been guilty of- (i) fraud or (ii) misfeasance or other misconduct- to wards the company or towards any of its members. (d) That information has been withheld from the members about its affairs which might reasonably be expected including calculation of commission payable to- (i) managing or other director, (ii) managing agent, (iii) the secretaries and treasurers, (iV) the managers. Since the existence of "circumstances" is a condition fundamental to the making of an opinion, the existence of the circumstances, if questioned, has to be proved at least prima facie. It is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead to conclusions of certain definiteness. The conclusions must relate to an intent to defraud, a fraudulent or unlawful purpose, fraud or misconduct or the withholding of information of a particular kind. We have to see whether the Chairman in his affidavit has shown the existence of circumstances leading to such tentative conclusions. If he has, his action cannot be questioned because the in reference is to be drawn subjectively and even if this Court would not have drawn a similar inference that fact would be irrelevant. But if the circumstances pointed out are such that no inference of the kind stated in s. 237(b) can at all be drawn the action would be ultra vires the Act and void".
(3.) According to the view taken by the Hon'ble the Supreme Court the exercise of jurisdiction to order investigation is limited to the extracted grounds. An order of investigation which is not based on the circumstances suggesting an inference of the kind extracted from (a) to (d) would not be valid. Apparently, there is absence of a general direction to go on a fishing expedition to find evidence. Although the formation of opinion is subjective but the existence of circumstances relevant to the inference is a sine qua non for exercise of jurisdiction. It has further been observed that it is not sufficient to assert that the circumstances exist and give no clue to what they are because the circumstances must be such as to lead to conclusions of certain definiteness. The conclusions must relate to an intent to defraud, a fraudulent or unlawful purpose, fraud or misconduct or the withholding of information of a particular kind. In other words the circumstances as pointed out above do not exist then no inference of the kind stated in extracted para (a) to (d) could be drawn and the prayer for investigation must fail.;