LexK JOSEPH AUGUSTHI AND TWO ORS. versus M. A. NARAYANAN, OFFICIAL LIQUIDATOR. PALAI CENTRAL BANK LTD .
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.. 7 S.C.R SUl'HE'.\rn COURT REl'OHTS 137 K JOSEPH AUGUSTHI AND TWO ORS. v. M. A. NARAYANAN, OFFICIAL LIQUIDATOR. PALA! CENTRAL BANK LTD . IP. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO, J. c. SHAH, N. RAJAGOPALA AYYANGAR ANDS. M. SIKRI, JJ:] Banking Companies Act-Banking Company under liquida· lion-Public examination of directors ordered-Section 45G oj the Act does not violate Art. 20(3)-Elements of self incrimina· 1i.on-:4cts and oniissions of directors need not be crim1.nal-It is suffic'ent if they are commercia!lv rmsound-Ordinarv public e:i.:ani:nation-Covrt has to see only that a prima facie case is est•lb!ished--Constitution oj l udia, Art. 20(3)-Ban'dng Com- panies Act, 1949 (X of 1949). s. 45G. · The appellants were directors of Palai Central Bank Ltd. On an applicat10n made by the Reserve Bank of India the High Court of Kerala ordered the winding up of the Bank and appoint- ed an Official Liquidator whc filed a number of reports under s. 45G(l) of Banking Corn;)anics Act, 19~9. The appellants filed their objections and the learned single Judge after hearing the parties made an order directing ihe puhlic exa1nination of the appellants under s. ·15G(2) of the Act. After appealing without success to a Division Bench the appellants filed the present appeals on a certificate granted by the High Court. It was contended on behalf of the appellants that the provi- sion of s. 45G(2) in as ni.uch as it '.vould compel a person ordered to be publicly examined to be a 'vitness against himself is viola- tive of Art. 20(3) of the Constitution and therefore bad. It was further contended that the acts or omissions alleged as contem- plated by s. 45G(l) should be acts or omissions which are prohi- bited by law or enjoined by law and on this basis the reports of the Liquidator have not made out a· case for public examination. The third contention was that the High Court has misconstrued the effect of the provisions of s. 45G and hc:.s refused to g~ve an opportunity to the appellants. Held: A person examined publicly under s. 45G may in some cases be compelled to be a witness against himself and thus one element of Art. 20(3) is satisfied. But it is only when a person can be said to have been accused of an offence that the prohibi- tion prescribed by Art. 20(3) comes into operation. If a person who is not accused of any offence, is compelleci.to give evidence and it ultimately leads to an accusation against him, that would not be a case which would attract the provisions of Art. 20(3). After the examination under s. 45G is over and materials adduced before the court have been examined by the court an occasion may or may not arise to take £•.n/ a:-tioD. In such a case, \Vhat mair conceivably follow canaot said to be existing before the order is passed under s. 45G; an accusation may follow the enquiry but an accu£ation is not in existence at the time when public exarili- nation is ordered. Hence the appellant cannot be said to have been accused. Since the essential condition nrecedent for the application of Art. 20(3) is ;:bsent in all cases -covered by s. 45G it cannot be said that s. 45G is violative of Art. 20(3) of the :Constitution. · 1964 ll!arch 11 138 SUPREME COURT REPORTS [1964} 1964 K. Joseph Auguathi and two others Ma!la1a Suryanarayana v. Viiaya Commercial Bank Ltd. decided on 26-10-61 (C.A. No. 286/59) and Raia Narayan!a! Bansi- lal v. Maneck Phiroz Mistry and Anr., A.LR. 1961 S.C. 29, referred to. v. M.A. Narayanan, (ii) The acts or omissions contemplated under s. 45G need O~iai Liquidalor, not necessarily be criminal, they may even include acts or Pala• Central Bank omissions which are commercially unsound or unwise. The court Ltd. has only to see whether the acts or omissions "as to the promo- Gajendragadkar c J tion or formation or the conduct of the business of the banking ' · · company or as to his conduct and dealings in so far as they relate to the affairs of the banking company" have led to loss to the banking company. For this, what the court can and should do is to read the report submitted by the Official Liquidator, consider whether the opinion expressed in the report appears to be prima facie reasonable, hear the explanation of the per- sons concerned; and find out prima facie whether the explana- tion tendered by the person is sufficient to reject the liquidator's request for such person's public examination and whether on the w
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