UNION OF INDIA & ANR. versus SWADESHI COTTON MILLS & ANR.

Citation: [1979] 1 S.C.R. 735 · Decided: 12-09-1978 · Supreme Court of India · Bench: V.R. KRISHNA IYER · Disposal: Appeal(s) allowed
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Judgment (excerpt)

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UNION OF INDIA & ANR. 
v. 
SWADESHI COTTON MILLS & ANR. 
September 12, 1978 
735 
A 
[V. R. KRISHNA IYER, D. A. DESAI AND A. P. SEN, JJ.J 
B 
Practice and Procedure-Interference by the Suprenle Court against inter-
locutory orders is permissible under Art. 136 of the Constitution only }Pheu ends 
of ju.'>tice don1inate and if public interest so dictates-Co1nvany Law 
Board 
inducting additional Directors under s. 408(1) of the 
Companies Act-High 
Court cannot stay the orders at the interlocutory stage unless there are good 
grounds to STRIKE down the order. Benefit of reasonable doubt belongs to the 
specialised body. 
The Company Law Board by its order dt. 17th Deeember, 
1977 inducted 
several additional directors in ·addition to the existing directors of the respon-
dent company, under s. 408(1) of the Companies ~ct, .~956, •!"ce it was 
of 
the opinion that the affairs of tho company in question are bemg conducted m 
a manner which is prejudicial to the interest of the company and to 
publ~c 
interest". But the Delhi High Court passed an ad interim stay of the said 
orders, while admitting the writ Petition. 
Allowing the appeal by special leave, the Court 
HELD : Where repercussions are incalculable and the basis of the direction, 
though interlocutory, is obscure, the ends of jmtice dominate and the Supreme 
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Court' may interfere, if public interest so dictates under Art. 136 of the Cons-
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titution. 
[736B] 
(2) A company of considerable financial dimensions and involved in opera-
tions using public resources as Investment naturally becomes the concern not 
merely of the Company Law Board but also all of the economic process of the 
country. The specialised body with responsibility to watchdog corporate pro-
cess is the Company Law Board. When it investigates and reaches a definite 
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conclusion and makes a consequential direction, it is entitled to prima facie 
respect unless there are glaring circumstances to the contrary, It may welt be 
that the order of the Board may be vitiated by infirmities, legal or other. It 
nfay also be that the reasoning of the Board and the factual foundation for it 
is sound. 
In such situations acting at an interlocutory stage, the benefit of 
r<asonable doubt belongs to the specialised body. If there are good grounds to 
strike down the order certainly the High Court has jurisdiction to stay 
its 
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operation. [7370-G] 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1501 of 1978. 
Appeal by Special Leave from the Judgment and Order dated 
18-1-1978 of the Delhi High Court in Civil Misc. Petition No. 1120-
W of 1977 and 109/78 in Writ Petition No. 585/77. 
H 
Soli J. Sorabjee Addi. 
Sol. General, Girish Chandra for the 
Appellant. 
13-549 SCI/78 
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736 
SUPREME COURT REPORTS 
[I ?79] 1 s.c.R. 
S. T. Desai, B. P. Maheshwari and Suresh Sethi for Respondent 
No. !. 
A. K. Sen and Vineet Kumar for Respondent No. 2. 
ORDER 
An ad interim order of stay passed by the High Court of Delhi 
has been challenged before us in th.is appeal. We should have hesita-
ted to interfere with an interlocutory order following the usual practice 
in this Court. But, where repercussions are incalculable and the basis 
of the direction, though interlocutory, is obscure, the ends of justice 
dominate and we may interfere if public interest so dictates. 
Here is an order of the Company Law Board nnder sec. 408 ( 1) 
of the Companies Act, 1956, which gives·a wealth of facts and a 
variety of reasons to support an ultimate direction which runs thus : 
"Since all the three conditions referred to in sub-section 
(1) of sec. 408 of the Companies Act, 1956, are establish-
ed on the facts and circumstances of the case, the Company 
Law Board hereby appoint officers for three years, in addi-
tion to the existing directors of the company :-
1. Shri B. M. Kaul, Member, Railway Board 
(Reid.) 
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5-J-4 Jawahar Nagar, Jaipur. 
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2. Shri A. K. Mazumdar, Chief Secretary, Orissa Govt. 
(Retd.) 26/2, Dover Road, Apartment No. 4, 
Cal-
cutta-19. 
'3. Shri P. K. Choksi, Senior Partner, Price Waterhouse 
Pest & Co., B-4, Gillander Honse, Calcutta-I. 
4. Shri S. K. Mitra, President, Institute of Cost & Works 
Accounts of India, 14-A/6 Western Extension Area, 
Karol Bagh, New Delhi-5. 
5. Shri P. A. S. Rao, Formerly President of the Institute of 
Company Secretaries of India, C-7/7, Vasant Vihar, 
New Delhi. 
6. Shri M. C. Bhatt, Joint Secretary, 
Govt. 
of India 
(Retd.) B-22, Defenc
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