judgement:
Appeal No. 552 of 1963.
Appeal by special leave from the order dated April 28, 1960 of the Deputy Secretary to the Government of India, Ministry of Rehabilitation, New Delhi, purporting to exercise the powers of Revision under section 33 of the Displaced Persons (Compensation of Rehabilitation) Act, 1954 in Case No. 38(894)/59 Neg.
A. With Writ Petition No. 108 of 1960.
Petition under article 32 of the Constitution of India for the enforcement of Fundamental Rights.
Achhru Ram and N. N. Keswani, for the appellants and the petitioners.
N. section Bindra and B. R. G. K. Achar, for respondents Nos. 1 and 2 (in both the appeal and petition).
M. C. Setalvad, K. Jairam and R. Ganapathy Iyer, for the respondents Nos.
3 to 7 (in both the appeal and petition).
March 10, 1964.
The Judgment of the Court was delivered by AYYANGAR, J.
The appeal, by special leave, is directed to question the correctness of an order passed by the Deputy Secretary to the Government of India, Ministry of Rehabilitation under section 33 of the Displaced Persons (Com pensation and Rehabilitation) Act, 1954 (Central Act XLIV of 1954) which for convenience will be referred to hereafter as the Act.
The facts necessary to appreciate the points urged be fore us are briefly these: The property in dispute is agricul tural land of an extent of about 60 acres situated at Nizam abad in the former State of Hyderabad and now in the State 105 of Andhra Pradesh.
On September 7, 1950 the Deputy Cus todian of Nizamabad District allotted 44 acres of this land to five persons who are the respondents before us.
All these five were displaced persons and were entitled to this allotment.
By a further order dated July 21, 1951 the balance of the 16 acres and odd was also allotted to them.
The allotment was by way of lease and one of its stipulations was that the terms of the lease would be revised only after five years.
The only point that needs to be stated about the terms of this lease is, that there was no condition imposed upon the lessees that they should cultivate the lands personally.
While the lease was continuing in force, the Government of India issued a press note on November 13, 1953 by which they announced that they had decided to allot evacuee agricultural land in Hyderabad State to displaced persons whose claims for agricultural lands had been verified under the Displaced Persons (Claims) Act, 1950.
It further stated that the allotments would be towards the settlement of claims in respect of their agricultural lands.
The allotment was to be on the same terms as under the quasi permanent allotment scheme in the Punjab and applications for allotment were invited from persons residing inter alia in Hyderabad State whose verified claims included a claim for agricultural lands.
The press note prescribed the 31st of December as the last date for the receipt of these applications.
The appellants made an application in pursuance of this notification and on May 4, 1954 the land now in dispute, though under a sub sisting lease in favour of the respondents, was allotted to them on quasi permanent tenure.
It is not disputed that the appellants satisfied the qualifications for making applications under the press note and for being allotted evacuee property thereunder.
The order of allotment, a copy of which was forwarded to the Collector of Nizamabad district, contained a request that the allottees may be put in possession of the land and the fact intimated to the office of the Regional Settlement Commissioner.
The revenue authorities acting on this request or direction dispossessed the respondents from the lands leased to them and put the appellants in possession thereof.
Thereafter, the respondents made a representation to the Regional Settlement Commissioner, Bombay pointing out that they were displaced persons who having been rehabilitated by the allotment by way of lease were now being uprooted.
They also pointed out that they had incurred large expenses in improving the land and bringing it into proper cultivation.
These applications were considered by the Regional Settlement Commissioner who by his order dated July 10, 1954 rejected their application.
It is not necessary 106 to set out the reasons for making this order except to say that one of them was the failure on the part of the lessees to personally cultivate the lands.
The respondents, then, moved the Regional Settlement Commissioner requesting him to review his order and they also sought relief from the Gov ernment of India seeking intervention in their favour.
Subsequent to this date the Act was enacted and it came in to force on October 9, 1954.
Section 12 of the Act em powered the Central Government to acquire evacuee property for rehabilitation of displaced persons and in pursuance thereof the properties now in dispute were acquired by Government by a notification dated January 18, 1955.
During the pendency of the proceedings by which the respondents ,sought to obtain a reversal of the order dated July 10, 1954 and without reference to them, the Regional Settlement Commissioner issued sanads in favour of appellants 1 to 4 on January 12, 1956 acting under section 20 of the Act.
The Deputy Chief Settlement Commissioner who dealt with the representations made by the respondents passed an order on August 22, 1958 after obtaining a report from the Regional Settlement Commissioner.
He pointed out in his ,order that there was no indication from the papers on the file that the land was originally leased to the respondents on condition that they should cultivate the lands personally.
He therefore set aside the order of the Regional Settlement Commissioner dated July 10, 1954 and remanded it for further enquiry directing the passing of fresh orders after a thorough enquiry.
Thereafter a report was called for and obtained from the Collector who conducted this enquiry and in his report dated June 13, 1959 he recorded a finding that there had been personal cultivation of the lands by the respondents.
He pointed out that of the 60 acres comprising the entire extent, 26 guntas were allotted on a quasi permanent basis to other displaced persons in 1954 and this extent was therefore out of the controversy.
It ought to be mentioned that the order of the Deputy Chief Settlement Commissioner which was of the date August 22, 1958 was apparently by inadvertence passed without notice to the appellants.
When this was brought to his notice after the remand he issued notice to them and after hearing them, referred the case to the Government of India for action under section 33 of the Act.
The matter was considered by the Deputy Secretary in the Rehabilitation Ministry who heard all the parties and recorded the following findings: (1) that the order dated July 10, 1954 refusing to transfer the lands to the respondents was wrong, and (2) that there was no justification for terminating the lease and depriving the respondents of possession of the 107 property now in dispute and on these findings directed the sanads granted to the appellants to be revoked and the res pondents be put in possession of the property.
It is the legality of this order that is challenged in this appeal.
Three points were urged by Mr. Achhru Ram learned Counsel for the appellant: (1) that the Central Government had no power under section 33 of the Act to revise the order of the Regional Settlement Commissioner dated July 10, 1954, (2) that even assuming that that order was capable of revision, the land in dispute had been transferred to the appellants irrevocably by way of quasi permanent allotment and sanads issued and that thereafter the title under the sanads which had been granted in the name of the President of India could not be disturbed except in accordance with the terms of the sanads, (3) that the Deputy Secretary in the Government of India had no materials before him on the basis of which he could find that the order dated July 10, 1954 was erroneous and required to be revised.
We shall deal with these points in the same order.
Section 33 under which the order under appeal was made reads: "The Central Government may at any time call for the record of any proceeding under this Act and may pass such order in relation thereto as in its opinion the circumstances of the case require and as is not inconsistent with any of the provisions contained in this Act or the rules made thereunder.
" In considering the argument addressed to us under this head there are two points to be borne in mind.
If the order dated July 10, 1954 passed by the Regional Settlement Com missiooner was "a proceeding under this Act" then obviously there is no limitation on the power of the Central Govern ment to pass "such order as in the circumstances of the case was required".
Of course, the Central Government cannot pass an order which is inconsistent with any of the provisions contained in the Act or the Rules made thereunder and subject to the objection made that after the transfer of property and the grant of a sanad under section 20 of the Act read with r. 91(8) in the form specified in Appendix XXIV to the Rules which is the second point raised by learned Counsel, it was not suggested that the order now impugned was inconsistent with any of the provisions of the Act or the Rules made thereunder.
Whether the opinion which the Central Government entertained was correct or incorrect on the evidence would, of course, not fall for consideration by this Court in an appeal under article 136 but as regards the contention that 108 the order is illegal or invalid as distinct from its being incorrect, we shall deal with it in considering the last of the arguments submitted to us by learned Counsel.
It was urged that the order of the Regional Settlement Commissioner which the Central Government revised under section 33 was not "a proceeding under the Act" having been passed before the Act came into force and was therefore outside its jurisdiction under section 33 of the Act.
The answer to this is, however furnished by section 39 of the Act.
That section deals with orders passed prior to the commencement of the Act and renders "all things done" or "action taken" in the exercise of powers conferred by or under this Act as if the Act were in force on the date when such thing was done or action taken.
Section 39 enacts: "Anything done or any action taken (including any order made) by the Chief Settlement Commissioner, Settlement Commissioner, Additional Settlement Commissioners or Settlement Officers for the purposes of payment of compensation or rehabilitation grants or other grants to displaced persons shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken in the exercise of the powers conferred by or under this Act as if this Act were in force on the date on which such thing was done or action was taken.
" It was then suggested that since the order dated July 10, 1954 had merely rejected an application filed by the respon dents for restoring them to possession of lands from which they complained they had been unjustly dispossessed, it was not "a thing done" or "action taken for the purpose of payment of compensation or rehabilitation grants to dis placed persons" so as to be deemed to be taken under the provisions of this Act.
The same point was urged in a slightly different form by saying that even if the Central Government could interfere and set aside the order of the Regional Settlement Commissioner dated July 10, 1954 still they could not direct the cancellation of the sales and grants of sanads to the appellants and that as this was not a matter pending before them, the order in so far as it directed the cancellation of the sanads and the dispossession of the appellants from the disputed property was without jurisdiction.
We do not see any substance in the points stated in either form.
In the first place, even if learned Counsel is right in submitting that the Central Government should have stopped with setting aside the order dated July 10, 1954 the result would have been the same, because the prayer which was rejected by the Regional Settlement Commissioner when he 109 passed that order was that contained in an application by the respondents that they should be restored to the possession of the lands from which they had been dispossessed.
If that prayer had to be granted on the reversal of the order dated July 10, 1954 it would inevitably have meant that the appellants should have been deprived of possession which is exactly what the order now impugned has directed.
As the dispossession of the appellants was consequential on the setting aside of the order dated July 10, 1954 the appellants do not obtain any advantage by raising the contention that the Central Government should have confined itself to setting aside that order and doing nothing more.
Besides, this submission proceeds from not appreciating the matters that were the subject of consideration before the Central Government and were considered by them at the time when the impugned order was passed.
The facts were that there had been an allotment by way of lease as a rehabilitation grant to persons who were admittedly displaced persons in 1950 51.
It was "this thing done" that had been upset in 1954 and which was restored by the order of July, 1954 being set aside by the order under section 33 of the Act.
In substance and effect therefore the impugned order was dealing with and rectifying an error committed in relation to a "thing done or action taken" with respect to a rehabilitation grant to a displaced person.
Not merely the order dated July 10, 1954 but the entire question as to whether the respondents as original allottees by way of lease were entitled to the relief of restoration was referred to the Central Government by reason of the order of the Regional Settlement Commissioner dated November 3, 1959.
Both the parties were heard on all the points by the Central Government before the orders were passed and it would not therefore be right to consider that the matter in issue before the Central Government was technically merely the correctness of the order of the Regional Settlement Commissioner dated July 10, 1954, which read in vacuo might not be comprehended within section 39.
The next point that was urged was that the appellant had been granted sanads on January 12, 1956 and that their sanads could.
not be cancelled and the title acquired there displaced except in accordance with the terms of the sanads The term of the sanad which is relevant and which was referred to as the sole ground on which it could be set aside and the title of the appellants displaced reads: "It shall be lawful for the President to resume the whole or any part of the said property if the Central Government is, at any time, satisfied and records a decision in writing to that effect (the decision of the Central Government in this behalf 110 being final) that the transferee or his predecessor in interest had obtained or obtains any other compensation in any form whatsoever under the said Act by fraud or misrepresentation.
" It is not disputed that this condition has not been ful filled but the question, however, is whether when the order of allotment on the basis of which the property was granted to the appellant and the sanad issued, is itself reversed or set aside can the sanad and the title obtained thereunder survive? On this point there are two decisions to which our attention was invited the first is a decision of the High Court of Rajasthan in Partumal vs Managing Officer, Jai pur(1), being a decision of a Full Bench of that Court.
That case was concerned With the construction of section 24 of the Act which deals with the power of the Chief Settlement Commissioner to revise orders passed by a Settlement Officer, Assistant Settlement Officer, Assistant Settlement Commissioner, Additional Settlement Commissioner etc.
The relevant part of the head note brings out the point of the decision.
It reads: "Section 24 of the , no doubt confers very wide powers of revision on the Chief Settlement Commissioner, but it does not authorise cancellation of sal es after they are completed.
No doubt, allotments can be set aside under section 24 of the Act, but after such allotments ripen into sales, they cannot be cancelled.
The Chief Settlement Commissioner, but it does not authosioner exercising his power has no authority to cancel sale of property and an order of cancellation of sale of property is without jurisdiction and invalid.
It would be too much to read in section 24 of the Act to hold that it extends to cancellation of sales by expressly providing for cancellation of allotments.
The execution of a sale deed can not be regarded as only a formal expression of an order of allotment dependent on its subsis tence.
" Subsequent to this decision a case arose before the High Court of Punjab: Balwant Kaur vs Chief Settlement Commiss ioner (Lands)(2 ) and a Full Bench of that Court by a majority dissented from this view and held that where an order making an allotment was set aside the title which was obtained on the basis of the continuance of that order also well with it We are clearly of the opinion that the judgment (1) I.L.R. (2) I.L.R. [1964] Punjab 36. 111 of the Punjab High Court is correct.
The relevant provisions of the Act and the Rules have all been set out in the decision of the Punjab High Court and we do not consider it necessary to refer to them in any detail.
It is sufficient to say that they do not contain any provision which militates against the position which is consistent with principle and logic.
It is manifest that a sanad can be lawfully issued only on the basis of a valid order of allotment.
If an order of allotment which is the basis upon which a grant is made is set aside it would follow, and the conclusion is inescapable that the grant cannot survive, because in order that that grant should be valid it should have been effected by a competent officer under a valid order.
If the validity of that order is effectively put an end to it would be impossible to maintain unless there were any express provision in the Act or in the rules that the grant still stands.
It was not suggested that there was any provision in the Act or in the rules which deprives the order, setting aside an order of allotment, of this effect.
We do not therefore consider that there is any substance in the second point urged by learned Counsel.
The last of the points urged was that the Deputy Secretary who passed the impugned order had no materials upon which he could find that the order dated July 10, 1954 was erroneous or justified being set aside.
Learned Counsel is not right in this submission because if the respondents were entitled to remain in possession of the property originally leased to them by way of allotment and their leasehold interest had not been validly terminated a fact which on the materials the Deputy Secretary was competent to find the order that he passed restoring them to possession could not be said to lack material.
We consider therefore that there is no merit in this submission.
The result is that the appeal fails and is dismissed with costs.
Writ Petition 108 of 1960: This petition under article 32 of the Constitution has been filed by the appellants in Civil Appeal 552 of 1963 and seeks the issue of a writ of certiorari to quash the same order of the Deputy Secretary to the Union Government as that whose legality is challenged in the appeal.
Both the Writ Petition as well as the application for special leave came on for preliminary hearing on November 30, 1960 and while the leave prayed for was granted, rule nisi was also issued in the petition and the two matters have been heard together.
In view of our decision in the appeal, the writ petition will stand dismissed, but there will be no order as to costs.
Appeal and Writ petition dismissed.

summary:
The appellants and the five respondents were displaced persons.
The Deputy Custodian of Nizamabad District allotted about 60 acres of land to the five respondents.
The allotment was by way of lease.
There was no condition imposed upon them that they should cultivate the lands personally.
While the lease was continuing in force, the Government of India issued a Press Note on November 13, 1953 by which they announced that they had decided to allot evacuee agricultural land in Hyderabad State to displaced persons whose claims for agricultural land had been verified under the Displaced Persons (Claims) Act, 1950.
The appellants made an application in pursuance of this notifi cation and on May 4, 1954 the land now in dispute, though under a subsisting lease in favour of the respondents, was allotted to them.
In the mean time the , came into force on October 9, 1954.
Under Section 20 of this Act, the Regional Settlement Com missioner issued Sanads in favour of appellants in respect of these lands.
Both the appellants and the respondents claimed these disputed plots.
The matter went up to the Deputy Chief Settlement Commissioner.
He referred the case of both parties to the Government of India for action under section 33 of the Act.
The matter was considered under section 33 of the Act by the Deputy Secretary in the Rehabilitation Ministry who upheld the contentions of these respondents.
The result was that the allotment made in favour of the appellants was set aside.
It is the legality of this order that is challenged in this appeal.
Held (i) The order of the Central Government was covered by section 33 of the Act as one dealing with and rectifying an error committed in relation to a "thing done or action taken" with respect to a rehabilitation grant to a displaced person.
Not merely the order of the Regional Settlement Commission rebut the entire question as to whether the respondents as original allottees by way of lease were entitled to the relief of restoration was referred to the Central Government by reason of the order of the Deputy Chief Settlement Commissioner.
Both the parties were heard on all the points by the Central Government before the orders were passed and it would not therefore be right to consider that the matter in issue before the Central Government was namely the correctness of the order of the Regional Settlement Commissioner, which read in vacuo might not be comprehended within section 39 of the Act.
(ii) It is manifest that a Sanad can be lawfully issued only on the basis of a valid order of allotment.
If an order of allotment which is the basis upon which a grant is made 104 is set aside it would follow, and the conclusion is inescapable that the grant cannot survive, because in order that grant should be valid, it should have been effected by a competent officer under a valid order.
If the validity of that order is effectively put an end to, it would be impossible to maintain unless there were any express provision in the Act or in the rules, that the grant still stands.
On the facts of this case it was held that where an order making any allotment was set aside the title which was obtained on the basis of the continuance of that order also fell with it.
Partumal vs Managing Officer, Jaipur, I.L.R. , distinguished.
Balwant Kaur vs Chief Settlement Commissioner (Lands), I.L.R. [1964] Punjab 36, approved.


judgement:
Appeals Nos. 254 to 256 of 1963.
V. A. section Muhammad, for the appellant (in C.A. No. 254/63) J. B. Dadachanji, 0.
C. Mathur and Ravinder Narain, for the appellants (in C.A. Nos. 255 and 256 of 1963).
M. C. Setalvad, Atiqur Rehman, Shureshta Kumari and K. L. Hathi, for the respondent (in all the appeals).
March 11, 1964.
The Judgment of the Court was delivered by GAJENDRAGADKAR, C. J.
Two questions of law have been raised, before us by Dr. Seyid Muhammad on behalf of K. Joseph Augusthi, the appellant in Civil Appeal No. 254/ 1963.
Both of them are related to section 45G of the Banking Companies Act, 1949 (No. X of 1949) (hereinafter called the Act).
The first question raised has reference to the validity of the said section and the second to its true scope and effect.
Dr. Seyid Muhammad contends that the answers given by the Kerala High Court to both these questions are erroneous 139 According to him, section 45 G is unconstitutional inasmuch as it contravenes the fundamental right guaranteed to the citizens of this country by article 20(3) of the Constitution.
He also argues that in making an order for the public examination of the appellant, the High Court has misconstrued the scope and effect of the relevant provisions of the said section.
The appellant Joseph Augusthi was the Managing Director of the Palai Central Bank Limited from 26 1 1927 to 8 8 1960; K. George Thomas and George Joseph who are the appellants in the two other appeals Nos. 255 and 256 of 1963 respectively, were the Directors of the said Bank , the first of them was the Director from 14 1 1935 to 8 8 1960 and the latter from 26 1 1927 to 8 8 1960.
An application for the winding up of the said Bank was made before the Kerala High Court by the Reserve Bank under section 38(3)(b)(iii) of the Act.
The said provision justi fies the making of an application by the Reserve Bank in case in the opinion of the Reserve Bank, the continuance of the banking company in question is prejudicial to the interests of the depositors.
On the 8th August, 1960, an order was passed on the said application appointing the Official Liquidator of the High Court the Provisional Liquidator of the Bank.
The order of winding up then followed on the 5th December, 1960, and on the 8th December, 1960, an Official Liquidator was appointed under section 39 of the Act.
After the Official Liquidator came on the scene, he made three reports to the High Court report No. 192 on the 17th August, 1961; report No. 242 on the 29th September, 1961 and report No. 350 on the 4th December 1961.
All these reports were made under section 45G(1) of the Act.
The appellants filed their objections on the 23rd November, 1961 to the first two reports.
The matter was then ,considered by the learned single Judge of the Kerala High Court and after hearing the parties, he made an order directing the public examination of the three appellants under section 45G(2).
This order was challenged by the appellants by preferring three appeals before a Division Bench of the High Court.
The Division Bench agreed with the view taken by the learned single Judge and dismissed the three appeals.
The appellants then applied for and obtained certificates from the High Court and it is with the said certificates that they have come to this Court by the present three appeals.
The first point which has been argued before us by Dr. Seyid Muhammad is that section 45G is unconstitutional because it contravenes the fundamental rights guaranteed by article 20(3).
In order to appreciate this argument, it is necessary to read section 45G(1) & (2).
140 "(1) Where an order has been made for the winding up of a banking company, the official liquidator shall submit a report whether in his opinion any loss has been caused to the banking company since its formation by any act or omission (whether or not a fraud has been committed by such act or omission) of any person in the promotion or formation of the banking company or of any director or auditor of the banking company.
(2) If, on consideration of the report submitted under sub section (1), the High Court is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a director or an auditor of the banking company should be publicly examined, it shall hold a public sitting on a date to be appointed for that purpose and direct that such person, director or auditor shall attend thereat and shall be publicly examined as to the promotion 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: Provided that no such person shall be publicly examined unless he has been given an opportunity to show cause why he should not be so examined.
" The other sub sections of this section need not be cited, because it would be enough for our purpose to notice, in substance, what their effect is.
Sub section (3) allows the Official Liquidator to take part in the examination and to employ such legal assistance as may be sanctioned by the High Court, if he is specially authorised by the High Court in that behalf.
Sub section (4) permits the creditor or contributory to take part in the examination either personally or by any person entitled to appear in the High Court.
Sub section (5) gives authority to the High Court to put questions to the person who is being examined; sub section (6) empowers oath to be administered to the said person and compels him to answer questions as may be put to him by the High Court, or as the High Court may allow to be put to him.
Under sub section (7), such a person is entitled to appear by a lawyer and the lawyer so appointed shall be at liberty to put to him such questions as the High Court may deem fit just for the purpose of enabling him to explain or qualify any answer given by him; there is a proviso to this sub section which authorises the High Court to make an order of costs in its discretion in case the person under examination is exculpated from any charges made or suggested against him.
Sub section (8) deals with the procedure to be followed in keeping a record of the examination.
Subsection (9) provides that where after the examination of the 141 person,the High Court is satisfied that a person, who has been a Director of the banking company, is not fit to be a director of a company, or an auditor, or a partner who has been acting as such auditor, is not fit to be such an auditor or partner, the High Court may make an order that that person shall not, without the leave of the High Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of, any company, or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors of, any company for such period not exceeding five years as may be specified in the order.
Thus, it will be clear that the scheme of section 45G is first to decide whether, prima facie, there is a, case for the public examination of a person; then in deciding this question, give an opportunity to the person concerned; if it is decided to hold a public examination of the said person, proceed to hold that examination; if suggestions made against the person examined are found to be unwarranted, make an order of costs in his favour; and if the person concerned is found to have been responsible for acts or omissions which caused loss to the banking company, to make a penal order disqualifying such person from acting as a director or an auditor as indicated by subsection (9).
It is in the light of this scheme that the argument about the contravention of article 20(3) falls to be examined.
Article 20(3) provides that no person accused of any offence shall be compelled to be a witness against himself.
it may be conceded that when a person is compelled to submit to a public examination, that itself.
prima facie, looks like pillorying him in the public gaze.
It is also true that section 45G(6) compels the person to answer questions which the High Court may put to him, or which the High Court may allow to be put to him, and it is quite likely that in cases where public examination is ordered to be held, some suggestions and even some charges may be levelled against the person examined by reference to his acts or omissions in relation to the promotion, formation or conduct of the banking company of which he was a director or an auditor.
Therefore, there is no difficulty in holding that a person examined publicly under section 45G may, in some cases, be compelled to be a witness against himself.
Thus, one element of article 20(3) is satisfied , but the question still remains whether the other essential element is satisfied or not.
Article 20(3) guarantees to every citizen the fundamental right not to be compelled to be a witness against himself, provided the person who is being compelled in that way, is accused of any offence.
In other words, it is only when a person can be said to have been accused of any offence that the prohibition prescribed by article 20(3) comes into operation.
If a person who is not accused of any offence, is compelled to give 142 evidence, and evidence taken from him under compulsion ultimately leads to an accusation against him, that would not be a case which would attract the provisions of article 20(3).
The main object of article 20(3) is to give protection to an accused person not to be compelled to incriminate himself and that is in consonance with the basic principle of criminal law accepted in our country that an accused person is entitled to rely on the presumption of innocence in his favour and cannot be compelled to swear against himself.
Therefore, unless it is shown that a person ordered to be publicly examined under section 45G is, before, or at the time when the order for examining him publicly is passed, an accused person, article 20(3) will not apply.
What then is the position with regard to a person against whom an order for public examination is made by the High Court as done against the appellants? All that has happened at the relevant time is that the official liquidator has submitted reports indicating that in his 'opinion, loss has been caused to the banking company under liquidation by the acts or omissions of the appellants, and the High Court, on considering the reports and taking into account the explanation ,given by the appellant, has come to the conclusion that, prima facie, a case has been made out for their public examination.
In such a case, how can it be said that the appellants have been accused of any offence? The whole object of the enquiry is to collect evidence and decide whether any acts or omissions caused loss to the banking company.
It may be that as a result of the enquiry, the court may reach the conclusion that the alleged acts or omissions did not cause any loss; in such a case, nothing further has to be done.
On the other hand, it is likely that the opinion formed by the liquidator may be vindicated and the court may come to the conclusion that some or all of the acts or omissions on which the liquidator 's opinion was based did cause loss to the banking company; and in that case, some action may conceivably be taken against the persons examined in addition to the action contemplated by section 45G(9).
That, however, only means that after the examination is over and the material adduced before the court has been examined by the court, an occasion may or may not arise to take any action.
In such a case, what may conceivably follow cannot be said to be existing before the order is passed under section 45G; an accusation may follow the enquiry, but an accusation was not in existence at the time when the public examination was ordered; and so, the appellants cannot contend that they were accused of any offence at the time when the order for their public examination was passed by the High Court.
The accusation of any offence which is an essential condition for the application of article 20(3) is a condition precedent for the application of the principle prescribed by the said Article, and since this essential condition is lacking in all cases covered by sec 143 tion 45G, it is difficult to sustain the argument that the said section contravenes article 20(3).
Therefore, we do not think Dr. Seyid Muhammad is right in contending that section 45G is invalid on the ground that it contravenes article 20(3) of the Constitution.
It appears that in the case of Mallala Suryanarayana vs The Vijaya Commercial Bank Ltd.(1), the same view I has been expressed by this Court, though it may be added that this question does not appear to have been then elaborately argued.
In this connection, we may refer to a decision of this Court in Raja Narayanlal Bansilal vs Maneck Phiroz Mistry and Anr.
(2), where a somewhat similar provision contained in section 240 of the old Companies Act fell to be considered and it was held that it did not contravene article 20(3) of the Constitu tion.
That takes us to the question of the construction of section 45G. Dr. Seyid Muhammad contends that section 45G requires that the acts or omissions alleged against a person should be acts which are prohibited by law, or omissions in relation to acts the performance of which is enjoined by law, and he suggested that if this interpretation is put on the words "acts or omissions", it would appear that the reports made by the liquidator in the present case have not made out any case for the public examination of the appellants.
We are not impressed by this argument.
It is significant that the acts or omissions to which section 45G(1) refers need not be fraudulent acts or omissions, because, in terms, the section provides that the act or omission would attract section 45G(1) if it has led to any loss to the banking company even though fraud may not have been committed by such act or omission.
The context also shows that what the Court has to consider, is whether any act or omission on the part of the director or the auditor of the banking company has caused any loss to the company.
Now, such an act or omission need not necessarily be criminal; it may even include acts or omissions which are commercially unsound or unwise.
In this connection, it may be recalled that section 478 of the Companies Act which deals with a similar problem, requires that the report of the Official Liquidator should disclose his opinion that a, fraud has been committed.
To the same effect is the provision contained in section 268 of the English Companies Act (11 & 12 Geo. 6, c 38).
Therefore, it would, we think, be unreasonable to put a narrow and restricted construction on the words "acts or omissions" used by section 45G(1).
Dr. Seyid Muhammad has then contended that in dealing with the reports made by the liquidator in the present case, the High Court has not given effect to the provision contained in (1) Civil Appeal No. 286 of 1959 decided on 26 10 1961.
(2) ; 144 the proviso to section 45G(2).
The said proviso requires that no person shall be publicly examined unless he has been given an opportunity to show cause why he should not be so examined, and Dr. Seyid Muhammad argues that unless the matter is fully examined and an opportunity is given to him to show that the facts alleged in the reports are untrue, the requirements of the proviso will not have been satisfied and his grievance is that no such opportunity was given to the appellants in the present case.
There is no substance even in this argument.
What the Court has to do in exercising its power under section 45G(2) is to consider the report made by the liquidator and decide whether it can reasonably entertain the opinion that any person who has taken part in the promotion or formation ,or conduct of the banking company should be publicly examined.
In other words, it is a preliminary stage of the enquiry and the point which the Court has to consider is whether, prima facie, a case has been made out to hold a public examination of the person concerned.
It cannot be the object of section 45G(2) read with the proviso that the Court should allow the appellants to lead evidence rebutting the allegations made by the liquidator in his reports, for if such a course was adopted, it would itself develop into a full fledged enquiry and the very object of a limited enquiry at the initial stage would be defeated.
What the Court can and should do in such cases 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 person concerned; and find out prima facie whether the explanation tendered by the person is sufficient to reject the liquidator 's request for such person 's public examination and whether, on the whole, it is just and beneficial to the interest of the banking company that public examination should be held.
The subjectmatter of this preliminary investigation is not the whole of the enquiry on the merits; it is an enquiry as to whether the director or the auditor should be publicly examined.
Therefore, we do not think Dr. Seyid Muhammad is justified in contending that the High Court has ignored the safeguard afforded to the appellants by the proviso section 45G(2).
The question about the construction of section 45G(1) & (2) does not present any serious difficulty.
What must be disclosed by the report of the Official Liquidator is the act or omission of the person there specified which has led to loss to the banking company since its formation.
The acts or omissions to which section 45G(1) refers, when considered in the light of section 45G (2), are acts or omissions "as to the promotion, or formation, or the conduct of the business of the banking company, or ,is to his conduct and dealings in so far as they relate to the affairs of the banking company", so that after the report is made, the court takes a broad and overall view of the state of 145 affairs disclosed by the report and considers prima facie whether a case has been made out for the public examination of the director or the auditor.
We are satisfied that the High Court has dealt with the matter precisely in this way, and no Grievance can be made against its decision on the ground that the provisions of the proviso to section 45G(2) have been ignored.
In support of his argument that the High Court has mis construed the effect of the provisions of section 45G(1), Dr. Seyid Muhammad referred to two decisions which may be mentioned at this stage.
The first of these is the decision of the House of Lords in Ex parte George Stapylton Barnes(1).
In that case, the question which fell to be considered was the scope and effect of section 8(3) of the Companies (Winding up) Act, 1890; Lord Halsbury observed that he entertained not the smallest doubt that the meaning of this legislation is that, in order to give the Court jurisdiction to make an order for public examination, there must be a finding of fraud, and a finding of fraud against an individual who is thereby made subject to being summoned before the Court, and is compelled to answer, whether the answer incriminates him or not, but, being exculpated, receives his costs.
He further observed: "I confess I am unable, looking at the whole of the legislation on the subject, to entertain the least doubt that that was what the Legislature intended, and I am a little surprised, I confess, that there should have been any doubt that fraud must be found." In our opinion, this passage is hardly relevant for our purpose, because as we have already indicated, section 45G(1) expressly provides that the act or omission complained of need not necessarily be fraudulent, and so, there can be no question, under section 45G(1), of coming to a conclusion that fraud has been committed before directing public examination of a person.
The other decision on which Dr. Seyid Muhammad has relied is the judgment of the Bombay High Court in Sir Fazal Ibrahim Rahimtoola vs Appabhai C. Desai(2).
In that case, dealing with the provisions contained in section 196 of the old Companies Act, Chagla C.J. disapproved of the practice of ordering ex parte public examination of persons.
In that connection, he quoted with approval the warning sounded by Sir Lawrence Jenkins in the Ahmedabad Advance Spinning and Weaving Company vs Lakshmishanker(3), that the practice of passing ex parte orders involving the person affected in serious liability is much to be deprecated.
In that case, the Bombay High Court was called upon to consider whether the allegations made against the director were vague and indefinite.
As we will.
(1) at P. 152.
(2)A.I.R. (3)I.L.R. 146 presently point out, that difficulty does not arise in the present appeals.
The allegations made by the liquidator in his reports against the appellants are clear, precise and definite.
Let us now refer to the reports submitted by the liquidator in the present case.
In his first report, the liquidator has stated that in carrying out the affairs of the bank, the Directors, with the help of officers appointed by them out of their own relatives, have not properly conducted the affairs of the bank.
He has also stated that in his opinion, loss had been caused to the bank since its formation by the acts and omissions of the Directors and of the auditor of the bank.
The report then proceeds to specify the extent of the loss and the causes for the said loss.
It appears from the report that loans were advanced by the bank without regard to the question of any adequate security.
In many cases, loans were advanced without any security at all and the inevitable consequence has been that a large number of debts have become barred by time long before the winding up proceedings were started.
The bank appears to have paid dividends without earning profits.
Similarly, though it did not earn any profits between 1936 to 1958, it submitted reports showing substantial amounts as net income and so, it has paid income tax on the said amounts.
A large amount of advances appears to be irrecoverable.
At the end of his report, the liquidator has mentioned 10 persons, including the three appellants before us, whose acts and omissions, in his opinion, contributed to loss to the banking company.
Two further reports were made by the liquidator and they support the opinion expressed by him in his first report.
The third of these reports was filed after this matter was heard by the learned Single Judge but the first two reports themselves fully justify the order made by him, and so, the third report can well be left out of consideration.
When we turn to the objections filed by the appellants, it is clear that some of the facts are not seriously disputed.
Take, for instance, the allegation that dividends were declared without earning profits.
The appellant Joseph Augusthi contended before the High Court that the bank used to treat interests accrued on advances, though not received, as income, and so, income tax and super tax were paid on such income and dividends were also paid on the same basis.
He suggested that the Reserve Bank had noticed these facts and had waived its objection.
In other words, he relied on a practice which is obviously unsound in a commercial sense and pleaded that at this stage the Reserve Bank cannot challenge the correctness or propriety of the said practice.
This practice has been described by the appellant as mercantile system of accounting.
It would thus be seen that some of the facts alleged by the liquidator in his report are not disputed; the effect of those facts was a matter of argument between the parties before the High Court.
In such 147 a case, we do not see how the appellants can successfully challenge the correctness of the view taken by the High Court that a case had been made out for the public examination of the appellants.
That is why we do not think there is any substance in the argument urged before us by Dr. Seyid Muhammad that on the facts, an opportunity had not been given to the appellants to show that their public examination should, not be ordered.
We are satisfied that in dealing with the facts of this case, the Courts below have taken into account the reports made by the liquidator and after considering the objections raised by the appellants, they have come to the right conclusion that the appellants should face a public examination.
The result is the appeals fail and are dismissed with costs.
One set of hearing fees.
Appeals dismissed.

dataset_name: IN-Abs

summary:
The appellants were directors of Palai Central Bank Ltd. OD an application made by the Reserve Bank of India the High Court of Kerala ordered the winding up of the Bank and appointed an Official Liquidator who filed a number of reports under section 45G(1) of Banking Companies Act, 1949.
The appellants filed their objections and the learned single Judge after hearing the parties made an order directing the public examination of the appellants under section 45G(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 section 45G(2) in as much as it would compel a person ordered to be publicly examined to be a witness against himself is violative of article 20(3) of the Constitution and therefore bad.
It was further contended that the acts or omissions alleged as contemplated by section 45G(1) should be acts or omissions which are prohibited 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 section 45G and has refused to give an opportunity to the appellants.
Held:A person examined publicly under section 45G may in some cases be compelled to be a witness against himself and thus one elementof article 20(3) is satisfied.
But it is only when a person can be said to have been accused of an offence that the prohibition prescribed by article 20(3) comes into operation.
If a person who is not accused of any offence, is compelled to give evidence and it ultimately leads to an accusation against him, that would not be a case which would attract the provisions of article 20(3).
After the examination under section 45G is over and materials adduced before the court have been examined by the court an occasion may or may not arise to take any action.
In such a case, what may conceivably follow cannot said to be existing before the order is passed under section 45G; an accusation may follow the enquiry but an accusation is not in existence at the time when public examination is ordered.
Hence the appellant cannot be said to have been accused.
Since the essential condition precedent for the application of article 20(3) is absent in all cases covered by section 45C it cannot be said that section 45G is violative of article 20(3) of the Constitution.
138 Mallala Suryanarayana vs Vijaya Commercial Bank Ltd. decided on 26 10 61 (C.A. No. 286/59) and a a Narayaulal Bansilal vs Maneck Phiroz Mistry and Anr., ; , referred to.
(ii) The acts or omissions contemplated under section 45G need not necessarily be criminal, they may even include acts or omissions which are commercially unsound or unwise.
The court has only to see whether the acts or omissions "as to the promo 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 persons concerned; and find Out Prima facie whether the explanation tendered by the person is sufficient to reject the liquidator 's ' request for such person 's public examination and whether on the whole it is just and beneficial to the interest of the banking company that public examination should be held.
The High Court has dealt with the matter precisely in this way in the present case and hence the appellants cannot have any grievance.
Ex parte George Stapylton Barnes, , Sir Fazal Ibrahim Rahimtoola vs Appabhai C. Desai, A.I.R. 1949 Bom.
339 and The Ahmedabad Advance Spinning and Weaving Co. vs Lakshmishankar, I.L.R. , distinguished.
(iii) Applying the above principles and examining the reports submitted by the Official Liquidator it is clear that the courts below have taken into account those reports and after considering the objections raised by the appellant, they have come to the right conclusion that the appellants should face a public examination.