Facts
The Appellants, minority shareholders of M/s. BHP Engineers Pvt. Ltd. (the Company), filed a petition for oppression and mismanagement under Sections 397/398 of the Companies Act, 1956.
Source reference: p. 2They alleged that Respondent No. 2 siphoned funds and diverted business to newly incorporated entities (Respondents 4 and 5) controlled by him, including the sale of plant and machinery at undervalued prices and the purchase of alternate land in the name of Respondent No. 4 using Company resources.
Source reference: p. 13-14In 2013, the Appellants filed CA 120/2013 seeking discovery by interrogatories to clarify Respondent denials and address gaps left by an incomplete document inspection in 2009.
Source reference: p. 2, 11The Company Law Board (CLB) dismissed the application on March 17, 2015, characterizing it as a "fishing and roving enquiry" and citing a six-year delay.
Source reference: p. 3Issues
1. Whether the Company Law Board has the power to allow interrogatories under the Companies Act, 1956 and its regulations.
Source reference: p. 5-72. Whether the interrogatories sought by the Appellants constituted a "fishing and roving enquiry" or were relevant to the issues of oppression and mismanagement.
Source reference: p. 3, 123. Whether the application for interrogatories was liable to be rejected on the ground of delay.
Source reference: p. 8, 16Law Applied
Rule 6 of the Companies (Court) Rules, 1959, which extends the Code of Civil Procedure, 1908 (CPC) to company proceedings.
Source reference: p. 5Section 10E(4-C) of the Companies Act, 1956, the CLB is vested with the same powers as a civil court regarding discovery and inspection.
Source reference: p. 6Order XI of the CPC governs interrogatories, aiming to save expenses and obtain admissions on material facts; specifically, Order XI Rule 7 permits striking out interrogatories only if they are vexatious, prolix, or scandalous.
Source reference: p. 7, 16Union of India v. Ibrahim Uddin (2012) regarding the right to submit interrogatories to secure material documents and Suresh Kumar Sanghi v. Supreme Motors Ltd. (1981) which explicitly allowed interrogatories in petitions under Sections 397/398.
Source reference: p. 7, 8Reasoning
Legally, the CLB failed to realize that interrogatories are a valuable right intended to destroy an adversary's case or support one’s own.
Source reference: p. 9-10Factually, the Court noted that the 2009 inspection was partial and failed to provide records regarding director-interested contracts or terms of the Managing Director's appointment.
Source reference: p. 11-12Upon reviewing the specific interrogatories (Nos. 4-8, 14-17), the Court determined they had a direct nexus to serious allegations—such as the transfer of plant, machinery, and land to Respondent No. 4—and were not "fishing" expeditions but attempts to elicit information the Respondents failed to disclose in their reply.
Source reference: p. 12-14Regarding delay, the Court observed that the application was filed in 2013 when pleadings were completed, and any subsequent delay was due to settlement attempts encouraged by the CLB, not a lack of bona fides.
Source reference: p. 16Holding
The Court set aside the CLB’s order, holding that the interrogatories were reasonable, relevant, and not vexatious under Order XI Rule 7 CPC.
The Court allowed the appeal and directed the Respondents to respond to interrogatory nos. 4, 5, 6, 7, 8, 14, 15, 16, and 17 within eight weeks. The matter was directed to be transferred to the National Company Law Tribunal (NCLT), as the successor to the CLB.
Source reference: p. 17Original Court PDF
Atul Batra & Ors.vsBhp Engineers Private Limited & Ors.
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