Section 478 – The Companies Act,1956

The Companies Act, 1956

478. Power to order public examination of promoters, directors, etc.

(1) When an order has been made for winding up a company by the 1[Tribunal], and the Official Liquidator has made a report to the 1[Tribunal] under this Act, stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any officer of the company in relation to the company since its formation, the 1[Tribunal] may, after considering the report, direct that that person or officer shall attend before the 1[Tribunal] on a day appointed by it for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealings as an officer thereof.

(2) The Official Liquidator shall take part in the examination, and for that purpose may, if specially authorized by the 1[Tribunal] in that behalf, employ such legal assistance as may be sanctioned by the 1[Tribunal].

(3) Any creditor or contributory may also take part in the examination either personally or by any 2[chartered accountants or company secretaries or cost accountants or legal practitioners entitled to appear before the Tribunal under section 10GD].

(4) The 1[Tribunal] may put such questions to the person examined as it thinks fit.

(5) The person examined shall be examined on oath, and shall answer all such questions as the 1[Tribunal] may put, or allow to be put, to him.

(6) A person ordered to be examined under this section

(a)shall before his examination, be furnished at his own cost with a copy of the Official Liquidator’s report; and

(b)may at his own cost employ an 2[charterted accountants or company secretaries or cost accountants or legal practioners entitled to appear before the Tribunal under section 10GD], who shall be at liberty to put to him such questions as the 1[Tribunal] may deem just for the purpose of enabling him to explain or qualify any answers given by him.

(7) (a) If any such person applies to the 1[Tribunal] to be exempted from any charges made or suggested against him it shall be the duty of the Official Liquidator to appear on the hearing of the application and call the attention to the 1[Tribunal] to any matters which appear to the Official Liquidator to be relevant.

(b) If the Court, after hearing any evidence given or witnesses called by the Official Liquidator, grants the application, the Court may allow the applicant such costs as it may think fit.

(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined: and may thereafter be used in evidence against him, and shall be open to the inspection of any creditor or contributory at all reasonable times

.

(9) The Court may, if it thinks fit, adjourn the examination from time to time.

3[(10) An examination under this section may, if the Tribunal so directs, be held before any person or authority authorised by the Tribunal.]

(11) The powers of the Court under this section as to the conduct of the examination, but not as to costs, may be 4[exercised by the person or authoritiy] before whom the examination is held in pursuance of sub-section (10).

comments

Section 478 of the Act does not offend clause (3) of Article 20 of the Constitution of India and no order for public examination under it could violate that clause as there could be no accusation in a proceeding under the section resulting in an order for public examination; Official Liquidator (The Popular Bank Ltd.) v. K. Madhava Naik, 1965 (35) Comp. Cas. 174: 1965 (1) Com LJ 161: AIR 1965 SC 654.

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1. Subs. by Act 11 of 2003, sec. 78, for “Court”.

2. Subs. by Act 11 of 2003, sec. 78, for “advocate, attorney or pleader entitled to appear before the Court”.

3. Subs. by Act 11 of 2003, sec. 78, for sub-section (10).

4. Subs. by Act 11 of 2003, sec. 78, for “exercised by the Judge or officer”.

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