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Central Calcutta Bank Ltd., In Re
Structured Summary of the Court's Opinion
Factual and Procedural Background
This proceeding arises under section 45G of the Banking Companies Act and concerns the affairs of the Central Calcutta Bank Ltd., which is then in liquidation. The Court Liquidator (Official Liquidator) submitted a report to the High Court on 2 January 1957 requesting an order for the public examination of the Directors named in paragraph 4 of that report. Of those named, No. 1 (Charu Chandra Dutt) was deceased, and Nos. 12 and 13 (Asoke Kumar Sen and Jotindra Chandra Rui) were released from the proceedings by the presiding judge on the ground that they were not concerned with the transactions complained of for the relevant period.
Several directors appeared by counsel and filed affidavits. Their affidavits generally described them as passive or "dummy" directors and attributed responsibility for bank losses to the Managing Director, Debidas Roy. The Court considered objections to public examination, including a constitutional challenge raised by Mr. G.P. Kar contending that section 45G was ultra vires as it violated Article 20(3) of the Constitution because notes of the examination could later be used in civil or criminal proceedings under section 45G(8).
Legal Issues Presented
- Whether a public examination of directors under section 45G of the Banking Companies Act infringes Article 20(3) of the Constitution (the protection against being compelled to be a witness against oneself).
- Whether the statutory process under section 45G (including the use of deposition in subsequent proceedings under subsection (8)) renders the section constitutionally invalid.
Arguments of the Parties
Official/Court Liquidator
- The Court Liquidator submitted a report under section 45G asking for public examination of the Directors named in paragraph 4 to discover whether loss was caused to the Bank by acts or omissions of directors.
Directors (through Counsel)
- Many directors filed affidavits describing themselves as passive onlookers or dummies on the Board and contended that the Managing Director, Debidas Roy, was responsible for the losses.
- These directors argued that their status as passive directors made public examination unnecessary or unjustified (an objection the Court did not accept on merits).
Counsel Mr. G.P. Kar (for one Director)
- Contended that section 45G was ultra vires because it violated Article 20(3) of the Constitution: since notes of the examination might be used later in civil or criminal proceedings under section 45G(8), a public examination would compel a person to be a witness against himself.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Maqball Hossein v. State of Bombay (1953 S.C.A. 641) | Referenced as a recent Supreme Court decision relevant to the constitutional point raised. | The Court noted this decision among authorities and stated that the view it adopted did not, as understood by the Court, conflict with that decision. |
| M.P. Sharma v. Satish Chandra, A.I.R. 1954 S.C. 300 | Referenced as a recent Supreme Court decision relevant to the constitutional point raised. | The Court listed this decision and said its view did not go against this decision as it understood it. |
| Raman Lal Rathi v. Commissioner of Police, Calcutta, A.I.R. 1952 Cal 26 | Referenced as a Calcutta decision concerning related legal issues. | The Court observed its conclusion did not, in the Court's view, conflict with this Calcutta decision. |
| Calcutta Motor Cycle Company v. Collector of Customs (60 C.W.N. p. 67) | Referenced as another Calcutta decision relevant to the issues under consideration. | The Court stated that its view was not contrary to this decision as understood by the Court. |
Court's Reasoning and Analysis
The Court's analysis proceeded in several linked steps, closely following the statutory text and constitutional provisions:
- Text of Article 20(3): The Court quoted Article 20(3): "No person accused of any offence shall be compelled to be a witness against himself."
- Nature of a public examination under section 45G: The Court emphasized that a public examination under section 45G is not necessarily a compulsion to give self-incriminating evidence. The witness may give exoneratory evidence, and where a question would be self-incriminatory the witness can refuse to answer and claim constitutional protection.
-
Statutory safeguards in section 45G: The Court outlined the statutory framework in section 45G (and its subsections):
- The Official Liquidator must submit a report stating his opinion whether any loss has been caused to the bank by the act or omission of a director (s45G(1)).
- The High Court considers the report and, if it thinks fit, holds a public sitting for examination (s45G(2)).
- The Official Liquidator must participate and creditors or contributories may take part (s45G(3) and (4)).
- The High Court may put such questions as it thinks fit (s45G(5)), and although the person is examined on oath and must answer such questions, they are only those which the High Court allows (s45G(6)).
- The Director may have legal assistance and his counsel may put questions the Court deems just for enabling explanation or modification of answers.
- Proper test for constitutional validity: The Court stated that the constitutional validity of a statute must be judged on the statute as it is and on its proper application and interpretation; erroneous application or misinterpretation that leads to infringement of constitutional rights does not, in the Court's view, make the statute itself unconstitutional.
- The meaning of "accused of any offence" in Article 20(3): The Court reasoned that Article 20(3) applies only where a person is "accused of any offence" and that an order for public examination under section 45G is not an accusation of an offence. The Official Liquidator is not a prosecutor in the criminal sense but states an opinion as to whether a loss has been caused by a director's act or omission; such acts or omissions may or may not be criminal.
- Use of the General Clauses Act and contextual interpretation: The Court considered section 3(38) of the General Clauses Act (definition of "offence") raised by Mr. Kar, but relied on Article 367(1) which directs that the General Clauses Act applies "unless the context otherwise requires." The Court held that the context of Article 20 shows that "offence" in Article 20 is to be read as a criminal offence.
- Textual and contextual support from Article 20 sequence: The Court pointed to Articles 20(1) and 20(2) using words such as "convicted", "charged", "prosecuted" and "punished" — terms of criminal jurisprudence — and concluded that Article 20(3)'s reference to a person "accused of any offence" should be read similarly as referring to criminal accusation.
- On subsequent use of deposition: The Court held that the mere possibility that deposition under section 45G may later be used in civil or criminal proceedings (per subsection (8)) does not render section 45G unconstitutional. The Court reasoned that constitutional protection against self-incrimination begins with the accusation of an offence; evidence given prior to such an accusation does not fall under Article 20(3)'s prohibition.
- Scope and limits: The Court noted that provisions such as section 45G(9) (power to disqualify a person from being director) and the separate sections 45H and 45I (assessment of damages and punishment for offences) do not transform the public examination itself into a criminal trial, and the latter two sections were not under consideration in this application.
- Policy observations on testimonial compulsion: The Court discussed at length the general rule that testimonial compulsion is foundational to the law of evidence and the administration of justice, and that the constitutional exception for self-incrimination must be confined within its doctrinal limits and not be expanded to paralyze testimonial compulsion in all contexts.
- Precedents: The Court briefly referred to a few decisions (including Maqball Hossein, M.P. Sharma, Raman Lal Rathi, and Calcutta Motor Cycle Company) and stated that the Court's view did not, as understood by the Court, conflict with these authorities.
Holding and Implications
Holding: The Court ordered that public examination under section 45G of the Banking Companies Act of the Directors named in paragraph 4 of the Court Liquidator's report shall proceed, except for three persons already identified (Charu Chandra Dutt—deceased; Asoke Kumar Sen and Jotindra Chandra Rui—released from proceedings). The public examination was fixed for 24 June 1957. The Court directed compliance with Prayer (e) and Prayer (g) of the Liquidator's report and ordered publication of advertisements in the Amrita Bazar Patrika.
Direct consequences for the parties:
- The Official Liquidator may retain his costs up to that time out of the assets in his hands.
- The costs of the respondents to the application were ordered to abide the result of the examination.
- Respondent No. 9, Kshitish Chandra Dutt, being seriously ill and having produced a medical certificate, was ordered to be examined on commission at 55, Ballygunge Circular Road; Mr. Gautam Chakravorty was appointed Commissioner at the remuneration specified in the order ("10 g.ms" as stated in the record). The commission was to be returnable on or before 17 June 1957. The Liquidator would retain the costs of the commission in the first instance. Any creditor or contributory would be entitled to attend the public examination on commission.
The opinion does not articulate broader novel jurisprudential consequences beyond its application to these proceedings; the Court expressly observed that its view did not, as understood by the Court, conflict with the authorities cited and grounded its decision on textual interpretation of Article 20 and the statutory safeguards in section 45G.
The judgment of the Court was as follows:
P.B Mukharji, J.:— This is a proceeding under section 45G of the Banking Companies Act. The proceedings relate to the affairs of the Central Calcutta Bank Ltd., now in liquidation.
1. The Report of the Court Liquidator who is the Official Liquidator of the Central Calcutta Bank Ltd. (in liquidation) was submitted to this Court under section 45G of the Banking Companies Act on the 2nd January, 1957. The main prayer in the Report asks for an order directing public examination of the Directors of the Bank mentioned in the Report on a date to be appointed by the Court. The names of the Directors for the relevant period are mentioned in paragraph 4 of the Report of whom No. 1—Charu Chandra Dutt, who was the Chairman of the Board of Directors, is now dead and two others, Nos. 12 and 13 being respectively Asoke Kumar Sen and Jotindra Chandra Rui, have been released from these proceedings by me on the ground that they were not concerned with the transactions complained of during the relevant period.
2. A number of Directors have appeared through Counsel and filed their respective affidavits. On the merits the gist of their affidavits is that they were passive onlookers and dummies on the Board of Directors and it was the Managing Director, Debidas Roy, who was responsible for all the losses of the Bank. I have held previously that I do not consider that to be a sufficient ground why these directors: should not be publicly examined. The Companies Act does not provide for sleeping Directors. If they were acting as Directors, then it is no excuse to say that they asked somebody else to do their job. The Companies Act charges a Director with many responsible duties and expects every Director to discharge such duties. Many statutory duties are imposed on him under the law, and he cannot delegate his entire statutory office to somebody-else. On the merits, therefore, the objections on behalf of the Dirctors to their public examination have not been pressed. The other objection that was argued was formulated by Mr. G.P Kar, learned counsel for one’ of the Directors. His contention is that section 45G of the Banking Companies Act is ultra vires the Constitution: It is contended that the provisions of section 45G of the Banking Companies Act violate Article 20(3) of the Constitution of India. The argument is that as the notes of the examination of such evidence may be used later in evidence: against the person in any proceeding, civil or criminal, under section 45G(8) of the Banking Companies Act, a public examination of the Director is bad under that particular provision of the Constitution. I find it difficult to accept this argument. There are many reasons for which I consider this constitutional objection should not be upheld.
3. In the first place, Article 20(3) of the Constitution provides:—
“No person accused of any offence shall be compelled to be a witness against himself.”
4. Now a public examination of a Director under section 45G of the Banking Companies Act does not necessarily mean that the Director shall be compelled to be a witness against himself and to give evidence against himself. His evidence may be, and very often is, one of complete exoneration of himself. If, for instance, in this case the affidavits used by the Directors are any guide, as indeed they are on which they are likely to give evidence, such evidence, far from incriminating themselves, is going to blame others. If any individual question is asked in examination which is likely to incriminate the witness, he can refuse to answer the same and seek the constitutional protection. Express provisions are made in section 45G of the Banking Companies Act to say that only such questions are allowed to be put to the witness as the High Court thinks fit. I do not see any reason why I should assume that the High Court would allow self-incriminating questions to be put to a witness, and even if it did, why it should not be corrected either by itself or by the Supreme Court. The test by which the constitutional validity of a Statute is to be judged is not by the event ensuing upon its wrong application or wrong interpretation, but on the basis of the’ Statute as it is and on its right application and right interpretation. Erroneous interpretation or erroneous application of a Statute leading to infraction of any provision of the Constitution does not, in my opinion, make the Statute constitutionally invalid, but makes such interpretation or application bad.
5. In the second place, the constitutional provision only applies where a person is “accused of any offence”. An order for public examination under section 45G of the Banking Companies Act on the Report of the Official Liquidator is not an accusation for an offence. The Official Liquidator under this section of the Statute is not a prosecutor. An analysis of the statutory provisions contained in section 45G of the Banking Companies Act would show the nature and purpose of this examination. The Official Liquidator has a statutory obligation to submit a report under section 45G(1) of the Banking Companies Act saying whether in his opinion any loss has been caused to the Banking Company since its formation by any act or omission of a Director of a banking company. He only states his opinion. That opinion, again, is whether a loss has been caused to the Bank by an act or omission of a Director. That act or omission may or may not be an “offence” at all. Under sub-section (2) of section 45G of the Banking Companies Act, the High Court then considers his report. If the High Court upon such consideration is of the opinion that the Director should be publicly examined, it shall hold a public sitting for such purpose. The opinion of the High Court under subsection (2) is not that the Director is guilty of the loss, but that he should be publicly examined. Then the High Court holds such examination. It is only an exploratory examination tot discover what has happened. The conditions under which such examinations are held are important to notice. Under section 45G(3) of that Act, it is mandatory for the Official Liquidator to participate in such examination, and under sub-section (4) thereof any creditor or contributory is expressly permitted to take part in such examination. The examination is held under the strictest conditions. Sub-section (5) of section 45G of the Banking Companies Act provides that it is the High Court which may put such questions to the person examined as it thinks fit. Sub-section (6) goes on to provide that although the person shall be examined on oath and shall answer fall such questions, yet they are only such questions as the High Court might put or allow to be put to him. It is also provided that the Director to be so examined may have legal assistance of persons who can appear for him, and his lawyer will also have the liberty to put such questions as the Court might deem just for the purpose of enabling the Director to explain or modify the answers given by him.
6. I do not see why in spite of these provisions I should assume that such a Director in these circumstances is “compelled to be a witness against himself” within the language and meaning of Article 20(3) of the Constitution. I should have thought that these were the strongest guarantees that any man could have against self-incrimination. The fact that such evidence might be used in a subsequent civil or criminal proceeding cannot make section 45G of the Banking Companies Act bad on the ground of infringing Article 20(3) of the Constitution. Subsequent criminal accusation of an offence where this deposition under section 45G is permitted to be used under sub-section (8) thereof cannot, in my opinion, retrospectively render unconstitutional this statutory provision for public examination in a proceeding where the Director is not “accused of an offence”. A past evidence likely to be used for a future accusation of an offence does not infringe the constitutional right that a person accused of an offence shall not be a witness against himself. To attract that constitutional’ right the person must first be accused of an offence and thereafter he shall not be a witness against himself. This constitutional protection begins with the accusation of an offence and not be fore. The language of Article 20(3] of the Constitution, in my interpretation, means that the evidence must come after and not before the accusation of an offence to come within the constitutional prohibition.
7. The most fundamental objection to this argument is that Article 20(3) of the Constitution of India is limited to the case of a person “accused of an offence”. Mr. Kar has drawn my attention to section 3(38) of the General Clauses Act of 1897 which defines an offence to mean “any act or omission made punishable by any law for the time being in force”. He, therefore, argues that this includes not merely a criminal act but also a civil act. In other words, the point of the argument is that an offence may be civil or criminal.
8. If that be so, then the whole of the law of evidence will have to be scrapped as a result of such an interpretation of the constitutional provision in Article 20(3) of the Constitution of India and the entire machinery of law brought to a standstill. Testimonial compulsion is the very foundation of the law of evidence, for without such compulsion every refusal to give evidence will render administration of justice impossible. If Courts were to depend on volunteers who will choose for themselves whether to give evidence or not, then the entire machinery for discovery of facts on which the very foundation of justice depends will crumble to pieces. Testimonial compulsion, therefore, is not a legal fetish. It is a necessity.
9. Testimonial compulsion is the general rule. The constitutional prohibition of self-incriminating evidence is an exception designed to defend justice and insure the accused against self-created criminal traps. Legal protection against self-incrimination, therefore is one of the pillars, of a liberality of criminal justice in a civilised society. But such liberality should be confined within the limits of its doctrine and not expanded into (the sentimentality that testimonial compulsion is always a kind of unproclaimed tyranny to be shunned in law. Testimonial compulsion is a necessary obligation of a responsible citizen to aid the machinery of justice and thus help it to discover truth.
10. Before applying the General Clauses Act, it is good to bear in mind Article 367(1) of the Constitution of India which begins with the words of caution, “Unless the context otherwise requires, the General Clauses Act, 1897 shall *** apply for the interpretation of this Constitution ***”. I am satisfied that the context of Article 20 leaves no room for doubt that the offence contemplated in that Article of the Constitution is a criminal offence although it does not use the word “criminal” in the manner that is done in a comparable provision contained in Article 5 of the American Constitution which says “nor shall he be compelled in any criminal case to be a witness against himself”. Article 20(1) of the Constitution of India uses the words “convicted of any offence”, “charged as aft offence”, and “penalty greater than that which might have been inflicted”. Now these are words of criminal offence. Nobody uses the words “convicted of an offence” or “charged as an offence” or “inflicting a penalty” when it is a civil wrong or when the act is an act in delicto and not an act in criminis. Article 20(2) of the Constitution of India again uses the words “prosecuted” and “punished”. They, again, are words of criminal offence and not of civil wrong Article 20(3) of the Constitution coming at the end of this sequence and juxtaposition uses again the words “accused” of any offence” which I can only take and read as a criminal offence. The words, of the proviso in sub-section (7) of section 45G of the Banking Companies Act by using the expression “exculpated from any charges made or suggested” do not convert proceedings under section 45G of the Act into a criminal prosecution or a criminal charge or a criminal trial and are only used for the purpose of awarding costs to the Director and do not alter or modify the substantial or essential nature of the proceedings described in the substantive provisions of section 45G of the Statute. Apart from the dominant and eloquent textual proof which I consider sufficient by itself, the marginal note of Article 20 of the Constitution of India uses the significant words “protection in respect of conviction for offences” which I read as words of criminal jurisprudence only. I do not think that the provisions contained in section 45G(9) of the Banking Companies Act by which power is given to the High Court to disqualify a person to become a Director for any other Company without the leave of the High Court for a period not exceeding five years render the public examination itself under section 45G a criminal trial. The provisions of section 45H and 45-I of the Banking Companies Act are respectively special provisions for assessing damages against delinquent Directors and for punishing offences in relation to banking companies being wound up. But these two sections, 45-H and 45-I, are not the subject-matter of this application, and I do not propose to express any opinion thereupon.
11. It is unnecessary in my view to deal with cases at length. All I need refer to are a few recent decisions. The two well-known decisions of the Supreme Court on the point are Maqball Hossein v. State of Bombay, (1) reported in 1953 S.C.A 641 and M.P Sharma v. Satish Chandra, (2) reported in A.I.R 1954 S.C 300. The other two are the Calcutta cases, namely, the decision of Raman Lal Rathi v. Commissioner of Police, Calcutta, (3) reported in A.I.R 1952 Cal 26, and the decision of Calcutta Motor Cycle Company v. Collector of Customs, reported in 60 C.W.N at p. 67. I do not think that the view I have taken goes against any of these decisions as I understand them.
12. This disposes of the points taken in these proceedings.
13. There will, therefore, be an order for public examination of the Directors mentioned in paragraph 4 of the Report of the Court Liquidator under section 45G of the Banking Companies Act, except the three persons I have mentioned above. It will be held on the 24th June, 1957. There will be an order in terms of Prayer (e) and Prayer (g) of the Report the advertisements will be published in the Amrita Bazar Patrika. The Liquidator will retain his costs up to now out of the assets in his hands. The costs of the respondents to this application will abide by the result of the examination.
14. There is one small point on which all the parties and Counsel are agreed, and that is in respect of respondent No. 9 Kshitish Chandra Dutt. It is said that he is seriously ill.
15. He has produced a medical certificate which is annexed to his affidavit, it is agreed, and I direct accordingly, that his examination would be taken oni commission, and this order itself will be an order for the issue of a commis sion for his public examination which will be held at 55, Ballygunge Circular Road. Mr. Gautam Chakravorty, Barrister-at-Law, is appointed a Commissioner at a settled remuneration of 10 g.ms The parties will act on Counsel's endorsement certified by the Court Officer. The commission will be returnable on or before the 17th June, 1957. The Liquidator will retain the costs of the commission in the first instance. Any creditor or contributory will be entitled to attend the public examination on commission.
A.K.D.G
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