High Court of Bombay Adjudicates Appeals Against Company Law Board's Investigation Order Under Section 237(b)(i) of Companies Act, 1956. Appeals challenge the order directing investigation into the affairs of companies allegedly linked to Ketan Parekh in the 2001 stock scam.

Appeals against the order of the Company Law Board directing investigation under Section 237(b)(i) of the Companies Act, 1956 into the affairs of the appellant companies.

The appellants sought to set aside the Company Law Board's order and have the company petitions dismissed.

The order was challenged on grounds including lack of jurisdiction, violation of natural justice, that the investigation was not warranted and that other authorities had already conducted inquiries.

The Company Law Board passed the impugned order directing investigation under Section 237(b)(i) of the Companies Act, 1956; no earlier court orders are mentioned.

Whether the Company Law Board had the jurisdiction to direct investigation under Section 237(b)(i) of the Companies Act, 1956? Whether the principles of natural justice were violated in passing the investigation order? Whether the investigation under Section 237(b)(i) was justified given the material before the Company Law Board?

Appellants argued that they were not controlled by Ketan Parekh and had themselves suffered losses in the stock market crash; they were victims, not beneficiaries; the alleged intention to defraud was not established; the crash was due to global market trends; RBI's regulatory failure cannot be attributed to the appellants; and investigations by SEBI, CBI and under Section 209A had already covered the matter, making further investigation prejudicial.

Economic progress usher with it economic perversity such as the land scam, Petrol Pump scam, import export scam, Hawala scam, security scam, shares and stocks scam, bank scam etc. These 16 appeals are challenging an order passed by the company law board under which it has ordered an investigation into one of such alleged scams under section 237(b)(i) of the companies Act which is being known as Ketan Parekh - stock scam of 2001. In 2001 there was a sudden crash in the stock market ... attributed and alleged to one Mr. Ketan Parekh. On 25.6.2001 the respondents issued a letter to the appellants seeking inspection of the books of accounts of the appellant in exercise of power conferred under section 209(A) of the companies Act. On 2.5.2003 the company petition no. 39 of 2003 was filed by the respondent with the company law board seeking permission to investigate the affairs of the company ... based on the interim report of the various irregularities of the SEBI as well as certain irregularities which came to the light by virtue of inspection under section 209(A) of the Companies Act.

In 2001, a sudden crash in the stock market occurred, attributed to Ketan Parekh. On 26.4.2001, the Lok Sabha constituted a Joint Parliamentary Committee (JPC) to investigate the crash. On 3.8.2001, the JPC's terms of reference were enlarged to include the UTI crash. The JPC report recommended investigation into six corporate groups belonging to Ketan Parekh. On 25.6.2001, the Department of Company Affairs issued letters to the appellants for inspection under Section 209A of the Companies Act, 1956. Inspections were carried out and a preliminary finding report was filed. On 2.5.2003, the Central Government filed company petitions before the Company Law Board (CLB) seeking investigation under Section 237(b)(i) of the Companies Act, 1956. The petitions were served on the companies on 16.5.2003. On 12.7.2003, the appellants sought transfer of proceedings to the Mumbai bench and applied for inspection of relied-upon documents. On 24.11.2003, the appellants filed replies opposing the petitions. The CLB passed the impugned order directing investigation. The appellants filed the present appeals in 2005 challenging the CLB's order.

• Companies Act, 1956: 237(b)(i), 209A
• Securities and Exchange Board of India Act, 1992: