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Aspee (India) Ltd. Vs. M.L. Dahanukar and Co. Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberO.C.J. Appeal No. 85 of 1952
Judge
Reported inAIR1954Bom35; (1953)55BOMLR614; ILR1954Bom21
ActsCode of Civil Procedure (CPC), 1908 - Sections 35, 96, 220 and 540; Companies Act, 1913 - Sections 205
AppellantAspee (India) Ltd.
RespondentM.L. Dahanukar and Co. Ltd.
Appellant AdvocateN.A. Mody and Jamshedji Kanga, Advs.
Respondent AdvocateS.V. Gupte, Adv.
Excerpt:
.....v. the first defendant company does not wish to appeal from the whole decree passed by the learned judge, because with a part of the decree it is satisfied. that question does not arise before us and we do not propose to decide it, but it is rather interesting to note that in -dinanath v. we have, therefore, to be satisfied that on the company going into liquidation the retainer came to an end without the company revoking or cancelling that retainer, or, in other words, the authority given to the attorneys by the company to defend the action was withdrawn without the company taking any steps to withdraw the authority and merely by reason of the fact that the company went into liquidation. it is perfectly true that a company acts through its directors and it is only the directors..........2 was subsequently added a party defendant, the suit reached hearing on april 16, 1952, before the learned judge, and counsel for the plaintiffs informed the court that the first defendant company had gone into liquidation. mr. bhagwati appeared for the first defendant company before the learned judge. the plaintiffs intimated to the court that they did not desire to prosecute the suit. they also intimated to the court that as between them and defendant no. 2 it was agreed that there should be no order as to costs of the suit. the learned judge took the view that the retainer of the attorneys of the first defendant company had terminated by reason of the company having gone into liquidation and therefore he refused to order the plaintiffs to pay the costs of defendant no. 2. 2. the first.....
Judgment:

Chagla, C.J.

1. This is an appeal from a decree passed by Shah J. by which he dismissed the plaintiffs' suit and deprived the first defendant company of the costs of the suit. The suit was originally filed by the plaintiffs against the first defendant company. Defendant No. 2 was subsequently added a party defendant, The suit reached hearing on April 16, 1952, before the learned Judge, and counsel for the plaintiffs informed the Court that the first defendant company had gone into liquidation. Mr. Bhagwati appeared for the first defendant company before the learned Judge. The plaintiffs intimated to the Court that they did not desire to prosecute the suit. They also intimated to the Court that as between them and defendant No. 2 it was agreed that there should be no order as to costs of the suit. The learned Judge took the view that the retainer of the attorneys of the first defendant company had terminated by reason of the company having gone into liquidation and therefore he refused to order the plaintiffs to pay the costs of defendant No. 2.

2. The first question that has been urged before us by Mr. Gupta for the plaintiffs is that the appeal is not maintainable as the order of costs made by the learned Judge is not a judgment within the meaning of Clause 15 of the Letters Patent. The appeal made by the first defendant company is an appeal against a decree passed by Shah J. The decree is to the effect that the suit be dismissed and that there should be no order as to costs of the first defendant company. The first defendant company obviously is not appealing from that part of the decree which dismissed the suit, but it is appealing from the other part of the decree which has deprived the first defendant company of its costs, and the question that arises is whether it is competent under Clause 15 of, the Letters Patent to a party, which has been aggrieved by a part of the decree which deals with costs, to appeal from that part. We should have said, apart from authority, that every decree under the Civil Procedure Code must 'ex-hypothesi' constitute a judgment under Clause 15 of the Letters Patent. We in this Court have consistently accepted the construction placed upon the expression 'judgment' by the Calcutta High Court in the well known case of -- Justices of the Peace for Calcutta v. Oriental Gas Co.', 8 Beng LR 433 at p. 452 (A) and the interpretation was, to use the language of Couch C. J.:

'We think 'judgment' in clause 15 means a 'decision',......... which affects the meritsof, the question between the parties by determining some right or liability.'

When we turn to the definition of 'decree' under Civil P. C., 'decree' is defined as the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit and may be either preliminary or final. Therefore, when a decree is passed as defined by the Code, it must constitute the determination of the rights of parties. Now, to the extent that the decree deals with the question of costs, it conclusively determines the rights and liabilities of parties with regard to costs. In this case the firstdefendant company's contention is that it was entitled to the costs of the suit inasmuch as the plaintiffs did not prosecute the suit against it. When Shah J. deprived the first defendant company of its costs of the suit, he conclusively determined the right of the first defendant company with regard to the costs of the suit. Therefore, it is difficult to understand why, to the extent that a decree may deal with costs, it cannot constitute judgment. Our High Court has also taken the view that not only the whole decree can be appealed from, but also a part of the decree can be appealed from. The position here is the same. The first defendant company does not wish to appeal from the whole decree passed by the learned Judge, because with a part of the decree it is satisfied. It only wishes to appeal from that part of the decree which affects its rights and with regard to which it has a grievance. As we said, this seems to be the position apart from authorities, and when we turn to the authorities, we find that properly understood the authorities have taken the same view of the position.

3. The first case to which reference was made at the bar was -- 'Ranchordas Vithaldas v. Bai Kasi', 16 Bom 676 (B). It is important to note that in that case Bayley, Ag. C. J. and Farran J. were hearing an appeal from the Original Side and the appeal was from an order of costs passed by Parsons J., and what was held by the Court was that

'Where the original Court has made an erroneous order for costs under a misapprehension of fact and law, an appeal lies from such order under the Civil Procedure Code, although the appellant complains of nothing else but the order for costs so erroneously made.'

It is rather strange that neither at the bar nor in the judgment any reference was made to Clause 15 of the Letters Patent. The bar was strongly represented by such stalwarts as Mr. Lang, Mr. Inverrarity and Mr. Jardine, and in the judgment itself Bayley J. at p. 682 says:

'That being the case, an appeal, we think, lies under sections 220 and 540 of the Civil Procedure Code (which correspond to Sections 35 and 96 of the present Code) against an order for costs so erroneously made, whether there is, strictly speaking, any principle involved in such an appeal or not.' Therefore, the view taken by the learned Judge was that inasmuch as an order for costs was a decree, an appeal lay against such a decree under Civil P. C.

Therefore Bayley J. assumed, and with respect rightly assumed, that if an appeal lay against a decree under Civil P. C., such a decree would constitute a judgment under Clause 15 of the Letters Patent, and an appeal would lie under Clause 15 of the Letters Patent. Bayley, J. again with respect, rightly points out that although an appeal from a decree for costs would always lie, it is only in very limited class of cases that the appellate Court would interfere with the discretion exercised by the learned Judge with regard to costs, and as the learned Judge points out, it is only when there has been a misapprehension of fact or a violation of any established principle or where the Judge has exercised no discretion at all that the Court would interfere with the discretion exercised by the trial Court with regard to costs.

4. In -- 'Khushal v. Punamchand', 22 Bom 164 (C) there was again an appeal from adecree for costs passed on the Original Side, and Farran C. J. points out that the law was correctly laid down in the judgment of Bayley J. in -- 'Ranchordas v. Bal Kasi' (B) and again the learned Chief Justice points out at p. 167 that Civil Procedure Code does allow of an appeal from any part of a decree including the award of costs. Therefore, again, although this was an appeal from the Original Side, emphasis was placed upon the fact that an appeal is permissible under the Civil Procedure Code from a decree for costs.

5. In -- 'Laxmibai v. Radhabai' : AIR1917Bom18 (D) we have another case of an appeal from a decree for costs passed on the Original Side of this High Court, and there again Sir Basil Scott, C. J. and Batchelor J. followed the principle laid down in -- 'Ranchordas v. Bai Kasi', (B).

6. Different considerations may arise when we have a case of not a decree for costs but for an order for costs passed on the Original Side. It may be that the substantive order may not be appealable as not constituting a judgment, and the question may arise whether the part of the order which awards costs could be appealed from or not. That question does not arise before us and we do not propose to decide it, but it is rather interesting to note that in -- 'Dinanath v. Divanchand (No. 2)' AIR 1930 Bom 445 (E) Sir Amberson Marten C. J., and Blackwell J. were dealing with a case where a stay order had been passed by a Court on the Original Side, the appellant did not appeal against the stay but appealed only on the question of costs, and Sir Amberson Marten at p. 447 points out that as they were not in a position to set aside the learned Judge's order as to stay because there was no appeal from that order, they were not in a position to challenge the grounds on which he made that order for a stay, and therefore on a mere question of costs they could only challenge those grounds if they were also in a position to challenge them as regards the main order for a stay, and on that ground the appeal against the order for costs was dismissed.

7. Reliance was placed on a statement of the law to be found in Sir Dinshah Mulla's Commentary on the Civil Procedure Code. In the 11th edition at p. 154 the learned Commentator under Section 35 under the heading 'Letters Patent Appeal' says this:

'An order as to costs is not a 'judgment' within the meaning of clause 15 of the Letters Patent and is not appealable as such.'

And for this statement of the law reliance is placed on a Madras decision in -- :Saravana Mudaliar v. Rajagopala Chetty', 17 Mad LJ 569 (F). Now, usually we always find that the commentary of Sir Dinshah Mulla is remarkably accurate as to the statement of the law and the authorities on which the statement of the law is based, but through some curious inadvertence or omission the learned commentator has forgotten to note the fact that --'Saravana Mudaliar's case' (F) has been overruled by -- 'Kulasekara Naicker v. Jagadambal Animal', AIR 1919 Mad 678 (G) which has taken a contrary view. There a full bench of the Madras High Court held that an order as to costs, passed by a Judge of the High Court in the exercise of its original jurisdiction, is not the less a judgment within the meaning of Clause 15 of the Letters Patent because it relates to costs only.

8. Therefore, in our opinion, it is competent to a party which is aggrieved by a decree passed on the Original Side with regard to costs to appeal from that decree even though he does not appeal from the whole decree but only a part of it. The maintainability of the appeal has nothing to do with the question as to under what circumstances the appellate Court would interfere with the discretion exercised by the trial Court with regard to costs,

9. Turning to the merits of the matter, the first question is whether the retainer of the solicitors who were instructed by the first defendant company came to an end when the company went into liquidation. It is not disputed that the solicitors were properly engaged by the first defendant company to defend the suit, or, in other words, the retainer of the company was properly given to its solicitors. We have, therefore, to be satisfied that on the company going into liquidation the retainer came to an end without the company revoking or cancelling that retainer, or, in other words, the authority given to the attorneys by the company to defend the action was withdrawn without the company taking any steps to withdraw the authority and merely by reason of the fact that the company went into liquidation. It is perfectly true that a company acts through its directors and it is only the directors who can employ the solicitors for the company. It is equally true that on the company going into liquidation the authority of the directors to act for the company comes to an end and it is only the liquidator who can act on behalf of the company. But it does not follow from that fact, and it cannot follow from that fact, that because the agency of the directors ceased, the retainer validly given by the directors who were the proper agents of the company came to an end.

It cannot be disputed that it was open to the liquidators not to continue the retainer given to the solicitors. It was open to them to withdraw the retainer. It is not suggested in this case that the liquidator withdrew the retainer of the solicitors, and we do not understand on what principle of law it could be suggested that without the liquidator withdrawing the retainer given to the solicitors the retainer automatically came to an end because the company went into liquidation. Whatever authority there is, is contrary to the view taken by the learned Judge. In the well-known text on the law relating to Solicitors by Cordery it is stated at p. 78 that a retainer by a company ceases on its dissolution. Therefore, by inference it does not cease merely on the company going into liquidation because the company as an entity is not dead, nor is it dissolved by reason of the fact that it goes into liquidation or a winding up order is made against it. Its legal death only comes about when it is formally dissolved.

10. The same view of the law seems to have been taken by the Privy Council in -- 'Dawson's Bank, Ltd. v. Ninpon Menkwa Kabushiki Kaisha', . There the Privy Council was considering a question as to whether any change had to be made in the title of the suit when a company went into liquidation, and at p. 85 their Lordships point out:

'..... the liquidation could make no difference in this regard: the claim of the plaintiffs was a claim against the Bank, and not against the liquidators. The change whichwas brought about by the liquidation in regard to the suit was merely this, that in the conduct of their defence the Bank would, before liquidation, act through the directors, during liquidation through the liquidators, and after the termination of the liquidation through the directors once more.'

What has to be borne in mind is that liquidation by itself doe's not invalidate the authority which the directors undoubtedly had to give a retainer to the solicitors.

11. The learned Judge has taken into consideration the fact that it did not appear that Mr. Bhagwati, counsel for the company before him, had any instructions from the liquidator. With respect to the learned Judge, the Court is not concerned with the question as to who gives instructions to the advocate or counsel before it. The Court is only concerned to find out whether a party is properly represented, and if the solicitors properly represented the first defendant, company and if the retainer still continued, then it was for the solicitors and their counsel to get instructions from the proper party. From the judgment of the learned Judge, it appears that the only reason why he has deprived the first defendant company of its costs is that at the stage when the company appeared before the learned Judge it was not properly represented. But again, with respect, the learned Judge seems to have overlooked the fact that some order had to be made for the costs which had been incurred prior to the date of the hearing. Even assuming that the appearance on 16-4-1952, was not a proper appearance, the suit had been filed long before that date, costs of the suit had been properly incurred by the solicitors of the company, and some other had to be made for these costs. In the view that we take that the retainer of the company continued and that counsel was properly briefed to ask for costs, there seems to be no reason why on principle the costs should not have followed the event and the plaintiff should not have been made to pay the costs of the first defendant company.

12. We would, therefore, modify the decree passed by the learned Judge and direct that the plaintiffs should pay the costs of the suit of the first defendant company. Inasmuch as the plaintiffs have failed 'in this appeal, they must also pay the costs of this appeal to the appellants.

13. Appeal allowed.


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