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Balkrishna Mahadeo Vartak and ors. Vs. Indian Association Chemical Industries Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberFirst Appeal No. 522 of 1957
Judge
Reported inAIR1959Bom41; (1958)60BOMLR30; ILR1958Bom1006
ActsCompanies Act, 1956 - Sections 446 and 483
AppellantBalkrishna Mahadeo Vartak and ors.
RespondentIndian Association Chemical Industries Ltd.
Appellant AdvocateS.G. Patwardhan, Adv.
Respondent AdvocateL.G. Khare, Adv.
Excerpt:
.....on an application made under section 446 of the companies act, 1956, to file a suit against the company, is appealable under section 483 of the act.;maneklal v. saraspur manufacturing co. ltd. (1924) 29 bom. l.r. 253 sansar chand v. punjab industrial bank ltd. (1929) i.l.r. 10 lah. 806, f.b and bachharaj factories ltd. v. hirjee mills ltd. (1954) 57 bom. l.r. 378 referred to. - maharashtra scheduled castes, scheduled tribes, de-notified tribes (vimukta jatis), nomadic tribes, other backward classes and special backward category (regulation of issuance and verification of) caste certificate act (23 of 2001), sections 6 & 10: [s.b. mhase, a.p. deshpande & p.b. varale, jj] caste certificate petitioner seeking appointment against the post reserved for member of schedule tribe his caste..........any way to cut down or impair that right. it washeld that the first part of the section provided a right ofappeal against an order or decision which was not purelyprocedural in character, but which affected the rights orliabilities of parties, that the second part of the section,which dealt with the manner and the conditions in which an appealmight be preferred, did not in any way cut down or impair thesubstantive right conferred by the first part of the section, butonly referred to the procedural aspects of an appeal and theforum to which the appeal would lie.4. section 446 provides that when a winding up order has beenmade, no suit shall be commenced except by leave of the court andsubject to such terms as the court may impose. the object of thesection is to save the company which is.....
Judgment:

Chainani, J.

1. The father of appellants Nos. 1 and 2 and husband of appellantNo.3 had given on lease a land Section No. 128 of Mouje Kothrudin Haveli Taluka to the respondent-Company on 11th February 1944.One of the conditions of the lease was that the Company shouldnot sub-lease or transfer the land to any other person withoutthe permission of the lessors. The Company, however, assigned itsleasehold rights to one of its Directors, G.N. Patwardhan, fora consideration of Rs. 8,200. The land is now in the possessionof Patwardhan. The Company subsequently filed a suit for settingaside the assignment in favour of Patwardhan. this was dismissed.In 1953 an order was made for the winding up of the Company andan Official Liquidator was appointed. He obtained a decree forover Rs. 8,000 against Patwardhan. This decree has not yet beenexecuted. The appellants were paid rent for three years by theLiquidator, but it is their case that they have not received rentdue to tem since 1953. It is also the contention of theappellants that the company has committed several breaches of theconditions of the lease. According to them, a large number oftrees standing on the land had been wrongfully cut down. They,therefore, gave notices to the Company and Patwardhan terminatingthe lease. They also asked for possession of the land being givento them. Thereafter, they made an application to the DistrictJudge under Section 446 of the Companies Act, 1956, for leave tofile a suit against the Company in order to obtain possession ofthe land. The learned District Judge rejected the application.The appellants have, therefore, appealed.

2. Mr. Khare, who appears for the Official Liquidator, hascontended that the appeal is not competent. Section 483 of theAct provides that appeals from any order made, or decision given,in the matter of the winding up of a Company by the Court shalllie to the same Court to which, in the same manner in which, andsubject to the same conditions under which, appeals lie from anyorder or decision of the Court in cases within its ordinaryjurisdiction. Mr. Khare has urged that the order passed by theDistrict Judge refusing to grant leave to the appellants to filea suit against the Company cannot be said to be an order made ordecision given in the matter of winding up. We are unable toaccept this argument. In our opinion, the words 'in the matterof the winding up of a Company' are sufficiently wide to includean order of the kind appealed against. In Maneklal Mansukhbai v.Sraspur . 29 Bom LR 253 : AIR 1927 Bom 167(A), an appeal was entertained against an order passed by theDistrict Judge refusing to grant leave to the appellant toproceed with a suit.

The question whether an appeal lay against such a order was,however, not raised or decided in this case. A Full Bench of theLahore High Court held in Sansar Chand v. Punjab Industrial BankLtd. ILR 10 Lah. 806 : AIR 1929 Lah 707 , on aninterpretation of corresponding Section 202 of the old CompaniesAct, that 'it is wide enough to cover appeals against any order made in the matter of winding up of a Company provided such anorder finally decides a dispute between the parties or deprivesthe appellant of a substantial and important right and is not amere formal or interlocutory order.'

3. This decision of the Lahore High Court has been referred towith approval in Bachharaj Factories Ltd. v. Hirjee Mills Ltd. : AIR1955Bom355 (C), in which it wasobserved that Section 202 of the old Companies Act, whichcorresponds to Section 483 of the present Act, conferred asubstantial and a very valuable right and that the Court must beanxious not in any way to cut down or impair that right. It washeld that the first part of the section provided a right ofappeal against an order or decision which was not purelyprocedural in character, but which affected the rights orliabilities of parties, that the second part of the section,which dealt with the manner and the conditions in which an appealmight be preferred, did not in any way cut down or impair thesubstantive right conferred by the first part of the section, butonly referred to the procedural aspects of an appeal and theforum to which the appeal would lie.

4. Section 446 provides that when a winding up order has beenmade, no suit shall be commenced except by leave of the Court andsubject to such terms as the Court may impose. The object of thesection is to save the Company which is being wound up fromunnecessary litigation and to protect its assets for equitabledistribution amongst its creditors and its share-holders. Theconsequence of the winding up order, therefore, is that no suitcan be filed against the Company without obtaining the leave ofthe Court. An application for such leave is, therefore, madenecessary by the order for winding up. In dealing with such anapplication, the Court has necessarily to consider the interestof the Company and to see that its assets are not wasted infrivolous and unnecessary litigation. An order or decision onsuch an application is, therefore, clearly an order or decisionin the matter of winding up. It is not a mere procedural order,for it affects the valuable right to obtain relief by filing asuit. An appeal, therefore, lies against such an order ordecision under Section 483 of the Act.

5. We are, therefore, of the opinion that the present appeal ismaintainable.

6. The next question to be considered is whether this is a fitcase in which leave to file a suit agaisnt the Company shouldbe granted. Mr.Patwardhan who appears for the appellants, hasstated that the appellants do not with to file a suit in orderto recover arrears of rent due to them. Their claim in regard tothese arrears will be decided by the Liquidator. They only wantleave to file a suit for obtaining possession of the land leasedby them. This land is not in possession of the Company atpresent. It is in the possession of Patwardhan, to whom thelease-hold rights had been assigned by the Company. the right of the appellants to obtain possession cannot also be adjudicatedupon by the Liquidator in the winding up proceedings. Leave tofile a suit should ordinarily be granted, where the question atissue is one which cannot be gone into and decided in the windingup proceedings.

7. We, therefore, think that the appellants should be grantedthe permission asked for by them.

8. Accordingly, we set aside the order passed by the DistrictJudge and grant permission to the appellants to file a suitagainst the respondent-Company in order to obtain possession ofthe land given by them on lease to the respondent-Company. theappellants will be entitled to recover their costs of the appealfrom the respondent Company.

9. Appeal allowed.


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