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Motilal Kanji and Co. Vs. Natvarlal M. Jhaveri - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai
Decided On
Case NumberFirst Appeal No. 4 of 1929
Judge
Reported inAIR1932Bom78; (1931)33BOMLR1495; 136Ind.Cas.491
AppellantMotilal Kanji and Co.
RespondentNatvarlal M. Jhaveri
DispositionAppeal dismissed
Excerpt:
.....202 of the indian companies act, it is only a liquidator, a creditor, or a contributory who can appeal. a person who has no present interest in the company but only a prospective interest to be appointed secretary and agent, if the company is resuscitated as the result of a scheme under section 153 of the act, has no right to appeal.;in re bradford navigation company (1870) l.r. 5 ch. 600, in re london chartered bank of australia [1893] 3 ch. 540, 546, and chandrika bakhsh singh v. indar bikram singh (1916) i.l.r. 38 all. 440, 445, s.c. 18 bom. l.r. 846, p.c. followed. - - it does not entirely depend upon whether the person who proposes to appeal is a party to the proceedings, the principle is stated in clear terms in daniell's chancery practice, 8th edition, page 1111; and is well..........the case of a company in the course of being wound up on the liquidator and contributories of the company. the persons interested, therefore, in such application are the creditors or the members or the liquidators of the company. according to buckley on companies acts, 11th edition, page 321, a scheme under section 153 of companies act, 1929, which corresponds to section 153 of the indian companies act, is an alternative mode of liquidation, which by operation of law relieves the company and its contributories from liability further than that which is contemplated or imposed by the scheme. see in re london chartered bank of australia [1893] 3 ch. 540, 546 under section 174 of the indian companies act, the court may, as to all matters relating to a winding up, have regard to the wishes.....
Judgment:

Patkar, J.

1. In this ease the Hatim Mills ceased to work in February 1924 and went into voluntary liquidation, and on June 13, 1928, the learned District Judge on hearing the application of one Dhirajlal Bhimbhai referred the scheme, which was propounded by the present appellants Motilal Kanji and Co., to the creditors to ascertain whether the modifications suggested were acceptable to the statutory majority after first obtaining the approval of the present appellants to those modifications.

2. A meeting was held on July 8, 1928, and on July 21 one of the official liquidators, Mr. N.M. Jhaveri, made a report Exhibit 58. On August 5, Dhirajlal made an application to sanction the scheme as modified. The Court declined to give sanction on the ground that there was not the requisite statutory majority as required by Section 153 of the Indian Companies Act. Dhirajlal filed First Appeal No. 556 of 1923, but died during the pendency of the appeal, and his heirs not having been brought on the record the appeal has abated.

3. The present appeal is by Motilal Kanji and Co., who propounded the scheme. It is contended on behalf of the respondents that an appeal does not lie under Section 202 of the Indian Companies Act at the instance of the present appellants who are neither creditors nor contributories and who have no present interest in the company but only a prospective interest to be appointed secretaries and agents if the company is made to stand on its legs as a result of the modified scheme.

4. Under a 153 of the Indian Companies Act, in the case of a company which is not being wound up, an application has to be made by a creditor or a member of the company, or, in the case of a company being wound up, by the liquidator, and if a majority in number representing three-fourths in value of the creditors or class of creditors, or members or class of members agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on the creditors or the members and also on the company, or in the case of a company in the course of being wound up on the liquidator and contributories of the company. The persons interested, therefore, in such application are the creditors or the members or the liquidators of the company. According to Buckley on Companies Acts, 11th Edition, page 321, a scheme under Section 153 of Companies Act, 1929, which corresponds to Section 153 of the Indian Companies Act, is an alternative mode of liquidation, which by operation of law relieves the company and its contributories from liability further than that which is contemplated or imposed by the scheme. See In re London Chartered Bank of Australia [1893] 3 Ch. 540, 546 Under Section 174 of the Indian Companies Act, the Court may, as to all matters relating to a winding up, have regard to the wishes of the creditors or contributories as proved to it by any sufficient evidence. It appears clear, therefore, that in considering a scheme the wishes of the creditors and the contributories have to be consulted and not the wishes of any person who may have propounded a scheme. The appellants have no present interest in the affairs of the company, but only a prospective interest if the scheme is sanctioned. They are neither creditors nor contributories of the company. Their present interests are not likely to ba in any way affected by the order of the lower Court. If the scheme had been sanctioned they would have benefited by the scheme in so far as they would have been appointed secretaries and agents of the company if re-started according to the scheme. But by reason of the scheme not being sanctioned it does not appear that the interests of the appellants are in any way affected.

5. In In re Bradford Navigation Company (1870) L.R. 5 Ch. 600 it was held that no person has a right to be heard against a petition for winding up a company, except creditors and contributories, and that although the Court may reasonably hear other persons who have an interest in the property of the company as amici curice, yet such persons cannot appeal against the decision. In the judgment the winding-up proceedings of a company have been dealt with on the same footing as the winding-up proceedings of a partnership, and it was held that if the winding-up order does not in the slightest degree derogate from any right whatever which a third person has in respect of the property, he is not entitled to file an appeal against the order.

6. Unless a person shows that he has got an interest which is adversely affected by the decree of the lower Court or has an interest in the subject-matter which is under litigation, he has no right to appeal: see the decision of the Privy Council in Chandrika Bakhsh Singh v. Indar Bikram Singh I.L.R. (1916) All. 440 18 Bom. L.R. 848 where a person, who has no present title to protect and no interest which can give him a right to contest, is described by their Lordships of the Privy Council as 'a mere impertinent intervener in another person's affair.'

7. It is contended on behalf of the appellants that they were parties in the lower Court, but the mere fact that they were parties in the lower Court does not invest them with a right to appeal unless they conclusively prove that their rights are adversely affected by the decision of the lower Court.

8. I, therefore, think that the preliminary objection prevails and this appeal must be dismissed with costs. There will be two sets of costs, one in favour of respondents Nos. 7, 9 and 11 and another in favour of respondents Nos. 1 to 4.

Tyabji, J.

9. This is an appeal from an order of the District Judge refusing to sanction a scheme of arrangement presented in the liquidation of the Hatim Mills Co. Ltd.

10. The appellant before us is neither the official liquidator, nor a contributory, nor a creditor of the company, but he is the person who put forward the rejected scheme.

11. A preliminary objection is taken that such a person cannot appeal.

12. The decision depends upon the general principle of law that no person has a right to appeal unless he has an interest in the question sought to be raised in the appeal. It does not entirely depend upon whether the person who proposes to appeal is a party to the proceedings, The principle is stated in clear terms in Daniell's Chancery Practice, 8th Edition, page 1111; and is well illustrated by the decision of the Privy Council in Chandrika Bakhsh Singh v. Indar Bikram Singh I.L.R. (1916) All. 440 18 Bom. L.R. 846 There the question was whether a transfer by a Hindu widow was valid. The respondent before their Lordships of the Privy Council had claimed under a will, which was held and admitted by the respondent to be invalid, Nevertheless, in appeal to the Judicial Commissioners of Oudh, the respondent had been allowed to contend that the widow was not entitled to deal with the estate (in which he was himself not interested), and the Judicial Commissioners went into the merits, and decided that the widow's dealings with the estate were unauthorised, and ought to be set aside. The Privy Council reversed this decision, holding that, inasmuch as the respondent had admitted that he himself had no interest in the estate, the Judicial Commissioners were wrong in hearing him in appeal, and that the appeal should have been dismissed.

13. It was argued that the appellant before us had a right to appeal, inasmuch as he had been made a party to the proceedings in the lower Court; and, secondly, that he was interested in the appeal, as the scheme of arrangement that was rejected was put forward by him, and, if it had been accepted he would have been given the management of the Mills.

14. The question whether the appellant's interests are affected must be decided with reference to the proceedings before the Court. The proceedings arose in the liquidation of the company. Section 158 of the Indian Companies Act provides for the manner in which--in liquidation as well as at other times--questions arising between a company, its contributories and its creditors may be compromised or arranged. The persons concerned in the liquidation of a company are strictly only the contributories, following the analogy of partners in the dissolution of an ordinary partnership. But the law relating to joint stock companies (as explained by Lord Justice James in In re Bradford Navigation Company (1870) L.R. 5 Ch. 600 has provided that the creditors of the company should also have a say in its liquidation: this is given effect to in Section 153. That section provides that any arrangement or compromise which is proposed shall be placed before the creditors, as well as the contributories and shall (if sanctioned) be binding on both. But no one except the liquidator, the contributories and the creditors of the company is bound by it, or has any concern in any of the questions arising in liquidation. A compromise or arrangement in the course of liquidation is an 'alternative mode of liquidation,' as Lord Wrenbury calls it (Buekley on Companies, 11th Edition, page 321).

15. That a person has come forward before a meeting of the shareholders, and proposed a scheme for carrying out the liquidation of the company, does not make him a party to the original proceedings relating to the winding up of the company, nor does it give him any interest, in the eye of the law, in the question how the liquidator, the contributories and the creditors settle their domestic affairs. It may have been convenient in this case --the analogy of the Bradford Navigation Go's, case is very close--to let the creditors and the contributories hear for themselves what scheme the appellant proposed for their consideration, But when the parties really concerned in the affairs of the company rejected the scheme, it was no concern of the appellant to appeal to this Court, and say that the contributories and the creditors of the company shall not be allowed to manage their own affairs as they like. Without applying to him the choleric words of the Privy Council to which my learned brother has referred, it may be said that he has nothing to do with what the liquidator, the contributories and the creditors of the company do amongst themselves.

16. I, therefore, agree that the appeal should be dismissed with costs on the preliminary point.


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