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Virupakshappa Nagarajappa Jagali and ors. Vs. the Taluka Agricultural Produce Co-operative Society Ltd. - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies
CourtKarnataka High Court
Decided On
Case NumberFirst Appeal No. 127 of 1978
Judge
Reported inAIR1979Kant117; ILR1979KAR1354; 1979(1)KarLJ302
ActsKarnataka Co-operative Societies Act, 1959 - Sections 118(2); Indian Companies Act, 1913 - Sections 171 and 179
AppellantVirupakshappa Nagarajappa Jagali and ors.
RespondentThe Taluka Agricultural Produce Co-operative Society Ltd.
Excerpt:
.....to obtain leave before institution of the proceeding entails dismissal of the proceeding. 6. we are clearly of the opinion that the view taken by the court below that it lost jurisdiction to try the suit consequent on the winding up order by the registrar is erroneous and not warranted by the provisions in s......to obtain leave before institution of the proceeding entails dismissal of the proceeding. the suit or proceeding instituted without leave of the court may, in our judgment, be regarded as ineffective until leave is obtained, but once leave is obtained the proceeding will be deemed instituted on the date granting leave.'their lordships also observed that the purpose of the provisions in s. 171 of the indian companies act, 1913, was that the company court which was dealing with the winding up should have control over the proceedings in relation to the assets of the company and administer the same for the benefit of all the creditors. the supreme court also referred to a passage from the commentary on the companies act by buckley to the effect:'leave to continue after winding up a.....
Judgment:

Srinivasa Iyengar, J.

1. The appellants were the plaintiffs in Original Suit No. 69/1976 on the file of the Civil Judge at Raichur. That was a suit filed by the appellants, who constitute a partnership firm, for recovery of a sum of Rs. 28,805.40 with interest form the date of suit and for costs etc., from the defendant, which is a co-operative Marketing Society, in respect of certain goods alleged to have been supplied to the defendant. The suit was being contested by the Society. The suit was filed on 18-10-1976. Subsequently, it transpired that the Registrar of Co-operative Societies, Gulbarga Division, ordered the winding up of the Society by his order dated 17-6-1977. Thereupon, the defendant filed an application I. A. No. II before the Civil Judge contending that as an order for winding up has been made and a Liquidator appointed, the Court lost jurisdiction to try the suit and the suit should be dismissed. This application I. A. No. II was resisted by the plaintiffs. It was contended that the Court has not lost jurisdiction and the suit could not be dismissed. However, the learned Civil Judge was of the opinion that by virtue of the provisions of S. 118(2) of the Karnataka Co-operative Societies Act, 1959, he could not proceed with the suit and, therefore, the suit was liable to be dismissed and dismissed the suit by the order dated 20-4-1978. It is against this decree dismissing the suit that this appeal is filed.

2. It is contended by Shri S. G. Sundaraswamy, the learned Advocate for the appellants, that the view taken by the learned Civil Judge is erroneous and is not warranted by the provisions of S. 118(2) of the Karnataka Co-operative Societies Act, 1959.

3. This contention is sound and must be upheld. The said section reads:

'While a co-operative society is being would up, no suit or other legal proceedings relating to the business of such society shall be proceeded with, or instituted against, the Liquidator as such or against the Society or any member thereof, except by leave of the Registrar and subject to such terms as he may impose.

4. It is seen that the suit had already been instituted and was pending when the order for winding up had been made. Therefore, the suit was at a stage for being proceeded with. When the suit was filed, the Court had jurisdiction. S. 118(2) of the Karnataka Co-operative Societies Act, 1959, does not say that so soon as an order for winding up is made in respect of a society the suit shall abate or shall stand dismissed. It is implicit in the section that once the Registrar grants leave for the suit being proceeded with, the court can proceed with the suit. That means, the Court has jurisdiction to try the suit and only the requirement to be satisfied is that leave should be obtained from the Registrar to proceed with the suit. The section is in similar terms to Section 171 of the Indian Companies Act, 1913, the interpretation of which was for consideration by the Supreme Court in Bansidhar Sankarlal v. Md. Ibrahim (AIR 1971 SC 1291). In para 8 of the judgment, it was observed:

'Even granting that sanction under S. 179 does not dispense with the leave under S. 171 of the Act, to institute a proceeding in execution against a Company ordered to be wound up, we do not think that there is anything in the Act which makes the leave a condition precedent to the institution of a proceeding in execution of a decree against the Company and failure to obtain leave before institution of the proceeding entails dismissal of the proceeding. The suit or proceeding instituted without leave of the Court may, in our judgment, be regarded as ineffective until leave is obtained, but once leave is obtained the proceeding will be deemed instituted on the date granting leave.'

Their Lordships also observed that the purpose of the provisions in S. 171 of the Indian Companies Act, 1913, was that the Company Court which was dealing with the winding up should have control over the proceedings in relation to the assets of the Company and administer the same for the benefit of all the creditors. The Supreme Court also referred to a passage from the Commentary on the Companies Act by Buckley to the effect:

'Leave to continue after winding up a debenture-holder's action, whether previously or subsequently commenced, will be given unless the Liquidator is able and willing to give in the winding up the relief which could be obtained in the action.'

5. The object of the provisions in S. 118(2) of the Karnataka Co-operative Societies Act, 1959, is to protect the interests of all the creditors of the Society and to ensure an equitable distribution in respect of several claims against the Society by the Winding-up Authority. It is also clear that unless the Winding-up Authority can himself satisfy the claim of a particular creditor, leave to proceed with the pending action must invariably be given.

6. We are clearly of the opinion that the view taken by the Court below that it lost jurisdiction to try the suit consequent on the winding up order by the Registrar is erroneous and not warranted by the provisions in S. 118(2) of the Karnataka Co-Operative Societies Act, 1959, and the dismissal of the suit is untenable.

7. Accordingly, this appeal is allowed and the order of the Court below dismissing the suit is set aside. The Court below shall keep the suit pending until the plaintiffs obtain and produce before it an order of the Registrar granting leave to proceed with the suit and, thereafter, proceed with the suit in accordance with law.

The court-fee paid on the memorandum of appeal shall be refunded.

The appellants shall have their costs of this appeal from the respondents

8. Appeal allowed.


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