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Vishwa Pal Sharma Vs. Sukh Sancharak Co. (P) Ltd. and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad High Court
Decided On
Case NumberSpecial Appeal No. 587 of 1959
Reported inAIR1962All88; [1962]32CompCas947(All)
ActsCompanies Act, 1913 - Sections 175(2), 235 and 235(1)
AppellantVishwa Pal Sharma
RespondentSukh Sancharak Co. (P) Ltd. and ors.
Appellant AdvocateGyanendra Kumar, Adv.
Respondent AdvocateA. Banerji, Adv.
.....provisional liquidator also included in the meaning - three years commences from the date when the official liquidator is first appointed and winding up order has been made. (ii) liability - section 235 sub-section 1 of companies act,1913 - widow and child of deceased director - held, the heirs cannot be held responsible for the liability of the deceased director. - cantonments act[c.a. no. 41/2006]. section 346 & cantonment fund (servants rules, 1937, rules 13, 14 & 15: [h.l. gokhale, ag. cj, p.v. hardas, naresh h. patil, r.m. borde & r.m. savant, jj] jurisdiction of school tribunal constituted under maharashtra employees of private schools (conditions of service) regulations act, (3 of 1978) held, school run by the cantonment board is a primary school and it is not a school recognised..........(private) limited (in liquidation) and others. special appeal no. 22 of 1960 is by smt subhadra devi sharma and her two sons, aring pat sharma and kirti pal sharma against the official liquidator sukh sancharak company ltd, (in liquidation) and two others, namely, vishwa pal sharma and brijendra pal sharma. special appeal no. 29 of 1960 is by brijendra pal sharma against sukh sancharak co. (private) ltd. (in liquidation) and vishwa pal sharma, smt. subhadra devi, aring pal sharma and kirti pal sharma.2. the aforementioned appeals arise out ofthe liquidation proceedings that commended in respect of the private limited company known as the sukh sancharak company (private) ltd. the various appellants in the three aforementioned appeals were members of a single family, for the company was.....

Mukerji, J.

1. Special Appeal No. 587 of 1959 is by Vishwa Pal Sharma against Sukh Sancharak Company (Private) Limited (in liquidation) and others. Special Appeal No. 22 of 1960 is by Smt Subhadra Devi Sharma and her two sons, Aring Pat Sharma and Kirti Pal Sharma against the Official Liquidator Sukh Sancharak Company Ltd, (in liquidation) and two others, namely, Vishwa Pal Sharma and Brijendra Pal Sharma. Special Appeal No. 29 of 1960 is by Brijendra Pal Sharma against Sukh Sancharak Co. (Private) Ltd. (in liquidation) and Vishwa Pal Sharma, Smt. Subhadra Devi, Aring Pal Sharma and Kirti Pal Sharma.

2. The aforementioned appeals arise Out ofthe liquidation proceedings that commended in respect of the private limited company known as the Sukh Sancharak Company (Private) Ltd. The various appellants in the three aforementioned appeals were members of a single family, for the Company was a private limited liability company.

3. The company had in all 3000 shares and these 3000 shares were taken, by the three brothers Vishwa Pal Sharma, Shakti Pal Sharma and Brijendra Pal Sharma. It appears that the relations between the brothers were anything but cordial with the result that disputes arose between them. As a result of the disputes, on the 9th May, 1949, Brijendra Pal Sharma filed an application for the winding up of the private limited company bearing the name of Sukh Sancharak Co. (Private) Ltd. On the filing of the application it appears a prayer for the appointment of an Official Liquidator was made. On the 10th May, 1949, Sri I.B. Banerji was appointed provisional Liquidator.

4. The actual winding up order was made on the 14th May, 1952, and the provisional Liquidator was appointed official Liquidator by an order dated the 27th May, 1952--the Official Liquidator happened to be also Sri I.B. Banerji, so that for the purposes of this case the provisional Liquidator became the Official Liquidator in the Case.

5. An appeal was preferred against the winding up order and there was an application which, in effect, prayed for the stay of the winding up order and the functioning of the Official Liquidator, as such. By an order dated 2-6-1952 the operation of the winding up order was stayed, though it does not appear clear as to whether or not any specific order in regard to staying the activities of the Official Liquidator was made.

6. The appeal was dismissed on the 4th September, 1953, with the result that the interim stay order, whatever its scope and ambit was, ceased to operate and the appointment of the Official Liquidator came to have full legal play.

7. On the 17th December, 1954, the official Liquidator moved an application under Section 235 of the Companies Act 1913 against Vishwa Pal Sharma, Brijendra Pal Sharma and Shakti Pal Sharma's wife Smt. Subhadra Devi and her two sons. This application the Official Liquidator made on the basis of an audit report, whicli had been made on the 6th November, 1954. The audit report appears to have come into existence as a consequence of an order by the learned Company Judge for tbe auditing of the accounts. Under the audit report the liability of the persons mentioned hereunder appears to have been apportioned : Vishwa Pal Sharma was shown as liable for a sum of Rs. 93,591/5/1, while Shakti Pal Sharma's widow and sons were found liable for Rs. 52,315/2/11 and Brijendra Pal Sharma for Rs, 66,793/5/4. The question of liability appears to have come up before the learned Company Judge and all we need say in respect of this is that the liability in respect of Shakti Pal Sharma's branch was reduced from Rs. 52,315/2/11 to Rs. 42,524/6/2. This reduction in the liability was more on the ground of an arithmetical mistake than on any other ground.

8. The three appeals, which we have before us, are concerned with the liabilities aforementioned, determined in the first instance, by the auditors and thereafter affirmed by the learned Company Judge.

9. In regard to the extent of die liability, incase there was liability, there was no argument made except on behalf of Vishwa Pal Sharma, on whose behalf it was contended that the liability had been wrongly determined because there had not been a proper adjustment of accounts and proper credits had not been given to him for moneys to which he was entitled. We may, before turning to Other questions, dispose of this contention of Vishwa Pal Sharma by shortly stating that learned counsel appearing for him was unable to place before us any material on which the contention of Vishwa Pal Sharma that he was entitled to Rs. 350/- as salary and 2-1/2 per cent, of the profits as commission could be legitimately held to be valid. The learned Single Judge found that there was no evidence on the record to show that Vishwa Pal Sharma did not get the salary to which he was entitled or that he did not get any commission to which he was entitled, with the result that the claim of Vishwa Pal Sharma in regard to these two matters was rejected by the learned Company judge, and we have seen no reason on the materials on record to take a view different from that taken by the learned Company Judge.

10. Vishwa Pal Sharma and Brijendra Pal Sharma made their main-stay in the appeal on the quetion of limitation, although the question of limitation was also raised by Smt. Subhdra Devi and her two sons in Appeal No. 22 of 1960 but in her case, she had other shots in her locker to attack the judgment of the learned Company Judge with.

11. The question, of limitation that arose was this : Under Section 235 of the Indian Companies (1913) Act, proceedings against a promoter, past or present Director, Manager or Liquidator, or any officer of the Company, could be taken for misapplication, retainer, or any misfeasance or breach of trust, 'within three years from the date of the first apointment of a liquidator in the winding up'. It was conceded, we may mention here, that it is only this part of the section which applied for computing time for the purposes of limitation.

12. As we noticed, there were, in effect, two orders which could relate to the two appointments of a liquidator; one, by which a provisional liquidator was appointed, namely, the order of 10th May, 1949; while there was the other order which related to the appointment of the Official Liquidator, namely, the order of 27th May, 1952. The question that falls for determination is whether the period of three years mentioned in Section 235 (1) would start from the 10th May, 1949, or the 27th May, 1952, in the instant case. The material words of the section are : the first appointment of a liquidator in the winding up'. As we pointed out, the order of winding up in this case was made on the 14th May, 1952, and the Official Liquidator was appointed by an order of the 27th May, 1952. The order by which a provisional Liquidator was appointed was, as we pointed out, made on the 10th May, 1949.

Section 175 (1) says this:

'For the purpose of conducting the proceedings in winding up a company and performing such duties in reference thereto as the Court may impose, the Court may appoint a person or persons other than the official receiver to be called an official liquidator or official liquidators.'

This provision of Sub-section (1) quoted above appears to be of general import. Sub-section (2) of this section, however, is not of such general import, for the sub-section is in these words:

'The Court may make such an appointment provisionally at any time after the presentation of a petition and before the making of an order for winding up, but shall, before making any such appointment, give notice to the company, unless for reasons to be recorded it thinks fit to dispense with notice'.

This sub-section indicates that a provisional Liquidator can come into being after the presentation, of a petition but before the making of an order of winding up. From this it apears that a liquidator who is appointed after the making of the order of winding up is the liquidator in winding up. Mr. Gyanendra Kumar on behalf of his clients contended that by virtue of Section 168 the winding up of a company would be deemed to relate back to the date of the presentation of the petition. We have no quarrel with this proposition of Mr. Gyanendra Kumar : we are not concerned with determining the points of time from which the winding up is to be deemed to commence, we are concerned with knowing when a liquidator 'in the winding up' comes into existence. In our judgment, the words 'in the winding up' in Section 235 (1) must relate to a point of time subsequent to the making of the order of winding up, although it may be that the appointment order is contained in the same order by which winding up is made. The first appointment of a liquidator referred to in Section 235 (1) cannot, in our Judgment, refer to the appointment of the provisional liquidator made under Sub-section (2) of Section 175. Apart from the reasons which we have indicated above, there are other good reasons for coming to this conclusion.

13. If we were to hold that the first appointment referred to in Section 235 (1) could refer to the appointment of a provisional liquidator then we would be faced with the difficulty that although the provisional liquidator could not probe into the financial position of the company to see whether there was misfeasance, breach of trust, etc. and yet limitation for taking such action would commence to run; and it may bo that in certain cases, limitation would have run out before the provisional liquidator gave room to the Official Liquidator and before a probe into the state of affairs of the company could be made. This could never have been intended.

14. In our opinion there should be further support for the view which we have taken from the provisions of Section 177-B. The statement which the Official Liquidator was enabled to make under that section could be only after a winding up order had been made. For reasons given earlier we have not the slightest hesitation in holding that the period of three years mentioned in Section 235(1) of the Indian Companies (1913) Act commences from the date when the Official Liquidator is first appointed, after the winding up order has been made. The learned Single Judge took the same view and we are of opinion that he was right. Therefore the petition which the Official Liquidator made under Section 235 was within time.

15. As we pointed out in respect of appeals Nos. 587 of 1959 and 29 of 19GO, no other point needed determination except the small point raised by Vishwa Pal Sharma which we have already disposed of earlier.

16. Coming now to special appeal No. 22 of 1960 filed by Smt. Subhadra Devi and her two sons, the first thing that we need say first, is that her contention in regard to limitation must fail en the same ground on which it failed in regard to the other two appeals.

17. In this appeal the substantial question that the appellants raised way in regard to their liability to bo proceeded against for misapplication, retaining or misfeasance etc. as provided for under Section 235 (1). Against Smt. Subhadra Devi, the contention that was raised was that she was liable for the sums of money which her late husband Shakti Pal Sharma had taken away from the company in the capacity of a Director--sums to which he was not legally entitled; As against Smt. Subhadra Devi, there was further this case that she in her personal capacity had made certain withdrawals for which she was answerable. The question that arises in the forefront on the second part of the claim, which was put forward by the Official Liquidator against Smt. Subhadra Devi and her sons, was what was the capacity in which she purported to take away the moneys. It was contended by the Liquidator that she purported to take away the money as a Director; indeed, his case was that she was a Director. The finding of the learned Company Judge is that Smt. Subhadra Devi was not a Director, for she had never been elected as such. Further, there is nothing in the decision of the learned Single Judge or on the record to which our attention could be drawn, on which it can be said that when Smt. Subhadra Devi took any of the sums of money for which she is being made liable, she acted as a Director or as any of the persons mentioned in Section 235 (1) who could be proceeded against under that section. It appears that the Company which was a private company was looked upon as a family affair, and that Smt, Subhadra Devi may have in the capacity of a member of the family, as a widow of the deceased brother, who contributed to at least one-third of the assets, took away certain sums of money. Smt. Subhadra Devi may have acted illegally or without any justification, but that alone did not confer jurisdiction on the Official Liquidator to proceed against her under the provisions of Section 235 (1).

18. Smt. Subhadra Devi and her sons could not possibly be made responsible for moneys, which had been wrongfully taken by her husband, for Section 235 does not embrace within its ambit the heirs or the legal representatives of the persons mentioned in that section who could be proceeded against under that section. The liability which is enforced under Section 235 is a liability in the nature of a tort or a quasi criminal responsibility, and it is a well known proposition of law that no one could be held vicariously responsible for the tort of another unless that other had specifically authorised the tort nor can there be vicarious responsibility for a crime or a quasi crime. In our opinion, therefore, neither Smt. Subhadra Devi nor her sons could be made responsible for proceedings under Section 235 (1), for any thing which her husband did as a Director or in any other capacity for which he could be held responsible under Section 235, nor could Smt. Subhadra Devi be held responsible for any moneys which she took away herself Or through her sons in those proceedings.

19. The question whether Smt. Subhadra Devi could be liable as a contributory is another question. Our attention has not been drawn to any list of contributaries which might have been drawn up. Therefore, we cannot say whether Smt. Subhadra Devi could be or was on any such list, This decision of ours will therefore not affect any right that the Official Liquidator may have to proceed against Smt. Subhadra Devi and her sons as a contributory, but she and her sons cannot be proceeded against under Section 235 (1), under which they had been proceeded against, and out of which the present appeal has arisen.

20. In the result, we must allow appeal No. 22 of 1960, and we do so. Smt. Subhadra Devi and her sons will be entitled to their costs of the appeal.

21. Special Appeals Nos. 587 of 1959 and 29of 1960 will, for tho reasons given above, be dismissed, and these appeals are hereby dismissed.The Official Liquidator will have his costs fromthe appellants of these two appeals.

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