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The Official Liquidator of the Kayasth Trading and Banking Corporation Ltd. Vs. B. SatnaraIn Singh and ors. - Court Judgment

LegalCrystal Citation
CourtAllahabad
Decided On
Judge
Reported in60Ind.Cas.763
AppellantThe Official Liquidator of the Kayasth Trading and Banking Corporation Ltd.
RespondentB. SatnaraIn Singh and ors.
Excerpt:
.....232 - attachment of property of company--winding-up, application for, subsequent to attachment--sale of property thereafter, effect of--sale, adjournment of--fresh proclamation of sale, absence of, whether vitiates sale--appeal--liquidator--sanction of court, whether necessary--procedure - - we feel, however, perfectly satisfied that no substantial loss was suffered by the judgment-debtor in consequence of this procedure. moreover, if the matter had come before me sitting as the judge in winding-up and there had been an application by the company either before the actual winding up order, or after it to stay further proceedings by the decree-holder under this decree, i am quite satisfied, after examining the authorities on the subject in england, that it would have been my duty to..........fit to do so, pass an order the effect of which would be to suspend all proceedings, including execution proceedings, against the company's assets for the period between the presentation of the petition and the passing of the winding-up order. secondly, on the passing of the winding-up order, all proceedings, including proceedings in execution, are automatically suspended unless the leave of the court be obtained. in the present instance, no interim order was passed by the court in charge of the winding-up, and we may say hat on looking into the matter we think it very unlikely that any such order would have been passed if it had been asked for, looking at the scheme of the companies act as a whole, and also at the english authorities in which the expression with which we are.....
Judgment:

Piggott, J.

1. The appellant in this Case is the Official Liquidator of a Company known as the Kayasth Trading and Banking Corporation Ltd. This Company was brought into licudation on a winding-up application presented to this Court by a rector on the 26th of February 1920 and long previously was made on the 29fch of May 1920. Long previously to this, the immoveable property belonging to the Company with which we are concerned in this appeal had been attached at the instance of certain creditors. Daring the year 1919 the property was repeatedly proclaimed and put up for sale. For reasons with which we are not now concerned the Court had seen fit to fix a reserve, price of Rs. 30,000 and at one sale after another no one came forward prepared to bid this price The judgment-debtor, that is to say, the Company, had, and the meantime, more than once represented to the Court that there was a reasonable prospect of their being able to dispose of the property to greater advantage by, private treaty. The reasonable price suggested in these various petitions to the Court was from Rs. 35,000 1 to Rs. 40,000; but as a matter of fast I the Company, although allowed abundant opportunity by the Execution Court, had not succeeded in finding a purchaser pre pared to give even as much as the reserve price of RS. 30,000 which had been fixed for the action-sale. Finally, the property stood advertised for sale on the 26th of February 1920, the very day on which the winding-up proceedings were initiated by the presentation of a petition on the part of another creditor, in this Court. Once more, there was no bidder prepared to offer the reserve price and the amin reported accordingly. The Court's order on his report was that the decree holder be allowed 14 days within which to make some further application. On the 1st, of March 1920, however, the Court received from the Special Manager, Court of Wards, who is now the principal respondents this appeal, a communication expressing his willingness to pay Rs. 32,000 for the property under attachment. On this the learned District Judge fixed the 3rd of March 1920, for action-sale. No fresh proclamation was issued and we understand that no was ,received except the respondent's bid of Rs. 32,000. The sale was concluded upon this basis and has since been confirmed by the execution Court, in spite of protests by the judgment-debtor. The appeal before us is against the order confirming the sale, or the order overruling the judgment-debtor's objections to the sale. Two action points are taken, one under the Code of Civil Procedure, and one under the Indian Companies Act. We may take them in this order, It is contended that the learned District Judge in fixing the 3rd of Marsh 1920 for the auction sale, without issuing a fresh proclamation, committed a material irregularity and that, by reason of this irregularity, tie appellant has suffered substantial loss. In the view which we take on the question of substantial loss, it is not really necessary for us to discuss the question of the alleged irregularity at any length. We may say simply that, in our opinion, there was an irregularity committed in this matter. As we look at the point, the order actually passed by the execution Court on the 26th of February 1920 was in effect an order adjourning the sale sine die. No doubt, in passing his subsequent order of March the 1st, 1920, the learned District Judge was actuated simply by a laudable desire to gave the executing creditors from having to pay fresh proclamation fees, which they had fruitlessly done over and over again in the course of the previous year. We think, however, that, as a strict point of law, his powers of adjournment were exhausted by the order of the 26th of February 1923 and that his order of Marsh the 1st, 1920, was really an order fixing a new date for the pale and that a proclamation should have been issued. We feel, however, perfectly satisfied that no substantial loss was suffered by the judgment-debtor in consequence of this procedure. The case in favour of the alleged substantial loss begins and ends with the fast that, since these proceedings were concluded, that is to say, in the month of August las, the Municipal Board of Gorakhpur suddenly cams to a resolution that they were prepared to acquire this property for Rs, 40,000, Why they should have arrived at this resolution in the month of August 1920, when the property had been advertised for sale over and over again in the year 1919 and could then have been acquired by any one prepared to bid Rs, 10,000 less, it is impossible for us to say; but for the purposes of this appeal it is quite sufficient to make the point that there is not the slightest reason to suppose that, if a fresh sale proclamation had been issued in the month of March 1920, either the Municipal Board of Gorakhpur or any one else would have bid day Bum in excess of the sum of Rs. 32,000 actually bid and since paid by the respondent. The Municipal Board of Gorakhpur obviously was not prepared in that month to pay Rs, 40,000, or any other sum, for this property. We, therefore, overrule the objection taken raider the Code of Civil Procedure.

2. The point taken under the Companies Act is bared upon the wording of Section 232, considered long with Section 168,of the said Act. According to the earlier of these two sections the winding-up proceedings are deemed to commence at the time of the presentation of the petition. In this case, therefore, these proceedings commenced, within the meaning of this section, with the presentation of the creditor's petition to this Court on the 26th of February 1920. The relevant words under Section 232 are the following:

Where any Company is being wound up, any attachment, distress or execution put in force without the leave of the Court after the commencement of the winding-up, shall be void.

3. The appellant asks us to hold that the sale of the property was a putting in force of an execution within the meaning of this section. The expression which we have quoted is taken bodily from the English Law and is not altogether reconcilable with the rules of our Code of Civil Procedure on the subject of execution of decrees We take note of the fact that, in the Companies Act itself, provision is made for two dissect not contingencies. The Court to which the winding-up petition is presented can, if it sees fit to do so, pass an order the effect of which would be to suspend all proceedings, including execution proceedings, against the Company's assets for the period between the presentation of the petition and the passing of the winding-up order. Secondly, on the passing of the winding-up order, all proceedings, including proceedings in execution, are automatically suspended unless the leave of the Court be obtained. In the present instance, no interim order was passed by the Court in charge of the winding-up, and we may say hat on looking into the matter we think it very unlikely that any such order would have been passed if it had been asked for, Looking at the scheme of the Companies Act as a whole, and also at the English authorities in which the expression with which we are concerned has been interpreted, we have no doubt that the words any attachment, distrance or execution put in force' must be considered as a whole and that in this particular case the execution which we are concerned had been put in force' within the meaning of this section long prior to the i.6th of February 1920, It was in fact put in force for the purposes of this section when this particular property was attached. This plea, therefore, also fails and we dismiss the appeal accordingly with costs, including fees on the higher scale. With regard to the Official Liquidator, we think it fair to say that the point taken by him under the Companies Act was, in 6af opinion, so far arguable that it was not improper for him to raise it before this Court, so that we see no objection to his taking the costs of this appeal out of the assets of the Company.

Walsh, J.

4. I entirely agree. With regard to the point under the Companies Act, there would appear at first sight superficial difficulty in reconciling Section 232 with Section 168 which says, that the winding-up shall be deemed to commence at the time of the presentation of the petition, and with the provisions vesting in the Court the power to stay or to allow execution proceedings after presentation of the petition or even after the winding-up order. But clause sections are lifted verbatim from the English Act and have been substantially in force in England since 1857. It was decided by the English Court of Appeal in dealing with the very question now raised before us, as long ago as 1864, that Section 232 of the Indian Companies Act of 1913 must be read with and controlled by Sections 169 and 171. In addition to that, in applying this law to India, it must be noted that the words 'putting in force' are not strictly applicable to the machinery for issuing execution in this country. After all, they really mean no more than putting in motion, and it has been decided in England that where the writ for possession has been handed to the Sheriff or the Sheriff has actually entered, execution has been 'put in force' within the meaning of that section. Moreover, if the matter had come before me sitting as the Judge in winding-up and there had been an application by the Company either before the actual winding up order, or after it to stay further proceedings by the decree-holder under this decree, I am quite satisfied, after examining the authorities on the subject in England, that it would have been my duty to have allowed the execution to proceed. For example, where a creditor has issued execution bona fide, that is to say, applying that term to India, has applied for execution, which in this case he did as long ago as 1917, and the Sheriff has been put in possession before the presentation of the petition, the creditor will not, except under exceptional circumstances, be restrained from selling. If a sale were shown to be likely to be ruinous to the good wil5 or assets of the Company the creditor would, according to the English practice, be restrained from selling but allowed a fir t charge on the assets of the Company in the winding-up for his debt and costs as a condition of granting the stay. It has further been held that, where a Company has vaxatiously delayed its creditor so that he could not obtain a decree before the presentation of the petition and had to issue execution after the winding-up had taken place, nonetheless he has been allowed to proceed with his execution. Secondly, while agreeing with what my brother has said about the costs in this case, I would draw attention to the recognize practice with regard to Liquidators, who are officers of the Court, and not ordinary litigants at all, that a Liquidator appointed in a winding-up by the Court ought not to appeal in any case without the permission of the winding-up Court, and if he does so, he runs considerable risk, in the event of failure, of having to pay the costs out of his own pocket.


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