Skip to content


In Re: Khaitan Overseas and Finance Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAllahabad High Court
Decided On
Case NumberCompany Petition Nos. 77 and 78 of 1999
Judge
Reported in(2002)1CompLJ274(All)
ActsCompanies Act, 1956 - Sections 433; Companies (Court) Rules, 1959 - Rules 6, 18 and 21; Code of Civil Procedure (CPC) - Order 19; Allahabad Code of Civil Procedure (CPC) (Amendment) Rules - Rules 4 to 15
AppellantIn Re: Khaitan Overseas and Finance Ltd.
Advocates:R.P. Agarwal, Adv.
Cases ReferredShepherd v. Standard Motor Co.
Excerpt:
- .....company. the power of attorney executed in his favour dated 29-10-1990, provided in clause 4 to file suits and/or proceedings against the aforesaid companies or any of them for recovery of the amount that may become due or payable. clause 4 of the power given in the said attorney reads as follow: '4. to file suits and/or proceeding against the aforesaid companies or any of them for recovery of the amounts that may become due or payable to us; and also to affirm plaints, affidavits and other pleadings that may be necessary and as our said attorney may think fit and proper and to engage solicitors, advocates, pleaders and lawyers in any such matters, and also to appear otherwise, and also to defend any suits that may be filed against us by the said companies or on behalf of the said.....
Judgment:

Sunil Ambwani, J.

1. This company petition has been filed by Dhandhania Brothers (P.) Ltd., with its registered office at 4, Middleton Street, Ground Floor, Calcutta, for winding up Khaitan Overseas and Finance Ltd., with its registered office at Somdutt Plaza (11th Floor), the Mall, Kanpur, under Sections 433, 434 and 439 of the Companies Act, 1956 ('the Act'). It is alleged that the company took a loan for Rs. 25 lakhs from the applicant- company. The debt is still due with interest, and at present, a total amount of Rs. 43,15,818 is still due which has not been paid in spite of the reminder and statutory notice. The loan was given to Hostombe Spinals Ltd., 234/3-A, A.C.J. Bose Road, Calcutta, which subsequently merged in Khaitan Overseas and Finance Ltd, vide order of the High Court of Judicature at Allahabad dated 27-5-1997 in company petition No. 44 of 1996 connected with Company Petition No. 19 of 1996 by which the interest of the creditors was protected and safeguarded by the assets of the transferee-company. In Company Petition No. 78 of 1999 an amount of Rs. 28,21,565 has been claimed to be due from the company.

2. Notices were issued on 23-9-1999 in response to which a counter-affidavit of Narendra Kumar Jha, Chief Manager (Legal), of the company, has been filed, on 10-4-2000. An amendment application to amend the company petition was filed on 21 -5-2001 by the applicant-company which has been allowed vide order dated 30-7-2001.

3. Shri R.P. Agarwal, appearing for the company, has raised preliminary objection referred to in paragraph 2 of the counter-affidavit of Sri Narendra Kumar Jha. It is stated by him that the company petition, when filed, was not supported by proper affidavit and, further, it has not been filed by a competent person. In respect of the third objection, namely, that the petition has been filed in respect of the loan which is time-barred, Sri R.P. Agarwal has submitted that, after the amendment of the company petition and the documents filed along with the amendment application, the loan cannot be said to be time-barred when the company petition was filed and, as such, he is not pressing objections in this regard.

4. In respect of first preliminary objection Sri Agarwal has relied upon the provision of Section 433 of the Companies Act, 1956, and rules 6 and 21 of the Companies (Court) Rules, 1959.

4.1 Rules 6 and 21 of the Companies (Court) Rules, 1959 are quoted as below:

Rule 6 .

'6. Practice and procedure of the court and provision of the Code to apply. - Save as provided by the Act or by these rules, the practice and procedure of the court and the provision of the Code so far as applicable, shall apply to all proceedings under the Act and these rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these rules or the practice and procedure of the court.'

Rule 21

'21. Affidavit verifying petition--Every petition shall be verified by an affidavit made by the petitioner or by one of the petitioners, where theyarc more than one, and in the case the petition is presented by a body corporate, by a Director, Secretary or other Principal Officer thereof: such affidavit shall be filed along with the petition and shall be in Form No. 3:

Provtded that a Judge or Registrar may, for sufficient reason, grant leave to any other person duly authorised by the petitioner to make and file an affidavit.'

5. It is submitted that the affidavit accompanying the company petition is not in proper form. More particularly, the objection is that the copy of the affidavit served upon Sri Agarwal appearing on behalf of the company does not bear the seal of the notary and that Sri S.K. Dhandhania has signed between words 'For Dhandhania Brothers (P.) Ltd.' and Director. According to Sri Agarwal, the affidavit is not properly affirmed and that Sri S.K. Dhandhania has not signed in his personal capacity but for Dhandhania Brothers (P.) Ltd. I am unable to appreciate the objection. Rule 18, provides that every affidavit shall be drawn in first person and shall state the full particulars as age, occupation and place of abode of the deponent. It shall be signed by the deponent and sworn to in the manner prescribed by the Code or by the rules and practice of the court. Order XIX of the Civil Procedure Code was amended by the Allahabad High Court Amendments, by inserting Rules 4 to 15, providing for requirements of an affidavit in the Allahabad High Court. In the present case, the affidavit accompanying the company petition, has been signed, sworn and affirmed on oath. The deponent of the affidavit has been identified by Sri S.K. Chatterjee, Advocate, C.M.M.S. Court, Calcutta, dated 21-8-1999, and that Sri Rama Majumder, Notary, Regd. No. 938 of 1997, C.M.M. Courts Campus, 2 Bankshall Street, Calcutta, has affirmed as declared before him on identification of the deponent of the affidavit. It conforms to the requirement of law as provided in Rule 21, and Order XIX and, thus, I find that the first preliminary objection is devoid of any substance. The judgments in the matter of Goya Textile (P.) Ltd. In re AIR 1968 Cal. 388, and Mool Chand Wahi v. National Paints (P.) Ltd. [1986] 60 Comp. Cas. 198 (P&H;), do not support the contention of Sri Agarwal.

6. The next objection is with regard to the competence of Sri S.K. Dhandhania, who is the Chairman and director of the applicant-company, to affirm the affidavit on behalf of the applicant-company. Rule 21, provides that the petition can be presented by a body corporate, by a director, Secretary or other Principal Officer thereof. The objection is that Sri S.K. Dhandhania who is the director of the company was not authorised by the board of directors to affirm the affidavit and file the company petition. Sri Agarwal has relied upon the judgment of Bombay High Court in Shantilal Khushaldas & Bros. (P.) Ltd. v. Chandanbala Sughir Shah (Smt.) [1993] 77 Comp. Cas. 253 and a judgment by Patna High Court in BOC India Ltd. v. Zinc Products & Co. (P.) Ltd. [1996] 86 Comp. Cas. 358. In Shantilal Khushaldas and Bros. (P.) Ltd.'s case (supra) the question before the Bombay High Court was whether the constituted attorney of the company was authorised to file the company petition. In this case, Mr. Pravinkumar Gosalia claimed to be constituted attorney of the company. The power of attorney executed in his favour dated 29-10-1990, provided in Clause 4 to file suits and/or proceedings against the aforesaid companies or any of them for recovery of the amount that may become due or payable. Clause 4 of the power given in the said attorney reads as follow:

'4. To file suits and/or proceeding against the aforesaid companies or any of them for recovery of the amounts that may become due or payable to us; and also to affirm plaints, affidavits and other pleadings that may be necessary and as our said attorney may think fit and proper and to engage solicitors, advocates, pleaders and lawyers in any such matters, and also to appear otherwise, and also to defend any suits that may be filed against us by the said companies or on behalf of the said companies.'

6.1 The court found that the proceedings for winding up under Section 433 of the Companies Act can, by no stretch of imagination, be equated to suits, or for that matter suits for recovery of money. In winding up proceedings, there is no lis between the company petition and the company sought to be wound up. Once the petition is admitted, creditors, contributors, shareholders, etc., seek redress in the proceedings and even oppose the winding up. The company is directed to be wound up depending upon a case made out, whereupon the assets are taken over and distributed in accordance with the provisions of the Companies Act and the Rules. Sometimes, the relief is denied in the interest of public. The Court further found it difficult to read that the word 'proceedings' will include winding up proceeding, as it was a special remedy under the Companies Act, and found that unless the attorney has been specially authorised to lodge company petition for winding up, it is not possible to read such power. The Court thereafter considered the proviso to Rule 21 which gives powers to the Judge or the Registrar for sufficient reasons to grant leave to any other person duly authorised by the petitioner to make and file an affidavit. It held that if the power was given in favour of the attorney which authorised him to lodge winding up proceedings, he would have even at that stage granted leave; but that since the Court found that the power itself is lacking, the question for going into the aspect of proviso to rule 21 did not arise and the petition was, accordingly, rejected.

7.The Patna High Court in BOC India Ltd.'s case (supra), held that individual directors have been vested with only such powers as are vested in them by the memorandum and articles of association; and that since the board of directors of the petitioner-company had not passed resolution authorising Area Sales Manager to institute the petition for winding up of the respondent-company, the petition was not maintainable.

7.1 In the aforesaid case relied upon by Sri Agarwal, the petitions were filed by employees of the company, and not by directors.

8. A company, though a legal entity, cannot act by itself. It can act only through its director. The relation of company with its directors is that of the principal and agent and the general principles of law of agency will govern their relations: Ferguson v. Wilson [1866] 36 LJ Ch 67. Consequently, it is the company and not the directors, who are liable thereunder : Elkingion & Co. v. Hurter [1982] 2 Ch 452; Belvedere Fish Guanoco v. Rainham Chemical Works [1921] AC 465; Smith v. Hull Class Co. [1852] 11 CB 897. (Companies Act, by A. Ramaiya, Fifteenth Edition 2001, Vol. II, page 2525).

9. In the present case, Sri S.K. Dhandhania is a Chairman and director of the company. Along with the amendment application, he has annexed the extract from the minutes of the meeting of the board of directors of Dhandhania Brothers (P.) Ltd. held on 26-12-1998 at the registered office of the applicant-company resolving that the company to file a law suit against Khaitan Overseas and Finance Ltd., in order to recover the loan of Rs. 25,00,000 made to them along with interest thereof, and Sri S.K. Dhandhania, Director and Chairman of the Board, was authorised by the resolution, to sign and execute the necessary petition, documents, application evidence and other papers of any sort or description in this connection on behalf of the applicant-company. The substance of the objection is that, as held by the Bombay High Court, in Shantilal Khushaldas and Bros. (P.) Ltd. (supra), the winding up proceedings is not suit for recovery of the amount due to the company and, thus, the resolution lacked authority to file winding up petition. I am unable to agree with the objection. The company resolved to take action against the debtor --Khaitan Overseas and Finance Ltd. and to recover the loan by a resolution of the board of directors dated 26-12-1998 authorising Sri S.K. Dhandhania to sign and execute the necessary petitions, documents, applications, affidavit and to lodge suit in order to recover the same. The company petition was, consequently, filed in pursuance of the said resolution on 27-8-1999.

10. The word 'suit' has been defined by Webster's New Collegiate Dictionary as (a) recourse of appeal to a feudal superior for justice or redress; and (b) and action or process in a Court for the recovery of a right or claim. Legal Thesaurusby William C. Barton published by Macmillan Publishing Co. Inc., describes the 'suit' as follows :

'Suit, noun;

actio, action, action at law, action to serve justice, case, causa, cause, cause in court, judicial contest, law suit, legal action, legal remedy, lis, litigation, petition, proceedings, suit in law, trial.'

Black's Law Dictionary, defines 'law suit' as under :

Law suit. A Vernacular term; for a suit, action or cause instituted or depending between two private persons in the Court of law. A suit at law or in equity; an action or proceeding in a civil court; a process in law instituted by one party to compel another to do him justice. Shepherd v. Standard Motor Co. 263 Ky. 329, 92 S. W. 2nd 337.

Word 'Law suit1 has been defined in Law Lexicon as under :

Law suit Suit instituted in a law court. An action at law; litigation. An action or a proceeding in a civil court.

11. A suit, thus, amounts to legal proceedings initiated for any actionable claim, in the Court of law. The question whether winding up proceedings will include a law suit for recovery of money need not detain this Court. A creditor has various rights for recovery of his dues. He may file a suit in Court of law or to take proceedings for winding up of the debtor-company where the company is unable to pay its debts. Section 433(e) of the Act, provides that one of the circumstances in which the company may be wound up by the Court is that the company is unable to pay its debt. In case, a creditor-company finds that the debtor-company is unable to pay the dues, it may file a petition informing the Court that debtor-company is unable to pay its debt, and the consequences may be, of course, having regard to various circumstances including whether it is just and equitable to wind up the company. The authority given by the board of directors to its managing director to file law suit for recovery of loan, thus, did not exclude the winding up petition.

12. In the aforesaid circumstances, I find that Sri S.K. Dhandhania was authorised and was a competent person to affirm the affidavit and to file this company petition; and, as such, the second preliminary objection is also devoid of any substance.

13. In the counter-affidavit filed by the company, the liability has not been denied. The objection that the debt is time-barred has not been pressed. In the circumstances, the company petitions are admitted, and it is directed that these petitions shall be advertised in accordance with rule 24 of the Rules. Let the steps be taken by the applicant-company within a week fixing a date for hearing after six weeks.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //