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H. Naik, Vs. Jitendranath Das - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberExecution Case No. 29 of 1953
Judge
Reported inAIR1954Ori139; 20(1954)CLT345; [1954]24CompCas294(Orissa)
ActsBanking Companies Act, 1949 - Sections 45B(1); Provincial Insolvency Act, 1920 - Sections 4(1); Banking Companies (Amendment) Act, 1950 - Sections 45A and 45B(1)
AppellantH. Naik, ;o.L. Puri Bank Ltd.
RespondentJitendranath Das
Appellant AdvocateU.N. Rath, Adv.
Respondent AdvocateH.C. Mukherjee, Adv.
DispositionApplication rejected
Cases ReferredBank of India Ltd. v. A.N. Misra
Excerpt:
.....provision of the sub-section (1) of section 173 of the act does not extend to the provision relating to the deposit of statutory amount as embodies in the first proviso. therefore an appeal filed within the period of limitation or within the extended period of limitation, cannot be admitted for hearing on merit unless the statutory deposit is made either with the memo of appeal or on such date as may be permitted by the court. no specific order condoning any delay for the purpose of deposit under first proviso to sub-section (1) of section 173 is necessary. [new india assurance co. ltd. v md. makubur rahman, 1993 (2) glr 430 and new india assurance co. ltd. v smt rita devi, 1997(2) glt 406, approved. new india assurance co. ltd. v birendra mohan de, 1995 (2) gau lt 218 (db) and..........this court to grant him permission under section 171, companies act, read with section 2, banking companies act, 1949, to proceed with the said insolvency petition at baripada. on behalf of the liquidator, however, an objection was taken to the filing of such an insolvency petition by the judgment-debtor and it was urged that under section 45a, banking companies act, 1949, as amended by the amending act of 1950 (act 20 of 1950) this court alone had jurisdiction to entertain the insolvency petition of the judgment-debtor.2. the sole question for decision now is whether a 'banking company' under liquidation is a decree-holder, its judgment-debtor is entitled to prosecute his petition for insolvency before a district court with the permission of this court or else whether this.....
Judgment:
ORDER

Narasimham, J.

1. This is an execution petition filed by the official liquidator of Purl Bank Ltd. (which is Banking Company) against one Sri Jitendranath Das against whom an ex parte decree was obtained by the liquidator on 17-1-1951 in M. S. No. 25 of 1951. When the notice under Order 21, Rule 22, C.P.C. was served on the judgment-debtor the latter filed two petitions stating that he had already filed a petition before the District Judge of Mayurbhanj for being adjudged an insolvent and requesting this Court to grant him permission under Section 171, Companies Act, read with Section 2, Banking Companies Act, 1949, to proceed with the said insolvency petition at Baripada. On behalf of the liquidator, however, an objection was taken to the filing of such an insolvency petition by the judgment-debtor and it was urged that under Section 45A, Banking Companies Act, 1949, as amended by the amending Act of 1950 (Act 20 of 1950) this Court alone had jurisdiction to entertain the insolvency petition of the judgment-debtor.

2. The sole question for decision now is whether a 'Banking Company' under liquidation is a decree-holder, its judgment-debtor is entitled to prosecute his petition for insolvency before a District Court with the permission of this Court or else whether this Court alone has jurisdiction to entertain such a petition.

3. The relevant sections for this purpose are Sections 45A and 45B, Banking Companies Act, as amended in 1950. They are as follows:

'Part IIIA

Special provisions for speedy disposal of winding up proceedings.

45A. Court defined:-- In this Part and in Part III, 'Court means the High Court exercising jurisdiction in the place where the registered office of the banking company which is being wound up is situated or in the case of a banking company incorporated outside India which is being wound up, where its principal place of business is situated, and notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in any notification, order or direction issued thereunder or in any other law for the time being in force, no other Court 'shall have jurisdiction to entertain any matter relating to or arising out of the winding up of a banking company.

45B. Power of Court to decide all claims by or against banking companies: 1. Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913), or in any other law for the time being in force, the Court shall have full power to decide all claims made by or against any banking company including claims by or against any of its branches in India) and all questions of priorities and all other questions whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of the banking company coming within the cognizance of the Court'.

This Court is undoubtedly the Court as defined in Section 45A of the Act mentioned above. That section says that no other Court shall have jurisdiction 'to entertain any matter relating to or arising out of the winding up of a banking company'. The Puri Bank Ltd. is now being wound up and the question is whether the petition for being adjudged an insolvent filed by a judgment-debtor of the banking company is a matter 'relating to or arising out of' the winding up of the company. It was rightly conceded by the learned Counsel for the liquidator that such a petition under the Insolvency Act will not be a matter 'arising out of the winding up proceedings. But he urged that it will be a matter 'relating to' the winding up proceedings inasmuch as the expression 'relating to' is wider than the expression 'arising out of'.

4. I am inclined to accept this argument. The primary object of the winding up of a banking company is to ensure speedy realisation of the assets so as to effect an equitable distribution amongst the various creditors of that company. In fact, the heading of Part IIIA which was inserted in the Banking Companies Act, 1949, by the amending Act of 1950 (under which Sections 45A and 45B are found) is as follows: 'Special provisions for 'speedy' disposal of winding up proceedings.'

Section 45A seems to have been thus specially enacted with a view to ensure 'speedy disposal of winding up proceedings' by conferring on the High Court exclusive jurisdiction in respect of all matters relating to the winding up of a banking company notwithstanding anything to the contrary under any law for the time being in force. Hence, if the debtors of a banking company are permitted to prosecute their petitions for insolvency in the various District Courts within their jurisdiction the result would be that the winding up proceedings in the High Court may be brought to a complete standstill by the debtors applying to their respective District Courts under the provisions of the Provincial Insolvency Act and obtaining interim protection.

One of the main objects of the insolvency law is to give protection to a person who is adjudged an insolvent against his creditors by vesting all his property in the Court and conferring exclusive jurisdiction on the Insolvency Court to realise his assets and make an equitable distribution of the same amongst his creditors. Section 4, Provincial Insolvency Act, confers exclusive jurisdiction on the Insolvency Court to decide all questions whether of title or priority, or of any nature whatsoever and whether involving matters of law or of fact which may arise in any case of insolvency. As soon as a petition for being adjudged an insolvent is filed, if the Court admits the petition, it may under Section 20 of that Act appoint an interim Receiver to take charge of the assets and aiso grant the petitioner interim protection against arrest and detention in civil prison. Hence if the Insolvency court is also given concurrent jurisdiction in respects of the insolvency petition of a judgment-debtor of a banking company the Receiver appointed by the Insolvency Court wiil take charge of all his assets even at the interim stage and thereby hold up the winding up proceedings in this Court until the insolvency proceedings terminate in due course. There will tnus be not only inordinate delay in the disposal of winding up proceedings but the effective functioning of this Court for the purpose of realisation of the assets of the banking company would be seriously jeopardised.

5. It will be noticed that Sub-section (1) of Section 45B, Banking Companies Act, gives similar exclusive jurisdiction to the High Court in respect of any question relating to or arising in the course of the winding up of a company. This section is very similar in language to Section 4(1), Provincial Insolvency Act, with two important distinguishing features. Firstly the opening words of Section 45B(1) are 'Notwithstanding anything to the contrary contained in the Indian Companies Act, 1913 (7 of 1913) or in any other law for the time being in force'. These opening words make it absolutely clear that even the provisions of the Provincial Insolvency Act must give way before the provisions of the Banking Companies Act. Again, while Section 4(1), Provincial Insolvency Act, is limited to questions which may 'arise in' any case of insolvency, Section 45B (1) is wider and refers to questions which may 'relate to or arise in' the course of the winding up of the banking company. It thus seems clear that when the Legislature amended the Banking Companies Act by inserting Sections 45A and 45B they intended to confer exclusive jurisdiction on the High Court notwithstanding any provision in the Provincial Insolvency Act in respect of any matter relating' to the winding up of a banking company.

6. In an insolvency proceedings the first question for determination by the Insolvency Court is whether the debtor has committed an act of insolvency as described in Section 6, Provincial Insolvency Act. The same question will arise for consideration before the High Court in a winding up proceeding of a banking company if that debtor happens to be a debtor of the banking company. This Court has to decide whether it is worthwhile continuing the execution proceeding against that debtor in view of his inability to pay debts or in view of his having committed other acts of insolvency. Moreover, even after coming to a decision on this point, this Court has to take charge of his assets and then decide whether the banking company or the other creditors of that debtor should be given priority so far as distribution of his assets are concerned. Section 45B (1) expressly confers exclusive jurisdiction on this Court to decide 'all questions of priorities' in respect of all claims made by or against a banking company. Hence this Court alone has exclusive jurisdiction to decide whether the banking company should be given preference over other creditors of the debtor. This power cannot be properly exercised, if the Insolvency Court is also given concurrent powers to take charge of his assets.

7. It was, however, urged that if leave is given to the debtor of a banking company under Section 171, Companies Act, to prosecute his insolvency petition before the District Judge most of the difficulties anticipated would be solved. This argument, however, overlooks the primary object of the insertion of Part IIIA in the Banking Companies Act by the amending Act of 1950. In the original unamended Act of 1949 it was stated in Section 2 that the provisions of that Act were in addition to the provisions of any other law for the time being in force, that is to say, they were intended to supplement the existing law relating to insolvency and other allied matters.

But the amending Act of 1950 conferred exclusive jurisdiction on the High Court under Sections 45A and 45B (1). It will not only be opposed to the scheme of the amending Act but it will also materially affect speedy realisation of the assets of a banking company under liquidation if the various debtors of that company are given leave by this Court to prosecute their petitions for insolvency in the various District Courts. It seems to me that Sections 45A and 45B were inserted by the amending Act of 1950 with the main object of conferring even extraterritorial jurisdiction on a High Court so that all claims by a banking company against its debtors may be realised as soon as possible. For that purpose exclusive jurisdiction was conferred on this Court and on no other Court in respect of any matter relating to the realisation of the assets of the banking company. The solvency of a debtor of a banking company and the question as to whether he should be given protection under the insolvency law are matters so intimately connected with the realisation of the assets of the banking company that it may be fairly inferred that they 'relate to the winding up' of the company.

8. In -- 'Associated Banking Corporation of India Ltd. v. Nudaralli Kassambhai and Company', AIR 1952 Bombay 223 (A) while construing Section 45A it was held that the expression 'relating to the winding up' is much wider and much more extensive than the expression 'arising out of the winding up' and that a suit filed by an official liquidator to recover a claim due to a banking company from its debtor is a matter relating to the winding up of a banking company and that the High Court alone has exclusive jurisdiction to decide that suit. In that decision also, it was pointed out that one of the main functions in the winding up proceeding was to consider what were the possibilities of recovering the debts, what costs were likely to be incurred and whether from every point of view it was advisable to prosecute the claim.

It was also pointed out that the sole purpose and the whole object of the amending Act was to wind up the banking companies as expeditiously as possible and that the legislature must have intended that the assets should be realised as quickly as possible. Hence, if the debtors of a banking company are given permission to apply in the various insolvency Courts of the State for being adjudged insolvents and the liquidator of the company is thus made a party in all those Courts he will have to wait indefinitely until the insolvency proceedings terminate and rateable distribution of the insolvent's assets amongst his creditors is made. Any construction of Sections 45A and 45B which would lead to an indefinite protraction of such winding up proceedings will be clearly opposed to the plain intention of the Legislature and also to the language used in the Act.

9. In --'Jadunath v. Bank of Calcutta Ltd' AIR 1952 Cal 506 (SB) (B), it was held that the test to be applied in deciding whether a particular proceeding arises 'in the course of the winding up proceeding is that if at any stage of the proceeding the liquidator becomes a party to it it arises in the course of the winding up proceeding. Hence, an insolvency proceeding by a debtor of the company would necessarily arise in the course of the winding up proceeding of the company inasmuch as the liquidator must as one of the creditors of the debtor be impleaded as a party in the insolvency proceeding itself. I would in this connection refer to -- 'Discount Bank of India v. Triloki Nath AIR 1953 Punj 145 (C), where also Sections 45A and 45B and Section 11 of the amending Act came up for consideration.

Doubtless, in a later Punjab decision reported in -- 'Discount, Bank of India Ltd. v. A.N. Misra', AIR 1953 Punj 256 (D), a somewhat narrow construction was put on the expression 'relating to or arising out of' occurring in Section 45A and it was held that an appeal filed against a banking company prior to the commencement of the winding up proceeding of the company will not be a matter relating to or arising out of the winding up proceeding. This decision is of a single Judge and as on facts it is distinguishable from the present case it is unnecessary to consider how far it is correct.

10. I am, therefore, of the view that the question as to whether a debtor of a banking company under liquidation should be adjudged an insolvent and should get the protection of the insolvency law is a matter relating to the winding up of the banking company and consequently, this Court alone has exclusive jurisdiction under Sections 45A and 45B (1) to decide this question and all other questions arising out of the same. The District Judge of Mayurbhanj as an insolvency Court has no jurisdiction to entertain the petition of the judgment-debtor. Hence, no question of granting permission to the judgment-debtor to prosecute his petition before the insolvency Court arises and the prayer for such permission is rejected.

11. Let a copy of this order be sent to the District Judge of Mayurbhanj who should return the insolvency petition to the debtor for presentation before this Court.


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