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Durga Das Nayyar Vs. Official Liquidator, Bombay Thread Mills Co. Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberF.A.O. No. 116-D of 1955
Judge
Reported inAIR1959P& H472
ActsCompanies Act, 1913 - Sections 227(2) and 231; Companies Act, 1956 - Sections 531
AppellantDurga Das Nayyar
RespondentOfficial Liquidator, Bombay Thread Mills Co. Ltd. and anr.
Appellant Advocate S.K. Kapur, Adv.
Respondent Advocate A.N. Mongia, Adv.
DispositionAppeal dismissed
Excerpt:
.....articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 2,000/- to durga das nayyar by the company on account of damages and compensation for ousting him from the premises and non-fulfilment of its obligations and also by para (5) of the award any sum outstanding in favour of durga das nayyar has been made a first charge on the property of the company and in my opinion this clearly amounts to disposing of the property of the company......management. 8. it was suggested that those parts of theaward and decree could be upheld which clearlyonly dealt with the assets of the firm, but in myopinion the award and decree cannot be split up inthis manner, and according to the direction of thelearned district judge it may be still open to durgadas nayyar to prove that he is a preferential creditor in respect of at least part of his claims. in myopinion the matter has been properly decided by thelearned district judge and his direction is quite fairto all concerned. i accordingly dismiss the appealwith costs, counsel's fee rs. 50/-.
Judgment:

D. Falshaw, J.

1. This is an appeal against an order of the District Judge on the liquidation side disposing of an application filed by the Official Liquidator of the Bombay Thread Mills Company Limited (in liquidation).

2. The facts are that the Company went into voluntary liquidation on 4-10-1952, Mr. R. L. Khosla, the Managing Director, being appointed as Voluntary Liquidator. However, on 6-10-1952 a petition was presented for the compulsory winding up of the Company, and this was ultimately ordered by the Court on 5-12-1953.

3. It seems that by a partnership deed Exh. R. 10 the Company had in October 19-19 entered into a partnership with Durga Das Nayyar appellant, the partnership firm being called the B. T. M. Tube Reeling Works. The partnership agreement provided that the parties should invest equally in the machinery etc. and the firm should work in part of the Company's premises, for which the firm was to pay one-third or the rent of the whole premises. On 5-6-1952 about five months before the Company went into voluntary liquidation, Durga Das Nayyar and R. L. Khosla entered into an agreement to refer certain alleged disputes arising between the Company and Durga Das Nayyar to the arbitration of Mr. Kishan Chand Sondhi Advocate. The arbitrator delivered his award on 15-10-1952, i.e., several days after the Company had gone into voluntary liquidation and after the compulsory winding up petition had been instituted. An application was made on 10-1-1953 for making the award a rule of the Court and this was done on 20-2-1953.

4. It was this award and the decree based there-on which were attacked by the Official Liquidator of the Company in an application under. S. 231 of the Indian Companies Act of 1913. The learned District Judge has held that the award and the decree contravened the provisions of Section 227(2) of the Act and has therefore declined to validate any payment or adjustment made or any transfer of property effected in pursuance of the decree obtained on the basis of the arbitration award, and has directed that if Durga Dass Nayyar has any claim against the Company Ha should prove it in the ordinary way before the Liquidator who would no doubt take into consideration the relevant provisions of the Indian Companies Act and the Indian Partnership Act for determining whether anything was due to Durga Das Nayyar and whether he was entitled to preference over other creditors.

5. The main argument addressed to me has been to the effect that the award has not in any way disposed of any property of the Company, but has merely disposed of the assets of the partnership, which were the property of the partnership and not of the Company until disposed of by the award. I find, however, that para (4) of the awand orders the payment of Rs. 2,000/- to Durga Das Nayyar by the Company on account of damages and compensation for ousting him from the premises and non-fulfilment of its obligations and also by para (5) of the award any sum outstanding in favour of Durga Das Nayyar has been made a first charge on the property of the Company and in my opinion this clearly amounts to disposing of the property of the Company.

6. The provisions of Section 227 (2) of the Act rend :

'In the case of a winding up by or subject to the supervision of the Court every disposition of the property, including actionable claims, of the company, and every transfer of shares, or alteration in the status of the members, made after the commencement of the winding up shall, unless the Court otherwise orders, be void.'

The arbitration proceedings evidently started when the winding up of the company was already foreseen, and the award was actually delivered after both the voluntary winding up of the Company and the institution of the petition for compulsory winding up, and once a company has been ordered to be wound up by the Court, the winding up takes effect from the date of the petition.

7. Thus although the Court held that there was no evidence of fraud regarding the arbitration proceedings, it was in my opinion correct in holding that the award did dispose of the property of the Company after the winding up and that the decree based on the award could not be upheld localise the assets of the Company should be made availablefor distribution pari passu amongst the creditors of the Company and no creditor should be permitted to obtain an advantage over his fellow creditors merely because he came to know earlier of the embarrassed financial position of the company or had some influence on those in charge of its management.

8. It was suggested that those parts of theaward and decree could be upheld which clearlyonly dealt with the assets of the firm, but in myopinion the award and decree cannot be split up inthis manner, and according to the direction of thelearned District Judge it may be still open to DurgaDas Nayyar to prove that he is a preferential creditor in respect of at least part of his claims. In myopinion the matter has been properly decided by thelearned District judge and his direction is quite fairto all concerned. I accordingly dismiss the appealwith costs, Counsel's fee Rs. 50/-.


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