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Jaimal Singh MakIn Vs. the Official Liquidator of Majestic Financiers (P) Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberCompany Appeal No. 2 of 1969
Judge
Reported inAIR1978Delhi169; [1978]48CompCas419(Delhi); 14(1979)DLT124; ILR1978Delhi267; 1978RLR137
ActsCompanies Act, 1956 - Sections 45B and 446(2); Court-fees Act - Schedule - Article 1; Company Court Rules, 1959 - Rules 6, 34 and 36; Companies (Amendment) Act, 1966 - Sections 446
AppellantJaimal Singh Makin
RespondentThe Official Liquidator of Majestic Financiers (P) Ltd.
Appellant Advocate P.C. Khanna,; Reva Khanna and; Nand Kishore, Advs
Respondent Advocate N.S. Sistani and ; Rajiv Bahl, Advs.
Cases ReferredBangalore v. T. Muniswamy Achary
Excerpt:
companies act (1956) - section 446(2)(b)--scope and construction of--money--claim made by official liquidator against any person by way of petition instead of suit--maintainability of--option conferred by statute to be exercised by the official liquidator or the company judge in the matter--stage of--court fee payable in each case.; majestic finance private ltd. was ordered to be wound up by the order of the high court of punjab (circuit bench at delhi) in civil original 31-d of 1964 by order dated 11-12-1964 passed by s. b. capoor, j. the official liquidator filed a petition under section 446(2)(b) of the companies act, 1956 on 14-6-1967 for the recovery of rs. 1,11,866.30 from three persons including jaimal singh makin, the appellant in all the four appeals. the twin preliminary..........liquidator were:(i) that the application was not competent as the official liquidator should have filed a suit and (ii) that the court-fees on the petition should have been paid as upon a suit in accordance, with schedule i of the court-fees act. 10. the learned company judge framed various issues and, inter alia, treated issues 1 and 2 as preliminary issues which are as under:-(1) is the application not competent on ground that the official liquidator should have filed a suit ? (2) should court-fees on the petition have been paid as upon a suit in accordance with sch. i of the court-fees act 11. the learned company judge decided both the preliminary issues against the appellant and held that the petitions under s. 446(2)(b) of the companies act were maintainable and the fixed.....
Judgment:

Yogeshwar Dayal, J.

1. Company Appeals Nos. 2, 3, 4 and 8 of 1969 have been placed before the Full Bench in view of the order of reference dated Oct. 17,1974 passed by S. N. Shankar and T.P.S. Chawla JJ.

2. These appeals arise out of the order Dt. 4-2-1969 passed by the learned Company Judge (S. N. Andley, J. as his Lordship then was) in Company Petitions Nos. 70, 71, 68 and 69 of 1967 respectively.

3. This order will dispose of all the four appeals as common question of law is involved.

4. The facts of Company Petition 70 of 1967 alone are being stated here as they are sufficient to illustrate the common question of law arising in the aforesaid appeals.

5. Majestic Finance Private Limited was ordered to be wound up by the order off the High Court of Punjab (Circuit Bench at Delhi) in Civil Original 31-D of 1964 by order dated 11-12-1964 passed by S. B. Capoor, J. The Official Liquidator filed a petition under S. 446(2)(b) of the Companies Act on 14-6-1967 for the recovery of Rs. 1,11,866.30 from three persons including Jaimal Singh Makin, the appellant 'before us in all the four appeals.

6. Similar applications were filed against Jaimal Singh Makin and others by way of Company Petitions Nos. 71, 68 and 69 of 1967.

7. Jaimal Singh, the present appellant, R. Sen and Hargurchet Singh Kandola, who were respondents in Company Petitions Nos. 70 and 71 of 1,967, were directors of the company in liquidation. Another company Petition 68 of 1967 was also filed in which the aforesaid three persons were partners. The Official Liquidator had, in these petitions, claimed large amounts from several respondents on the basis of entries in the books of account of the company and in so far as at least the directors were concerned also on the basis of the statements made in the balance sheet and profit and loss account of the Company.

8. The appellant resisted the said claim petition and raised preliminary objections against their adjudication by the learned Company Judge.

9. The twin preliminary objections against the maintainability of the petitions filed on behalf of the Official Liquidator were:

(i) that the application was not competent as the official liquidator should have filed a suit and

(ii) that the court-fees on the petition should have been paid as upon a suit in accordance, with schedule I of the Court-fees Act.

10. The Learned Company Judge framed various issues and, inter alia, treated issues 1 and 2 as preliminary issues which are as under:-

(1) Is the application not competent on ground that the Official Liquidator should have filed a Suit ?

(2) Should court-fees on the petition have been paid as upon a suit in accordance with Sch. I of the Court-fees Act

11. The learned Company Judge decided both the preliminary issues against the appellant and held that the petitions under S. 446(2)(b) of the Companies Act were maintainable and the fixed court-fee of Rs. 13/- paid on the petition was proper and the petitions were not liable to be stamped under Sch. I of the Court-fees Act.

12. The appellant filed the present appeals against the aforesaid decision of the learned Company Judge deciding the preliminary issues Nos. 1 and 2 against the appellant. These appeals, as stated earlier, have been placed before the Full Bench for disposal.

13. Mr. P. C. Khanna, learned counsel for the appellant, in support of the appeals made his submissions in this way:

That on a proper construction of S. 446(2) of the Companies Act, it ought to have been held that no petition could be filed by way of a petition under S. 446(2)(b) of the Companies Act for the recovery of the amounts. The Official Liquidator could only have filed a suit. It was submitted that on a true construction of S. 446(2) (a) it ought to have been held that clause (b) of S. 446(2) applies and operates only in. fields other than those covered by S. 446(2)(a). It was further submitted that the fact that the court-fees will have to be paid if the suit was filed was not a relevant consideration for deciding whether the petition under S. 446(2)(b) was maintainable. In that connection, it was further submitted that looking at the nature of the claim and the controversies that may arise, the proper remedy for the Official Liquidator was to file a suit under S. 446(2)(a) and not a petition by way of a claim petition under S. 446(2)(b) of the Companies Act. It was also submitted that the fact that the appellant was a director was no consideration for whether a petition under S. 446(2)(b) was maintainable or not.

14. In any case, it was submitted, proper court-fees had not been paid on the petitions.

15. For proper appreciation of the submissions made by the learned counsel for the appellant, it is necessary to examine the provisions of S. 446(2) of the Companies Act, 19,56, before and after the amendment of 1960. These provisions are as under:-

Before the amendment of 1960.

'446. Suits stayed on winding up order:-

(1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of, any suit or proceeding by or against the company.

(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained In any other law for the time being in force, be transferred to and disposed o1i by that Court'.

After the amendment of 1960.

'446. Suits stayed on winding up order: (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with against the company, except by leave of the Court and subject to such terms as the Court may impose.

(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of:

(a) any suit or proceeding by or against the company;

(b) any claim made by or against the company (including claims by or against any of its branches in India);

(c) any application made under S. 391 by or in respect of the company;

(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been Instituted or is instituted or such claim or question has arisen or, arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960.

(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by that Court.

(4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.'

16. Even prior to the amendment of 1960, a suit under sub-section (2) of this section could have been filed in the Company Court but such suit, if filed, would have to beer court-fees in accordance with the provisions of the Court-fees Act and in suits for money, ad valorem court-fee was payable in accordance with Schedule I of the Court-fees Act.

17. The amendment by way of addition of Clauses (b), (c) and (d) to sub-section (2) was brought about in view of the report of the Companies Act Amendment Committee headed by Shri A. V. Vishvanatha Shastri. The said Committee at page 160 of its report in para. 164 made the following recommendation:

'Section 446: Suits and proceedings: 164. A suggestion has been made that the Court winding up the company should have full power to decide all claims made by or against any company 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 company coming within the cognizance of the court. Such a provision would be on the lines of Section 4 of the Provincial Insolvency Act, Section 7 of the Presidency Towns Insolvency Act and S. 45B of the Banking Companies Act and would speed up the winding up proceedings. There is no danger of the provisions being abused in view of the fact that it is the High Court or the District Court that has jurisdiction under the Act and there is a right of appeal.'

18. It was in pursuance of these recommendations made by the aforesaid Amendment Committee that sub-section (2) of S. 446 was further amended. The provisions of filing of any suit or proceeding by or against the company was already there before the amendment It is obvious that the amendment of 1960 which incorporated cls. (b), (c) and (d) in sub-section (2) of S. 446 of the Companies Act was intended to confer a very comprehensive jurisdiction upon the Company Court to decide all claims by or against the company. Another objective for making these amendments was to empower the court to decide all claims and other questions, whatsoever, by or against any company so that winding up proceedings might be expedited.

19. To attain similar objective, S. 45B had also been added to the Banking Companies Act, 1949. Section 45B of this Act provided as under:

'45B. The High Court shall save as otherwise expressly provided in S. 45-C, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made under S. 391 of the Companies Act, 1956 by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order for, the winding up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953.'

20. It will be seen that cls. (b), (c)and (d) which have been added to sub-section (2) Of S. 446 of the Companies Act cover the same field as was covered by S. 45B of the Banking Companies Act, 1949.

21. The scope of S. 45B of the Banking Companies Act was considered by the Supreme Court In the case reported as Dhirendra Chandra Pal v. Associated Bank of Tripura Ltd., : 1955CriLJ555 where an application for eviction of a tenant of a bank had been filed by the Liquidator before the High Court and that was purported to be done under section 45 B of the Banking Companies Act. It was contended that the High Court while exercising powers under section 45B had no power to deal with a question relating to ejectment in summary proceedings initiated on an application. The Supreme Court dealt with the scheme of the Banking Companies Act and dealing with sections in Part Iii A of this Act observed that these sections constituted a wide departure from the corresponding provisions of the Indian Companies Act and referring to the provisions of the Indian Companies Act, it was observed:

'Under various sections thereof the liquidator after an order for winding up of a company is made can approach a Company Court for exercising certain powers in aid of and to expedite the process of liquidation. The procedure normally adopted for the purpose is by way of an application. But the scope of matters in respect of which the liquidator can obtain the help of the Company Court by summary procedure is rather limited. In respect of other matters and particularly in the matter of collecting assets or recovering properties from third parties, (not covered by Ss. 185 and 186) the liquidator has to invoke the help of the appropriate Court in the ordinary way. This as is well known leads to a great deal of inevitable delay and expense.' and came to the conclusion that It was to avoid these delays and expense that the sections in Part III-A of the Banking Companies Act were brought. The Supreme Court came to the conclusion that Section 45B of the Banking Companies Act was not confined to claims for recovery of money or recovery of property, movable or immovable, but comprehends all sorts of claims which relate to or arise in the course of winding up and they further observed that the normal proceeding that the section contemplated must be taken to be a summary proceeding by way of application.

22. If the object of bringing sub-clauses (b), (c) and (d) to sub-s. (2) of S. 446 of the Companies Act was to avoid inevitable delay and expense which would be incidental to the institution and trial of a suit, we do not see any reason why, as a matter of construction, even a money claim by the Official Liquidator against any person has to be made only by a suit and not by a petition. The fact that a suit is contemplated by clause (a) of sub-section (2) does not go counter to this construction. The right to file a suit by or against the company or a petition making any claim by or against the company Is an option conferred by the statute. These options do not militate against each other.

23. The very fact that in the report of the Companies Act Amendment Committee, reference was directly made to the existing provisions of S. 45B of the Banking Companies Act goes to show that cls, (b), (c) and (d) ought to be interpreted in the same light in which the Supreme Court interpreted S. 45B of the Banking Companies Act.

24. The view which we are taking also finds support from the judgment of Bal Raj Tuli, J. in Punjab Finance Private Ltd. (in liquidation) v. Malhotra Singh (1975) 45 Comp Cas 261,1075 TLR CL670.

25. Once it is held that the present petition could be filed under S. 446(2)(b) of the Companies Act, the question of court-fees answers itself. The application filed by the Official Liquidator; would have to be stamped as an application under the Companies Act as provided in Art. 1 (d) of Schedule Ii of Court-fees Act which prescribes that the fee payable on an application presented to the High Court under the Companies Act for taking some judicial action other than the order for winding up is Rupees 13/-. The application, in the instant case, filed by the Official Liquidator was directly covered by that clause of Art. I of Schedule It and thereforee the payment of Rs. 13/- as court-fee was correct.

26. The learned counsel, however placed reliance on a decision reported in re: Official Liquidator High Court of Mysore, Bangalore v. T. Muniswamy Achary, Air 1967 Mys 190 wherein it was held (at, p. 191 of AIR) :

'The result is that although S. 446(2) of the Companies Act empowers this Court as the winding up court to entertain a suit, the court-fee payable in respect of it has necessarily to be calculated under the Mysore Court-fees and Suits Valuation Act, 1958.'

27. In that case, the liquidator under, the directions of the court took out notices to the debtors of the company (in liquidation) under S. 477 of the Companies Act which were dealt with under a single application. Majority of the debtors appeared in Court and admitted the claims made against them by the liquidator on behalf of the company. In some cases, the matters in dispute were settled by agreement and decrees by consent were passed. In regard to cases where there was some dispute to be gone into and in cases where parties served with notices did not appear, the learned judge made a general direction that the liquidator may take out applications in the nature of suits separately against such parties. In pursuance of that direction, the liquidator filed applications against the debtors in the High Court. The question then arose about the payment of the court fee on such applications, that is, whether it was to be paid ad valorem on a suit, or fixed court-fee as on application under S. 446 of the Companies Act. The learned judge held that:

'The nature of the suit as a suit does not get changed or transformed into a mere application or a proceeding other than a suit.'

and that the application was to be treated as a regular suit for the purpose of court-fee and court-fee had to be paid thereon under the Mysore Court-fees and Suits Valuation Act, 1958.

28. The learned Company Judge noticed that this decision supported the contention raised on behalf of the appellant but found it difficult to agree with this decision.

29. For the reasons given by us earlier, with respect to the learned Judge of the Mysore High Court, we are unable to agree with this conclusion.

30. Mr. P. C. Khanna, however, brought to our notice the provisions of Rules 6, 34 and 36 of the Company Court Rules, 1959. Rule 6 talks of the practice and procedure and applies the provisions of the Civil P. C. to all proceedings under the Act and the Rules. Rules 34 and 36 contemplate the decision of matters by affidavits and it is these two rules on the basis of which it is contended that in complicated matters proceedings should not be allowed to be instituted by applications but a direction should be given to file a suit. It is true that the normal method of a trial before a Company Court is by affidavits but that fact alone Is not sufficient to hold that 'any claim' as mentioned in sub-section (2) (b) cannot Include 'suit' used in sub-section (2) (a) of S. 446 of the Companies Act. As we have already observed cls. (a) and (b) give option to the Official Liquidator or the person concerned to either file 'suit' or 'claim'. The provisions of rules 6, 34 and 36 of the Company Court Rules 1959 can not narrow down the plain meaning of various clauses of S. 446(2). The same argument was also advanced before the learned Company Judge, who, while rightly rejecting the submission, made an observation that the fact that a suit is contemplated by clause (a) of sub-section (2) does not go counter to this construction because if the Official Liquidator makes a claim by a petition, it is open to the Company Court to say, by reason of the controversies that are raised in the claim petition, that such a claim should be made by a suit and if it is so ordered, the Official Liquidator will have to file a suit even though before the very Court and in such an event pay the court-fee that is required to be paid in accordance with the provisions of the Court-fees Act and which, in claims for money, would be ad valorem on the subject-matter of the claim, We do not think that these observations of the learned Company Judge mean that once any claim is properly filed by the Official Liquidator under Section 446(2)(b) of the Act. the Company Judge, during trial, could order it to be converted into a suit and then call upon the party to pay the court-fees. These observations as we understood have been made as to the power of the Company Judge to give directions to the Official Liquidator before the filing of the petition under S. 446(2)(b), namely, the direction that a suit be filed under S. 446(2)(a) instead of filing claim petition under S. 446(2)(b). Once such claim petition has been properly filed and is maintainable in law, there is no power with the court to direct its conversion into a suit later on.

31. Learned counsel for the appellant referred us to numerous decisions under S. 155 of the Companies Act where the Company Judge may decline to entertain petition in appropriate cases and refer the party to file a suit. There is no analogy in the powers exercised by the Company Judge under S. 155 to the making of any claim petition by or against the company under S. 446(2)(b).

32. There is thus no merit in the appeals and the same are dismissed with costs.

33. Appeals dismissed.


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