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Madhuban Pvt. Ltd. Vs. NaraIn Dass Gokal Chand - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 45 of 1970
Judge
Reported in7(1971)DLT371
ActsCompanies Act, 1956 - Sections 10 and 434
AppellantMadhuban Pvt. Ltd.
RespondentNaraIn Dass Gokal Chand
Advocates: Satish Chander and; Harnam Das, Advs
Cases ReferredJagannath Kathikar v. Gindhi Sewa Samaj Ltd.
Excerpt:
.....the amounts of the deecress passed against it in some other cases as well. the contention of the learned counsel, thereforee, was without any force (6) it was next contended by mr satish chander that the district judge, delhi, had no jurisdiction to entertain the petition under section 433 of companies act, 1956 but, as stated already, this contention bad been overruled by the learned district judge. the earlier notification issued under the 1913 act, thereforee, could have also been made, in respect of companies like the appellant, with a paid up capital of less than rs. 1,00,000.00 as it could be conferred under the old act it is precisely for this reason, that the saving is effected under section 645 of the new act, in respect of such order, rule,regulation, etc. has served on the..........act, 1956 ; and that the same be returned to him for presentation to the proper court. the learned district judge ordered accordingly. before the petition could be actually returned, the respondent made another applicaton on august 20, 1959, under section 151, civil procedure, code praying that the petition be retained on the file of the court, for taking further proceedings thereon, as the notification on the basis of which the earlier statement had been made by the counsel in court, was published in the official gazette dated june 6, 1959 and was, thereforee, effective from the slid date. as the winding up petition had been presented in court before june 6,1959. the said notification taking away the jurisdiction of the district court was not attracted. the court of the district.....
Judgment:

P.N. Khanna, J.

(1) This appeal under section 483 of the Companes Act, 1956 by the appellant company, 13 directed against the order dated April, 1, 1970 of the Learned Additional District Judge, Delhi, whereby he ordered it to be wound up.

(2) The appellant-company was incorporated under the Companies Act, 1913. in or about the year 1954 with its registered office in the Film Colony, Chandni Chowk, Delhi. The principal objects for which the company was incorporated were, inter alias the carrving on of the business of the Management of Theatres, palaces, halls cinematographic shows and exhibitions The authorised capital of the company was rupees one lakh, divided into 8000 ordinary shares of Rs. 10.00 each and 200 preference shares of Rs 100.00 each Its subscribed and issued capital was Rs. 32 700/ , its paid up capital was about Rs. 24,000.00 only. It had 15 members out of which seven were its directors.

(3) The respondent obtained a decree dated 4th December, 1957 against the appellant-company for a sum of Rs. 2,640.00 from the court of Sub-Judge, 1st Class, Delhi. The appellant company, it is alleged, had closed its business since the beginning of 1958 and was not able to pay the decretal amount despite service of notice on it by the respondent for that purpose. Even the landlord is alleged to have obtained a decree against the appellant for its eviction and for recovery of arrears of rent. The company had not held even a meeting of its share holders, nor had it submitted any returns to the Registrar of Joint Stock Companies, nor had it filed any balance sheet with him. This had resulted in the prosecution of its directors. The appellant company, it was asserted, could not pay its debts and its substratum had gone. Its assets were said to consist of few films, which were hardly wroth any value. It was under there circurnstances that ther respondent prayed that it was Just, equitable and convenient to wind up the appellant-company, more especially as it was not carrying on any business of its own. It was said to be having no income and was not commercially solvent. It had run into losses and was not in a position to raise any further capita). For these reasons, the respondent prayed for its winding up. After the filing of the petition on June 4, 1959. the counsel for the respondent made a statement in court on August 7, 1959 to the effect that the Court of the District judge had no jurisdiction to hear the petition in view of the Central Government's notificition dated May 29, 1959, issued under sub-section (2) of section 10 of the Companies Act, 1956 ; and that the same be returned to him for presentation to the proper court. The learned District Judge ordered accordingly. Before the petition could be actually returned, the respondent made another applicaton on August 20, 1959, under section 151, Civil Procedure, Code praying that the petition be retained on the file of the court, for taking further proceedings thereon, as the notification on the basis of which the earlier statement had been made by the counsel in court, was published in the official Gazette dated June 6, 1959 and was, thereforee, effective from the slid date. As the winding up petition had been presented in court before June 6,1959. the said notification taking away the jurisdiction of the District Court was not attracted. The court of the District Judge under the circumstances alone had Jurisdiction to entertain the said petition. On this, the learned District called for the file and finding that the petition had originally been presented in his court on June 4, 1959, ordered its retention on the file of that court. The petition was admitted and notice of the same was issued to the appellant company. It was also advertised in the local official gazette, in the Hindustan Times and in the Indian Express. The appellant-company then filed a written statement wherein it was contended as a preliminary objection that the court had no jurisdiction to try the petition. It was alleged that the petition should be deemed to have been filed on August 20, 1959, when the application under section 151, Civil Procedure Code, as aforesaid, was filed. The order returning the petition under Order 7 Rule 10, Civil Procedure Code, had not been set aside ; and the application filed on August 20., 1959 should be taken as the second petition filed at a time when the court of the District Judge had admittedly no jurisdiction to entertain the same. It was stated that even the original petition filed on June 4, 1959 could not be entertained by the court of the District Judge as the notification dated May 29, 1959 saved only such petitions (if it could save any) as were pending in the court on that date. As the said petition was not pending in the court of the said District Judge on May 29, 1959, it was not saved. The petition otherwise was resisted on merits The company was alleged to be commercially solvent and the existence of normal commercial debts was alleged not to imply that the company was unable to pay the same. It was also stated that the respondent was a firm different from the one which obtained a decree against the appellant-company as in the meanwhile on account of the death of certain partners, the constitution of the said firm had changed. It was prayed, under the circumstances, that the petition be dismissed with costs The learned District Judge, dealing with the question of his jurisdiction came to the conclusion that the notification dated May 29, 1959 having been published in the official Gazette dated June 6, 1959, came into effect on that date and as the winding up petition as presented on June 4, 1959, it was pending on the date of the enforcemeat of the notification. It could, thereforee, be entertained by that court, as the notification did not divest the court of the District Judge of the jurisdiction to decide the petition The respondent filed an appeal in the High Court against the said judgment of the learned District Judge, but: the same was withdrawn On this, the High Court on September 19, 1968, passed an order dimissing the appeal, leaving the parties to bear their own costs.

(4) So far as the objection of the appellant regarding the competence of the respondent to continue with the winding up petition, inspire of some of the partners of the respondent-firm having died without their legal representatives being brought on record, was concerned, it was held by the learned District Judge by his order dated April 3, 1969 that under Order 30 Rule 4 of the Civil Procedure Code if two or more persons sue in the name of a firm and any of such persons dies, then it shall not be necessary to join the legal representative of the deceased as aparty to the said suit. It was accordingly held that the proceedings could continue in the firms name inspire of the subsequent deaths of two or three of its partners On merits the learned District Judge, held that the respondent firm having a decree in its favor for Rs. 2640.00 with costs and future interest, was a creditor of the appellant-company. The respondent was found to have duly served the appellant company with a three weeks notice as required by section 435 of the Companies Act, 1956 It was also found that the appellant comapny had not paid the amounts of the deecress passed against it in some other cases as well. The appell- ant company was, thereforee, held to be unable to pay its dates. It was under these circumstances that the District judge came to the conciasion that it was just and equitable to wind up the Company The winding up of the company was accordingly ordered and the official liquidator was appointed the liquidator, against this order the appellant company filed its appeal in this court.

(5) Mr. Satish Chander, the learned counsel for the appellant company raised three contentions. Firstly that owing to the death of certain partners of the respondent-company, the respondent who was the petitioner in the main case, was an entity different from the one in whose favor the money decree had been passed and on the basis of which the winding up petition had been filed. But as held by the .learned District Judge in his order dated April 3, 1960, Rule 4 of Order 30 of the Code of Civil Procedure enabled the proceedings to bs still continued in the firm's name It was thereforee, not necessary to join the legal representatives of the deceased as parties. The contention of the learned counsel, thereforee, was without any force

(6) It was next contended by Mr Satish Chander that the District Judge, Delhi, had no jurisdiction to entertain the petition under section 433 of Companies Act, 1956 But, as stated already, this contention bad been overruled by the learned District Judge. Even the appeal against this order had been dismissed by the High Court as wirhdrawn. The contention of the learned counsel that this dismissal, not being on merits, did not preclude the appellant from urging again this objection, is without substance as under Subrule (3) of Rule i of Order 23, read with section 144 of the Code of Civil Procedure, where the appeal is withdrawn, the appellant is 'precluded from instituting any fresh' appeal in respect of the same subject matter. The appellant under these circumstances cannot urge the same objection again Even otherwise, a notification had been issued under section 3 of the Indian Companies Act, 1913 empowering the District Judge to entertain proceedings under the Indian Companies Act, 1913. The said notification was issued by the Central Government through the Chief Commissioner as the then province of Delhi was a Centrally admistered area, With the coming into force of the Companies Act, 1956, the said order of the Central Government in the said notification was specifically saved by section 645 of the said Act, which read as follows :-

'NOTHINGin this Act shall effect any order rule, regulation, appointment. coveyance, mortgage, deed, document or agreement, made fee, directed, resolution passed, direction given proceedings taken, instrument executed or issued, or thing done, under or in pursuance of any previous companies law; but any such order, rule, regulation, appointment conveyance, morgages, deed, document, agreement, fee, resolution direction, proceedings, instrument or thing shall, if in force at the commencement of this Act, continue to be in force, and so far as it could have been made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act, shall have effect as if made, directed, passed given taken, executed, issued or done under or inpursuance of this Act.'

The new Act thereforee, did not affect the order in the aforesaid notification issued under the provisions of the previous companies law ; and the same being in force at the commencement of the new Act, continaued to be in force under the new Act ; and had the same effect as if made under the Companies Act, 1956. Under Section 10 of the Companies Act, 1956 the court having jurisdiction under the said Act is the High Court, having jurisdiction in relation to the place at which the registered office of the company concerned is situated and where the jurisdiction has been conferred on the district Court the said district court, in matters falling within the scope of the jurisdiction conferred in respect of the Companies having their registered office in the district. The Central Government under sub-section (2) of section 10 by notification, can empower any D strict court to exercise all or any of the jurisdiction conferred by the said Act upon the Court, except the jurisdiction conferred by section 425 to 560 and the other provisions relating to winding up of companies, in respect of the companies with a paid up sliaire capital of not less than Rs, 1,00,000.00and jurisdiction conferred by sections 237, 391, 393 395 and 397 to 407 both inclusive in respect of companies generally. The earlier notification issued under the 1913 Act, thereforee, could have also been made, in respect of companies like the appellant, with a paid up capital of less than Rs. 1,00,000.00, under the present Act. and thereforee, continued to be in force and effect under the new Act till it was taken away on June 6, 1959, by notification dated May 20.1959, as already stated. The learned counsel for the appellant contended that under the old Act. this jurisdiction could be conferred in respect of all the provisions of the Act; while it cannot be done under certain sections of the present Act. The scope of the jurisdiction that could be conferred under the old Act was, thereforee, wider, than it is now,: Section 645 of present Act saves only such orders, urged the learned counsel, as could be made under such limited scope, as is provided under the present Act. Such being the case, contended the counsel, the powers conferred by the notification under the old Act having a wider scope could not be continued to be in force under the new Act with a limited scope. The argument of the learned counsel is, however, fallacious Even if the jurisdiction conferred bycertain provisions of the old Companies Act cannot be conferred now under the new Act, juri diction still can be conferred by sections dealing with winding up of companies with a paid up capital of less than Rs. 1,00,000.00 as it could be conferred under the Old Act It is precisely for this reason, that the saving is effected under section 645 of the new Act, in respect of such order, rule,regulation, etc. made under the old Act, in 'so far as it could have been made under or in pursuance of this Act.'' As the earlier notification conferring jurisdiction on the District Judge could have been made by the Central Government even under the present Act it continued to have effect under the present Act. The objection of the learned counsel for the appellant, has, therfeore no basis and the same cannot be accepted The learned counsaI relied on Chinatman-Jagannath Kathikar v. Gindhi Sewa Samaj Ltd., for the proposition that the notification issued under the old Act came to an end on the passing of the new Act, the reason given in that judgment being that the earlier notification had been issued there by the local Government and not by the Central Government. The court held that owing to change in law and the power of the local Government to issue such notification under the new Act having been abolished, the notification under the old act could not be continned. In the present case, Delhi being centrally administered, the earlier notification was issued by the Central Government which Government is now empowered to issue notifications under the new Act. The judgment in the said Bombay case, thereforee, has no application to the facts of the present case On the other hand in Ashoke Tea Estate (P) Ltd, v. Registrar Joint Stock Companies Madras it was held that the old Act having been repealed, the jurisdiction of the District Court conferred by the order of the Government under the old Act was saved by section 24 of the General Clauses Act In any case, the position of the District Judge, Delhi, as stated above; is entirely different, because the jurisdiction conferred on him was not by a local Government, but by the Central Government itself and was specifically saved by section 645 of the Companies Act 1956

(7) The learned counsel for the appellant further contended that the notice required to be served under section 434 of the Act could not help the respondent as he had not taken out execution of the decree passed in his favor, which he was required to do under clause (B) of sub-section (1) of section 434. Section 434 of the Companies Act, 1956 reads as follows :-

'434.(1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the compary is indebted in a sum exceeding five hundred rupee , then due. has served on the company by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring tie company to pay the sum so due and the company has for three vveeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor ; (b) if esecution or other process issued on a decree or order of any court in favor of a creditor of the company is returned unsatisfied in whole or in part : or (e) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company. (2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm if it is signed by any such agent or legal adviser or by any member of the firm. The learned counsel submitted that it was not necessary in the case of a creditor holding a decree against the company to serve a notice. Specific provision, on the other hand, was made for taking out execution of the decree in such a case, which was not done in this case. The argument of the learned counsel, however, is without any merits. Clauses (a) and (b) provide two alternative methods of showing the the company is upable to pay its debts. Acreditor does cot cease to be a creditor if he obtains a decree in his favor against the company. Clause (a) becomes applicable when a creditor has seized on the company a demand under his his requiring it to pay the sum due and the company has neglect d to pay the sane. The provision in clause (b) that if the creditor has a degree of a court in his favor and the execution is returned unsatisfied in whole or in part, the company shall be deemed to be unable to pay its debt, does not mean that the -effect of clause (a) is negatived in the case of a decree-holder creditor. The object of the two clauses is the same, that is to show that the company concerned is unable to pay its debts. Action can be taken under either of them. The objection of the learned counsel, thereforee, has no justification .

(8) In the result, there is no merit in the appeal and the same is dismissed with costs. Counsel's fee Rs. 150.00.


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