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Mysore Chemicals and Fertilizers Ltd. Vs. Official Receiver Cum Official Liquidator - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberFirst Appeal Nos. 57, 58 and 88 of 1967
Judge
Reported in[1975]45CompCas419(Delhi); ILR1975Delhi394
ActsCompanies Act, 1956 - Sections 435; Punjab Courts Act, 1918 - Sections 21
AppellantMysore Chemicals and Fertilizers Ltd.
RespondentOfficial Receiver Cum Official Liquidator
Advocates: J.R. Goel,; H.L. Sabarwalan and; Y.K. Sabharwal, Advs
Cases ReferredState of Bombay v. Narothamdas Jethabai and
Excerpt:
.....winding up order against a company--district--judge transferring the case to additional district-judge--jurisdiction of the latter to entertain and try the same--punjab courts act, 1918, as amended by act 35 of 1963 - (section 21) and further amended by act of 1968 - (section 21a).; the question, in the instant case, was regarding the jurisdiction of the additional district judge to deal with the winding up case which had been directed by the high court to be tried by the district judge:; that scheme of section 21 of punjab courts act as amended shows that the court of the district judge is the court of initiation or institution. that is the forum where all cases must be instituted. the distt. judge may make over to the additional distt. judge after cases for being dealt with and..........presented could transfer it to the additional district judge for trial. a division bench of the punjab high court took the view that it could not be done and that the court of an additional district judge could not be considered to be the principal civil court of original jurisdiction. the basis of their view was a decision of the supreme court in kuldip singh v. the state of punjab and another, : 1956crilj781 . that case created some difficulty and was principally responsible for the decision given in janak dulari's case (supra).(13) subsequently, a fuil bench was constituted in the punjab high court to decide gangagir chela of ram chandgir v. rasal singh and another, 1965 plr 592. before the full bench the question which arose for decision was whether the court of the additional.....
Judgment:

Avadh Behari, J.

(1) Ammonia Supplies Corporation Private Ltd. was incorporated under the Companies Act, 1956. There were only two shareholders of this company. They were brothers Murari Lal and Gulzari Lal. They were the only directors of this company. They fell out. Murari Lal complained of oppression by his other brother and made an application under Sections 397 and 398 of the Companies Act in the Circuit Bench of the Punjab High Court. Guizari Lal on the other hand moved a petition for winding up. Both these applications were heard by S. B. Capoor, J. On 21st of December 1962 he accepted the petition of Guizari Lal and orde

(2) Under Section 435 of the Companies Act Capoor. J., after making an order of winding up of the company, directed that all subsequent proceeding shall be had in the District Court of Delhi.

(3) Shri P. P. R. Sawhney was the District Judge then. On 1st June 1964 he transferred the winding up case to the Court of Shri C. G. Suri then Additional District Judge.

(4) On December 6, 1965 a petition under Section 446(2) of the Companies Act was made by the Official Liquidator against Mysore Chemicals & Fertilizers Limited. This petitionas made by the Liquidator to the Court of Shri M. L. Jain, Additional District Judge, Delhi who had succeeded Mr. C. G. Suri in the meanwhile.

(5) To this application Mysore Chemicals raised a preliminary objection. They objected to the jurisdiction of the Additional District Judge by their application dated 12th September 1966. This objection was repelled by the Additional District Judge by order dated 19th September 1966. Mysore Chemicals appeal to this Court. This is F.A.O. No. 57 of 1967.

(6) Mysore Chemicals then made another independent application. This time it was made to the District Judge. In this application it was said that the Additional District Judge has no juridiction to hear the winding up case and that that case should. be withdrawn to the Court of the District Judge. The District Judge rejected this application by order dated 8th December 1966. Mysore Chemicals have filed a second appeal against this order. This is F.A.O. 88 of 1967.

(7) On similar lines Gulzari Lal also moved an application before the District Judge. He also said that the proceedings should be withdrawn from the Court of the Additional District Judge, Delhi as that court had no jurisdiction. The District Judge rejected this application also on November 4, 1966. Gulzari Lal's appeal is F.A.O. 58 of 1967.

(8) In all the three appeals one common question of law has been raised. The question is regarding the jurisdiction of the Additional District Judge to deal with the winding up case which had been directed by the High Court to be tried by the District Judge. This order will govern all the three appeals.

(9) Under section 435 of the Companies Act, the High Court on making an order of winding up of a company may direct that all subsequent proceedings shall continue in a District Court subordinate to it and thereupon:

'FORthe purposes of winding up the company, the Court in respect of which such direction is given shall be deemed to be 'the Court' within the meaning of this Act, and shall have all the jurisdiction and powers of a High Court undcithis Act.'

(10) Section 435 speaks of a District Court. Section 2(14) defines the term 'District Court' as :

'THEprincipal civil Court of original jurisdiction in a district, but docs not iachide a High Court in the exercise of its original civil jurisdiction.'

THEREis no dispute that the High Court had the power to make the direction it did. It is also not disputed that the District Court is a competent Court where all subsequent proceedings can be had ill respect of the winding up under Section 435 read with Section 2(14). Mr. God, counsel for the appellants, takes exception to the order of Mr. P. P. R. Sawhncy dated 1st June 1964 by which proceedings subsequent to the winding up were transferred to the Court of Additional District Judge. He says that Section 435 provides that the subsequent proceedings must be had in a District Court. The Court of the Additional District Judge, it is said, is not a District Court in the sense in which that term is used in Section 435 read with Section 2(14) of the Act. I have to examine the validity of this argument.

(11) This objection to jurisdiction is not a new one. It has been raised previously also.

(12) For the first time in the present form this objection was raised in connection with Section 19 of the Hindu Marriage Act. Section 19 of the Hindu Marriage Act provides that every petition under the Hindu Marriage Act shall be presented to the District Court. But in some cases the District Judge made over petitions to the Additional District Judges in Delhi. In Janak Dulari v. Narain Das, 1959 Plr 42, the question arose whether the Court of the Additional District Judge was a principal Civil Court of original jurisdiction within the meaning of Section 19 of the Hindu Marriage Act and whether the District Judge to whom the petition was presented could transfer it to the Additional District Judge for trial. A Division Bench of the Punjab High Court took the view that it could not be done and that the Court of an Additional District Judge could not be considered to be the principal Civil Court of original jurisdiction. The basis of their view was a decision of the Supreme Court in Kuldip Singh v. The State of Punjab and another, : 1956CriLJ781 . That case created some difficulty and was principally responsible for the decision given in Janak Dulari's case (supra).

(13) Subsequently, a Fuil Bench was constituted in the Punjab High Court to decide Gangagir Chela of Ram Chandgir v. Rasal Singh and another, 1965 Plr 592. Before the Full Bench the question which arose for decision was whether the Court of the Additional District Judgc was not competent to try and dispose of a suit under Section 92 of the Code of Civil Procedure. The Full Bench examined the Supreme Court decision in Kuidip Singh's case (supra) and came lo the conclusion that the jurisdiction of an Additional District Judge is co-ordinate with that of the District judge and the District Judge being the principal Civil Court of original jurisdiction could assigned or transfer a suit instituted in his Court for disposal to the Additional District Judge by virtue of the provisions of the Punjab Courts Act 1918 and the Pepsu Judicature Ordinance. The Full Bench held that the Supreme Court decision in Kuldip Singh's case (supra) had not been correctly understood by the Division Bench in Janak Dulari's case. They also held that Janak Dulari's case was wrongly decided. The Full Bench agreed with a Division Bench of the Calcutta High Court (Ajit Kumar Bhunia v. Sm. Kaaan Bala Devi, : AIR1960Cal565 ) which had also taS.cn the view that the District Judge by transfer or assignment could make over a case under the Hindu Marriage Act to the Additional District Judge and on such transfer or assignment the Additional District Judge was certainly competent to hear and determine the matter.

(14) This time in these three appeals the same question has arisen. Now it is under the Companies Act. In order to examine the validity of this objection I will immediately turn to the Punjab Courts Act, 1918. The Punjab Courts Act was for the first time enacted in 1884. It was subsequently repealed. Another Punjab Courts Act was enacted in the year 1918. In 1956 the Supreme Court decision in Kuldip Singh's case (supra) was pronounced. That decision created difticulty. as I have said. It also created some uncertainty. The result was that the Punjab Courts Act, 1918 was amended in 1963 by Punjab Courts (Amendment) Act 35 of 1963. Section 21 of the amendment. Act reads as under :

'ADDITIONALDistrict Judges The State Government, in consultation with the High Court, may also appoint Additional District Judges to exercise jurisdiction in one or more courts of the District Judges.

(2)Additional District Judge shall have jurisdiction to deal with and dispose of such cases only as the High Court, by general or special order, may direct to deal with and dispose of or as the District Judge of the District may make over to them for being dealt with and disposed of :

PROVIDED that the cases pending with the Additional District Judges immediately before the 28th day of June, 1963, shall be deemed to be cases so directed to be dealt with or disposed of by the .High Court or so made over to them by the District Judge of the District as the case may be.

(3)While dealing with and disposing of the cases referred to in sub-section (2), an Additional District Judge shall be deemed to be the Court of the District Judge.'

(15) Now if we look at this section it makes it quite clear that the Additional District Judges are appointed:

'TOexercise jurisdiction in one or more Courts of the District Judges.'

THISmeans that they arc appointed to the Courts of the District Judges. It also makes it plain that they shall try such cases as are made over to them by the District Judge of the District for being dealt with and disposed of. Then comes sub-section 3 which says:

'WHILEdealing with the disposing of the cases referred to in sub-section (2), an Additional District Judge shall be deemed to be the Court of the District Judge.'

(16) The scheme of this Section shows that the Court of the District Judge is the Court of initiation or institution. That is the forum where all cases must be instituted. The District Judge may make over to the Additional District Judges these cases for being dealt with and disposed of. When the Additional District Judge after transfer and assignment of the case to him exercises the powers in dealing with and disposing of the cases he is deemed to be the Court of the District Judge. The word 'deemed' used in sub-section (3) imports a fiction. In order to get over the difficulty such as had been created by the decision of the Supreme Court, the Legislature employed this fiction and said that there shall be no difference between the Additional District Judge and the Court of the District Judge provided the case has been made over to the Additional District Judge by the District Judge. If this is done then the Additional District Judge is the Court of the District Judge. He is, in other words, another Court of the District Judge.

(17) In the proviso to sub-section (2) of Section 21 another fiction has been employed to deal with the pending cases.

(18) Section 24 of the Punjab Courts Act, 1918 defines the District Court as follows :

'DISTRICTCourt to be principal Civil Court of original jurisdiction The Court of the District Judge shall be deemed to be the District Court or principal Civil Court of original jurisdiction in the district.'

(19) It is worth noting that Section 18 of the Punjab Courts Act was amended in 1963. The amended section now provides that besides the Courts of Small Causes and the Courts established under any other enactment for the time being in force, there shall be the following classes of Civil Courts, namely :

(1) The Court of the District Judge; * * * * and (3) The Court of the Subordinate Judge. * * * *

(20) The words in old sub-clause (2) viz. '(2) The Court of the Additional Judge' were omitted by Punjab Act 35 of 1963, Section 2.

(21) The decision of the Supreme Court in Kuldip Singh's case (supra)dwelt upon sub-clause (2) and held that the Additional Judge is a separate and distinct court of its own. The Legislature has now amended this part of the Act which shows that the Additional District Judge which is the term now used in Sections 21 and 21A is not a separate or distinct court of its own as was held by the Supreme Court.

(22) Of some importance is another amendment made by Punjab Act 17 of 1968, Section 2. By this amendment Section 21-A was inserted which is in these terms :

'21-A.The High Court or the District Judge may assign to an Additional District Judge any of the functions of the District Judge, including the functions of receiving and registering cases and appeals, which but for such assignment of functions could be instituted in the Court of the District Judge, and in the discharge of those functions the Additional District Judge shall, notwithstanding anything contained in the Act, exercise the same powers as the District Judge.'

(23) Again the Legislature has made it clear beyond all manner of doubt that the High Court or District Judge can assign functions of receiving and registering cases and appeals to the Additional District Judge and in the discharge of those functions the Additional District Judge shall exercise the same powers as the District Judge. The power of assignment or transfer which vests in the District Judge is the only distinguishing feature between the District Judge and the Additional District Judge, otherwise the two stand on a status of co-equality. The power of assignment or transfer is what gives life to the Court of the Additional District Judge, without it that Court is lifeless and inert.

(24) As a matter of legislative history it is interesting to note that the Punjab Courts Act 1884 had a provision which was very much akin to the present Section 21 of the Punjab Courts Act 1918 as amended in 1963. That Section read as follows :

'75.(1) When the business pending before any Divisional Court consisting of one Judge, or before the Court of any District Judge, require the aid of an Additional Judge for its speedy disposal, the Local Government may appoint to the Court an Additional Divisional Judge or an Additional District Judge, as the case may be.

(2)An Additional Judge so appointed shall discharge any of the functions of a Divisional Judge or District Judge, as the case may be, which the Divisional Judge or District Judge may assign to him, and shall, as regards the discharge of those functions and subject to the provisions of the next following sub-section, be deemed, For the purposes of this Act, to be a Divisional Judge or District Judge. . .'

(25) In a company case which went up to the Privy Council a similar objection was raised. It was contended on behalf of the creditor that the Additional District Judge had no jurisdiction to pass the order under appeal and that all orders made in the winding up of a company must be made by the District Judge. This was the case of Bchari Lal-Bulaki Ram v. Kundan Lal and another, Air 1922 PC 361. The Privy Council repelled the objection and said:

'THEREis no doubt that the District Judge had assigned to the Additional District Judge all the functions of supervising this liquidation. He discharged these functions apparently without any objection for a considerable time and made many orders; and no point was taken till this appeal was made at an advance stage of the liquidation. He had Jurisdiction, and the question which remains to be decided is the propriety of the order which he made.'

LNview of this high authority I do not think that this objection to jurisdiction can be raised with any success now.

(26) The counsel for the appellant has placed considerable reliance on Kuldip Singh's case (supra) and in particular on the following observations of Bose, J. :

'THEPunjab Courts Act nowhere speaks of an Additional District Judge or of an Additional Judge to the District Court also, the Additional Judge is not a Judge of coordinate judicial authority with the District Judge. . . . .'

'THISis a very different thing from the administrative distribution of work among the Judges of a single Court entitled to divide itself into sections and sit as division Courts.

WHENthe Chief Justice of a High Court or the District Judge of a District Court makes an administrative allotment of work among the Judges of his Court, their jurisdiction and powers are not affected, and if work allotted to one Judge goes to another by mistake his jurisdiction to entertain the matter and deal with it is not affected. But that is not the scheme of the Punjab Courts Act and the mere fact that Mr. J. N. Kapur called himself the Additional District Judge and purported to act as such cannot affect the matter of his jurisdiction.

ASthe Punjab Courts Act does not contemplate the appointment of Additional Judges to the District Court, none can be appointed. The Court contemplated is the Court of the Additional Judge which is in the nature of a special tribunal set up for special purpose and invested with the powers of a District Judge when dealing with the matters specially entrusted to its jurisdiction. We hold thereforee that the Court of the Additional Judge is not a division Court of the Court of the District Judge but a separate and distinct Court of its own.'

(27) The counsel says that the Court of the Additional District Judge is not co-equal with the Court of District Judge. It is a separate and distinct Court of its own. I do not agree. The Supreme Court decision was given before the Punjab Courts Act was amended in 1963. After the amendment, the Legislature has left us in no doubt that an Additional District Judge shall be deemed to be the Court of the District Judge while dealing with and disposing of the cases referred to in sub-section (2) of Section 21. Sub-section (3) of Section 21 has made a change in the law and has set all doubts at rest.

(28) It is not necessary to examine the decision of the Supreme Court in Kuldip Singh's case (supra) once again for two reasons. Firstly, it has been considered at some length by the Full Bench of the Punjab High Court in Gangagir chela of Ram Chandgir's case (supra) as well as by the Division Bench of the Calcutta High Court in Ajit Kumar Bhunia's' case (supra). Secondly, the Supreme Court decision was given under the unamended Punjab Act 1918. The amendments to that Act were made subsequently. All that is important to notice about that decision is that in that case an appeal was presented to the Additional District Judge directly and was not made over by the District Judge. The Supreme Court held that the Additional District Judge was certainly not competent to receive the appeal, there being no delegation or transfer of that function to him by the learned District Judge under Section 21(2) of the Punjab Courts Act 1918 and accordingly he had no jurisdiction in the matter. This is not the case in the present company case. Proceedings subsequent to the winding up were directed by the High Court to be had in the District Court. The District Judge made them over to the Additional District Judge. The power of transfer and assignment cannot be questioned. The Act clearly gives that power. The Supreme Court in Kuldip Singh's case (supra) also recognised and confirmed the existence of that power m the District Judge. The Additional District Judge, thereforee, on transfer or assignment of a case has all the powers, authority and jurisdiction of the District Judge himself so far as that case is concerned. The assignment, so to speak, carries with it the necessary authority or competence provided the transferee Judge is the Additional District Judge and there is nothing in the particular statute to bar or prohibit the exercise of the District Judge's powers of assigning the business to the Additional District Judge. Once that is done, the Additional District Judge could be as competent to deal with the case as the District Judge himself. It is no doubt true that the case must be instituted in the Court of the District Judge itself. The case or the appeal cannot be presented directly to the Additional District Judge. This is what happened in the Supreme Court decision. As I have said that was not a case of transfer by the District Judge to the Additional District Judge but a case of direct presentation of the appeal to the latter Court which could not have been justified. This is the ratio of the Supreme Court decision. If that decision is correctly understood it cannot be said that the settled law was sought to be unsettled by the Supreme Court. Punjab and Calcutta Judges thought that the Supreme Court did not unsettle the settled law and I respectfully agree with that view.

(29) The Additional District Judge, after the assignment and transfer of the case to him, is a Judge of co-ordinate judicial authority and he can discharge all the functions of the District Judge. There is no distinction between him and the District Judge. He is the alter ego of the District Judge. 'The Additional District Judge shall be deemed to be the Court of he District Judge.' The counsel raised three arguments.

(30) Firstly, it was submitted that the Additional District Judge is a separate and distinct Court of its own. This does not appear to be correct after the amendment of the Punjab Courts Act in 1963, as I have endeavored to show.

(31) Secondly, it was suggested that the Companies Act is a central statute and the Punjab Courts Act being a state statute, the State Legislature has no power to alter or amend the central legislation by providing that the liquidation case under Section 435 can also be dealt with by the Additional District Judge when that Section in terms says that only the District Judge's Court can entertain and deal with the subsequent proceedings. This is a specious argument which cannot prevail. By providing in the Punjab Courts Act that the Additional District Judge, after transfer or assignment of the case to him shall be a Court of co-equal and co-ordinate authority and shall be deemed to be the District Judge, the State Legislature is in no way altering the Central enactment. It was not disputed that the Civil Courts Act can be passed by the State Legislature. This is what has been done. On account of the heavy pendency of cases the State Legislature has empowered the State Government to appoint Additional District Judges to exercise jurisdiction in one or more Courts of the District Judges.

(32) The counsel relics on State of Bombay v. Narothamdas Jethabai and another, : [1951]2SCR51 . I do not think that that case has any application. When the Additional District Judge is dealing with the winding up case after the same has been transferred to him, it cannot be said that. a Court different from the one intended by Section 435 is hearing that case. It is being heard in the very jurisdiction which has been preseribed by the Central statute.

(33) Lastly, it was argued that in Fao 57 of 1967 the Official Liqidator made the petition under Section 446(2) to the Court of Additional District Judge directly and this could not have been done. This argument rests on a fundamental misconception. The District Judge had made over the liquidation case to the Additional District Judge. All subsequent procecdings arising in that case can be entertained directly by the Additional District Judge. It is not the requirement of law that every application which is made in the case transferred to the Additional District Judge must be made to or routed through the District Judge. What is transferred is the case which carries with it the power and authority to deal with all the proceedings arising in that case. (See Section 446 of the Companies Act).

(34) I thereforee, agree with Mr. Jagjit Singh, then District Judge (now a Judge of this Court). I would dismiss all the three appeals but in the circumstances make no order as to costs.

(35) The parties are directed to .appear in the Court of Shri D.C Aggarwal, Additional District Judge, Delhi who is now said to be seized of this case on December 12, 1974. Records to be sent down immediately.


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