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Gulzari Lal Bhargava Vs. the Official Receiver-cum-official Liquidator of Ammonia Supplies Corporation P. Ltd - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 91 of 1967
Judge
Reported in[1972]45CompCas419(Delhi); ILR1972Delhi401
ActsCompanies Act, 1956 - Sections 428, 435 and 461(2)
AppellantGulzari Lal Bhargava
RespondentThe Official Receiver-cum-official Liquidator of Ammonia Supplies Corporation P. Ltd
Advocates: R. Dayal,; H.R. Sawhney and; R.C. Beri, Advs
Excerpt:
(i) companies act (1956) - section 435--proceedings transferred to district judge--status of district judge is not equivalent to single judge of the high court.; that it will not be right to say that the district judge for the purposes of a matter transferred to it under section 435 of the act becomes a judge of the high court, or that the order of the district judge becomes the order of a single judge of the high court.; (ii) companies act (1956) - section 428--'contributory'--includes persons holding fully paid up shares.; that under the definition of the term 'contributory' not only those persons, who are liable to contribute to the assets of a company in the event of its being wound up, but also the persons holding fully paid up shars, shall fall.; (iii) companies act (1956) -..........the petitioner moved various applications under the companies act before the learned additional district judge which were dismissed. the petitioner has now come up in appeal to this court under section 483 of the companies act. (3) mr. h. r. sawhney, learned counsel for the official liquidator, has raised a preliminary objection. he says that the appeals are barred by limitation. the reason advanced by him is that after the winding up order, the subsequent proceedings were transferred to the additional district judge, delhi, under the provisions of section 435 of the companies act. this section makes the court of additional sessions judge as 'the court' within the meaning of the companies act and so the orders passed by the additional district judge shall be deemed to be orders passed.....
Judgment:

V.D. Misra, J.

(1) This judgment will dispose of F.A. 0s Nos. 69 of 1967, 82 of 1967, 85 of 1967 and 91 of 1967.

(2) This Court made an order for winding up of Ammonia supplies Corporation Private Limited and directed that all subsequent proceedings be had by the Additional District Judge, Delhi. During the winding up proceedings, the petitioner moved various applications under the Companies Act before the learned Additional district Judge which were dismissed. The petitioner has now come up in appeal to this Court under Section 483 of the Companies Act.

(3) Mr. H. R. Sawhney, learned counsel for the Official Liquidator, has raised a preliminary objection. He says that the appeals are barred by limitation. The reason advanced by him is that after the winding up order, the subsequent proceedings were transferred to the Additional District Judge, Delhi, under the provisions of Section 435 of the Companies Act. This section makes the Court of Additional Sessions Judge as 'the Court' within the meaning of the Companies Act and so the orders passed by the Additional District Judge shall be deemed to be orders passed by a Single Judge of this Court. Under Article 17 of the Limitation Act, 1963, the period of limitation for 10-981HCD/71 filing appeals from an order of a High Court to the same Court is thirty days. Admittedly, the appeals were filed beyond that period and so should be dismissed.

(4) In order to appreciate the contentions of the learned counsel, it is convenient to reproduce the relevant sections of the Companies Act, 1956. Section 2(11) (a) defines 'the Court' in the following terms :-

''the Court' means,- (a) with respect to any matter relating to a company (other than any offence again this Act), the Court having jurisdiction under this Act with respect to that matter relating to that company, as provided in Section 10;'

The relevant portion of Section 10 is in the following words :-

'10.(1) The Court having jurisdiction under this Act shall be- (a) The High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and (b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district. (2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred. . . . . .'.

(5) Section 435 runs thus :

'435. Where a High Court makes an order for winding up a company under this Act, the High Court may, if it thinks fit, direct all subsequent proceedings to be had a District Court subordinate thereto or, with the consent of any other High Court, in such High Court or in a District Court subordinate thereto; and thereupon for the 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 under this Act.'

(6) Section 10 shows that the High Court, in whose territorial jurisdiction the registered office of the Company is situate, is to be deemed to the Court having jurisdiction under that Act. A similar jurisdiction can be conferred on a District Court by the Central Government by notification in the official Gazette for certain purposes, and for that situation the District Court shall by deemed to be the Court having jurisdiction under the Act. Section 435 envisages a situation where a winding up order has been made by the High Court but it is thought proper that subsequent proceedings should be held in a District Court subordinate to the High Court. In that case the High Court has got the discretion to direct the subsequent proceedings to be held in the subordinate Court. These proceedings may be transferred by one High Court to another High Court with the latter's consent. These may also be transferred to a District Court not subordinate the High Court ordering the winding up of the company but subordinate to another High Court with the consent of the latter. In the case of such transfer, the transferee Court is to be deemed to be the Court having jurisdiction under the Act in terms of section 10. The transferee District Court has also been given all the jurisdiction and powers of a High Court.

(7) What Mr. Sawhney contends is that since the District Court has been given all the jurisdiction and powers of a High Court under the Act, the orders passed by the District Court will have the same effect as the orders passed by a Single judge of this Court. I am afraid I cannot agree to this proposition. One of the objects of this section seems to be to relieve the High Court of the detailed work of the winding up of a company and leave it to a District Court if the High Court decides to do so. While giving the power to the High Court to transfer the matter to a District Court, it was necessary that the. jurisdiction and powers of the District Court with respect to the matter transferred should be defined. Otherwise, it might have been doubtful if the District Court had powers to hold the proceedings. If the powers, which vested in the High Court, were not transferred, the purport of relieving the High Court of the onerous work would have been defeated. It was for that purpose necessary to say that on transfer the District Court would become 'the Court' within the meaning of the Companies Act, and shall have all the jurisdiction and powers of a High Court under the Act, This by no stretch of imagination raised the status of the District Judge to that of a Single Judge of the of High Court. By conferring the jurisdiction and powers on a Tribunal with reference to the existing jurisdiction and powers of another Tribunal will not convert the former into the latter. The only result would be that in order to find out the jurisdiction and powers of the former Tribunal, reference has to be made to the jurisdiction and powers of the latter. In these circumstances, it will not be right to say that the District Judge for the purposes of a matter transferred to it under Section 435 of the Act becomes a judge of the High Court, or that the order of the District Judge becomes the order of a Single Judge of the High Court. The preliminary objection, thus, has no force and is dismissed.

(8) I will now take up each individual appeal in the order in which it has been argued before me. F. A. O. No. 91 of 1967

(9) The appellant was a Director of the Company in liquidation and held fully paid up shares. He made an application under Section 556 of the Companies Act for direction to the official liquidator to make good the defaults alleged to have been committed by him in respect of various provisions of the Rules of Company (Court) Rules, and Section 462 of the Act. This was contested on the ground of maintainability.

(10) The learned Additional District Judge came to the Conclusion, that the appellant was not a contributory within the definition of the the word given in Section 428 of the Companies Act inasmuch as he had admittedly not been brought on the list of contributors by the official liquidator. Another reason for dismissing the application was the absence of the notice by the appellant as required under Section 556. Section 426 of the Companies Act relates to the liability as contributories of present and past members in the event of a company being wound up. Section 427 relates to the obligations of directors, managing agents and managers whose liability is unlimited. Section 428 defines the term 'contributory' in the following words :

(11) The term 'contributory' means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid up and for the purposes of all proceedings for determining, and all proceedings prior to the final determination of the persons who are to be deemed contributories, includes any person alleged to be a contributory..'

(12) This definition specifically includes the holder of any shares which are fully paid up. The result is that under the definition of the term 'contributory' not only those persons, who are liable to contribute to the assets of a company in the event of its being wound up, but also the persons holding fully paid up shares, shall fall. In the instant case, it is not denied that the appellant holds fully paid up shares, simply because the official liquidator has not shown him as a contributory in the list of contributories prepared by him, does not mean that he ceases to be a contributor. Section 556 gives a right to 'any contributory or creditor of the company' to approach the Court for certain reliefs. This section finds a place in Part Vii of the Company Act and so does Section 428. The term 'contributory' in section 556 has clearly been used according to its definition in Section 428. The appellant thus had a right to make the application and the Lower Court was not correct in holding that the appellant had no locus standi.

(13) Mr. Sawhney has referred to a Supreme Court decision in Allot Estate and another v. R. B. Seth Hiralal Kalyanmal Kasliwa land others, (1970)40 Company Cases 1116, (1), in support of his contention that the term 'contributory' does not include the persons holding fully paid up shares. I am afraid this case does not help him in any manner whatsoever. The Supreme Court had no where considered the import of this word in Section 556. The question before the Court was whether the appellants in that case could be placed on the list of contributories as defined in Section 158 of the Companies Act, 1913, where the term was defined to mean 'every person liable to contribute to the assets of a company in the event of its being wound up'.

(14) Under Section 556 the person desiring to approach the Court is required to serve a notice on the liquidator directing him to make good the default, in case the liquidator fails to do so within 14 days after the service on him of that notice, only then the person can approach the Court and make an application under this Section requesting the Court to give necessary directions to the liquidator to make good the default within such time as may be specified in the order. Admittedly, no prior notice was given to the official liquidator before the application was made. Mr. Rameshwar Dial, learned counsel for the appellant however,contends that the appellant had given a notice simultaneously when he made the application and in any case since he has a right to make an application after the expiry of 14 days he should not be forced to make another application, and then should ensure for the benefit of the present application.

(15) Mr. Sawhney, learned counsel for the respondent contends that this application was made more than six years ago and there is nothing to show that the defaults complained of by the appellant have not since been made good by the official liquidator. He also contends that after such a long period if the appellant makes the application to-day the Court may not even entertain it. There is force in the contention of Mr. Sawhney and I would not thus like to allow the appellant to have the benefit of the notice served on the liquidator six years ago for the purpose of further enquiry by the Court. This appeal is, thereforee, dismissed. F.A.O. No. 82 of 1967

(16) The appellant made an application to the Court for inspection of the account books of the liquidator maintained by him under Section 461(2) of the Companies Act. It was contested on the ground that it was not maintainable. Section 461 is in the following terms:-

'461.(1) The liquidator shall keep. in the manner prosscribed, proper books in which he shall cause entries of minutes to be made of proceedings at meetings and of such other matters as may be prescribed. ' (2) Any creditor or contributory may, subject to the control of the Court, inspect any such books, personally or by his agent.

(17) This Section shows that the liquidator is required to keep proper books in which he shall cause entries or minutes to be made of proceedings at meetings held and of such other matters as may be prescribed. It is only these books which a contributory has been given the right to inspect.

(18) Mr. Rameshwar Dial contends that Rule 286 of the Companies (Court) Rules, 1959, requires the official liquidator to maintain various registers which include the account books. This rule, according to the learned counsel, has been framed under the powers conferred on the Supreme Court under Section 643 of the Companies Act read with section 461. There is nothing to show in the rules that Rule 286 has any reference to section 461. The Supreme Court under Section 643 has been given powers to frame rules providing or all matters relating to the winding up of companies. While the winding up is going on, the company may be directed to carry on the business for the purpose of winding up and in that case it will be necessary for the official liquidator to maintain various account books. It is for that purpose that Rule 286 seems to have been framed. It cannot by any stretch of imagination be connected with Section 461 which talks about keeping what is otherwise known as minute book relating to the proceedings of the meetings. As the language of sub-section (1) of Section 461 shows, the books required to be kept by the liquidator should contain entries or minutes to be made of proceedings at meetings. This book has to contain such other matters as may be prescribed. The words such other matters as may be prescribed' cannot be said to relate to the account books since it has to be read as ejusdem generis. The learned Additional District Judge was, thereforee correct in holding that the appellant was not entitled to inspect the account books. This appeal is, thereforee, dismissed. F.A.O. No. 69 of 1967

(19) The appellant made an application for the return of 786 gas cylinders by the official liquidator on the allegation that he and Murari Lal Bhargava had placed cylinders belonging to them at the disposal of the company at its formation on rental basis. Whereas Murari Lal Bhargava placed 1,000 cylinders, the appellant placed about 1200 cylinders at the disposal of the company. Later on the appellant entrusted another 448 cylinders. In the month of June. 1962. the business of the company came to a standstill. The appellant terminated the contract of hiring and withdrew 1 130 cylinders belonging to him and started his own independent business of Ammonia Gas Suppliers. Later on the official liquidator look into possession various cylinders from the office of the appellant as well as from various other places which were detailed in the application. On March 30, 1965, the Court ordered the delivery of 1000 cylinders back to Murari Lal Bhargava. The appellant thus requested for the return of the cylinders belonging to him.

(20) This application was contested by the official liquidator on various grounds. The then learned Additional District Judge, dealing with the case, ordered that evidence of the parties be recorded. While I he evidence was going on, Shri M. L. Jain, who had succeeded Shri C. G. Suri, heard the argument and dismissed the application of the appellant without completing the evidence.

(21) The learned Additional District Judge held that the appellant was not entitled to unilaterally cancel the contract without the consent of the opposite party and so was not entitled to the return of the cylinders.

(22) It is not disputed before me that 1,000 cylinders contributed by Murari Lal Bhargava were ordered to be returned to him as alleged by the appellant. It is, however, contended by the respondent that .these were so ordered because the appellant did not raise any objection. I cannot appreciate this submission. After the company has gone into liquidation, the assets vested in the liquidator and they cannot he fritted away on the basis of a compromise entered into between the two shareholders only. Mr. Sawhney could not defend this order of the learned Additional District Judge but submitted that it should .he no consideration for allowing the appellant to have cylinders returned to him. He also contends that there is nothing to show what the terms of the contract were. Mr. Rameshwar Dial contends that the company was in fact a bailee in respect of the cylinders hired out to it by the appellant and the latter was entitled to its return under the provisions of Section 160 of the Indian Contract Act.

(23) The circumstances under which the appellant hired his gas cylinders to the company can only be decided after the parties are allowed to lead their respective evidence. The parties' were in fact leading such other matters as may be prescribed' cannot be said to relate to the account books since it has to be read as ejusdem generis. The learned Additional District Judge was, thereforee correct in holding that the appellant was not entitled to inspect the account books. This appeal is, thereforee, dismissed. F.A.O. No. 69 of 1967

(24) The appellant made an application for the return of 786 gas cylinders by the official liquidator on the allegation that he and Murari Lal Bhargava had placed cylinders belonging to them at the disposal of the company at its formation on rental basis. Whereas Murari Lal Bhargava placed 1,000 cylinders, the appellant placed about 1200 cylinders at the disposal of the company. Later on the appellant entrusted another 448 cylinders. In the month of June. 1962. the business of the company came to a standstill. The appellant terminated the contract of hiring and withdrew 1 130 cylinders belonging to him and started his own independent business of Ammonia Gas Suppliers. Later on the official liquidator look into possession various cylinders from the office of the appellant as well as from various other places which were detailed in the application. On March 30, 1965, the Court ordered the delivery of 1000 cylinders back to Murari Lal Bhargava. The appellant thus requested for the return of the cylinders belonging to him.

(25) This application was contested by the official liquidator on various grounds. The then learned Additional District Judge, dealing with the case, ordered that evidence of the parties be recorded. While I he evidence was going on, Shri M. L. Jain, who had succeeded Shri C. G. Suri, heard the argument and dismissed the application of the appellant without completing the evidence.

(26) The learned Additional District Judge held that the appellant was not entitled to unilaterally cancel the contract without the consent of the opposite party and so was not entitled to the return of the cylinders.

(27) It is not disputed before me that 1,000 cylinders contributed by Murari Lal Bhargava were ordered to be returned to him as alleged by the appellant. It is, however, contended by the respondent that .these were so ordered because the appellant did not raise any objection. I cannot appreciate this submission. After the company has gone into liquidation, the assets vested in the liquidator and they cannot he fritted away on the basis of a compromise entered into between the two shareholders only. Mr. Sawhney could not defend this order of the learned Additional District Judge but submitted that it should .he no consideration for allowing the appellant to have cylinders returned to him. He also contends that there is nothing to show what the terms of the contract were. Mr. Rameshwar Dial contends that the company was in fact a bailee in respect of the cylinders hired out to it by the appellant and the latter was entitled to its return under the provisions of Section 160 of the Indian Contract Act.

(28) The circumstances under which the appellant hired his gas cylinders to the company can only be decided after the parties are allowed to lead their respective evidence. The parties' were in fact leading their evidence and they should have been allowed to complete the same belore deciding this matter. The learned Additional District Judge was not correct in deciding the petition at this stage.

(29) The appeal is, thereforee, allowed and the impugned order is set aside and the case is remanded to the Additional District Judge to decide the same after recording the evidence of the parties.


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