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Union of India (Uoi) (Through the Commissioner of Income-tax) Vs. Asia Udyog P. Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectLimitation
CourtDelhi High Court
Decided On
Case NumberF.A.O. No. 160 of 1968
Judge
Reported in[1974]44CompCas359(Delhi); [1974]95ITR229(Delhi)
ActsIndian Companies Act, 1913 - Sections 153 and 153A(1); Companies Act, 1956 - Sections 392, 392(1), 392(2), 394, 394(1), 394A and 446; Limitation Act, 1963 - Schedule - Articles 137 and 147; Indian Limitation Act, 1908 - Schedule - Article 181
AppellantUnion of India (Uoi) (Through the Commissioner of Income-tax)
RespondentAsia Udyog P. Ltd. and ors.
Appellant Advocate S.L. Bhatia, Adv
Respondent Advocate R. Dial, Adv. for respondent No. 1
DispositionAppeal dismissed
Cases ReferredNityanand M. Joshi v. Life Insurance Corporation of India
Excerpt:
the case debated on the maintainability of the petition under section 392 read with section 394 of the companies act, 1956, seeking directions for recovery of such arrears of tax - as per the scheme of amalgamation of the company, the transferor company was liable in regard to the payment of tax due by the transferor company - on the question with regard to the claim of the union of india for such arrears of tax, it was ruled that the liability of tax was a matter incidental, consequential and supplementary to the amalgamation - accordingly, the petition seeking direction for recovery of such arrears of the tax was not maintainable - - 3 'by virtue of the order of amalgamation 'with a view to secure that the reconstructions or amalgamation shall be fully and effectively carried out. 3......h.l. anand, j.1. this appeal is directed against an order of the district judge, delhi, made in misc. company case no. 5/65 by which the petition of the appellant under section 153a(1)(f) of the companies act, 1913, hereinafter called the act of 1913, read with section 647 of the companies act, 1956, hereinafter called the act of 1956, seeking an order providing for payment of certain tax outstandings of respondent no. 2 by respondent no. 1 and/or respondent no. 3 was dismissed on the grounds that the petition was not only not maintainable but was also barred by time and the question that this appeal raises are as to the true construction of the provisions of section 153a(1)(f) of the act of 1913 and its corresponding provision in the act of 1956 as also of the provisions of article 137.....
Judgment:

H.L. Anand, J.

1. This appeal is directed against an order of the District Judge, Delhi, made in Misc. Company Case No. 5/65 by which the petition of the appellant under Section 153A(1)(f) of the Companies Act, 1913, hereinafter called the Act of 1913, read with Section 647 of the Companies Act, 1956, hereinafter called the Act of 1956, seeking an order providing for payment of certain tax outstandings of respondent No. 2 by respondent No. 1 and/or respondent No. 3 was dismissed on the grounds that the petition was not only not maintainable but was also barred by time and the question that this appeal raises are as to the true construction of the provisions of Section 153A(1)(f) of the Act of 1913 and its corresponding provision in the Act of 1956 as also of the provisions of Article 137 of the Limitation Act, 1963.

2. The facts are not in dispute and may be briefly stated to the extent they are necessary. Respondent No. 1 is a joint stock company belonging to what was commonly known as the Dalmia Jain group. Respondent No. 2 was also a joint stock company in the same group and while respondent No. 2 was in voluntary liquidation with respondent No. 3 as the voluntary liquidator, the liquidator proposed a scheme of arrangement under Section 153 of the Act of 1913 for the amalgamation of respondent No. 2 with respondent No. 1 and after the statutory meeting of the members had been held to consider the scheme and had approved of it, the same was sanctioned by the District Judge, Delhi, by an order made on February 10, 1953. By a subsequent order of February 13, 1953, the District Judge in exercise of powers conferred on it further directed that the whole property of the transferor-company, that is respondent No. 2, would stand transferred to and vest in the transferee-company, that is respondent No. 1, and that all the liabilities of the transferor-company would, by virtue of the said order, become the liabilities of the transferee-company. Certain other directions were also made by the said order but these are not relevant for our present purpose. The appellant herein,Union of India, had a large claim against respondent No. 2 on account of the tax liability of the said respondent of the total order of about Rs. 30 lakhs which had arisen in the year 1953-54.

3. The Union filed the petition out of which the present appeal has arisen on May 22, 1965, under Section 153A(1)(f) of the Act of 1913 read with Section 647 of the Act of 1956, in the Court of the District Judge, Delhi, praying that the court may be pleased to make an order ' providing for payment and discharge of the said liability of respondent No. 2 by respondent No. 1 and/or by respondent No. 3 ' by virtue of the order of amalgamation ' with a view to secure that the reconstructions or amalgamation shall be fully and effectively carried out.' Two similar applications made by the Union earlier had been dismissed by the District Judge, Delhi, in default by two successive orders of October 10, 1963, and April 15, 1965. The three applications were apparently in identical terms.

4. The petition was contested on behalf of the respondents and three preliminary objections were raised which led to the framing of three preliminary issues which are in the following terms :

'1. Whether this court has jurisdiction to entertain the petition? O.P. Petitioner.

2. Whether the petition is within time O.P. petitioner.

3. What is the effect on this petition of two previous applications of like nature having been dismissed in default O.P. petitioner.

5. By the impugned order, the learned District Judge dismissed the petition on the ground that the petition was not maintainable and was also barred by time. Issue No. 3 was, however, found in favor of the appellant and it was held that the dismissal of the two earlier petitions did not debar the institution of the third.

6. Aggrieved by the aforesaid order, the Union has come up in appeal.

7. At the outset learned counsel for the respondents conceded that he was not challenging the finding of the learned district judge on issue No. 3 regarding the effect of the dismissal of the earlier petitions on the petition out of which this appeal has arisen. The third issue, thereforee, does not survive.

8. The questions that, thereforee, require consideration are whether having regard to the provisions of Section 153A(1)(f) of the Act of 1913, or of the corresponding provisions of the Act of 1956, it could be said that the petition was not maintainable and the court had no jurisdiction to entertain it and as to whether, assuming that it was maintainable, it was within time.

9. On the first question, it was contended on behalf of the appellant that on a true construction of the provisions of Section 153A(1)(f) of the Act of 1913, and its corresponding provision, i.e., Section 394(1)(vi) of the Act of1956, it must be held that the terms ' to secure that the reconstruction or amalgamation shall be fully and effectively carried out' occurring in the said sections include within their scope an application for a direction to the transferee-company, in the case of amalgamation of companies, to pay to the creditors of the transferor-company the amount due to the creditors or to discharge the liability incurred by the transferor-company before the amalgamation, and that the payment by the transferee to the creditor of the transferor company or the discharge of liability by the transferee-company of the transferor-company would be matters which would be ' incidental, consequential and supplemental ' to the amalgamation even though the scheme of arrangement leading to the amalgamation did not contain any provision with regard to the manner in which the liability is to be discharged as distinguished from mere transfer of these liabilities to the transferee-company and did not in any manner affect the rights of the creditors and the creditors were neither parties to the scheme nor had accorded their approval to it.

10. On the other hand, learned counsel for the respondents contended that the aforesaid provisions were merely intended to deal with such matters as may be ' incidental, consequential and supplemental' to the amalgamation in the sense that direction with regard to these matters was necessary to give effect to the amalgamation and reconstruction and to make it complete and effective, and that any question as to the payment by the transferee to the credit of a transferor company or the discharge of any such liability by the transferee was wholly beyond the scope of the said provisions and no direction in relation to it could, thereforee, be made unless the scheme or arrangement leading to the amalgamation itself provided for the manner of payment in such a way that it could be said that until these liabilities were discharged, the amalgamation would either be not full, complete or effective.

11. It appears to me that the contention of the respondents on this question must prevail.

12. Sections 153 and 153A of the Act of 1913 run as follows:

' 153. (1) Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the court may, on the application in a summary way of the company 'or of any creditor or member of the company or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be called, held and conducted in such manner as the court directs.

(2) If a majority in number representing three-fourths in value of the creditors or class of creditors, or members or class of members, as the casemay be, present either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors or the class of creditors, or on all the members or class of members, as the case may be, and also on the company, or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

(3) An order made under Sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar, and a copy of every such order shall be annexed to every copy of the memorandum of the company issued after the order has been made ; or in the case of a company not having a memorandum, of every copy so issued of the instrument constituting or defining the constitution of the company.

(4) If a company makes default in complying with Sub-section (3) the company and every officer of the company who is knowingly and willfully in default shall be liable to a fine not exceeding ten rupees for each copy in respect of which default is made.

(5) The court may, at any time, after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against a company on such terms as it thinks fit and proper until the application is finally disposed of.

(6) In this section the expression 'company' means any company liable to be wound up under this Act and the expression 'arrangement' includes a re-organization of the share capital of the company by the consolidation of shares of different classes or by the division of shares into shares of different classes or by both those methods, and for the purposes of this section, unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors.

(7) An appeal shall lie from any order made by the court exercising original jurisdiction under this section to tke authority authorised to hear appeals from the decisions of the court.'

' 153A. (1) Where an application is made to the court under Section 153 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the court that the compromise or arrangement has been proposed for the purposes of or in connection with a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies and that under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme (in this section referred to as a ' transferor company ') is to be transferred to another company (in this section referred to as ' the transferee company '), the court may, either by the order sanctioning the compromise or arrange-ment or by any subsequent order, make provision for all or any of the following matters :

(a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;

(b) the allotting or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;

(c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;

(d) the dissolution, without winding up, of any transferor company;

(e) the provision to be made for any persons who, within such time and in such manner as the court directs, dissent from the compromise or arrangement;

(f) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.

(2) Where an order under this section provides for the transfer of property or liabilities, that property shall, by virtue of the order, be transferred to and vest in, and those liabilities shall, by virtue of the order, be transferred to and become the liabilities of, the transferee company, and in the case of any property, if the order so directs, freed from any charge which is by virtue of the compromise or arrangement to cease to have effect.

(3) Where an order is made under this section, every company in relation to which the order is made shall cause a certified copy thereof to be delivered to the Registrar for registration within fourteen days after the completion of the order, and if default is made in complying with this sub-section, the company and every officer of the company, who is knowingly and willfully in default shall be liable to a fine not exceeding fifty rupees.

(4) In this section the expression ' property ' includes property, rights and powers of every description, and the expression ' liabilities ' includes duties.

(5) Notwithstanding the provisions of Sub-section (6) of Section 153, the expression ' company' in this section does not include any company other than a company within the meaning of this Act.'

13. The provisions of Sections 391 and 394 of the Act of 1956 which, except to the extent that they incorporate additional provisions, are identical to the corresponding provisions in the Act of 1913 and are in the following terms :

'391. Power to compromise or make arrangements with creditors and members.--(1) Where a compromise or arrangement is proposed-

(a) between a company and its creditors or any class of them ; or

(b) between a company and its members or any class of them ; the court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the court directs.

(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or, in the case of a company which is being woundup, on the liquidator and contributories of the company :

Provided that no order sanctioning any compromise or arrangement shall be made by the court unless the court is satisfied that the company or any other person by whom an application has been made under Sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under Sections 235 to 251, and the like.

(3) An order made by the court under Sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.

(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company,

(5) If default is made in complying with Sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy in respect of which the default is made.

(6) The court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the court thinks fit, until the application is finally disposed of,

(7) An appeal shall lie from any order made by a court exercising original jurisdiction under this section to the court empowered to hear appeals from the decisions of that Court, or if more than one court is so empowered, to the court of inferior jurisdiction.

The provisions of Sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application. '

394. ' Provisions for facilitating reconstruction and amalgamation of companies.-- (1) Where an application is made to the court under Section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the court-

(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies ; and

(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a 'transferor company') is to be transferred to another company (in this section referred to as ' the transferee-company'), the court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:--

(i) the transfer to the transferee-company of the whole or any part of the undertaking, property or liabilities of any transferor-company;

(ii) the allotment or appropriation by the transferee-company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;

(iii) the continuation by or against the transferee-company of any legal proceedings pending by or against any transferor company ;

(iv) the dissolution, without winding-up, of any transferor-company,

(v) the provision to be made for any persons who, within such time and in such manner as the court directs, dissent from the compromise or arrangement; and

(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:

Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the court unless the court has received a reportfrom the Company Law Board or the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:

Provided further that no order for the dissolution of any transferor-company under Clause (iv) shall be made by the court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.

(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee-company, and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.

(3) Within ' thirty ' days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.

If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees.

(4) In this section-

(a) ' property ' includes property, rights and powers of every description ; and ' liabilities ' includes duties of every description ; and

(b) ' transferee company ' does not include any company other than a company within the meaning of this Act; but ' transferor company ' includes any body corporate, whether a company within the meaning of this Act or not.'

14. Section 392 of the Act of 1956, which had no corresponding provisions in the Act of 1913 but would be applicable to proceedings pending at the time of the commencement of the Act of 1956 by virtue of Sub-section (3)of that section, are in the following terms :

' 392. Power of High Court to enforce compromises and arrangements, etc.--(1) Where a High Court makes an order under Section 391 sanctioning a compromise or an arrangement in respect of a company, it---

(a) shall have power to supervise the carrying out of the compromise or arrangement; and

(b) may, at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.

(2) If the court aforesaid is satisfied that a compromise or arrangement sanctioned under Section 391 cannot be worked satisfactorily with or without modifications it may, either on its own motion or on the application of any person interested in the affairs of the company, make an order winding up the company, and such an order shall be deemed to be an order made under Section 433 of this Act.

(3) The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act under Section 153 of the Indian Companies Act, 1913 (VII of 1913), sanctioning a compromise or an arrangement.'

15. Section 153 of the Act of 1913 and its corresponding provisions in the Act of 1956 provide that a compromise or arrangement may be entered into between a company and its creditors or any class of them or between the company and its members or any class of them, and lays down the procedure by which the creditors or the members of the company, as the case may be, would consider and accord their approval to such a compromise or arrangement and make provisions for matters incidental thereto. Section 153A of the Act of 1913 and its corresponding provisions in the Act of 1956, inter alia, provide that, in case the compromise or arrangement has been proposed for the purpose of or in connection with a scheme of reconstruction of a company or the amalgamation of two or more companies and such scheme provides for the transfer of the undertaking or the property of the company, concerned in the scheme, the court may either by the order sanctioning the compromise or arrangement make provisions for various matters which are referred to in Clauses (a) to (e) of Section 153A(1) of the Act of 1913 and Clauses (i) to (vi) of Section 394(1) of the Act of 1956. Clause (f) of Sub-section (1) of Section 153A of the Act of 1913, which corresponds to Clause (vi) of Section 394(1) of the Act of 1956, makes provisions for matters which are not specifically enumerated in the earlier clause and provides for ' such incidental, consequential or supplemental matters as are necessary to secure that reconstruction or amalgamation shall be fully and effectively carried out '.

16. It is well-settled that the amalgamation of two or more companies may either be by the formation of a third company with which the other companies are merged or by the absorption of the transferor-company into the transferee-company and, in case where the amalgamation is by the latter course, provision has to be made for the transfer of the assets and liabilities of the transferor company to the transferee-company. A reference to Clauses (a) to (e) and Clauses (i) to (v) referred to above would show that such directions would relate to matters which are intended to give effect to and complete the process of amalgamation, absorption or merger, and that being so, the terms of Clause (f) and Clause (vi) should, thereforee, beconsidered as being ejusdem generis with the clauses that preceded these so that the matter in respect of which directions could be made in terms of the last clause must be such matters, directions in respect of which may be necessary to complete the process of amalgamation, merger or absorption. Even otherwise, on the plain language of the last clauses, it is clear that provision has been made not only for matters which are incidental, consequential and supplemental to the amalgamation but only in so far as such directions are necessary to secure that the amalgamation would be fully and effectively carried out.

17. The liability of the transferor-company in the present case was anterior in point of time to the order sanctioning the scheme of amalgamation and it is only after the assets and liabilities of the transferor-company stand transferred to the transferee-company and the liabilities of the transferor company became the liability of the transferee-company pursuant to the direction made by the court in that behalf that the question as to the liability of the transferee-company to pay the petitioner as indeed the corresponding right of the petitioner to claim the amount from the transferee-company could be said to have come into existence and to that extent, thereforee, the liability of the transferee-company to pay the petitioner in discharge of the initial liability of the transferor-company would be a matter incidental, consequential and supplemental to amalgamation but could it be said that the second requirement of Clause (f) or (vi) would also be satisfied. The answer to my mind has to be in the negative because it could not be said on any reckoning that the enforcement of the liability of the transferor-company as against the transferee company or the corresponding enforcement of the right of the petitioner to have recourse for the said liability to the transferee company would be ' necessary to secure that the reconstruction or amalgamation would be fully and effectively carried out ' The payment by the transferee-company to the petitioner or the discharge by the transferee-company of the liability of the transferor company to the petitioner could not be said to be a step in aid of the completion of the process of amalgamation. To put it differently, the process of amalgamation of the company by the absorption of the transferor-company into the transferee-company and the consequential transfer of the assets and liabilities of the transferor company to that of the transferee company did not depend or could be said to be incomplete without the discharge of such liability by the transferee-company. The liability of the transferee company to pay the creditors of the transferor-company could not be a step in aid to amalgamation but would be a consequence of it. The directions sought by the petitioner under Section 153A(1)(f) of the Act of 1913 could not, thereforee, be withinthe scope of the said provision and the petition was accordingly not maintainable.

18. Although the petition was not sought to be justified with reference to the provisions of Section 392 of the Act of 1956 it may be appropriate to consider if the relief sought by the petitioner or the assumption of jurisdiction by the court to entertain the petition could be justified with reference to Section 392 of the Act of 1956. This section was for the first time introduced in the Act of 1956 and there was no corresponding provision in the Act of 1913 but by virtue of Sub-section (3) of that section the application of the provisions of the section were extended to a company in respect of which an order had been passed under Section 153 of the Act of 1913.

19. Section 392 provides that where the High Court made an order sanctioning a scheme or arrangement under Section 391 of the Act of 1956, which corresponds to Section 153 of the Act of 1913, (a) the court may supervise the carrying out of the compromise or arrangement, and (b) at the time of making the order or at anytime thereafter 'give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement. '

20. While it is no doubt true that the extent of the power of the court under Section 392(1) of the Act of 1956 is much wider than that of Section 153A(1) of the Act of 1913, the grant of relief to the petitioner by direction to the respondent No. 1 to pay the petitioner the amount claimed by it would not be justified even with reference to the provisions of this section because it could not be said that in directing payment of the amount claimed by the petitioner the court was either supervising ' the carrying out of compromise or arrangement' as contemplated by Clause (a) of the said sub-section or by taking any steps ' for the proper working of the compromise or arrangement' as envisaged by Clause (b) of that sub-section. This appears to be so because the scheme of amalgamation makes no provision regarding the manner in which the transferee-company would have to discharge the liability of the transferor-company and the only provision it contains is that of merger of the two companies and the consequential direction by which the liability of the transferor-company would become the responsibility of the transferee-company.

21. Even if the scheme of compromise or arrangement, whether between the company and its members or between the company and its creditors or any class of the members or creditors and whether for amalgamation, reconstruction of the company or for the payment of its creditors, made provision for the manner in which the creditors of a company have to be paid, as a compromise or arrangement between the company and its creditorsnormally would, it is doubtful if the court would have any power either under Section 392 or Section 394 of the Act of 1956 or under the corresponding provisions of the Act of 1913 to make the direction of the kind sought by the petitioner and become a forum capable of making a decree or an executable order having the force of a decree, which is what the appellant in effect seeks. Section 392 of the Act of 1956, which confers much wider powers on the court than were conferred under the Act of 1913, does not empower the court to make any such direction and the only effect of the sanction of the compromise or arrangement between the company and its creditors would be that the parties become bound by the terms of the arrangement but if in terms of the arrangement payment is not made it could only invoke Sub-section (2) of Section 392 and order the winding up of the company if it comes to the conclusion that the conditions of that sub-section have been satisfied. The court could not in such a case assume the role of an ordinary civil court for the enforcement of the creditors' right to payment as it could, for example, in a winding up, by virtue of the provisions of Section 446(b) of the Act of 1956 and its corresponding provision in the Act of 1913. These provisions obviously have no application to the case of an amalgamation.

22. While on the subject, it may be pertinent to point out that although the provisions contained in Chapter V of the Act of 1956, inter alia, with regard to compromise or arrangement and reconstruction of companies are a considerable improvement on the corresponding provisions in the Act of 1913 and a number of safeguards have been provided notably by the provisions of Sections 392 and 394A, an anomaly still appears to exist in the Act inasmuch as the creditors of the company which is being amalgamated are not entitled as of right at any stage to participate in the process of the consideration or the sanction of any compromise or arrangement proposed between a company and its members which may result in the amalgamation of the company by its absorption in the other or by the merger of the two to create a third and there is no provision for a notice to the creditors of any such proceedings at any stage either prior to the making of the order or subsequent thereto except in so far as the creditors may have notice of it by public advertisement, although the creditors of a company which is sought to be merged in any other and be completely absorbed in the transferee-company would in a sense be adversely affected by the amalgamation because the creditors have dealt with the transferor-company and may have done so because they had confidence in its management and would by the process of amalgamation be compelled to deal with and become the creditors of another company whether an existing company or a new company that may come into existence even though the creditors or some of them may have had no dealing with such new entity and may have,therefore, no confidence in its management. I am confident that the appropriate authorities would consider the desirability of remedying the situation, inter alia, by incorporating a provision which may entitle the creditors of the company concerned to be suitably associated with the proceedings so as to better secure the interests of the creditors.

23. On the second question, learned counsellor the appellant assailed the conclusion of the learned district judge on issue No. 2 with regard to limitation and contended that on a true construction of the provisions of Article 137 of the Limitation Act, 1963, and of Section 30 of that Act, the court ought to have held that the present petition was beyond the scope of the provision of Article 137 and there was, thereforee, no period of limitation prescribed for it either under the Limitation Act of 1963 or that of the Limitation Act of 1908 and that the petition was, thereforee, within time.

24. On the other hand, learned counsel for the respondents sought to justify the conclusion of the court on the aforesaid question on the basis of a decision of the Bombay High Court in the case of Employees' State Insurance Corporation v. Bharat Barrel and Drum ., : (1967)ILLJ625Bom which was also relied upon by the learned District Judge, Delhi, in support of the conclusion arrived at by him.

25. Although, in the view that I have taken of the maintainability of the petition and the jurisdiction of the court to deal with it, it may not be necessary to consider and decide this question but in view of the importance of the question, I have thought it fit to examine it and to deal with it.

26. After hearing learned counsel for the parties and after going through the various decisions touching the question, it appears to me that the contention of the appellant must prevail.

27. The Limitation Act of 1908 prescribed the period of limitation in respect of some of the applications under the Code of Civil Procedure and dealt with applications for which no period of limitation was provided elsewhere in the Schedule to that Act or by Section 48 of the Code of Civil Procedure in Article 181. This article was in the following terms :

'Applicantfor which no period of limitation is provided else-where in thisSchedule or by section 48 of the Code of Civil Procedure 1908 (V of1908).(threeyears) Whenthe right to apply accrues.'

28. Although the application of this article was not in terms limited to applications under the Code of Civil Procedure, such a limitation was read into it by the various High Courts and this view was eventually accepted by the Supreme Court in the case of Sha Mulchand & Co. v. Jawahar Mills Ltd., : [1953]4SCR351 and it was held that the article had been understood for a fairly long time as one which referred to applications under the Code of Civil Procedure and must, thereforee, be construed as taking within its sweep only applications under the Code even though Articles 158 and 178 oi the Act of 1908, which preceded Article 181 of that Act, had been substituted in the Limitation Act by the Amendment Act, (10 of 1940) so as to provide for certain applications under the Arbitration Act, 1940. This is how the Supreme Court dealt with the question :

' It does not appear to us quite convincing without further argument, that the mere amendment of Articles 158 and 178 can ipso facto alter the meaning which, as a result of a long series of judicial decisions of the different High Courts in India, came to be attached to the language used in Article 181. This long catena of decisions may well be said to have, as it were, added the words ' under the code ' in the first column of that article. If those words had actually been used in that column then a subsequent amendment of Articles 158 and 178 certainly would not have affected the meaning of that article. If, however, as a result of judicial construction, those words have come to be read into the first column as if those words actually occurred therein, we are not of opinion, as at present advised, that the subsequent amendment of Articles 158 and 178 must necessarily and automatically have the effect of altering the long acquired meaning of Article 181 on the sole and simple ground that after the amendment the reason on which the old construction was founded is no longer available. '

29. This decision of the Supreme Court was referred to and followed in a number of subsequent decisions of that court and reference may only be made to two of these, that is, the cases of Bombay Gas Co. v. Gopal Bhiva A.I.R. 1964 S.C. 352 : 25 F.J.R. 179 and Smt. Pravita Bose v. Kumar Rupendra Deb Raikat, : [1964]4SCR69 .

30. In its third report, the Law Commission of India dealt with the question of a suitable provision in the new Limitation Act for applications or petitions under special laws as it was felt that there was no such provision in the existing law of limitation. This is how the recommendation runs at page 5 of the official printed report:

' We recommend that a new definition of the word ' application ' so as to include any petition, original or otherwise, should be added. The object is to provide a period of limitation for original petitions and applications under special laws as there is no such provision now. Consequential alterations in the definition of the word ' applicant' should also be made. '

31. By the Indian Limitation Act, 1963, the Act of 1908 was repealed and the period of limitation for various applications was provided in the new Act in the third division which is entitled ' Applications ' and consists of two parts. Part I is entitled ' Applications in specified cases ' and consists of Articles 118 to 136, which deal with various applications under the Code of Civil Procedure except Article 131 which also provides for applications under the Code of Criminal Procedure and Article 119 which provides for certain applications under the Arbitration Act, 1940. Part II is entitled ' other applications ' and Article 137 is the only article in this Part. Another change brought about by the new Act was the incorporation of the definition of the terms ' applicant' and 'application ' by Sections 2(a) and 2(b) of the Act. The term ' applicant ' is denned as including ' a petitioner' and the other term is defined as including 'a petition'. Article 137 is in the following terms :

'Anyother application for which no period of limitation is providedelsewhere in this division.(threeyears) Whenthe right to apply accrues.'

32. An indication of the extent of the application of Article 137 is provided by the following declaration in the statement of objects and reasons of the Act:

' A new definition of application is being inserted so as to include a petition, original or otherwise. The object is to provide a period of limitation for original applications and petitions under special laws as there is no such provision now. '

33. While construing Article 181 of the Act of 1908, the various High Courts and later the Supreme Court had read into the article words of limitation so as to limit its scope to applications made under the Code of Civil Procedure on the ground that by long user it had acquired that meaning so much so that the subsequent substitution of Articles 158 and 178 of that Act was not considered as in any manner justifying the deviation from the aforesaid construction of Article 181. In view of the wider scope of Article 137 as compared to that of Article 181, the definition of the term ' application ' in Section 2(b), the history of the present legislation and the circumstances in which the change had been brought about in the context of the indication in the statement of objects and reasons, it is possible to hold that Article 137 would contain within its sweep not only applications under the Code of Civil Procedure for which no provision is made in Part I of the division dealing with applications but also applications under various special statutes such as the one with which I am concerned in the present case and I am not surprised that High Courts of Bombay, Calcutta and Kerala have taken that view.

34. In Employees' State Insurance Corporation v. Bharat Barrel and Drum ., : (1967)ILLJ625Bom a Division Bench of the Bombay High Court was concerned, inter alia, with the question whether an application for relief under Section 75 of the Employees' State Insurance Act, 1948, was subject to any period of limitation and it was held that although having regard to the limited application of Article 181 of the old Act it was not, such an application was subject to Article 137 of the new Act.

35. In the case of Ram Kumar Kajaria v. Chandra Engineering (India) Ltd., : AIR1972Cal381 the question arose as to the application of Article 137 to an application for pre-emption under the West Bengal Land Reforms Act, a special statute, and after considering the comparative phraseology of Articles 181 and 137, the definition of the term ' application ' in the new Act, the statement of objects and reasons and the legislative history of the new Act, it was held that, on its true construction, Article 137 would take within its sweep applications other than those that could be made under the Code of Civil Procedure including the applications under the special statute.

36. In the case Beerevu v. Kathiymma, : AIR1973Ker226 the question whether an application under Section 151 of the Code of Civil Procedure invoking the inherent powers of the court was within Article 137 of the Limitation Act was answered in the negative on the ground that Article 137 would have no application to a case of motion made by a party seeking to invoke the inherent jurisdiction of the court but the question whether the application of Article 137 extended to applications other than those provided under the Code of Civil Procedure and whether the article was wider in its scope and sweep than Article 181 of the old Act was answered in the affirmative. The decision of the Calcutta High Court was followed. This is how the conclusion was summarised :

' In Article 181 as it stood words of limitation were read into because of the context of that article. These words of limitation were ' under the Code of Civil Procedure '. If, by reason of reading the corresponding Article 137 along with the definition of the term 'application', there is no scope to read into the article any restriction or limitation, that is the end of the matter. The plain meaning of that article will have to be applied and that is without the limitation ' under the Code of Civil Procedure '. That would mean that it will apply to all applications which are not otherwise expressly provided for in the other articles of the Limitation Act. thereforee, according to me, taking the scope of the change made in the new enactment, Article 181 will have to be read in a more comprehensive manner to include all applications without the limitation of applications ' under the Civil Procedure Code '. More or less the same view has been taken by the Calcutta High Court in R. K. Kajaria v. Chandra Engineering (India) Ltd..'

37. If the matter had ended at that, I would have no difficulty in holding that Article 137 was wider in its scope than Article 181 of the Act of 1908 and would include within its sweep even applications which are made under any special statute. Such a conclusion would, however, be contrary to the decision of the Supreme Court in the case of Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli, : (1969)IILLJ651SC which does not appear to have been placed before the Calcutta and Kerala High Courts. The decision of the Bombay High Court was earlier than that of the Supreme Court.

38. In the case of Town Municipal Council, Athani, the Supreme Court was called upon to consider if an application claiming computation of benefit for over-time work under Section 33C(2) of the Industrial Disputes Act, 1947, was subject to any period of limitation and whether Article 137 of the Limitation Act, 1963, applied to such an application was answered in the negative on two grounds, namely, (1) Article 137 did not represent such a drastic alteration of the scope of Article 181 as to justify a conclusion that it would include within its sweep all applications irrespective of the fact whether they had any reference to the Code of Civil Procedure, and (2) Article 137 would have no application to applications made to the Tribunal or authorities other than courts.

39. This is how Bhargava J., as he then was, speaking for the court in that case, dealt with the first question:

' It appears to us that the view expressed by this court in those cases must be held to be applicable, even when considering the scope and applicability of Article 137 in the new Limitation Act of 1963. The language of Article 137 is only slightly different from that of the earlier Article 181 inasmuch as, when prescribing the three years' period of limitation, the first column giving the description of the application reads as ' any other application for which no period of limitation is provided elsewhere in this division '. In fact, the addition of the word 'other' between the words ' any ' and ' application ' would indicate that the legislature wanted to make it clear that the principle of interpretation of Article 181 on the basis of ejusdem generis should be applied when interpreting the new Article 137. This word 'other' implies a reference to earlier articles, and consequently, in interpreting this article, regard must be had to the provisions contained in all the earlier articles. The other articles in the third division to the Schedule refer to applications under the Code of Civil Procedure, with the exception of applications under the Arbitration Act and also in two cases applications under the Code of Criminal Procedure. The effect of introduction in the third division of the Schedule of reference to applications under the Arbitration Act in the old Limitation Act has already been considered by this court in the case of Sha Mulchand & Co. Ltd., : [1953]4SCR351 . We think that, on the same principle, it must be held that even the further alteration made in the articles contained in the third division of the Schedule to the new Limitation Act containing references to applications under the Code of Criminal Procedure cannot be held to have materially altered the scope of the residuary Article 137 which deals with other applications. It is not possible to hold that the intention of the legislature was to drastically alter the scope of this article so as to include within it all applications, irrespective of the fact whether they had any reference to the Code of Civil Procedure.'

40. It may, however, be pointed out that in the case of Nityanand M. Joshi v. Life Insurance Corporation of India, : (1969)IILLJ711SC , a slightly larger Bench of the Supreme Court answered the question, whether an application under Section 33-C(2) of the Industrial Disputes Act would be governed by Article 137 of the Limitation Act, in the negative on the ground that in their Lordships' view Article 137 only contemplated 'applications to courts' and that the industrial tribunal or labour court were not courts and the article would have no application to proceedings before these authorities. In this case, Sikri J., as he then was, who spoke for the court, considered the earlier decision of the Supreme Court in Town Municipal Council, Athani and noticed that Article 137 had been held to be inapplicable to applications made under Section 33-C(2) of the Industrial Disputes Act in that case on two grounds and while agreeing with the earlier decision in respect of the ground that the article had no application because the industrial tribunal or labour court was not a court to which Article 137 could apply, felt that it was not necessary to express any views on the first ground, namely, whether the scope of Article 137 extended to applications under special statute and it was observed that this question required ' serious consideration ' and apparently a mild doubt was cast on the correctness of the earlier decision of the Supreme Court, and I say so with utmost respect. This is how the matter was dealt with in paragraph 4 of the judgment:

' It is not necessary to express our views on the first ground given by this court in Civil Appeals Nos. 170 to 173 of 1968, D/-20-3-1969 : (1969)IILLJ651SC . It seems to us that it may require serious consideration whether applications to courts under other provisions, apart from the Civil Procedure Code, are included within Article 137 of the Limitation Act, 1963, or not.'

41. Even though it may be possible to read in the aforesaid observations a possible expression of opinion that the earlier decision required reconsideration I should have thought that the said decision not having been overruled or reconsidered would still hold the field, and I say so with respect, and be binding on courts in India and I would have no option but to hold that Article 137 is not wider in its sweep than Article 181 of the earlier Act and that the scope of the said article would not extend to an application under special statute such as the one with which I am concerned in the present case. In this view of the matter, with respect, the judgments of the Bombay, Calcutta and Kerala High Courts would not be good law.

42. In the result, as at present advised, I am bound by the view that Article 137 had no application to the proceedings out of which the appeal has arisen and to hold that the learned district judge was wrong in his conclusion that the application was barred by time.

43. In the view that I have taken of the scope of Article 137 of the new Act, the further questions whether Article 137 would regulate applications that may be made either under the Code of Civil Procedure or otherwise to invoke the inherent jurisdiction of the court or the power of the court even though no right is conferred by any statute on the litigant to make such an application and as to whether Section 30 of the new Act would apply to cases where the old Act did not prescribe any period of limitation but the new Act did, do not survive. These are, however, questions of some importance and would require serious consideration and even a cursory examination of the latter question brings out a serious lacuna in the Act. Section 30 provides for cases where the period of limitation provided under the old Act was longer than the one provided by the corresponding provision in the new Act. But what happens where the old Act did not prescribe any period of limitation for a particular proceeding but the new Act did. Could it be said in such cases that the period prescribed by the new Act was 'shorter' than the one prescribed by the old Act within the meaning of the provisions of Section 30 The plain language of Section 30 would not justify such a conclusion. If that be so how would the new provision providing for limitation for the first time in the Act be administered. An instance in point would be provided by Article 137 itself. If the article is construed in a wider sense it would take within its sweep all applications irrespective of the statute that they may purport to invoke. There was no provision for some such application in the old Act. The starting point under the article would be ' when the right to apply accrues', and the period is three years. The right may have accrued long before the repeal of the old Act, which provided no period of limitation. Could such an application be ever filed under the new Act if Section 30 did not save it An appropriate provision to deal with such cases was apparently necessary.

44. In the view I have taken of the maintainability of the appellant's petition, the appeal fails and is dismissed but in the circumstances with no costs.


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