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V.K. Padmanabhan Vs. Kunjan Narayanan and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKerala High Court
Decided On
Case NumberC.R.P. No. 1217 of 1960
Judge
Reported inAIR1964Ker97
ActsCompanies Act, 1956 - Sections 446; Companies (Amendment) Act, 1960; Code of Civil Procedure (CPC) , 1908 - Order 29, Rule 1 - Order 32
AppellantV.K. Padmanabhan
RespondentKunjan Narayanan and ors.
Appellant Advocate A.B. Pereira, Adv.
Respondent Advocate N. Padmanabha Panicker, Adv.
DispositionPetition dismissed
Cases ReferredS. K. G. Sugar Ltd. v. Sri Ali Hassan
Excerpt:
.....of code of civil procedure, 1908 - petitioner (official liquidator of company) submitted application in liquidation court stating that dismissal of suit by munsif after passing of winding-up order was without jurisdiction and suit should be proceeded - application dismissed by lower court - petition for reversion of order - suit by company can be proceeded with in favour of company after winding-up order passed and it can be dismissed for default of company in suit - order of dismissal passed by munsif cannot be treated as nullity - no motion for restoration of suit - lower court order justified. - - 7. in the result, the order of the court below appears well justified......expression 'no suit shall be proceeded with against the company' would cover the dismissal of a suit instituted by the company, as it is a proceeding of the court against the company. according to counsel, the court can only proceed to decree the suit in favour of the company and if, for any reason, it comes to a conclusion that the suit should be disposed of against the company, section 446, requires it to secure the leave of the liquidation court to dispose it. it was also contended that when a winding up order has been made, the company can be represented by the liquidator alone and that thereafter no proceeding against the company can be had without tile liquidator on the array of parties thereto. 4. the argument is certainly fascinating and as counsel put it, it appeared to carry.....
Judgment:

M. Madhavan Nair, J.

1. This petition by the Official Liquidator of a Company is to revise an order dismissing his application to proceed with a suit ignoring its dismissal by the court of institution after the order for the winding up of the Company has been passed.

2. O. S. No. 370 of 1955 on the file of the Munsif, Vaikom, is a suit for money instituted by the Company on the 30th June 1955. On the 5th November 1956, the Company was wound up by an order of the District Court, Alleppey; on the 5th December 1956 when the suit was called, the managing director submitted that fact before the Court and' thereupon the Court adjourned the case to the 31st January 1957, for the liquidator to get impleaded. As nothing was done, the suit was dismissed on the 30th January 1957. Nothing happened till the ,25th June 1958 when the liquidator submitted an application in the liquidation court stating that the dismissal of the suit by the Munsif, Vaikom. after the passing of the winding-up order, was without jurisdiction as being contrary to the stay enacted in Section 446 of the Companies Act, 1956, and therefore, ignoring the same, the suit should be taken to file and proceeded with. That application was dismissed by the District Judge on the 12th January 1960. This petition is for a revision of that order.

3. Section 446 of the Companies Act, 1956, treads:

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

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

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

(b) .....

(c) .....

(d) .....

Whether such suit or proceeding has been instituted or is instituted.....before or after the order for the winding up of the company, of before or after the commencement of the Companies (Amendment) Act, 1960.

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

4. Nothing in Sub-section (1) or Sub-section-(3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court'Counsel for the petitioner contends that the expression 'no suit shall be proceeded with against the Company' would cover the dismissal of a suit instituted by the Company, as it is a proceeding of the Court against the Company. According to counsel, the court can only proceed to decree the suit in favour of the Company and if, for any reason, it comes to a conclusion that the suit should be disposed of against the Company, Section 446, requires it to secure the leave of the liquidation court to dispose it. It was also contended that when a winding up order has been made, the Company can be represented by the liquidator alone and that thereafter no proceeding against the Company can be had without tile liquidator on the array of parties thereto.

4. The argument is certainly fascinating and as counsel put it, it appeared to carry force too. 'Suit or other legal proceeding' denotes a party's action, not the court's order or decision thereon. Though no ruling under Section 446 of the Companies Act, 1956, has been brought to my notice there is a long catena of decisions on its predecessor Section 171 of the Companies Act 3913, the latest whereof is Rahmat Ali Fatehullah v. Calcutta National Bank Ltd., AIR 1955 All 169 (FB). The said Section 171 was as follows:

'When a winding up order has been made or a provisional liquidator has been appointed no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.'

After review of prior decisions, the Full Bench observed:

'The words 'against the company' must mean a proceeding where a liability is intended to be fastened on the company or its assets and not a proceeding commenced by a person with the object of escaping liability arising put of a proceeding commenced by the company itself. It would probably be useful to clarify the position a little further. If a person wants to file a suit to escape liability on the ground that the company's claim against him is unfounded, it is a proceeding against the company, but where the company has started the proceeding, that is, put forward its claim in a court of law, any remedy available by way of defence to escape liability, which the company wants to fasten on him, should Hot be deemed to be a proceeding commenced or continued against the company and in such a case, the question, whether the claim was put forward or the suit was filed by the company before or after the winding up order, should make no difference.

......Liquidation proceedings under the Companies Act are for making available the assets of the company in 'pari passu' satisfaction of its liabilities, and if persons, other than secured creditors, are allowed to enforce their claims without any control exercised by the Company Judge, it may defeat or delay that object. But where a company has initiated a proceeding in a court of law whether before or after the winding up order, no permission of the Company Judge should be needed for anything done by the defendant or the opposite party to escape the liability this intended to be fastened on him.

If, however, the proceedings in a court of law are started by a person other than the company either with the object of fastening a liability on the company or with the intention of escaping a liability in respect of a claim which has not been brought into Court by the company itself, the permission of the Company Judge is required for the institution or the continuance of the proceedings. For instance, if a person files a suit for a declaration that the company owes to him a certain sum of money or that he does not owe the company any sum of money, the permission of the company Judge is necessary. If, however the company has instituted a suit or other proceeding to enforce a claim, any action taken by the defendant or the opposite party by way of defence, or if the company has obtained a decree or order, any defensive action by way of appeal, revision, review or setting aside of any 'ex parts' decree or order should not require the permission of the Company Judge.'

5. The legislature must be deemed to have been aware of the judicial interpretation of its enactments, and when, in the light of the rulings to the above effect, they, in their reiteration of the rule in the new Act, adopted the wording of the prior enactment, they must be held to have used the expression in the sense attributed in the judicial interpretation thereon. I would therefore hold that 'proceeding' mentioned in Section 446 of the Companies Act, 1956, comprehends only the steps in action taken by a party, but not the court's orders thereon, and that therefore a dismissal of a suit instituted by a company is not a proceeding against the Company within the meaning of that section.

6. On the other contention, that, after a winding up order, the liquidator is the representative of the company, the observations of the Supreme Court in S. K. G. Sugar Ltd. v. Sri Ali Hassan, AIR 1959 SC 230 at p. 235 and of Buckley on Companies Act page 513, 1957 edition, appear to support the petitioner. But, it is not essential that the representative of a Company should appear on the array of parties to an action concerning the Company. A comparison of the provisions of Orders 29 and 32 of the Civil Procedure Code and of the several illustrative forms of Title of suits in Appendix A to the Code, would show that it is enough to name the company itself as a party to the proceeding, without indicating who its physical representative is.

If a suit by a Company can be proceeded with in favour of the Company after a winding up order has been passed, it must necessarily follow that it can be dismissed for default of the Company in the conduct of the suit. The order of dismissal passed by the Munsif, Vaikom, cannot therefore be treated as a nullity. There was no motion for restoration of the suit under Order IX, Rule 9, Civil Procedure Code.

7. In the result, the order of the court below appears well justified. This C. R. P. fails, 'and is hereby dismissed. The records of the court below, come to this Court for purposes of this C. R. P., will be returned expeditiously.


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