Skip to content


Ramanlal Amratlal Sodhan Vs. Employees' State Insurance Corporation (20.06.1979 - GUJHC) - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtGujarat High Court
Decided On
Case NumberCivil Revision Application No. 307 of 1978
Judge
Reported in(1980)1GLR671
ActsCompanies Act 1956 - Sections 128, 446 and 446(1)
AppellantRamanlal Amratlal Sodhan
RespondentEmployees' State Insurance Corporation
Appellant Advocate Mangaldas M. Shah, Adv.
Respondent Advocate S.B. Vakil, Adv.
Cases ReferredIn Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath
Excerpt:
- - shah has raised is that, except by leave of the court which made the winding-up order, the suit cannot proceed against the company as well as against the guarantor. in order to make good that contention, he has invited my attention to the decision of the supreme court in punjab national bank ltd. if his liability is in the alternative, the guarantor can raise that defence and escape on merits the liability to make good the amount until the company has finally failed to make it good. if the guarantor thinks that the company has been statutorily discharged from the liability and that, therefore, he too is discharged from that liability, he may raise that contention is defence, make it good and have the suit as against him dismissed......(hereinafter referred to as 'the plaintiff') has filed in the city civil court, ahmedabad, civil suit no. 2831 of 1972, against defendant no. 1, who is the official liquidator of anant mills ltd., and defendant no. 2, who was the managing director of that company, for recovering a sum of rs. 2,80,268.34, which, according to the plaintiff, are recoverable as a special contribution from anant mills ltd. under the employees' state insurance act. anant mills ltd. is a company under liquidation. defendant no. 2 has been joined as a party to the suit because he is the guarantor. the official liquidator representing the company has not filed the written statement in the suit. defendant no. 2 has filed his written statement and, inter alia, raised the contention that the trial court has.....
Judgment:

S.H. Sheth, J.

1. Employees' State Insurance Corporation (hereinafter referred to as 'the plaintiff') has filed in the City Civil Court, Ahmedabad, Civil Suit No. 2831 of 1972, against defendant No. 1, who is the official liquidator of Anant Mills Ltd., and defendant No. 2, who was the managing director of that company, for recovering a sum of Rs. 2,80,268.34, which, according to the plaintiff, are recoverable as a special contribution from Anant Mills Ltd. under the Employees' State Insurance Act. Anant Mills Ltd. is a company under liquidation. Defendant No. 2 has been joined as a party to the suit because he is the guarantor. The official liquidator representing the company has not filed the written statement in the suit. Defendant No. 2 has filed his written statement and, inter alia, raised the contention that the trial court has no jurisdiction to entertain the suit. Issue No. 6 raised by the learned trial judge relates to the jurisdiction of the court to entertain and try the suit. It was tried the learned trial judge as a preliminary issue. Reliance was placed upon s. 446 of the Companies Act, 1956, in support of the contention that the trial court has no jurisdiction to proceed with the suit. The learned trial judge negatived the contention and held that he had jurisdiction to try the suit.

2. It is the order which is challenged by defendant No. 2 in this civil revision application.

3. Mr. M. M. Shah who appears on behalf of defendant No. 2 has invited my attention to sub-section (1) of section 446 of the Companies Act, which, according to him, bars the jurisdiction of the court to try the suit. It provides as follows :

'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 commended, in 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.'

4. It is not is dispute that the winding-up order has been made in respect of Anant Mill Ltd. and that the official liquidator has been appointed. It is also not in dispute that when the winding-up order was made, the present suit was pending in the City Civil Court against both defendants. The contentions which Mr. M. M. Shah has raised is that, except by leave of the court which made the winding-up order, the suit cannot proceed against the company as well as against the guarantor. Sub-section (1) of section 446 expressly provides that except, by the leave of the court and subject to such terms as the court may impose, a pending suit shall not be proceeded with against the company only. The guarantor of the company is not the company itself. They are two different and distinct legal persons. Therefore, merely because the official liquidator representing the company has been joined as a party to the suit, it cannot be said that the said that the suit cannot proceed against the other defendant. To include a guarantor in the expression 'the Company' used in sub-section (1) of section 446 is to unduly widen its connotation and to introduce in the section what Parliament has not intended to introduce.

5. Mr. S. B. Vakil who appears on behalf of the plaintiff has argued that the liability of the guarantor is distinct from the liability of the company and that, therefore, independently of the liability of the company, the liability of its guarantor can be adjudicated upon and enforced in a court of law. In order to make good that contention, he has invited my attention to the decision of the Supreme Court in Punjab National Bank Ltd. v. Shri Vikram Cotton Mills Ltd. : [1970]2SCR462 . The principles which have been laid down by the Supreme Court in that decision are as follows. A contract of guarantee requires concurrence of three persons, the principal debtor, the surety and the creditor, the surety undertaking an obligation at the request, express or implied, of the principal debtor's default. Where a managing agent of a company executes in favour of a bank a promissory note, a deed of hypothecation and a letter assuring the bank that the company shall remain solely responsible for all loss to the hypothecated stock, and as a part of the same arrangement, the managing director or the managing agent in his individual capacity executes a bond called an agreement of guarantee, reciting that he, the managing director, guarantees to the bank payment on demand of all monies which may at any time be due to the bank from the company, the guarantee is a continuing guarantee for the balance which may remain due to the bank on such cash credit account. The liability of the surety under section 128, Contract Act, is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Therefore, in each case the terms of the bond may have to be considered to find out whether the liability of the surety is not co-extensive with that of the principal debtor. In the case before the Supreme Court, the liability of the guarantor was co-extensive with that of the company. It was, therefore, held that the suit filed against guarantor was not premature.

6. In Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath [1941] 11 Comp Cas 11; AIR 1940 Bom 247, it has been laid down by the High Court of Bombay that the liability of guarantor or a surety may be co-extensive or may be in the alternative. If the liability of the guarantor or the surety is co-extensive with the liability of the principal debtor, then it is open to the creditor to recover the amount from any one of them. The jurisdiction of the civil court to try the suit against the guarantor is not at all affected irrespective of whether the liability of the guarantor is co-extensive with that of the company or is in the alternative. If it is co-extensive with that of the company, the proof of the liability itself will render the guarantor liable independently of the company. If his liability is in the alternative, the guarantor can raise that defence and escape on merits the liability to make good the amount until the company has finally failed to make it good. Whatever may be the nature of the liability, the jurisdiction of the civil court to try the suit against the guarantor is not at all affected. On merits, if the guarantor is not liable, he may raise the defence, prove is and succeed.

7. Mr. Shah who appears on behalf of defendant No. 2 has next argued that the plaintiff's claim has priority over other claims in the matter of its realisation from the assets of the company. Assuming that it has such a priority, it does not affect the jurisdiction of the civil court to entertain and try the suit against defendant No. 2. Priority or no priority, if the liability of the guarantor is co-extensive, the creditor can, at his option, lay his hands on any one, the principal debtor or the guarantor at any time. If the liability of the guarantor is in the alternatives, that defence can be raised on merits by the guarantor. In any case, if does not bar the jurisdiction of the civil court to entertain the suit against the guarantor.

8. Mr. Vakil has further argued that even if the company is statutorily discharged from the liability to pay the amount, the guarantee furnished by the guarantor is not necessarily discharged. I am not expressing any opinion on this aspect because it does not affect the jurisdiction of the court to proceed with the suit against the guarantor. If the guarantor thinks that the company has been statutorily discharged from the liability and that, therefore, he too is discharged from that liability, he may raise that contention is defence, make it good and have the suit as against him dismissed. This aspect has nothing to do with the jurisdiction of the civil court to entertain and proceed with the suit.

9. Mr. Vakil has brought to my notice the order made by this court in Company Application No. 166 of 1978 granting to the plaintiff on 4th August, 1978, leave to proceed with the suit as against the company. Therefore, not only the suit as against defendant No. 2. can proceed but is can also proceed as against defendant No. 1.

10. In the result, I find that the trial court has jurisdiction to proceed with the suit. The impugned order, therefore, suffers from no infirmity. The civil revision application, therefore, fails and is dismissed. Rule is discharged with costs.

11. In this civil revision application, defendant No. 2 has also prayed for transfer of the suit from the City Civil Court at Ahmedabad to this court. In cannot decide this plea in a revision application. Defendant No. 2 will be at liberty to make an appropriate to this court for the purpose if he thinks fit to do so.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //