1. It is very unfortunate that the learned Judge should have embarked on considerations which, in our opinion, are not germane to the disposal of the application made by the Official Liquidator under Section 179(1) of the Indian Companies Act for leave to file a suit. We agree with the learned Judge that the said provision in the Indian Companies Act was intended to prevent frivolous and wasteful litigation by an Official Liquidator. At the same time, it is obvious that the Court, when approached by the Official Liquidator for sanction to institute a suit cannot decide on the merits of the case. No doubt in one part of the judgment, the learned Judge definitely refrained from dealing with the strict legal merits of the claim, but later on he expressed a definite opinion that he should not allow the suit to be filed to recover a large sum of interest on the basis of Section 55 of the Transfer of Property Act in the absence of a specific agreement to pay interest. It looks as though the learned Judge was much influenced by what he apparently considered to be improper on the part of the Official Liquidator, namely, to have issued suit notices and prepared a plaint and thereafter filed an application for sanction to institute the suit. While we agree with him that leave of the Court under Section 179 is not a mere formality, we cannot see anything improper in the Official Liquidator, if he bona fide believed that there was a fair claim which he could put forward on behalf of the company making every preparation for the Institution of the suit. We do not see why the Official Liquidator should first apply and obtain the sanction of the Court and thereafter begin to prepare his case. We do not think that the Liquidator demurred in any way to what is undoubtedly proper, namely, that the final responsibility should rest on a liquidation Court in the matter of embarking on litigation on behalf of the company.
2. We see no justification for issuing notice to the Province of Madras, the defendant in the proposed suit. In our opinion Section 179 does not contemplate a formal application which has to be decided after notice to the opposite party. An application under that section is strictly between the Official Liquidator and the Court. It appears to us to be unreasonable that the party against whom a suit is proposed to be filed should be given an opportunity to oppose an application by the Official Liquidator to institute the suit.
3. We have no hesitation in holding that sanction should be accorded to the Official Liquidator to institute the proposed suit. We do not understand what the learned Judge meant when he said that he would not allow the suit to be filed solely on the basis of Section 55 of the Transfer of Property Act. That section, among other things, declares that in the absence of a contract to the contrary, the seller is entitled, where the ownership of the property has passed to the buyer, before payment of the whole of the purchase money, to a charge upon the property in the hands of the buyer for the amount of the purchase money or any part thereof remaining unpaid and for interest on such amount or part from the date on which possession has been delivered. We are not now concerned with what defence the Province may have to the claim for interest. But the provision in Section 55 to which we have referred certainly shows that the claim put forward by the Official Liquidator cannot be frivolous or vexatious.
4. We, therefore, allow the appeal and set aside the order of the learned Judge dismissing the appellant's application. We give sanction to the Official Liquidator to Institute the proposed suit. There will be no order as to costs; but the Official Liquidator will get his costs of the appeals from the funds of the company.