Skip to content


Mohamed Hasan Khaleeli Vs. P. Varadarajulu Naidu, Liquidator of the Tamil Nadu Ltd. in Voluntary Liquidation and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1938Mad96; (1937)2MLJ825
AppellantMohamed Hasan Khaleeli
RespondentP. Varadarajulu Naidu, Liquidator of the Tamil Nadu Ltd. in Voluntary Liquidation and ors.
Excerpt:
- - the learned advocate for the second respondent intimated that his client would like to continue the petition in the place of the petitioner, but later realising that he was not in a position to prove facts which would justify a supervision order being passed he informed the court that he was not in a position to proceed further. it is said that in these circumstances the petition having failed, they are not entitled to costs in their favour. as a general rule the successful party is entitled to costs in his favour and the unsuccessful party is liable to have an order for costs against him......we have been referred to a number of cases decided in england on questions relating to costs in winding up petitions. it appears to be usual there to allow one set of costs to the successful party and where the petition is withdrawn one set even to the supporting creditor or creditors. but it must be remembered that in england supporting creditors are invited to come in. they are not invited to come in under the rules of this court. the question of costs must be decided in the light of the facts of the particular case. as a general rule the successful party is entitled to costs in his favour and the unsuccessful party is liable to have an order for costs against him. the opposing respondents in this case are not the successful parties.8. a case which has a general application.....
Judgment:

Alfred Henry Ltonel Leach, C.J.

1. This appeal raises a question with regard to costs in a winding up petition. In November, 1936, a resolution was passed for the voluntary winding up of the 'Tamil Nadu Limited', a company registered under the Indian Companies Act, 1913. The company had been formed for the purpose of publishing a daily newspaper in Tamil in Madras. On the 11th December, 1936, the appellant filed a petition on the Original Side of this Court asking that an order might be passed for the winding up of the company under the supervision of the Court. This action was taken as the result of a resolution passed at a meeting of creditors held on the 2nd December, 1936. On the 15th December, a further application was filed for the appointment of an interim official liquidator. These petitions came before Gentle, J., on the 27th April of this year. The learned advocate appearing for the appellant then informed the Court that his client did not propose to pursue the winding up petition and he had no interest in it. The learned Judge enquired whether any other creditor would proceed with the petition. I should mention that six creditors had entered appearances and professed to support the petition. Two of them, respondents 2 and 7, asked for time to look into the matter. Time was accordingly granted until next day when the case was again placed in the list. The learned advocate for the second respondent intimated that his client would like to continue the petition in the place of the petitioner, but later realising that he was not in a position to prove facts which would justify a supervision order being passed he informed the Court that he was not in a position to proceed further. The seventh respondent was also not willing to go on with the petition. In his case there was only a small amount due by the company. The learned Judge then passed an order dismissing both the petitions; and in respect of the petition for a supervision order, he directed that the petitioner should pay the costs of all parties appearing before him. As there were seven respondents, the voluntary liquidator and six creditors, this meant that the petitioner was required to pay seven sets of costs which would amount, we are told, to a sum of over Rs. 2,000. The petitioner has appealed against this order and contends that the learned Judge was not entitled to pass any order for costs against him.

2. While the position of the creditors who appeared is on a different basis, it is quite clear that the voluntary liquidator would have been entitled to his costs, because he had successfully opposed the petition. But he had agreed before the case came into Court on the 27th April that he would not press for his costs and that there should be an order dismissing the petition without costs. In these circumstances he does not ask for the dismissal of the appeal. In fact, he is quite agreeable to the appeal being allowed. The third respondent in the appeal leaves the matter in the hands of the Court. Respondents 2, 4, 5, 6 and 7 in the appeal strongly oppose the appeal.

3. The question involves a reference to the provisions of the rules of the Court and consideration of the principles which apply. Dealing first with the rules, Rule 27 of the Rules of the Original Side of this Court under the Companies Act, provides that every petition for the winding up of any company by the Court, or subject to the supervision of the Court shall after admission, be advertised fourteen clear days before the hearing, and the advertisement is required to be in the terms of Form No. 9 to be found at page 324 of the rules. The form reads as follows:

Notice is hereby given that a petition for the winding up of the above-named company by the (or subject to the supervision of the) High Court of Judicature at Madras was on the day of 19 , presented to the High Court of Judicature at Madras, by the said company (or A.B. of a creditor or contributory of the said company, or as the case maybe). And that the said petition is directed to be heard on the day of 19: and any creditor or contributory of the said company desirous to oppose the making of an order for the winding up of the said company under the above Act, should appear at the time of hearing by himself or his Counsel or Vakil for that purpose; and a copy of the petition will be furnished to any creditor or contributory of the said company requiring the same, by the undersigned, on payment of the regulated charge for the same.

Attorneys or Vakils for the Petitioners.

4. It will be observed that this form only refers to the appearance of persons who desire to oppose the winding up order. It differs materially from the form prescribed by the English rules which allow interested persons to appear to oppose or to support. Rule 101 of this Court states that in cases not provided for by the rules or by rules of procedure laid down in the Act, the practice and procedure of the High Court of Justice in England in matters relating to companies shall be followed so far as they are applicable and not inconsistent with the rules and the Act. It is said that by reason of this rule the English rule can be applied here and that the Court is justified in regarding the notice to appear as an invitation to appear to oppose or to support. I am unable to accept this contention. It is quite clear from the form of the notice that this Court only intended notice to issue to persons who wished to oppose. The law allows the Court to permit another creditor to take the place of a petitioning creditor who does not wish to proceed with his petition, but this is another matter and does not really affect the point under discussion.

5. We have here a notice inviting creditors who wished to oppose the application for a winding up order to appear at the hearing. The creditor-respondents to this appeal appeared in answer to the notice issued, but they appeared to support, not to oppose the petition. It is said that in these circumstances the petition having failed, they are not entitled to costs in their favour. They supported a petition which the Court dismissed.

6. We consider that there is great force in this argument. Moreover, none of the creditors who did appear were willing to undertake the burden of the petition. The second respondent did express his willingness at one time to undertake this burden, but he found it too much for him and quickly abandoned the idea. It seems to us that in these circumstances it is not open to him to oppose this appeal, and the same remark applies to the other opposing creditors.

7. We have been referred to a number of cases decided in England on questions relating to costs in winding up petitions. It appears to be usual there to allow one set of costs to the successful party and where the petition is withdrawn one set even to the supporting creditor or creditors. But it must be remembered that in England supporting creditors are invited to come in. They are not invited to come in under the rules of this Court. The question of costs must be decided in the light of the facts of the particular case. As a general rule the successful party is entitled to costs in his favour and the unsuccessful party is liable to have an order for costs against him. The opposing respondents in this case are not the successful parties.

8. A case which has a general application is that of Hull and County Bank, In re (1878) 10 Ch. D. 130 where it was decided that a creditor appearing in a winding up petition is not entitled to his costs as a matter of right. To entitle him to them he must show reasonable ground for appearing. In giving the judgment in this case, Jessel, M.R., observed:

I refused these costs, and I will state my reasons for doing so. I by no means assent to the proposition that creditors appearing on a petition to wind up a company are entitled to their costs as of right. It is usual to give one set of costs when many appear, and when there is a reasonable ground for appearing; but I have said before, and I repeat it, that I will not lay down any such rule as that creditors are entitled to their costs as of right, because that would induce solicitors to instruct counsel simply for the purpose of obtaining costs, and for no other purpose whatever.

9. I do not wish to suggest that appearances have been entered in this case for the mere purpose of obtaining costs, but the appearances of the respondent creditors have not been justified. When they were called upon to adopt the petition they refused to do so. I will not pause to consider what their motives might have been, but it is clear that they have not made out a case for an order for costs in their favour. The only order for costs which might have been made in the circumstances was an order in favour of the voluntary liquidator, but he did not ask for it.

10. The appeal will be allowed but we make no order for costs in the appeal. The appellant did not disclose before the learned trial judge the reasons why he was not proceeding with the appeal and his attitude was one which was sufficient to raise suspicion as to his motives. The liquidator will have his costs of the appeal out of the assets of the company.


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