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Om Prakash Mohta Vs. Steel Equipment and Construction Co. (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. 138 of 1963
Judge
Reported in[1968]38CompCas82(Cal)
ActsCompanies Act, 1956 - Section 434
AppellantOm Prakash Mohta
RespondentSteel Equipment and Construction Co. (P.) Ltd.
Appellant AdvocateS.C. Sen and ;S.B. Mukherjee, Advs.
Respondent AdvocateGouri Mitter and ;R.C. Nag, Advs.
Cases ReferredRanjit Singh v. Gobardhan Chandra
Excerpt:
- s.k. dutta, j. 1. this is an application for winding up of the above-mentioned company. the more relevant facts giving rise to this application may be summarised hereinafter for convenience.2. between the 11th day of april, 1956, and the 21st day of february, 1959, the abovementioned company, steel equipment and construction (p.) ltd., guaranteed repayment of a loan of rs. 1,97,000 made by the applicant to its sister concern, d.c. dhiman and brothers (p.) ltd.3. on 10th april, 1961, the petitioner instituted a suit, inter alia, against d.c. dhiman & brothers private limited impleading the guarantor, above-mentioned company, steel equipment & construction (p.) ltd. for rs. 2,10,000 and other reliefs. on 5th september, 1962, consent decree was passed for rs. 2,45,000 in favour of the.....
Judgment:

S.K. Dutta, J.

1. This is an application for winding up of the above-mentioned company. The more relevant facts giving rise to this application may be summarised hereinafter for convenience.

2. Between the 11th day of April, 1956, and the 21st day of February, 1959, the abovementioned company, Steel Equipment and Construction (P.) Ltd., guaranteed repayment of a loan of Rs. 1,97,000 made by the applicant to its sister concern, D.C. Dhiman and Brothers (P.) Ltd.

3. On 10th April, 1961, the petitioner instituted a suit, inter alia, against D.C. Dhiman & Brothers Private Limited impleading the guarantor, above-mentioned Company, Steel Equipment & Construction (P.) Ltd. for Rs. 2,10,000 and other reliefs. On 5th September, 1962, consent decree was passed for Rs. 2,45,000 in favour of the petitioner against the defendants including the abovementioned company, Steel Equipment & Construction Private Ltd. The said decree also created a charge on the assets of the said company being premises No. 22, G. T. Road, and the machinery lying thereat for payment of the decretal amount and interest. On 1st June, 1963, the petitioner through its solicitors gave a statutory notice of demand to the abovementioned company by registered post. On the same day, a suit was instituted by the said company in the Howrah court being Title Suit No. 177 of 1963 against the petitioner and other parties for a declaration that the said consent decree in Suit No. 543 of 1961 was verbally adjusted between the parties and the petitioner herein had agreed to finance the company with further advances. Thereupon the said company also obtained in the said Howrah suit an ex parte interim order restraining the petitioner from committing breach of the said alleged verbal agreement pleaded in the Howrah suit. On 6th July, 1963, the petitioner received a reply to their statutory notice, dated 1st June, 1963, from the said company wherein it was alleged, inter alia, that the said consent decree in Suit No. 543 of 1961 of this court was adjusted and upon terms, inter alia, that the petitioner will finance the company to the extent of a further sum of Rs. 4,58,000, that the said company had filed a suit in the Howrah court being Title Suit No, 177 of 1963 and had obtained an injunction against the petitioner restraining him from committing breach of the said oral adjustment or agreement. On 8th July, 1963, the petitioner filed an application for winding up of the company being Company Petition No. 138 of 1963, which was admitted on 9th July, 1963, when directions were given, inter alia, fixing the hearing on 8th August, 1963. On 10th July, 1963 the petitioner made an application in the said winding-up matter, their Application No. 172 of 1963, for appointment of a provisional liquidator of the company, whereupon the court was pleased to appoint a receive for limited purposes only. On 15th July, 1963, the said order of appointment of the official liquidator as receiver was somewhat modified but he continued to be the receiver. This application is still pending.

*****

4. Mr. Sen, at the outset, submitted that the company is commercially insolvent even leaving aside the question of the disputed debt and consequently should be wound up.

5. In the case of Company v. Sir Rameswar Singh, (1920) 58 I.C.561, it was observed that, where there is a bona fide dispute as to the debt and the company is solvent, there can be no question of winding up of the company. In the case of Bengal Luxmi Cotton Mills Ltd. v. Mahaluxmi Cotton Mills Ltd. : AIR1955Cal273 , similar observation was made by C. J. Chakraborty. The implied suggestion in these two cases is that, even though there may be a bona fide dispute as to the debt in question, if the company is proved to be insolvent otherwise, the company may be wound up.

6. The omission to file the balance-sheets for years and the omission to give particulars of the assets and liablilities of the company in the affidavit in opposition raises according to Mr. Sen, a strong presumption of commercial insolvency under Section 114 of the Evidence Act, because the company, which had special means of knowledge of these facts, had not chosen to disclose them.

7. The burden of proof for proving insolvency is on the applicant.

8. The allegations as to the insolvency made by the petitioner have been denied by the respondent-company. In reply, the applicant did not rely on specific facts and not even, the last balance-sheet which was published and distributed to the shareholders. In my view, on the omission of the respondent is not sufficient to discharge the burden of proof, and in any event not sufficient in this matter. Hence, this contention must be rejected.

9. Mr. Sen secondly submitted that, in any event, there should be a winding up order, as the claim being founded on a decretal debt, leaves no room for bona fide disputes.

10. Mr. Gouri Mitter, learned counsel for the respondent-company, on the other hand urged that the company was not competent to guarantee the liabilities of the sister concern and consequently the consent decree passed thereon was void and a nullity, and further and in the alternative that the consent decree dated 5th September, 1962, which affected the immovable properties outside the said jurisdiction, was without jurisdiction.

11. The learned counsel appearing for the parties made their respective submissions at length on these two points not only with great zeal but with considerable ability backed by industry and learning.

12. At the outset, it is necessary to consider the position when a debt is disputed before the winding-up court.

13. It has been held in England, on the one hand, that if the dispute is raised for the purpose of evading payment, such a dispute is not bona fide. In other words, it has been held that, if the dispute raised is a garb or cloak or means to hide its inability to pay, then such a dispute is not bona fide and the court in such circumstances will direct a winding up of the company.

14. On the other hand, it has been firmly established in England that nonpayment of a bona fide disputed claim is no proof of insolvency. This has been explained further : see Gold Hill Mines, In re, Palmer's Company Precedents, (1883) 23 Ch.D. 210, 16th edition, part II, page 34. See Halsbury's Laws of England, volume VI, 3rd edition, page 538, Article 1033.

15. This view of the English courts has been followed by our High Court. This is evident from the cases, Company v. Sir Rameswar Singh, (1920) 58 I.C. 61, Bharat Vegetable Products Ltd., In re, [1952] 22 Comp. Cas. 62, Bengal Luxmi Cotton Mills Ltd. v. Mahaluxmi Cotton Mills Ltd. : AIR1955Cal273 , Md. Amin Bros. v. Dominion of India. : AIR1952Cal323 .

16. The word ' bona fide disputes ' has been explained in English cases, as will appear from the said volume of Halsbury's Laws of England that there is a bona fide dispute where the dispute is based on a substantial ground.

17. Chief Justice Chakraborty in Bengal Luxmi Cotton Mills Ltd. v. Mdha-luxmi Cotton Mills Ltd., indicated the nature of a bona fide dispute in these words : 'In such a case the winding up Court will only see if the grounds on which the liability is disputed are substantial and if the dispute is in that sense 'bona fide'.'

18. In England, the courts have refused to make the order for winding up when a part of the debt is disputed although admitted to exceed fifty pounds: Brighton Club and Norfolk Hotel Co., In re, (1865)35Beav. 204, London and Paris Banking Corporation In re, (1875) 19Eq.444. and Gold Hill Mines, In re., (1883) 23 Ch.D. 210. In the case of Cardiff Preserved Coal & Coke Company, (1867) 2 Ch. App. 405, however, Lord Chelmsford expressed a contrary view, which in my opinion is not only consistent with the relative sections but also reason.

19. In the case of Company v. Sir Rameswar Singh, Chief Justice Sanderson extended the scope of disputed debt :

' it appears to the Court that on the materials before it there is ground for supposing that there is a bona fide dispute as to the substantial part of the debt upon which the winding up petition was made.'

20. Therefore, according to this decision, the bona fide dispute need not extend to the whole debt but it is sufficient if a substantial part thereof is bona fide disputed. In the case of Bharat Vegetable Products, In re, [1952] 22 Comp Cas. 62, the same trend is discernible.

21. In the case of a bona fide dispute, the court may decide finally the disputes as to the debt in order to save costs as was done in In re Imperial Silver Quarries Company, (1868) 16 W.R. 1220. (11) (1919) S.C. 492. and Landauer & Co. v. Alexander & Co., (1919) S.C. 492, or the court may adjourn the petition to enable the question to be decided in an action, with or without a direction that the entire amount of the debt or a part thereof be paid into court or dismiss the petition. (See same paragraph at Halsbury's Laws of England). In England, the modern practice in case of a disputed debt is to dismiss the petition. In our High Court, the most general practice, it seems to me, is to stay the winding up petition and direct one of the parties to file a suit for resolving the controversies as to the disputed debt. This has been done in cases where the dispute turned on a question of law depending on the construction of a clause or clauses in a scheme sanctioned by the winding-up court and which the winding-up court could resolve. In my opinion this course, in such cases involving questions of law, is productive of delay and expenses which could be avoided to the advantage of the parties, if the questions of law were decided by the winding-up court. Be that as it may, I am bound by the decision of the appeal court in Bengal Luxmi Cotton Mills Ltd. v. Mahaluxmi Cotton Mills Ltd. : AIR1955Cal273 .

22. It is now necessary to consider the effect of a decree in order to appreciate the application or effect of these principles in the case of decretal debt.

23. It ordinarily operates in the ordinary courts as res judicata or an estoppel in subsequent proceedings between the same parties or their successors.

24. It has, however, been held in numerous cases that a decree without jurisdiction is a nullity.

25. This receives support from Section 44 of the Evidence Act, Golab Sao v. Chowdhury Madho Lal, (1905)2 C.L.J. 384, and Peary Lal Ray Chaudhuri v. Secretary of State, : AIR1924Cal913 . It has been again held that a decree obtained by fraud and collusion is void : Rajib Panda v. Lakhan Sendh Mahapatra, (1900) I.L.R. 27 Cal. 11, Aswini Kumar Samaddar v. Banamali Chakrabarty, (1917) 40 I.C. 607, and Jamiruddin v. Khadejanessa Bibi, : AIR1929Cal685 . This again received support from Section 44 of the Evidence Act.

26. It has been again held that, where the decree is tainted with illegality, it is void and a nullity. It has again been held that, when a decree offends a public statute, it is void and a nullity. It has again been held that a contract founded on the incapacity of a party to the contract, as in the case of a minor, is void and a nullity.

27. It has been further settled that a consent decree stands on the same footing as a decree on contract. See Secretary of State for India in Council v. Atteendranath Dass, (1935) I.L.R. 63 Cal. 550, and Shankar Sitaram v. Balkrishna Sitaram : [1955]1SCR99 . A consent decree may be set aside on the same grounds as an agreement : Nibaran Chandra Shaha v. Motilal Saha, (1935) I.L.R. 62 Cal. 642.

28. It is beyond controversy that a decree, which is void and a nullity, can be set aside by means of a suit. It has equally been held over and over again that it is not necessary to file a suit to impeach a decree which is a nullity. It can be attacked in proceedings in which reliance is placed on such a decree.

29. In this connection, reference may be made to the cases of Rajib Panda v. Lakhan Sendh Mahapatra, (1900) I.L.R. 27 Cal. 11, Peary Lal Ray Chaudhuri v. Secretary of State, : AIR1924Cal913 , Aswini Kumar Samadhar v. Banamali Chakrabarty, (1917) 40 I.C.607, and the case of Britannia Building & Iron Co. v. Govinda Chandra Bhattacherjee, (1960) 64 .W.N. 324.

30. It is also well known that the plea of waiver, estoppel or acquiescence cannot arise in cases where the decree is void and consequently a nullity. In this connection, reference may be made to the cases of Golab Sao v. Chowdhury Madho Lal, (1905) 2 C.L.J. 384, and York Corporation v. Henry Leetham & Sons Ltd., [1924] 1 Ch. 557. Hence, if a decree is vitiated and is null and void on any of the grounds mentioned above, then that decree will lose its efficiency in any subsequent proceedings. Therefore, in a winding-up court it can be challenged collaterally as it can be done in the ordinary civil courts and the pleas of res judicata and acquiescence, waiver and estoppel are of no avail.

31. It may, however, be noticed that in the ordinary civil courts, if the plea of illegality and/or nullity was taken in the suit and the court had decided it, it is binding on the parties as res judicata even though the court may have decided it wrongly. This puts a limitation on the powers of the ordinary civil courts. When the same question of illegality or nullity is taken in collateral proceedings as between the parties to the earlier suit, except when it is vitiated by want of jurisdiction or fraud or collusion it attracts Section 44 of the Evidence Act.

32. It may be observed that, though the court in a collateral proceeding ignores the decree on the ground of illegality and/or nullity, it has no power to set aside the earlier decree which is challenged in collateral proceeding. There is, however, another possible approach to the problem.

33. The winding-up court has borrowed several branches of the law of bankruptcy. The bankruptcy court has always enquired into consideration in a proper case. The bankruptcy court enquired into the consideration even though it was admitted by the insolvent in his statement of affairs of schedule.

34. The bankruptcy court, as a logical consequence, has also enquired into the consideration of a debt though it is supported by a decree. The bankruptcy court originally extended its arms behind the decree, on the ground that if it was not so done, it would open the door to fraud and enable the insolvent to have decrees passed against him with the help of his friends and relations and thereby defeat those who are justly entitled to the same. In course of time the bankruptcy court pierced through the veil of the decree on other grounds. The bankruptcy court has assumed jurisdiction and enquired into the consideration of a judgment-debt where there has been a judgment by default without collusion: Ex parte Mudie, (1842) 3 Mont. D. & De G. 66, Ex parte Kibble, (1875) 10 Ch. App. 373, Ex parte Chatteris, (1872) 26 L.T. 174 and In re A Debtor, [1927] 2 Ch. 367. It has gone behind the judgment debt even where the debtor has consented to the judgment, Ex parte Lennox, (1885) 16 Q.B.D. 315. it has again been held that the court is competent to enquire into the consideration even when the decree is based on a compromise between the parties on the ground that it was not bona fide for it was made for the purpose of extortion : Ex parte Banner : In re Blythe, (1881) 17 Ch. D. 480. In In re Flatau : Ex parte Scotch Whisky Distillers Ltd., (1888) 22 Q.B.D. 83, it was further held that the court can enquire into the consideration of a judgment-debt on the ground of absence of consideration, fraud, collusion, miscarriage of justice and mistake.

35. It has been held that a debt barred by the law of limitation is not a good petitioning creditor's debt, Ex parte Tynte, (1880) 15 Ch. D. 125. It has been again held that a debt founded on an illegal consideration cannot support a bankruptcy or insolvency petition : Wells v. Girling, (1819) 1 Brod. & B. 447 and Raja Ram v. Chandi Prasad, A.I.R. 1932 Oudh 107.

36. It has been held that a debt founded on immoral consideration cannot be recognised by bankruptcy court ; a debt arising out of wager or gambling has not been recognised by the court even though supported by a judgment. The bankruptcy court cannot allow proof when it is based on a contract against the policy of the bankruptcy law or is a result of a secret agreement between the bankrupt and the third party.

37. It follows from this unusual and extraordinary power assumed by the bankruptcy court for the beneficial winding up of the estate of the insolvent that the plea of res judicata is no answer and cannot prevent the court from enquiring into the consideration even in cases where the plea as to invalidity or nullity was taken in the earlier suit and thereby confers more extensive power to the bankruptcy court to go behind the decrees than the ordinary civil courts.

38. It must, however, be observed that this extraordinary power of the bankruptcy court to go behind the decree does not and cannot enable the bankruptcy court to set aside the decree. It is now necessary to consider how far and to what extent the winding-up court had adopted these principles of the bankruptcy court. In Bowes v. Hope Mutual Life Insurance and Guarantee Co. Ltd., (1865) 11 H.L. Cas. 389 and United Stock Exchange Company,, (1884) 51 L.T. 687, cases under the Companies Act, the prior decree was not considered as a sufficient answer to the winding-up petition. In Ko Ku La Ltd., In re, [1953] 23 Comp. Cas. 81, Mukharji J. observed that the principle applicable to bankruptcy was equally applicable to the winding-up court.

39. It must, however, be observed that the bankruptcy does not lightly ignore a decree for it raises a strong presumption. In the winding-up court, it has been expressly held by the House of Lords in Bowes v. Hope Mutual Life Insurance and Guarantee Co. Ltd., (1865) 11 H.L. Cas. 389, that the burden of impeaching the decree lay on the respondent company. In Ko Ku La Ltd., In re, [1953] 23 Comp. Cas. 81, it was observed that the decree raises the strongest presumption. It has been held accordingly in In re Flatau : Ex parte Scotch Whisky Distillers Ltd., (1888) 22 Q.B.D. 83 and Amalgamated Properties of Rhodesia (1913) Ltd., In re, [1917] 2 Ch. 115, that the fact that an appeal is pending is not sufficient to rebut this strong presumption.

40. Hence, in considering these two pleas raised on behalf of the respondent company, this consideration that the decree raises a strong presumption as to the existence of the debt must be kept in view, in determining whether there is a bona fide dispute or not.

41. Therefore, the next question for consideration is the procedure to be adopted by the court, where the question of bona fide dispute is raised in the case of decretal debt.

42. In the House of Lords case, Bowes v. Hope Mutual Life Insurance and Guarantee Co., the petition was allowed to stand over on the undertaking of the respondent to file a suit for setting aside the decree. In the last case of United Stock Exchange, (1884) 51 L.T. 687, the question of collusion was gone into by the winding-up court and therefore the petition was dismissed.

43. In my opinion, the same principle applicable to a debt simpliciter is applicable to a decretal debt and the same course should be followed.

44. In our High Court, the trend is to refer one of the parties to a suit, when there is a bona fide dispute. The same rule should be applicable in the case of a decretal debt. Therefore, though at one stage of the argument I indicated that I will give my considered opinion on the points involved and either allow the application or reject it, I do not now propose to do so, having regard to the authoritative pronouncement of the court. It may be observed that, if I felt myself free, I would have done so and thereby saved the parties from costs and delay.

45. Hence, the question in this case is whether the points raised to attack the said consent decree are points of substance or only mere cloak to hide the inability to pay, bearing in mind that the decree raises a strong presumption.

46. It is not usual, it seems from the judgments referred to hereinbefore, to indicate why the grounds are substantial but only state the conclusion. In my opinion, having regard to the elaborate arguments advanced before me, the reasons as to why the debt is bona fide or otherwise disputed should be indicated.

47. This leads us to the principal question raised in the affidavit-in-opposi-tion and canvassed before me, the question of ultra vires.

48. It has been held that, when a person is legally incompetent to contract as in the case of an infant or minor, he cannot enter into a valid and enforceable contract even though the other side is a competent person as a major. In my opinion, the case of an ultra vires contract by a company is analogous and stands on the same footing. The company is incompetent in law to enter into a contract which its memorandum or constitution does not permit. In such a case, there is total incapacity on the part of the company. Hence, a purported contract by a company cannot give birth to any legal obligation and cannot be binding on the company, and the position is that in law there was no such contract at any time. It is void at its inception and cannot be made valid at any time.

49. A consent decree founded on the incompetency of an infant or minor is void and a nullity. Likewise, a contract founded on the incompetency of the company is void and a nullity.

50. Hence, the ordinary civil court would be competent to set aside the decree in a properly framed suit unless the point as to the invalidity was raised and decided even wrongly.

51. This matter has been agitated in England. Hence, it is necessary to turn to the English cases.

52. It may be observed that in the case of Great North-West Central Railway Company v. Charlebois, [1899] A.C. 114, 123, 124, it has been observed in a case on suit filed to set aside a consent decree as follows :

' Of course, those judges who think that the contract though improper was not ultra vires have no difficulty in holding that the judgment is binding, whether by way of ratification or by its own force. But the difficulty is to reconcile an opinion that the contract is ultra vires with an opinion that a judgment obtained as this was is a binding judgment. The authorities referred to by the Supreme Court do not relate to contracts ultra vires. It is quite clear that a company cannot do what is beyond its legal powers by simply going into court and consenting to a decree which orders that the thing shall be done. If the legality of the act is one of the points substantially in dispute, that may be a fair subject of compromise in court like any other disputed matter. But in this case both the parties, plaintiff or defendant in the original action and in the cross-action, were equally insisting on the contract. The president, who appears to have been exercising the powers of the company, Lad an interest to maintain it, and took a large benefit under the judgment. And as the contract on the face of it is quite regular and its infirmity depends on extraneous facts which nobody disclosed, there was no reason whatever why the court should not decree that which the parties asked it to decree. Such a judgment cannot be of more validity than the invalid contract on which it was founded.'

53. The consent decree in the above case was set aside in another suit.

54. In my opinion, again when a decree is void by reason of ultra vires, itcan be successfully attacked in any collateral proceeding even in cases ofproceeding other than insolvency or winding-up proceedings though it cannotbe set aside. This follows from the ordinary rules of law.

55. This rule, in my opinion is again applicable in bankruptcy and winding-up proceedings, where the court's jurisdiction is of wider amplitude.

56. This rule was applied by the winding-up court in the case of In re Jon Beauforte (London), Ltd., [1953] 1 All E.R. 634, where Roxburgh J. observed, inter alia, as follows :

'It seems to me that any compromise made on the footing that the contract is intra vires and any judgment suffered in an action in which the defence of ultra vires is not raised can be set aside, because (applying the principle stated) it is ultra vires the company to proceed on the footing that the contract is intra vires, whether by negotiating a compromise on that footing or by submitting to judgment without delivering an appropriate defence. Accordingly, I interpret the judgment of the Privy Council as meaning that, in the case of an ultra vires contract, no judgment founded on it is inviolable unless it embodies a decision of a court on the issue of ultra vires or a compromise of that issue, and I adopt the reasoning which appears to lead to that conclusion;'

57. In my opinion, Roxburgh J., in his judgment, restricted the amplitude of the power of the bankruptcy or the winding-up court when he confined his observation only to cases where the defence of ultra vires had not been taken in the earlier suit for, according to me the bankruptcy court or the winding-up court is competent to go behind a decree even where the plea of ultra vires had been taken and the point had been decided manifestly wrongly or has been compromised unjustly for the beneficial winding up of the company and equitable distribution of its assets.

58. The next question for consideration is whether in fact, on a true construction of the memorandum of association, this contract of guarantee to secure the loans of the sister concern is ultra vires or intra vires.

59. The attitude to this construction of objects clauses with reference to ultra vires has not been uniform from the historical point of view.

60. At one time, at the earlier stages of development of joint stock companies when there was a marked trend to divert capital for extraneous objects, the court leaned towards ultra vires, which doctrine had by that time been well established in case of companies formed under Charter or special Acts, even causing hardship to the third parties who seldom looked into the memorandum of association. Thereafter, when it was appreciated that the doctrine of ultra vires often operated harshly on third parties, who had no actual notice of the contents of the Memorandum of Association, there developed an opposite trend. This led the English courts to liberally interpret the objects clauses in the memorandum so as to include those things which are implied or incidental or ancillary or consequential to the main purposes. This also led the Parliament to give liberal powers to alter the objects of the company.

61. In England, the Cohen Committee went so far as to recomend the abolition of the doctrine of ultra vires. This recommendation, however, was not accepted.

62. The relative objects clauses are set out below :

(a) To carry on the business of buildings and structural engineers, makers and sellers of steel products and equipments and contractors for the supply of labour.

(b) To enter into contracts with Government, Central or local, companies or firms for the supply of steel or other metal or wood products and equipment or for the carrying out of any structural or other works for such Governments, companies or firms.

(c) To enter into partnership or into any arrangement for sharing profits, union of interest co-operation and joint adventure, reciprocal concession, otherwise, with any person or association of persons or company carrying on or engaged in or about to carry on or engage in, any business or transaction which this company is authorised to carry on or engage in, or any business or transaction capable of being conducted so as directly or indirectly, to benefit this company.........

(h) To invest and deal with the moneys of the company not immediately required for the company's business upon such securities and in such manner as may from time to time be determined.

(i) To draw, make, accept, endorse and execute and to discount and sell promissory notes, bills of exchange, bills of lading, warrants and other negotiable instruments.

(j) To sell, dispose of and transfer the business property assets and undertaking of the company or any branch or part thereof for such consideration as the company may think fit and in particular for payment in cash or in shares or stock or in debentures or other securities of any other company or partly in one and partly in another or others of such modes of payment.

(k) To borrow, by way of discount, cash or overdraft or upon bond, ...............................................mortgage, debenture, debenture-stock deposit, bill, promissory note, receipt or in any other manner and grant security for all or any of such sums and by way of security to dispose, mortgage and pledge or charge the whole or any part of the property and assetsand revenue of the company including uncalled capital, and to dispose, transfer and convey the same absolutely or in trust, with the usual powers of sale, to lenders and creditors and also raise money by the issue of mortgage debenture or debentures or preference stock.

(1) To promote any company or companies for the purpose of acquiring all or any of the properties and liabilities of this company or for any other purposes which may seem directly or indirectly calculated to benefit the company and generally to form, promote, subsidise and assist companies, syndicates and partnership of all kinds.........

(n) To do all such things as are incidental or conducive to the attainment of the above objects.

63. Clauses (c), (h), (i), (j) and (1) do not expressly or by implication empower the company to be a guarantor for the debt of a sister company even though it may be carrying on the same kind of business. These clauses seem to authorise the company to do all the several acts for the benefit of the company directly. It does not seem to me that any power can be spelled out from these clauses which can enable the company to be a guarantor not for its own but for the debts of stranger, though it may be a sister concern without any consideration.

64. Clause (1) contains the words 'subsidize ' and ' assist companies '.

65. In my opinion, the word ' subsidize ' is insufficient to enable the company to guarantee the debts or dues of a sister concern itself when the sister concern is not a ' subsidiary '.

66. It is now necessary to turn to the word ' assist'. It has been the subject matter of judicial decisions in England.

67. In this connection, reference was made to the case of In re Financial Corporation, Good-sons Claim, (1880) 28 W.R. 760, and the case of In re Friary Holroyd and Healy's Breweries Ltd., (1922) W.N. 293, where the very same word ' assist ' occurs. It was held in the case of In re Friary Holroyd that the word ' assist ' enabled the company to stand as a guarantor of a sister company. It may, however, be noted that the relevant clause in that case is not identical to the clause before me but an amalgam of Clause (m) and other objects of this company. Hence, again, in my view, there is a bona fide dispute as to a substantial ground of law.

68. It has been also noticed that a suit has already been filed by the respondent and in fact its prayer for injunction has been refused. It was suggested that in view of those orders it is clear that the courts dealing with those matters had held in effect that there is no prima facie case, that is to say, no substantial ground of law or of facts. It does not appear whether these arguments which were advanced before me were advanced there with such care and industry. Even if they were, it is for the winding-up court to form its own independent judgment on the question whether there is a bona fide dispute or not. Therefore, the winding-up court may in certain circumstances come to hold a different view, at any rate, prima facie from the view held by a different court sitting in another jurisdiction. This, however, does not mean that I have not kept this order in my mind or that in any way I am showing any disrespect to the learned judges but I am constrained to differ from them in the exercise of another jurisdiction, which is wider than the jurisdiction of the other courts in certain respects, if they had held that there is no prima facie case for injunction.

69. This leads us to the other principal controversy, which was not taken in the affidavit-in-opposition but was taken for the first time before me at the time of arguments and was fully argued before me.

70. This relates to the jurisdiction of the High Court to receive, try and determine the earlier suit which resulted in the consent decree.

71. It may be reiterated that this point was not taken in the affidavit-in-opposition. Hence, according to the ordinary rules, the court should not allow the respondent to agitate this point at this belated stage. There are, however, cases to the contrary where it has been said when the point of law depends on undisputed or admitted questions of fact, then the court can take notice of the point of law even though it is not pleaded : Connecticut Fire Insurance Co. v. Kavanagh, [1892] A.C. 473, Badri Prasad v. Nagarmal, [1959] 29 Comp. Cas. 229 (S.C.) and Ranganathan v. Government of Madras, [1955] 25 Comp. Cas. 344 (S.C.). It has been held by the Privy Council that a plea of want of absolute jurisdiction can be raised at any time in any court even though the plea was abandoned earlier : Bansilal Abirchand v. Ghulam Mahbub Khan, A.I.R. 1925 P.C. 290.

72. Clause 12 of the Letters Patent debars the court not only to determine but to receive and try a suit for land when the land is situate wholly outside the local limits of the Ordinary Original Civil Jurisction of the High Court. There is no dispute and, in my opinion, there cannot be a dispute over the statement of law.

73. The relevant plaint lays down a case for money decree against the defendants including the respondent company on the basis of a bond of guarantee and a promissory note. The plaint further lays down a case for a charge in respect of immovable properties situate outside the jurisdiction of this court.

74. There is a prayer for money decree, there is a prayer for leave under Clause 12 of the Letters Patent followed by a prayer for declaration of charge over the immovable properties including premises No. 12, Grand Trunk Road, belonging to the defendants except the respondent company which, was the 6th defendant in this suit.

75. Section 26, Civil Procedure Code, provides that every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed. The legislature has not prescribed any other manner.

76. A suit, prima facie, refers to the whole of the claim or claims made in the suit. A suit is treated as one unit, though it may contain different causes of action and/or different claims. This is evident from various sections, beginning from Section 9 and ending with Section 35-A. It will be noticed that the suit is registered as one unit, there is one plaint, one summons, and generally one discovery and one inspection and one set of costs and one judgment or decree in respect of a suit.

Order 1 again contemplates that there may be more than one plaintiff and/or more than one defendant in a suit. This, however, does not make a suit more than one suit depending on the number of the plaintiffs and/or defendants. It is one suit, though there may be more than two parties.

77. Order 2 contemplates joinder of cause of action or different claims or causes of action in one suit. It may be that the different claims in a suit may be split up and tried separately. It does not, however, mean that the suit can be split up. The suit remains one and the same. The suit itself cannot be split up into two suits and treated as two suits, though there may be two causes of action or claims.

78. A suit abates as a whole, in case of death, marriage or insolvency. The rights of a party to the suit devolve on the same person, generally. Therefore, in my opinion, there is a good deal of force in the contention that the decree was without jurisdiction and, consequently, a nullity. It was, however, urged, on the other hand, that it is clear from the pleading that there was a claim for money and a claim on the basis of the charge which can be separated and distinguished from claim for money and, consequently, the court can ignore that part of the claim which relates to land and give effect to that part of the decree which refers to the money claim and decree. In other words, when the two separate and distinct causes., of action can be separated from each other, there are really two suits rolled into one and, consequently, if one suit fails, the other remains and may succeed. It does not fall within the prohibition of Clause 12 of the Letters Patent. In this connection, reference was made to the case of the Bengal Agricultural and Industrial Corporation Ltd. v. Corporation of Calcutta : AIR1960Cal123 . Mallick J. observed that the court can for the purpose of jurisdiction divide the claim into two parts--ignore one and consider the other. The case, however, can be distinguished on facts. The point arose at the trial court before the trial and the determination of the suit and not, as in this case, after the trial and the determination of the suit.

79. There is another aspect of the matter.

80. In this case, the ownership of premises No. 22, Grand Trunk Road, during the pendency of the suit, was transferred to the defendant No. 6, the respondent company. There was a compromise decree and a decree for charge over premises No. 22, Grand Trunk Road, situate wholly in Howrah, outside the jurisdiction. Hence, on the one hand, it may be contended that the decree may be separable on the basis of Order 23, Rule 3, of the Civil Procedure Code, read with the case of Ranjit Singh v. Gobardhan Chandra. On the other hand, it can be said that the present case is distinguishable from the facts of Ranjit Singh v. Gobardhan Chandra, on more than one ground. In the other case, the plaint did not start with two claims, one for money and the other for a decree for charge over the properties outside the jurisdiction, as in the instant case. In the other case, there is a provision that the decree will be executable without recourse to another suit, which is absent in the present case. Hence, in my opinion, it cannot be said that this point as to jurisdiction is not bona fide and, in my opinion, raises a substantial ground of dispute.

81. The question of fraud, though taken in the affidavit-in-opposition, was not canvassed before me. This would have raised the question of sufficiency of pleading and proof of the same.

82. In the result, in my opinion, the application shall be adjourned till the disposal of the pending Suit No. 2011 of 1963 filed by the respondent company, where if any amendment is sought to be made, an application must be made within 3 weeks from date. In case the suit is not proceeded with or it is decided in favour of the petitioning creditor, then the petitioning creditor will have liberty to mention and bring it on the list. The costs of this application are reserved. I have not considered the claims of the supporting creditors and I do not express any view about their claims or their rights. I do not, however, propose to give them any costs. The interim order dated 10th July, 1963, made by the Hon'ble Mr. Justice B.C. Mitra will continue. Interim order restraining the respondent company from applying for an injunction against the petitioning creditors restraining him from proceeding with the winding-up application will stand modified to the extent of the order made herein.


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