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Eastern Coal Co. Ltd. Vs. Sunil Kumar Roy - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberSuit No. 1790 of 1956
Reported inAIR1968Cal355,[1969]39CompCas126(Cal),72CWN424
ActsCode of Civil Procedure (CPC) , 1908 - Order 6, Rule 17; ;Companies Act, 1956 - Sections 446, 446(3), 457 and 512
AppellantEastern Coal Co. Ltd.
RespondentSunil Kumar Roy
Appellant AdvocateShankar Ghose, Adv.
Respondent AdvocateM.M. Sen, ;Dwipankar Ghose and ;S.K. Kapoor, Advs.
DispositionPetition allowed
Cases ReferredLtd. v. Nippon Menkwa Kabushiki Kaisha
- .....procedure code (5 of 1908) point to the same conclusion. take order 4 captioned : institution of suits. rule 1 thereof bears inter alia:'1. suit to be commenced by plaint. (1) every suit shall be instituted by presenting a plaint to the court or such officer as it appoints in this behalf.'that is commencement or institution of the, come to order 5, rule 1, sub-rule (1) of which bears inter alia:'when a suit has been duly instituted, a summons may be issued to the defendant to appear and answer the claim on a day to be therein specified.'that is continuing the suit.12. it only remains to be noticed that order 49, rule 3, does not render either order 4 or order 5 inapplicable to this side (original side) of the court. more, rule 1 of order 49 saves, amongst others, summonses to.....

Bijayesh Mukherji, J.

1. By this application the plaintiff, the Eastern Coal Co., Ltd., asks for amendment of the plaint presented and admitted on July 10, 1956.

2. The plaintiff company went into a members' voluntary liquidation on June 26, 1958. And the amendment asked for seeks to incorporate that only, in the plaint, in suitable terms.

3. The first attempt to defeat such amendment is rested on section 446 of the Companies Act, 1 of 1956, by which, amongst other things, all proceedings that pend in a court other than the Company Court, have got to be transferred to the Company Court, when a winding-up order has been made. When, however, it is pointed out that what bulks large here is a case of members' voluntary winding-up, not a winding-up by the Court or subject to the supervision of the Court, and that section 489 does not list section 446 as one of the sections applicable to a members' voluntary winding-up, the attempt is given up, it being conceded that section 446 is irrelevant in the context. Indeed, occurring as it does under the Company Act's Part VII, Chapter II captioned 'Winding-up by Court,' it can, without more, do no duty here: a case of voluntary winding-up, provided for by Chapter III ibid.

4. Equally barren appears to be reference to rules 241 and 256 in Appendix 7 to the Court's Original Side Rules, volume II. Rule 241, which is more or less a rehash of Section 446, Sub-sections (2) and (3), provides for, inter alia, assignment of suits and proceedings, that pend, to the Company Court, 'upon the making of an order by the High Court for the winding-up of a company by or under the supervision of the Court.' The winding-up on hand does not come under either. By parity of reasoning, rule 256 remains idle here. No application has yet been made, for all I am told, to the Company Court.

5. Section 518, Sub-section (1), Clause (b), no doubt, enables the liquidator to apply to the Court, to exercise, as respects the enforcing of calls, the staying of proceedings or any other matter, all or any of the powers which the Court might exercise if the Company were being wound up by the Court. The Court means the the Company Court: Section 2(11) read with Section 10. The liquidators of the plaintiff company have the complete freedom to avail this enabling provision, (section 518), if they so choose. But that is one matter.

And the present application for amendment, before a proper Court, lawfully seised of the plaint and not deseised thereof, by any law, is quite another, which Section 518 neither rules nor governs. Thus, reliance upon this Section, with a view to thwarting the amendment the plaintiff company prays the Court for, has been in vain.

6. No less vain has been the citation of the following rules of the Companies (Court) Rules 1959 --

(i) Rule 312. It makes these rules applicable, mutatis mutandis, to the voluntary winding-up of a company, where an application is made to the Company Court. In the case in hand, no such application appears to have been made yet.

(ii) Rule 315. It provides for notice of appointment of liquidator in a prescribed manner and to a prescribed authority when the winding-up is voluntary.

(iii) Rule 321. It prescribes inter alia how a liquidator, in a members' voluntary winding-up, as has been the plaintiff company's on June 26, 1958, should resign.

(iv) Rule 323. The keeping of proper accounting books, a record book, etc. forms the burden of this rule.

7. Say, there is an infraction of these rules -- 315, 321 and 323 -- though I have had put before me no materials upon which I can find so as a fact. Even then, how such infraction can frustrate the amendment sought for completely beats me. What counts in this context is the fact of voluntary winding-up, (which indeed is patent), not violation of this rule or that. Sure enough, these rules do not go so far as to say that if they are broken, the voluntary winding-up is no more in the eye of law. Section 547, I am referred to, is no doubt there. But all it does is to lay down a salutary rule as under:

No matter, what way the winding-up of a company comes, by or under the supervision of trie Court or voluntarily, notify that you must in (i) every invoice, (ii) order; for goods or (iii) business letters, -- documents on which the names of the company appears. If you do not, you shall be punishable with fine up to Rs. 500.

The principle is that all who deal with such company must be made to know that its liquidation is on. I am unable to translate this principle to the facts which have led to the present application for amendment of the plaint filed on July 10, 1956 a little less than two years ahead of the voluntary winding-up of the plaintiff company on June 26, 1958. Then, Section 547 is a penal provision, within the clear language of which you must bring yourself, if you want to call it in aid. But an application for amendment cannot be regarded as falling under any one of the three classes of documents it specifies: (i) invoice, (ii) order for goods, or (iii) business letters. If, by an acrobatic feat of the mind, it can be so regarded, what the application for amendment seeks to do is to secure compliance with this section. Therefore, neither Section 547 nor the rules of the Companies (Court) Rules 1959, I have been referred to, can stand between the plaintiff company and the amendment it asks for.

8. This exhausts all the contentions addressed to me, on behalf of the defendant, in order to negate my jurisdiction to deal with the application for amendment. And I find each such contention to be destitute of merit.

9. Section 512, Sub-section (1), Clause (a), provides that, in a members' voluntary winding-up, with the sanction of a special resolution of the company, (as here), the liquidator may exercise, amongst other things, the power given by Clause (a), subsection (1), Section 457, to a liquidator in a winding-up by the Court. Such power is the power, inter alia, to institute, with the sanction of the Court, a suit, in the name, and on behalf of, the company. These provisions foster the contention that instituting a suit is the same as continuing a suit, re-verification prayed for of the amended plaint being a pointer, and that the present application for amendment is, therefore, barred in limine. The reply, on behalf of the plate-tiff company, is : what Section 457 bars is institution of a suit, without the sanction of the Court which necessarily means the Company Court), and not continuing the suit.

10. As a matter of words, 'to institute a suit' can never mean 'to continue a suit To institute a suit is to lay the foundation of the suit: to commence the suit. Once the foundation is laid so, the suit gets going. The plaintiff, who has instituted the suit and has the carriage of the suit, goes on with the suit, that is to say, continues the suit. It, therefore, appears to be plain that 'to institute a suit' and 'to continue the suit' cannot be regarded as synonymous Expressions.

11. Such plain meaning apart of com-mon words, the relevant provisions of the Procedure Code (5 of 1908) point to the same conclusion. Take Order 4 captioned : Institution of Suits. Rule 1 thereof bears inter alia:

'1. Suit to be commenced by plaint. (1) Every suit shall be instituted by presenting a plaint to the Court or such officer as it appoints in this behalf.'

That is commencement or institution of the suit.

Now, come to Order 5, rule 1, sub-rule (1) of which bears inter alia:

'When a suit has been duly instituted, a summons may be issued to the defendant to appear and answer the claim on a day to be therein specified.'

That is continuing the suit.

12. It only remains to be noticed that Order 49, rule 3, does not render either Order 4 or Order 5 inapplicable to this side (Original Side) of the Court. More, rule 1 of Order 49 saves, amongst others, summonses to defendants from the special mode of service of processes prescribed therein.

13. So, by the conjoint operation of Sections 512 and 457, the power of a liquidator, in a members' voluntary winding-up, with the sanction of a special resolution of the company, is the power, with the sanction of the Court, 'to institute a suit' -- an expression which does not mean continuance of a suit as well. Re-verification asked for, of the amended plaint, so much emphasized on behalf of the defendant, cannot set the hands of the clock back, by converting the continuation of a suit from June 26, 1958, into institution of the suit, which was here instituted, in fact and at law, en July 10, 1956.

14. There is perhaps another way of looking at the matter. Parliament has not been oblivious of pending suits fas the one before me is) at the date of the winding-up order by the Court. To Section 446 again, but to its Sub-section (3). By virtue thereof, all such pending suits have got to be transferred to, and disposed of, by the Company Court. But Section 512 does not incorporate Section 446. It incorporates Dart of Section 457 only. The suit I am seised of is a suit by the company. So, because of incorporation of part of Section 457 by Section 512, the only power the liquidator of a company, voluntarily wound up by its members, with the sanction of a special resolution, has, is to institute a suit, with the sanction of the Court. Continuing a suit already instituted, before the operation, winding-up, does not come anywhere near Section 457.

15. It is however said that Section 446 is there in a different context. It is. The context is the context of winding-up by the Court. So what? Section 457 is in that context too: the context of winding-up by the Court. Section 512 has as its context the voluntary winding-up. But, by incorporating part of Section 457, it makes the procedure in two contexts one pro tanto. So, the point is right here. Section 512, a Section in Part 7, Chapter 3, on voluntary winding-up, does not incorporate Section 446 in Part 7, Chapter 2, on winding-up by the Court, or lay down anything independently on that line, and thereby keeps at large pending suits by the company, before it is voluntarily wound up by the members, with the sanction of a special resolution. Therefore, in the context of facts here, the only power the liquidator has, this being a case of a members' voluntary winding-up, with the sanction of a special resolution of the company, is to institute a suit, with the sanction of the Court: vide Section 512, sub-sec. (1), Clause fa), read with Section 457, Sub-section (1), Clause (a). For continuing a suit, already instituted, (as here), he has no such fetters, nothing to say of the fact that Section 512 is an enabling provision.

16. Thus, from whatever angle the matter may be examined, the conclusion reached is that the liquidators of the plaintiff company, now in a members' voluntary liquidation, with the sanction of a special resolution of the company, do not need the sanction of the Company Court to continue the suit, already there before such liquidation, by seeking to amend the plaint, as they are doing. I am, therefore, unable to accept the contention that the application for amendment is barred at the threshold.

17. By the special resolultion of the plaintiff company, carried unanimously, on June 26, 1958, in an extraordinary general meeting of the members, two decisions have been taken. One, the voluntary winding-up of the company. Two, appointment of Messrs. Just. Hartley, Hill, Sen and Choksey, Chartered Accountants and Partners in the firm of Price, Waterhouse, Peat & Co., as liquidators jointly and severally for the purpose of such winding-up. But the petition for amendment of the plaint is over the signature of only one, Choksey, for self and co-liquidators. This, it is said, in-fracts Section 512, Sub-section (4), by virtue of which the petition for amendment is te be signed by at least two of the five liquidators. But to say so is to misread and misapply Sub-section (4) of Section 512, the ingredients of which are --

(1) Appointment of several liquidators.

(2) Determination at the time of their appointment about any power given by the Companies Act to be exercised by such one or more of the liquidators so appointed.

(3) In default of such determination, the exercise of such power by any number of them not being less than two.

18. The first ingredient is well met here. Appointment of several liquidators, five in all, is there to be seen. One of them. Hill, has since died.

19. So is the second ingredient. At the time of the appointment of so many liquidators, it is determined that they are appointed so jointly and severally for the purposes of such winding-up. So, any power given by the Companies Act may be exercised by all of them jointly or any one of them separately, that is, individually. If the making of the present petition for amendment of the plaint is regarded as a power given by the Companies Act, as it may well be, it is open to Choksey to petition so individually, by the very determination made at the time of his and co-liquidators' appointment, though he has done far more, he has signed for self and co-liquidators.

20. In the circumstances, the third in-gredient does not fall to be considered. Had it fallen to be considered, it would not have helped matters forward for the defendant. It would not have, because Choksey does not stop signing on his own. He signs as such and also for his co-liquidators. So, it is the signature of each and every one of them.

21. To such an approach, the objection taken is : Section 512, Sub-section (4) is a mere copy of Section 303, Sub-section (3) of the English Companies Act 1948, upon which Buckley on the Companies Acts, 13th edition, comments at p. 603:

'The liquidators cannot themselves delegate their powers generally to one of their number.'

22. One obvious answer to disarm this objection is: nothing like any delegation by the liquidators is here. What is here is authority from the company, right at the time of the liquidators' appointment, authorizing even one to act.

23. On the assumption that no such authority is there, no delegation of power by the other liquidators to Choksey appears to be discernible too. What is discernible instead is performance of a purely ministerial act of signing by Choksey for all. Not that the other liquidators have left to Choksey the making of the application for amendment. That is the decision of all. But the signing, a ministerial act, has been left to one, namely, Choksey. That this is so looks manifest from the affidavit in reply of Sen, one of the liquidators. I accept this affidavit-evidence.

24. To return to the passage relied upon from Buckley's great book (paragraph 20 ante), it is based on, as footnote (n) at p. 603 shows, two decisions, the first of which is (1) In re, London and Mediterranean Bank Ltd. Ex parte London and South Western Bank, (1867) 36 LJ Ch. 807. There, four liquidators of a company, which was being voluntarily wound up, subsequently authorized one of them to exercise their statutory powers on behalf of all, no such determination having been come to at the time of their appointment and the one so authorized accepted a bill of exchange on behalf of the company, whereupon it was held that such acceptance, not by at least two, but by one, having no legal sanction behind his authority, was not binding on the shareholders. Say this of Choksey? All he has been authorized to do is to sign the petition for amendment on behalf of all liquidators who are acting as such: just what Liquidator Sen says in his affidavit in reply. So, this decision cannot be assimilated to the case in hand.

25. The other decision is In Re, London and Mediterranean Bank, Ex parte Birmingham Co., (1868) 3 Ch. App. 651. There it is reiterated that, according to the Companies Act 1862, liquidators, when they are in plural number, cannot perform any act except there be two at least engaged in the performance of that act, in absence of authority from the company when appointing them, to perform it through the medium of one liquidator. At the same time it is laid down that the authority of the two does not necessarily mean that you should find the names of the two liquidators on the piece of paper concerned (there the bill of exchange and here the petition for amendment). What counts is having the benefit of the judgment of the liquidators upon the particular act. Once that is there, the ministerial act of signing by another duly authorized appears to be too good. This is just what I see before me upon affidavit-evidence.

26. Let me stretch still more in favour of the defendant. Say, Choksey has signed the petition, for amendment, for himself only. Even then, comes Sen and says by his affidavit that he qua liquidator subscribes to the petition : to what has been done. That is substantial compliance with the minimal requirement of Section 512, Sub-section (4): the performance of the act by two at least

27. Hence, this contention, resting on Section 512, Sub-section (4), fails too.

28. The last contention, assailing the bona fide of the petition for amendment, has only to be stated in order to be rejected; the more so, as it is grounded on absence of any affidavit in reply by the plaintiff company. The affidavit in reply is very much there. But it was lost sight of.

29. Before I part with this matter, I cannot help questioning the necessity of any amendment, in the circumstances obtaining here. Section 487, laying down the consequences of a voluntary winding-up, calls attention. From the commencement of the winding-up, the company shall cease to carry on its business, except so far as may be required for the beneficial winding-up of such business. That is what the Section prescribes. But it does not stop at that. It prescribes a little more too:

'Provided that the corporate state and corporate powers of the company shall continue until it is dissolved.'

The plaintiff company is yet to be dissolved. Therefore, the plaintiff company qua juristic person still goes strong. And the present suit is just by such a one. Why amend then? And what will you amend? The plaint by the company, before the com-mencement of the voluntary liquidation, remains just that plaint, after such commencement, without needing any amendment anywhere. The only difference, it makes, is that the liquidators shall have carriage of the suit, and not the Board of Directors, whose powers are no more. That the liquidators may very well do, without any amendment of the plaint -- a plaint by the company as much before the commencement of liquidation as after it. To quote only a little from the judgment of Lord Russell of Killowen in Dawson's Bank, Ltd. v. Nippon Menkwa Kabushiki Kaisha :

'The liquidation could make no difference in this regard : the claim of the plaintiffs was a claim against the Bank, and not against the liquidators. The change which was brought about by the liquidation in regard to the suit was merely this, that in the conduct of their defence the Bank would, before liquidation, act through the directors, during liquidation through the liquidators, and after termination of the liquidation through the directors once more.'

Just so here, save that the claim is by the company: in the conduct of the suit the company was, before liquidation, acting through its directors, and would now act, during liquidation, through the liquidators. That is all. Why amendment then, I ask again. An amendment is called for, when a change in the contents of the pleading is called for; not when a change of the agency, in the conduct either of the suit or of the defence takes place, the suit itself undergoing no change, but remaining what it was.

30. I may, therefore, reject the amendment prayed for, without any party being any the worse or better for it. But I need not do so, since it is a routine procedural matter and assists the convenience of all in getting to know from the plaint ex facie who the liquidators are, entrusted with the carriage of the suit.

31. In the result, I order that the petition for amendment be allowed in terms of prayers (a) and (b) of the Master's summons. Amendment be carried out within a fortnight from the filing of this order.

32. No costs.

Certified for counsel.

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