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Tulsidas Mundhra Vs. the Official Liquidator and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberAppeal No. 440 of 1979
Judge
Reported inAIR1983Cal403
ActsCode of Civil Procedure (CPC) , 1908 - Section 51
AppellantTulsidas Mundhra
RespondentThe Official Liquidator and ors.
Appellant AdvocateA.C. Bhabra and ;D.K. Basu, Advs.
Respondent AdvocateAnindya Mitra and ;R.C. Kar, Advs.
Cases ReferredPercival v. Wright
Excerpt:
- .....properly. this in ouropinion was so designedly used by thelegislature. here against the judgment-debtor decree was passed. the intention,it appears to us must have been to provide deterrent punishment. it was submitted before us on behalf of the appellant that such kind of deterrent punishment would serve no purpose if a manwho had no means to pay at the time ofexecution of the decree though he mighthave been guilty of breach of any actin fiduciary capacity and decree mighthave been passed in this respect no purpose would be served by passing an orderagainst such a person, trying to penalize him or coerce him to pay the amount.but in our opinion, however, the intention of the legislature is clear, on thelanguage used that intention becomesmanifest if we compare and contrast.....
Judgment:

Sabyasachi Mukharji, J.

1. This appeal arises out of an order made and judgment delivered on December 10, 1979, by Mr. Justice Salil K. Roy Chowdhury. By the said order the learned Judge directed that Sri Tulsidas Mundhra be arrested to suffer simple imprisonment for three months. This order came to be passed because there was misfeasance. The order was to the following effect ;

'This Court doth hereby declare that the above named respondent Haridas Mundra and Gopidas Mundra and Tulsidas Mundra as the Directors of the said Company and in particular the said Haridas Mundra also as the proprietor of the said company had misappropriated, retained or become liable or accountable for the money or property of the said company or are guilty of misfeasance and breach of trust in relation to the said company in (i) that the respondent Directors of the said company in particular the said Haridas Mundhra made secret profits and/or obtained personal advantage by causing two lacs and ninety thousand shares of Rupees ten and valued at Rupees twenty nine lacs to be allotted in the name of F. C. Osier (India) Ltd., and wrongfully utilising the said shares for his/their personal gain and/or in making illegitimate profits by dealing with the said companies shares and/or by issuing or causing to be issued shares scripts of the said company fraudulent entry and without consideration to the extent of sixty five thousand shares of Rupees ten each valued at Rupees six lacs and fifty thousand and further extra shares to the extent of sixty three thousand and five hundred shares of rupees ten each valued at Rupees six lacs and thirty five thousand and (ii) that the Directors of the said company and the said Haridas Mundhra in particular are liable and accountable for loss of shortage of assets of the said company to the extent of at least Rupees sixty three lacs fifty thousand five hundred and thirty nine and ninety paise which the said company should have possessed at the rate of winding up having regard to paid up shares capital and the loan obtained on mortgage and the value of the Tea Gardens sold and the value of equity of redemption realised as mentioned in the statement of particulars and set out in the Schedule hereunder written whereby the sums mentioned in the said Schedule became wholly lost to the said company as insolvent on the sixteenth day of June in the year, one thousand nine hundred and sixty one and it is further ordered that the said respondents do jointly and severally contribute to the assets of the said company and do pay to the applicant all such sums as found liable to contribute to such assets as mentioned in Clauses (i) and (ii) as aforesaid together with interest on such sums at the rate six per cent per annum as from the several dates on which the said sums are payable until payment.'

2. Sri Haridas Mundhra, as the order states, was the principal Director and Sri Tulsidas Mundhra, his brother, was another Director were found guilty of breach of the fiduciary manner in which the Directors are supposed to act. Mr. Justice A. K. Basu examined the judgment debtor under Order 21 of the Civil P. C. and certain facts came out which indicate that the gross income of the appellant was Rs. 70,000/- but his assessable income came to about Rs. 15,000/-per month, according to him. The appellant had employed an accountant. He had an office at the Tagore Castle and his wife was a Director of several companies and further the appellant, Sri Tulsidas Mundhra, was also a Director of several companies which had all gone into liquidation and in most of these companies, Sri Haridas Mundhra and other members of his family were interested. It also appears from the said examination as also from the subsequent examination by Mr. Justice Salil K. Roy Chowdhury under Section 51 of the Code that the appellant stays in a flat in Southern Avenue, which was quite spacious. Furthermore, he and his family members used to travel by Air for personal and business reasons to various parts of India. He does not seem to have given an indication that he had little income and money or he had any financial stringency either in his living or for his movement. He had also given an impression, that he could raise money from the market and he had credit in the market. Learned advocate for the respondent submitted that from the examination of the judgment debtor, on both occasions, the following facts emerged : (1) the judgment debtor had an income of Rs. 70,000/- per year, (2) he and the members of his family used to move by Air, (3) he was still carrying on the business, (4) he had an office at Tagore Castile, (5) he had a residential flat in the Southern Avenue, Calcutta, which was quite spacious, (6) the judgment debtor was a Director of several companies all of which had gone into liquidation, (7) his wife had substantial means, shares and assets. Before Mr. Justice Salil Kr. Roy Chowdhury, the judgment debtor was asked how he was able to raise money for his movement by Air and he said that he used to take loans from X, Y & Z. As we have mentioned hereinbefore, there does not seem to be any dearth of money either for his movement or for his living. He had also given in marriage four of his daughters and one of his daughters, at the relevant time, was still unmarried. In these facts and circumstances, Mr. Justice Roy Chowdhury found against the judgment debtor under Section 51 of the Civil P.C. and therefore, he directed his arrest and simple imprisonment for three months.

3. The appellant has now appealed be-fore us on the ground that none of the ingredients necessary to bring the appellant under the mischief of Section 51 of the Civil P. C. had been proved. It was, secondly argued that in any event Clause (c) of the proviso to Section 51 of the Code does not apply in the facts and circumstances of the case. Thirdly, it was urged that Section 51 in any event has given the Court discretion and that the learned Judge has not properly exercised in the fact is and circumstances of the case his discretion.

4. In order to appreciate these contentions it is necessary to set out the relevant provisions of Section 51 which read as follows:

'51. Subject to such conditions and limitations as may be prescribed, the Court may, on the application of the decree-holder, order execution of the decree:--

(a) by delivery of any property specifically decreed;

(b) by attachment and sale or by sale without attachment of any property;

(c) by arrest and detention in prison for such period not exceeding the period specified in Section 58, where arrest and detention is permissible under that section,

(d) by appointing a receiver; or

(e) in such other manner as the nature of the relief granted may require:

Provided that where the decree is for the payment of money, execution by detention in prison shall not be ordered unless, after giving the judgment-debtor an opportunity of showing cause why he should not be committed to prison the court, for reasons recorded in writing, is satisfied:--

(a) that the judgment-debtor, with the object) or effect of obstructing or delaying the execution of the decree,

(i) is likely to abscond or leave the local limits of the jurisdiction of the Court, or

(ii) has, after the institution of the suit in which the decree was passed, dishonestly transferred, concealed, or removed any part of his property or committed any other act of bad faith in relation to his property, or

(b) that the judgment-debtor has, or has had since the date of the decree, that means to pay the amount of the decree or some substantial part) thereof and refuses or neglects or has refused or neglected to pay the same, or

(c) that the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account.

Explanation:-- In the calculation of the means of the judgment-debtor for the purposes of Clause (b) there shall be left out of account any property which, by or under any law or custom having the force of law for the time being in force is exempt from attachment in execution of the decree.

5. Learned advocate for the appellant took us through the evidence and submitted that the evidence adduced did not indicate that the judgment debtor, in this case after the institution of the suit, in which the decree was passed, ever dishonestly transferred, concealed, or removed any part of his property or committed any other act of bad faith in relation to his property. Nor, it was submitted, was the respondent able to prove that the judgment-debtor has, or has had since the date of the decree the means to pay the amount of the decree or some substantial part thereof or had refused and neglected to pay in respect of the same. It was submitted that even if his gross income was taken into account after deduction in respect of the decretal amount, it could not be said that he could pay substantial part of the decree. It was submitted that the substantial part of a decree meant matter of some substance. In this connection, reliance was placed on certain observations in the case of Palser v. Grinling, 1948 AC 291 and drew our attention to the observations of Viscount Simon at pages 316-317 of the report which read as follows :--

'What does 'substantial portion' mean? It is plain that the phrase requires a comparison with the whole rent, and the whole rent means the entire contractual rent payable by the tenant in return for the occupation of the premises together with all the other covenants of the landlord. 'Substantial' in this connection is not the same as 'not unsubstantial' i. e. just enough to avoid the 'de minimis' principle. One of the primary meanings of the word is equivalent to considerable solid, or big. It is in this sense that we speak of a substantial fortune, a substantial meal, a substantial man, a substantial argument or ground of defence. Applying the word in this sense, it must be left to the discretion of the judge of fact to decide as best he can according to the circumstances in each case, the onus being on the landlord. If the judgment of the Court of Appeal in Palser's case were to be understood as fixing percentages as a legal measure; that would be going beyond the powers of the judiciary. To say that everything over 20 per cent, of the whole rent should be regarded as a substantial portion of that rent would be to play the part of a legislator, if Parliament thinks fit to amend the statute by fixing percentages, Parliament will do so. Aristotle long ago pointed out that the degree of precision that is attainable depends on the subject matter. There is no reason for the House to differ from the conclusion reached in these two cases that the portion was not substantial, but this conclusion is justified by the view taken on the facts, not by laying down percentages of general application'. In that view of the matter, learned Advocate for the appellant, submitted that any sum which he has now means to pay could not be considered to be substantial in relation to the amount of decree. The principal amount decreed was Rs. 63 lakhs and with interest the total would come to Re. 1 crore or over. Therefore, the small sum that the judgment debtor could pay, in the facts and circumstances of the case, could not be, by any measure, considered to be substantial part of the decree.

6. On the other hand on behalf of the respondents it was urged that the expression 'substantial' should not be considered to be a percentage of the decree. Any amount to be substantial in the facts and circumstances might be adequate. In the facts and circumstances of the case and in the view we propose to take it is not necessary for us to express any opinion as to the actual meaning of the expression 'substantial part thereof' in Clause (b) of proviso to Section 51 of the Civil P. C.. Here we might observe the view taken by Viscount Simon based on Aristotle that the expression 'substantial' in the facts and circumstances of the case must depend on the subject matter in the context of which the expression falls for decision. On the other hand our attention was drawn to the decision of the Madras High Court where the Division Bench of Madras High Court in the case of M. A. Malik v. V. S. Thiruvengadaswami Mudaliar, : AIR1950Mad208 , held that the relationship between the director and the members of a company was that of trustee and cestui que trust. Though he was not an express trustee he yet occupied a fiduciary position with regard to the members of the company. Therefore, he could be arrested in execution of a decree for payment of money for loss caused by him as director under Section 51, proviso (c) even though his allegation that he had no money was true. Therefore, it was submitted on behalf of the respondents that in any event irrespective of whether the judgment-debtor in this case being the appellant came within the mischief of Clause (a) or Clause (b) of the proviso to Section 51 indisputably came within the mischief of Clause (c) of the proviso to Section 51 and, therefore, it was urged on behalf of the respondent that the learned Judge was right in passing the decree as he did.

So far as the first part of the contention of the respondents that he came within the mischief of Clause (c) of the proviso to Section 51 is concerned, it was urged that though the onus of proof was on the judgment-creditor, being the liquidator and if from certain facts an inference followed, then that fact should be taken to have been proved. It was submitted that in the background of the facts and circumstances of the case narrated hereinbefore about the living and ways of life of the judgment-debtor to was only the natural conclusion to consider that he had means to pay but the judgment-debtor was avoiding payment. It was further urged that the actual state of finance except under coercive process of statute could not be proved by any inference drawn only by certain circumstances. It was, therefore, submitted that in the facts and circumstances of the case sufficient evidence had been adduced from which an inference could be drawn. But as we mentioned hereinbefore it is true that though these facts which the learned Advocate for the respondents have drawn to our attention raise grave doubt and suspicion that though the Judgment-debtor had means to pay had neglected to pay at least a substantial part of the decretal amount, it may not be safe in the fads and circumstances of the case to rest our decision on this aspect of the matter and in the view we have taken on the other aspect of the matter it is not necessary for us to express any final opinion on this question. As to what amount of evidence would lead to the inference which will be taken to be proved under Clause (a) or Clause (b) of the proviso to Section 51 of the Civil P. C., is left out it appears to us that the case clearly comes within the purview of Clause (c) of the proviso to Section 51. Our attention was drawn to Statute of England which is called 'The Debtors Act, 1869' where Section 4 provides that with the exceptions mentioned in Sub-sections of Section 4 no person shall, after the commencement of this Act, be arrested or imprisoned for making default in payment of a sum of money. One of the exceptions was Subsection (3) of Section 4 which reads as follows:--

'Default by a trustee or person acting in a fiduciary capacity and ordered to pay by a Court of equity any sum in his possession or under his control.'

It was emphasised that though the Legislature had used the expression 'any sum in his possession or under his control' in the Indian Statute the real purpose was that a man could be sent to prison after the decree had been passed against Mm for acting in breach of fiduciary capacity but he could not be sent to prison if he had no sum in his possession or under his control to pay. It appears to us that this construction would be unwarranted. The Indian Legislature had advisedly emitted to use the same expressions as in Clause (c), proviso to Section 51 of theCivil P. C. Unlike Clauses (a) and (b),Clause (e) is without any condition or anyrequirement that the delinquentjudgment-debtor had refused or neglected to pay or had transferredor concealed any properly. This in ouropinion was so designedly used by theLegislature. Here against the judgment-debtor decree was passed. The intention,it appears to us must have been to provide deterrent punishment. It was submitted before us on behalf of the appellant that such kind of deterrent punishment would serve no purpose if a manwho had no means to pay at the time ofexecution of the decree though he mighthave been guilty of breach of any actin fiduciary capacity and decree mighthave been passed in this respect no purpose would be served by passing an orderagainst such a person, trying to penalize him or coerce him to pay the amount.But in our opinion, however, the intention of the Legislature is clear, on thelanguage used that intention becomesmanifest if we compare and contrast therequirements of Clauses (a) and (b) withClause (c) of the proviso to Section 51 ofthe Civil P. C. In this case on this aspect we are in respectful agreement withthe observations of the Division Bench ofthe Madras High Court where the MadrasHigh Court expressed the view that ifa director occupied a fiduciary positionin relation to the members of a company,he was liable to account to them. It seemed that his liability to account flowedfrom his fiduciary position which required him to hold the property of the company over which he had control for thebenefit of the members of the company.The fact that it may not serve as a purpose of realising money would in ouropinion be not sufficient when the legislative intent was clear. The purposewas to act as deterrent to all others toprovide an absolute liability for thosewho were found guilty and a decree waspassed in respect of the money in fiduciary capacity. If that is the position,in our opinion this case comes clearlywithin the mischief of Clause (c) of theproviso to Section 51 of the Civil P. C.It is true that where civil liberty of acitizen is concerned, the Court shouldbe reluctant to read such power of restraint unless compelled by the circumstances. We find that this is manifestlyclear in contradistinction to Clauses (a)and (b) of the same proviso and it was the intention of the Legislature to treat the men who are in fiduciary capacity separately and strictly for a public purpose.

7. One of the points urged in support of this appeal was that the appellant might have been holding the money or fund in the assets of the company in his fiduciary capacity but he was not holding the assets of the company in his fiduciary capacity for individual shareholders. In aid of this proposition a director of the company was not the trustee for individual share-holder. Reliance was placed on certain observations of the decision in the case of Percival v. Wright, (1902) 2 Ch D 421. In the view we have taken this question does not require this consideration. Reliance was also placed on certain observations in the case of V. P. Madhavan Nambiar y. Chaldean Syrian Bank Ltd., : AIR1955Mad409 . That was on the question of onus. In the view we have taken it is not necessary again to discuss this decision.

8. Learned Advocate for the appellant, however, submitted that the opening sentence of the section stipulates that there was discretion to be exercised by the Court in various circumstances. The proviso has also indicated 'execution by detention in prison shall not he ordered'. Unlike some other sections where it is provided in some of the provisions of the same statute that detention shall be ordered. The discretion is, therefore, left in the Court. So, in the facts and circumstances of the case, in the light of evidence adduced and the demeanour as discussed by the learned Judge of the judgment-debtor in the witness box it appears to us that the appropriate order or direction would be to uphold the learned judge's order of detention of the judgment-debtor but to direct that the said judgment and order of imprisonment of the judgment-debtor should be kept in suspense provided the judgment-debtor goes on paying a sum of Rs. 40,000/- per year payable in half-yearly instalment of Rs. 20,000/- until the satisfaction of decree or further order of the Court. In arriving at this figure we have relied on rough and ready method on the evidence adduced during the examination of the appellant under Order 21. Rule 41 and also the evidence he gave before the learned trial Judge and taking an overall view of the matter. The appellant will go on paying as above until the decretal amount is paid and the order of detention will remain suspended. In default of payment of the first instalment by 30th June, 1983 and/ or in default of payment of any instalment, the stay will stand vacated. If a substantial amount of the decree is liquidated by thus process, the appellant judgment-debtor would be at liberty to move the court for reduction of the sentence or suspension of sentence for rest of the time. This order, however, will not prevent the judgment-debtor or the appellant to pay any larger sum for the satisfaction of the decree. Parties will pay and bear their own costs. Liquidator will retain his costs out of the assets. The sum of Rs. 6,000/- lying with the Advocate on Record for the Liquidator will be appropriated to the decretal amount. Liberty to the Advocate on Record of the Liquidator to pay the amount to the Liquidator.

9. Learned Advocate for the appellant asks for certificate for leave to appeal to the Supreme Court. In view of the facts and circumstances of the case and in view of the order we are making, we do not think that any substantial question of law of general importance arises in this case which need be decided by the Supreme Court. Hence the prayer for certificate for appeal to the Supreme Court is refused.

Suhas Chandra Sen, J.

10. I agree.


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