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Arrah Sasaram Light Railway Company Ltd. (In Voluntary Liquidation) and ors. Vs. District Board and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. Nil of 1979
Judge
Reported in[1982]52CompCas326(Cal)
ActsCompanies Act, 1956 - Sections 446(3) and 518(1); ;Code of Criminal Procedure (CrPC) , 1973 - Section 144
AppellantArrah Sasaram Light Railway Company Ltd. (In Voluntary Liquidation) and ors.
RespondentDistrict Board and ors.
Appellant AdvocateS.B. Mukherjee and ;Sibaji Sen, Advs.
Respondent AdvocateR.C. Deb and ;J.P. Srivastava, Advs. for respondent No. 1 (District Board, Rohtas), ;S.C. Sen, Adv. for the purchaser (respondent No. 2), Technical Steel & Alloys Co. Ltd. and ;H.K. Mitter, Adv. f
DispositionApplication allowed
Cases ReferredRohtas v. Arrah Sasaram Light Railway Co. Ltd.
Excerpt:
- .....liquidation), to decide the saidquestion which has been raised in the suit filed by the district board,rohtas, in the sub-judge's court, sasaram. mr. sen also referred to apassage in buckley on the companies acts, 13th edn., p, 607, where dealingwith section 307 of the english companies act, 1948, which is in pari materiawith section 518 of the companies act, 1956, the author has commented asfollows: the object of the, act is to leave the company, its contributories, and creditors, if possible, to settle their affairs without coming to the court for either a compulsory or a supervision order, but to provide them under this section with the means of access to the court in the voluntary winding-up just as in a compulsory winding-up or under supervision.in several cases the court has.....
Judgment:

Salil K. Roy Chowdhury, J.

1. This is an application under Section 446 read with Section 518(1)(b) of the Companies Act, 1956, for a transfer of the Title Suit No. 564 of 1978 (District Board, Rohtas v. Arrah Sasaram Light Railway Company Ltd.) pending in the Sub-Judge's Court of Sasaram and other consequential orders.

2. The present application was moved on the 8th of January, 1979, and an ad interim order of injunction restraining the respondents. District Board, Rohtas, its servants and agents from taking any step in the said title suit pending in the Sub-Judge's Court at Sasaram was passed. Thereafter, the parties appeared and filed their affidavits.

3. The facts shortly are that by an agreement dated 15th of October, 1909, between the then District Board of Sahabad and Martin & Company Ltd., for and on behalf of Arrah Sasaram Light Railway Company Ltd., the latter company was to be formed for the construction and erection of tramways or light railways between Arrah and Sasaram. On the 19th of October, 1909, Arrah Sasaram Light Railway Company Ltd. was incorporated as a public limited company having its registered office at No. 12, Mission Row, Calcutta. On the 17th of July, 1910, an agreement was entered into between the then District Board of Sahabad and Martain & Company Ltd., Calcutta, being the promoters of the Arrah Sasaram Light Railway Company Ltd. for the construction of tramways or light railways to be worked by steam power from Arrah to Sasaram through the road between Arrah and Sasaram under the jurisdiction of the said District Board on the terms and conditions of the agreement dated the 15th of October, 1909. On the 6th of March, 1911, the company, Arrah Sasaram Light Railway Company Ltd. was opened in terms of the said principal agreement dated the 15th of October, 1909. On the 19th of August, 1936, a supplementary agreement was entered into between the said District Board of Sahabad and the Arrah Sasaram Light Railway Company Ltd., whereby the parties agreed to amend a clause in the principal agreement regarding the method of computation of profit or loss. On the 26th of March, 1941, another supplementary agreement was entered into between the said District Board and the company making further amendment in the principal agreement. On 4th April, 1951, the chairman of the District Board of Sahabad by a letter to the company and others exercised the option to purchase the light railways with all the plants, buildings, stores, rolling stock, etc. Then ultimately, on the 20th of July, 1959, Arrah-Sasaram Road vested in the State of Bihar. In the meantime, it appears that the District of Sahabad was divided into two districts being District of Rohtas and District of Bbojpur. It appears that the company fell into financial difficulties and received financial assistance from the District Board of Bhojpur and, ultimately, on the 18th of December, 1974, the company issued a notice of closure with effect from 15th of February, 1976. It appears that on the 8th of September, 1975, there was an agreement between the Central Govt. and the company that the company would withdraw the notice and in consideration thereof the Central Govt., in addition to the principal agreement dated the 15th of October, 1909, entered into a separate agreement for a period of three years with effect from 1st of April, 1975, whereby the Central Govt. would advance a sum of Rs. 2,50,000 repayable with interest at the rate of 4% per annum before 31st of March, 1976, from 10th of March, 1975. There were certain letters of the Railway Board to the Eastern Railways stating that the State of Bihar would increase the subsidy. The company made its demands to the District Board of Bhojpur to make payment of the dues as per the agreement. On the 29th of November, 1977, the Central Govt. directed the company to close its operations prior to the expiry of the agreement dated the 8th of September, 1975. On the 6th of December, 1977, there was a letter from the company to the Railway Board that the company agreed to close down the operations of the said company on and from 15th of February, 1978, and on the said date, being 15th of February, 1978, the company closed its operations. It appears that the company in its extraordinary general meeting held on the 29th of March, 1978, at its registered office in Calcutta passed a resolution that the company be wound up voluntarily by members' voluntary winding-up and further resolved that M/s. S. Gupta and Ramen Mukherjee be appointed liquidators of the said company for the purpose of winding up the affairs and distributing the assets of the company with joint and several powers. The said liquidators were authorised to act jointly and severally and exercised all or any of the powers enumerated in Clauses (a) to (d) of Sub-section (1) of Section 457 of the Companies Act, 1956. It appears that in the course of the said voluntary liquidation all the formalities were complied with and the said joint liquidators took a decision to sell the assets of the said company and invited tenders for that purpose. Respondent No. 2, Technical Steel & Alloy Company Ltd., made the highest offer for the purchase of a part of the assets of the said company, namely, railway track, sleepers, rolling stock, plants and machinery lying in its premises between Arrah and Sasaram for a total sum of Rs. 95 lakhs and the same were sold by the company through the said joint liquidators to the said purchaser being respondent No. 2, Technical Steel & Alloy Company Ltd. of 23A, Netaji Subhas Road, Calcutta, on the terms and conditions incorporated in the contract and the said purchaser thereafter paid the first instalment of Rs. 12,00,000 and took steps to remove and lift the said goods purchased by them from the company. In the course of such sale the liquidators encountered enormous difficulties from the District Board, Rohtas, who ultimately on the 7th of September, 1978, filed a criminal proceeding under Section 144 of the Cr. PC.

4. The said Criminal Proceeding, No. 1618 of 1978, was commenced at the instance of the District Board, Rohtas, against the company and others before the Court of Sub-Divisional Officer, Sasaram, and a complaint was filed by the Administrator of the District Board, Rohtas, inter alia, alleging that the portion of the road on which the railway track was lying belonged to the said District Board of Rohtas, and for other grounds alleged in the said complaint-petition. The District Board of Rohtas were entitled to a statement as to the profit of the company and without furnishing any such statement the company along with the other accused were trying to remove the assets of the company and trying to create mischief, etc., thereby apprehending breach of peace. A copy of the said complaint petition is annexed to the affidavit of Saradindu Gupta, affirmed on the 8th of January, 1979, being the grounds of this application, as annex. 'H' at pp. 52 to 54. On the 30th of October, 1978, the Sub-Divisional Officer, Sasaram, in the said proceeding under Section 144 of the Cr. PC made an order restraining the District Board of Rohtas from taking away or selling the assets of the company except the land on which the railway track was lying and also restrained the joint liquidators from disbursing the sale proceeds. The order of the Sub-Divisional Officer, Sasaram, dated 30th October, 1978, is annexed to the-said affidavit affirmed on the 8th January, 1979, of Saradindu Gupta, being annex. 'I' at pp. 55 to 57. On the 18th of November, 1978, another criminal proceeding under Section 144 of the Cr. PC, being Case No. 2278/M of 1971, was filed on the 18th of November, 1978, before the said Sub-Divisional Officer, Sasaram, against the company and others more or less on the identical grounds alleging that the railway company and others being the opposite parties to the said proceeding under Section 144 were emboldened by the order of the Sub-Divisional Officer, Sasaram, dated 30th October, 1978, and were hurriedly removing the materials lying between Sasaram and Hassanbazar Stations and were damaging the railway tracks and buildings and that the acts of the accused were unjustified, unlawful and illegal. The Sub-Divisional Officer, Sasaram, on the 20th of November, 1978, restrained the company and others, being the purchaser and its agents, from going near the disputed lands and assets to prevent the alleged breach of peace, and directions were given for filing a show-cause statement by the railway and other opposite parties.

5. Thereafter, respondent No. 1, District Board, Rohtas, filed the Title Suit No. 164 of 1978 before the Sub-Judge's Court, Sasaram, against the company, its deputy general manager, the purchaser. Technical Steel & Alloy Company Ltd., and the manager of the purchaser and also made the 'District Board, Bhojpur, a pro forma defendant for the adjudication of the respondent No. 1, District Board, Rohtas' claim and for a decree for accounts in respect of the profit & loss and also for a decree of Rs. 1,00,000 and other reliefs. A copy of the plaint is annexed TO the said affidavit of Saradindu Gupta, affirmed on the 8th of January, 1979, being annex. 'L' at pp. 64-73. The suit appears to be for accounts and a money decree after such account is taken, between the said plaintiff, District Board, Rohtas, and the company, Arrah Sasaram Light Railway Company Ltd., making the District Board, Bhojpur, a pro forma defendant. On the 7th of December, 1978, an interim injunction was granted by the Subordinate Judge, Sasaram, in the said Title Suit No. 164 of 1978 restraining the company, and the purchaser, from removing or selling the materials lying on the railway road of the Arrah Sasaram Light Railway Company Ltd. between Hassanbazar and Sasaram and also from spending the sale proceeds which they have got without rendering accounts to the said District Board, Rohtas. It now transpires that no writ of summons of the suit or notice of the interim application has been served on the purchaser, Technical Steel & Alloy Company Ltd. but only recently a notice has been served on the company. The said injunction order passed by the Subordinate judge, Sasaram, is still continuing and on the 9th of January, 1979, the petitioner through the joint liquidators has taken out the summons of this application and on the 8th January, 1979, the interim order was made.

6. Mr. S.B. Mukherjee, appearing with Mr. Sibaji Sen, for the petitioner, submitted that the court has jurisdiction and power under Section 446(3) read with Section 518(1)(b) of the Companies Act, 1956, to transfer the said Title Suit No. 164 of 1978 filed by respondent No. 1, District Board, Rohtas, against the petitioner and others from the Court of Subordinate Judge, Sasaram, to this court along with all pending proceedings and for the same to be disposed of by this court. Mr. Mukherjee drew my attention to the provisions of the said sections and also to an unreported decision of mine which is on the identical question of the court's power to transfer a suit under Section 446(3) read with Section 518(1)(b) of the Companies Act, 1956 in Company Application No. 12 of 1976 (Agra Electric Supply Company Ltd. (In voluntary liquidation) v. Nagar Makapalika, Agra) delivered on the 12th of November, 1976 (since reported at p. 337 infra). In my view, the said decision fully covers the question as to the court's jurisdiction and power to transfer a suit under Section 446(3) read with Section 518(1)(b) of the Companies Act, 1956, in the facts of this case also.

7. Mr. R.C. Deb, appearing for respondent No. 1, District Board, Rohtas, submitted that in view of the said unreported decision of mine (see p. 337 infra) covering the said question, he did not wish to advance any argument on this question but he is not admitting that the said decision is correct.

8. Thereafter, Mr. Mukherjee referred me to the conduct of respondent No. 1, District Board, Rohtas, firstly starting with the criminal proceeding under Section 144 of the Cr. PC one after the other and, thereafter, filing the suit obtained in ex parte injunction as hereinbefore stated. He submitted that the whole intention of respondent No. 1, District Board, Rohtas, is to prevent the joint liquidators from discharging their duties as liquidators by collecting the assets and distributing the same according to the Companies Act, 1956. Mr. Mukherjee submitted that at best the claim of the District Board, Rohtas, if any, is a money claim which can always be preferred before the liquidators and there is no allegation that the same could not be paid. The company would have enough funds to pay out of the sale proceeds, if there is any valid claim. In any event, Mr. Mukherjee submitted that having regard to the facts of this case, that is, the company's registered office being at Calcutta, the joint liquidators are at Calcutta, all the books, papers and documents of the company are at its registered office at Calcutta and the purchaser is also carrying on business and has its office at Calcutta, the balance of convenience is entirely in favour of the suit being tried in Calcutta and, therefore, this is a fit case where the court should exercise its power under Section 446(3) read with Section 518(1)(b) of the Companies Act, 1956, as laid down in my said unreported decision in Agra Electric Supply Company Ltd's case (since reported as Appendix at p. 337 infra).

9. Mr. S.C. Sen, appearing for the purchaser. Technical Steel & Alloy Company Ltd., submitted after drawing my attention to the plaint of the District Board, Rohtas filed in the Sub-judge's Court, Sasaram, that the claim of the District Board, Rohtas, if any, is a money claim and it will be convenient if the suit is heard by this court as all the materials evidence, both oral and documentary, that is, the witness and the documents are lying at Calcutta and the court has ample power to transfer the said suit having jurisdiction in the winding-up proceeding and these can be fairly dealt with and decided by this court in the winding-up-proceeding. Mr. Sen referred to an English decision in In re Union Bank of Kingston-Upon-Hull [1880] 13 Ch D 808 (Ch D), where it has been held that if a company is in the course of being wound up voluntarily, the liquidator may apply to the court under Section 138 of the Companies Act, 1862 (of UK), to determine any question fairly arising in the winding-up and any such application may be either by motion or summons. In that case, in the course of a voluntary winding-up the liquidators were empowered to carry out the transfer or sale of all the company's business to another company and a question as to the objection of certain dissentient members of the company (in liquidation) came up for consideration where Jessel, M R. observed at p. 809 as follows :

'This being a voluntary winding-up, the liquidators are entitled tohave any question in the winding-up decided by me under the 138th sectionof the Companies Act, 1862. As regards this point, I think it is importantto say that I am not going to cut down the meaning of the 138th section.In a voluntary winding-up a liquidator may apply to the court to decideany question fairly arising in the winding-up, and it is much cheaper tobring it before me by way of motion than by an action.'

10. Relying on the said observation Mr. Sen submitted that it will beproper for this court being the winding-up court, having jurisdictionover the company (in voluntary liquidation), to decide the saidquestion which has been raised in the suit filed by the District Board,Rohtas, in the Sub-Judge's Court, Sasaram. Mr. Sen also referred to apassage in Buckley on the Companies Acts, 13th Edn., p, 607, where dealingwith Section 307 of the English Companies Act, 1948, which is in pari materiawith Section 518 of the Companies Act, 1956, the author has commented asfollows:

The object of the, Act is to leave the company, its contributories, and creditors, if possible, to settle their affairs without coming to the court for either a compulsory or a supervision order, but to provide them under this section with the means of access to the court in the voluntary winding-up just as in a compulsory winding-up or under supervision.

In several cases the court has discountenanced any distinction between the jurisdiction in a voluntary winding-up, and in a winding-up under a compulsory order or under supervision.'

11. Mr. Sen thereafter drew my attention to the scheme of the Companies Act regarding winding-up and submitted that Pt. VII deals with winding-up which is divided into five chapters under different headings in respect of different modes of winding-up, i.e., winding-up by court, voluntary winding-up and winding-up under the supervision of the court and there are certain provisions which are applicable to all modes of winding-up, i.e., provisions in Chap. 5 of Pt. IV. Therefore, Mr. Sen submitted, that in all modes of winding up, including voluntary winding-up, the court always has jurisdiction to make any order for the purpose of winding-up and final dissolution of the company regarding collection of its assets and payment of its debts and dividend and final dissolution.

12. Mr. Sen thereafter submitted that in the present case the purchaser for whom he was appearing has a valuable right to get the property and assets he has purchased from the liquidators, who have sold the said assets of the company in the due course of winding-up. The purchaser, respondent No. 2, has got his office, business, etc., at Calcutta and it is not only inconvenient but highly expensive for the purchaser to contest the said suit at Sasaram. Further, it will lead to a business dislocation of the purchaser to be involved in a protracted litigation at Sasaram in respect of the purchase made from the company through the joint liquidators for the value of Rs. 95 lakhs. It is only at the point when the purchasers were removing the assets pursuant to the contract of purchase, the respondent, District Board, Rohtas, started criminal proceedings under Section 144 (Cr. PC) and thereafter, the suit has been filed and an order of injunction has been obtained preventing the purchaser or the liquidators from going near the site for removal of the goods purchased by them. Mr. Sen stated on instruction that the purchaser has not yet been served with the ex parte interim order of injunction, restraining them from removing the assets or going near the railway track where the assets are lying, passed by the Sasaram Court. Mr. Sen, therefore, submitted that the suit should be stayed or, in any event, the same should be transferred to this court for expeditious trial. Mr. Sen also submitted that the suit filed by the respondent is for a realisation of money and it may involve the (interpretation as to the) construction of certain documents and, therefore, it will be convenient for the matter being heard by this court and the suit should be transferred.

13. Mr. R.C. Deb appearing with Mr. J.P. Srivastava for the District Board, Rohtas, the respondents, firstly submitted that this court has no jurisdiction to transfer the said suit from Sasaram to this court but Mr. Deb, in his usual fairness, submitted that in view of my judgment in the Agra Electric Supply Company's case (see p. 337 infra)covering an identical point he is not making any submission, but, he is not conceding. Mr. Deb thereafter submitted that the court should not exercise its power assuming that there is such a power under Section 518 read with Section 446 to transfer the said suit as the balance of convenience is not in favour of the suit being tried in this court.

14. Mr. Deb referred to a decision of Bachawat J., in In re P.P. De & Co. Ltd. [1951] 55 CWN 271 at pp. 273 274; 21 Comp. Cas 215 that the court should not exercise the power for the~ stay of a suit when the claim is disputed in the voluntary winding-up of a company. Mr. Deb also referred to the English decision which was relied on in the said Calcutta decision of Bachawat J., being the case of Currie v. Consolidated Kent Collieries Corpn. Ltd. [1906] 1 KB 134 (CA), at p. 138, where it was held that when the question of the company's liability, being a matter which was prima facie properly determinable in the ordinary way by an action and no special ground for a stay of proceedings being made out, the application should, in exercise of the discretion of the court, be refused. That was a case for a stay of the action. Relying on this decision and also on Buckley on the Companies Acts, 13th Edn, at p. 478, Mr. Deb submitted that this court should not exercise its power of stay of the suit or proceedings of the suit filed by the District Board, Rohtas, at Sasaram.

15. Mr. Deb further submitted that the balance of convenience is entirely in favour of the action being continued at Sasaram. Therefore, the application should be dismissed.

16. Mr. H.K. Mitter appearing for the District Board, Bhojpur, proforma defendant, adopted the arguments of Mr. Deb and submitted thatthe application should not be allowed.

17. Considering the respective contentions very carefully in my view this is a fit and proper case where the court should exercise its power of transfer of the said suit under Section 446(3) read with Section 518(1)(b) of the Companies Act, 1956. The identical point was raised before me in the said unreproted decision in Agra Electric Supply Company Ltd. (In voluntary liquidation) v. Nagar Mahapalika in C.A. No. 12 of 1976 (since reported as Appendix at p. 337 infra) and I delivered the judgment on the 12th November, 1976. The reasoning, in the said decision applies to this case as the facts seem to me to be identical.

18. Further; as I have already noted, the submission of Mr. S.C. Sen regarding the principles on which the court acts in respect of the voluntary winding-up and the passages from Buckley and the decisions cited by him apply with full force in the present case. Further, the conduct of the respondent. District Board, Rohtas, seems to me not only unreasonable but harassive and intended for the purpose of preventing the liquidators to carry out their duties by a winding-up of the company, i.e., by sale of its assets and distribution of the amounts collected after payment of the debts and finally dissolving the company. The court always retains its jurisdiction over the winding-up and can make any orde^ at any stage of the winding-up whenever necessary in aid of the winding-up as asked for by the liquidator. In this case, there cannot be any question that the balance of convenience is overwhelmingly in favour of the suit being tried in this court, the court having jurisdiction over the company which is voluntarily wound up. The material evidence, both documentary and oral, most of them, are lying at Calcutta. Further, the claim of the said respondent, District Board, Rohtas, is a money claim and it may involve the interpretation of certain documents and the same can be conveniently tried by the winding-up court extensively and at less expense, within a minimum time. The conduct of respondent No. 1, by instituting proceedings under Section 144 of the Cr. PC one after another and finally filing the suit at Sasaram and obtaining an ex parte injunction, restraining the liquidator and the purchaser from going near the railway track and removing the assets, makes it quite clear that the whole intention of respondent No. 1 is to obstruct the winding-up proceedings and prevent the purchaser from removing the goods or taking delivery of the goods pursuant to the sale effected by the joint liquidators in their favour in the course of the winding-up of the company.

19. I may only refer to Section 425 of the Companies Act, which is set out here-under:

' 425. Modes of winding-up.--(1) The winding-up of a company may be either--

(a) by the court; or

(b) voluntary; or

(c) subject to the supervision of the court.

(2) The provisions of this Act with respect to winding up apply, unless the contrary appears, to the winding up of a company in any of those modes. '

20. Section 518(1)(b) read with Section 446(3) gives the court ample power and jurisdiction for transfer of the said suit pending at Sasaram to this court and, in my view, in the interest of justice and for expeditious hearing of the suit and also for a speedy winding up and final dissolution of the company, the suit should be immediately transferred in exercise of the court's power under Section 446(3) of the Companies Act.

21. The decisions cited by Mr. Deb, in my view, have no application to the present case as those decisions relate to a stay of action or stay of execution proceedings against a company which had been voluntarily wound up. In the present case I am concerned about the transfer of a suit pending in another court to this court having jurisdiction over the company which has been wound up voluntarily. Therefore, in my view, the principle, which I have held to be applicable, in the decision of Agra Electric Supply Co. Ltd.'s case (see p. 337 infra) applies to the present case.

22. In the result, I am making the following order :

There will be an order in terms of prayers (a), (b) and (c).

23. The Registrar, Original Side, of this court shall transmit without delay a certified copy of this order to the Subordinate Judge's Court at Sasaram where the said Title Suit No. 164, of 1978 (District Board, Rohtas v. Arrah Sasaram Light Railway Co. Ltd.) is pending and the sajd Subordinate Judge's Court, Sasaram, shall on receipt of the said order transmit the records of the said suit and all proceedings thereunder to this court.

24. The Registrar, Original Side, of this court and the Registrar, Subordinate Judge's Court at Sasaram and all parties to act on a signed copy of the minute.

25. Costs of this application will be costs in the suit. The suit will appear in the list three weeks hence for direction.

26. Stay asked for is refused.

27. Order to be drawn up expeditiously.


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