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Indian Bank Vs. Bengal Potteries Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberCompany Petition No. 9 of 1980
Judge
Reported in[1982]52CompCas471(Cal)
ActsCompanies Act, 1956 - Sections 155, 446, 536(2) and 537; ;Industries (Development and Regulation) Act, 1951 - Sections 18A, 18FA(3), 18FA(4), 18FA(5), 18FA(10), 18FB(1) and 18FG
AppellantIndian Bank
RespondentBengal Potteries Ltd. and ors.
Advocates:Bimalesh Chatterjee, Adv.
Cases ReferredSmt. Bhagwati Devi Bubna v. Dhanraj Mills Private Ltd.
Excerpt:
- .....was issued read with section 80aa of the industries (development & regulation) act, 1951. the industrial undertaking being the entire undertaking of the respondent-company, bengal potteries ltd., was taken over by the central govt. without investigation under the circumstances mentioned in the notification and the industrial reconstruction corporation of india ltd. was appointed the authorised person under the said notification. it follows, therefore, that under the provisions of section 18fa, sub-sections (3), (4), (5) and (10), which are as follows :18fa. (3) where an order has been made by the high court under sub-section (2) the high court shall direct the official liquidator or any other person having, for the time being, charge of the management or control of the industrial.....
Judgment:

Salil Kumar Roy Chowdhury, J.

1. This is an application under Section 155 of the Companies Act, 1956, for rectification of the share register of the company in respect of 38,000 equity shares mentioned in para. 8 of the petition in favour of the petitioner and for consequential orders.

2. The admitted facts are that by an order dated the 9th of February, 1976, the company, Bengal Potteries Ltd., was wound up and subsequently with the leave of the court a notification under Section 18FA dated the 15th of September, 1976, was issued read with Section 80AA of the Industries (Development & Regulation) Act, 1951. The industrial undertaking being the entire undertaking of the respondent-company, Bengal Potteries Ltd., was taken over by the Central Govt. without investigation under the circumstances mentioned in the notification and the Industrial Reconstruction Corporation of India Ltd. was appointed the authorised person under the said notification. It follows, therefore, that under the provisions of Section 18FA, Sub-sections (3), (4), (5) and (10), which are as follows :

18FA. (3) Where an order has been made by the High Court under Sub-section (2) the High Court shall direct the Official Liquidator or any other person having, for the time being, charge of the management or control of the industrial undertaking, whether by or under the orders of any court, or any contract or instrument or otherwise, to make over the management of such undertaking or the concerned part, as the case may be, to the authorised person and thereupon the authorised person shall be deemed to be the Official Liquidator in respect of the industrial undertaking or the concerned part, as the case may be.

(4) Before making over the possession of the industrial undertaking or the concerned part to the authorised person, the Official Liquidator shall make a complete inventory of all the assets and liabilities of the industrial undertaking or the concerned part, as the case may be, in the manner specified in Section 18FG and deliver a copy of such inventory to the authorised person, who shall, after verifying the correctness thereof, sign on the duplicate copy thereof as evidence of the receipt of the inventory by him.

(5) On taking over the management of the industrial undertaking, or on the commencement of the exercise of functions of control in relation to the concerned part, the authorised person shall take immediate steps to so run the industrial undertaking or the concerned part as to ensure the maintenance of production.

(10) The proceedings in the winding up of the company in so far as they relate to-

(a) the industrial undertaking, the management of which has been taken over by the authorised person under this section, or

(b) the concerned part in relation to which any function of control is exercised by the authorised person under this section, shall, during the period of such management or control, remain stayed, and, in computing the period of limitation for the enforcement of any right, privilege, obligation or liability in relation to such undertaking or the concerned part, the period during which such proceedings remained stayed shall be excluded.'

It is also provided under Section 18FB of the said Industries (Development & Regulation) Act, 1951, as follows :

'18FB. (1) The Central Govt. may, if it is satisfied in relation to an industrial undertaking or any part thereof, that the management or control of which has been taken over under Section 18A, whether before or after the commencement of the Industries (Development and Regulation) Amendment Act, 1971, or under Section 18AA or Section 18FA, that it is necessary so to do in the interests of the general public with a view to preventing fall in the volume of production of any scheduled industry, it may, by notified order, declare that...

(b) the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force (to which such industrial undertaking or the company owning such undertaking is a party or which may be applicable to such industrial undertaking or company) immediately before the date of issue of such notified order shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising thereunder before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notified order. (2) The notified order made under Sub-section (1) shall remain in force, in the first instance, for a period of one year, but the duration of such notified order may be extended from, time to time by a further notified order by a period not exceeding one year at a time :

Provided that no such notified order shall, in any case, remain in force-

(a) after the expiry of the period for which the management of the industrial undertaking was taken over under Section 18A, Section 18AA or Section 18FA or

(b) for more than five years in the aggregate from the date of issue of the first notified order, whichever is earlier.

(3) Any notified order made under Sub-section (1) shall have effect notwithstanding anything to the contrary contained in any other law, agreement or instrument or any decree or order of a court, tribunal, officer or other authority or of any submission, settlement or standing order.

(4) Any remedy for the enforcement of any right, privilege, obligation or liability referred to in Clause (b) of Sub-section (1) and suspended or modified by a notified order made under that Sub-section shall, in accordance with the terms of the notified order, remain suspended or modified, and all proceedings relating thereto pending before any court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notified order ceasing to have effect-

(a) any right, privilege, obligation or 'liability so remaining suspended or modified shall become revised and enforceable as if the notified order had never been made ;

(b) any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed.

(5) In computing the period of limitation for the enforcement of any right, privilege, obligation or liability referred to in Clause (b) of Sub-section (1), the period during which it or the remedy for the enforcement thereof remained suspended shall be excluded.'

3. It is also relevant to set out the provisions of Section 18FG of the said Act, which runs as follows :

18FG. For the purposes of this Act, the authorised person shall, assoon as may be, after taking over the management of the industrial undertaking of a company under Section 18A or Section 18AA or Section 18FA,--(a) prepare a complete inventory of-

(i) all properties, movable and immovable, including lands, buildings, works, workshops, stores, instruments, plant, machinery, automobiles and other vehicles, stocks of materials in the course of production, storage or transit, raw materials, cash balances, cash in hand, deposits in bank or with any other person or body or on loan, reserve funds, investments and book debts and all other rights and interests arising out of such property as were immediately before the date of taking over of the industrial undertaking in the ownership, possession, power or control, of the company, whether within or without India and all books of accounts, registers, maps, plants, Sections, drawings, records, documents or titles of owner-ship of property, and all other documents of whatever nature relating thereto ; and

(ii) all borrowings, liabilities and obligations of whatever kind of the company including liability on account of terminal benefits to its employees subsisting immediately before the said date ;

(b) prepare separately a list of members and a list of creditors of such-company as on the date of taking over of the management of the industrial undertaking showing separately in the list of creditors, the secured creditors and the unsecured creditors :

Provided that where the management of the industrial undertaking of a company has been taken over under the said Section 18A before the commencement of the Industries (Development and Regulation) Amendment Act, 1971, the aforesaid function shall be performed by the authorised person within six months from such commencement.'

Mr. Bimalesh Chatterjee, appearing for the petitioner, Indian Bank, submitted after drawing my attention to various provisions of the saidIndustries (Development and Regulation) Act, 1951, particularly Sections 18E(1)(a), (b) and (2), 18AA(3)(5), 18FA(2), (3), (4) and (10), 18FB(1)(b) and 18FH and submitted that by the operation of the said provisions it is quite clear that the provisions of the Companies Act, 1956, are not suspended and he particularly referred to Section 18E(2) and submitted that save and except the provisions mentioned therein, all the other provisions of the Indian Companies Act continue to apply to the undertaking in the same manner as it applied thereto before the notification under Section 18A. In my view, the said contention is not correct as the reference to Section 18A under Chap. III-A which, from a plain reading of the said section, contemplates the taking over of an industrial undertaking which is not wound up. Therefore, in my view, when there are specific provisions for the management and control of an industrial undertaking owned by companies (in liquidation) under Chap. III-AA which has been introduced in the Act by an amendment, being Act No. 72 of 1971, making specific provisions in respect of a company (in liquidation) the management and control of which is taken over, after obtaining the permission of the High Court by making an application by the Government there cannot be any question of the application of any other provision. Therefore, there being specific provisions for the management of companies (in liquidation) being taken over by the Central Govt., Section 18E cannot have any application and Chap. III-AA, containing the provisions of Section 18FA, which appears to be a complete code in respect of taking over the management and control of a company (in liquidation) after the Central Govt. forms the opinion that there are possibilities of re-starting an industrial undertaking and that such undertaking should be run or re-started, as the case may be, for maintaining or increasing the production, supply or distribution of the articles or class of articles relatable to a scheduled industry needed by the general public, and it has been made specifically clear in Sub-section (3) of Section 18FA that the authorised person will replace the official liquidator and take over possession from him after making an inventory in accordance with Section 18FG, the said authorised person will thereafter be deemed to be the official liquidator and Sub-section (10) of Section 18FA, which I have set out before, makes it abundantly clear that the winding-up proceeding would be stayed and enforcement of any right, privilege, obligation or law in relation to such an industrial undertaking would remain stayed during the period the Central Govt. takes over the management and control of such undertaking being the company (in liquidation). It is further made clear by Sub-section (1)(b) of Section 18FB that the operation of all or any contract, etc., shall remain suspended or shall be enforceable with such adaptation and in such manner as may be specified in the notified order and all rights of the parties including the shareholder of the company (in liquidation) remain suspended and,in my view, the power to enforce the right of transfer of shares by rectification of the register of members is also a right of a shareholder of a company to transfer and correspondingly the transferee's right to get his name rectified in place of the transferor remains suspended. It makes no difference whether such right to become the shareholder is declared by a decree of the court as in the present case, because that would be rectification of the share register of the respondent-company in the course of winding-up pursuant to the decree of the court and such execution remains stayed within the meaning of Section 18FA(10) during the period the management and control of the said company (in liquidation) is with the Central Govt. under the said Act.

4. Further, it appears that under Section 18FG the authorised person immediately after taking over the management of the said industrial undertaking under Section 18FA, inter alia, prepares separately a list of members as on the date of taking over the management of the industrial undertaking which clearly indicates that the said list of members cannot be rectified by the court so long the company is under the management and control of the Central Govt. under the said Act, reading the entire provisions, particularly Section 18FA(4), (5) and (10) read with Section 18FG of the said Act. I have no doubt in my mind that the winding-up proceeding being stayed in respect of the said industrial undertaking, being the entire undertaking of the respondent-company during the period the management and control are taken over by the Central Govt. under the said Act, the court has no power to make any order under Section 155 of the Companies Act, 1956, even though it may be pursuant to a decree, as everything including the execution of the said decree remains stayed under the operation of the said provisions and the list of members as prepared by the authorised Controller cannot be rectified by the court so long as the industrial undertaking being the respondent-company (in liquidation) is under the management and control of the Central Govt. Mr. Chatterjee referred to several decisions which are under Section 446 of the Companies Act, 1956, for leave to proceed with any legal proceedings including the execution of the decree. Those cases being Suresh Chandra Khasnabish v. Bank of Calcutta Ltd. [1951] 21 Comp Cas 110 ; 54 CWN 832 (Cal), Rup Narayan Ram Chandra Private Ltd. v. Brahmaputra Tea Company Ltd. [1961] 65 CWN 1060 (Cal), and the Supreme Court decision in Bansidhar Shankarlal v. Mohd. Ibrahim [1971] 41 Comp Cas 21 ; : [1971]2SCR476 , where the principles on which the court grants leave to continue any legal proceeding under Section 446(1) of the Companies Act, 1956, are laid down which include granting of leave subsequent to the proceeding being started and a Patna decision in Smt. Bhagwati Devi Bubna v. Dhanraj Mills Private Ltd. : AIR1969Pat206 . But, in my view, all those decisions have no application to the facts of this present case where by operation of the said Act, being the Industries (Development & Regulation) Act, 1951, the winding-up proceeding is stayed so long as the control and management of the industrial undertaking being the respondent-company (in liquidation) is with the Central Govt. under the said Act and the notification is in operation. In short, the court has no jurisdiction as all proceedings in winding-up are stayed and, therefore, leave to proceed against the company (in liquidation) either under Section 446 read with Section 537 of the Companies Act, 1956, for the execution of a decree by court cannot and does not arise as all proceedings in winding-up have been stayed by the said special statute. Any other interpretation would frustrate and go against the object and purpose of the said Act which has specifically taken away the jurisdiction of the court so long the management and control of the industrial undertaking being the respondent-company (in liquidation) is with the Central Govt. Therefore, in my view, at this stage, the present petition is not maintainable as this court has no jurisdiction to grant any relief to the petitioner as his cause of action for making this application or the right to apply arises out of the contract between the shareholder and the company, who under the articles is entitled to transfer the same according to law and also by a decree which has declared the petitioner as being entitled to the said shares as the pledgee of the said shares in satisfaction of its claim against the registered shareholder but as all the proceedings in winding-up being stayed and, admittedly, the company is still in liquidation and the registration of the said shares in favour of the petitioner would be a proceeding in the winding-up as it has been specifically stayed as hereinbefore stated. Further, under Section 536(2) of the Companies Act, 1956, after liquidation no change in the shareholding can take place without the order of the court and at this stage by the operation of the said Industries (Development & Regulation) Act, 1951, as hereinbefore stated, all proceedings in the winding-up are stayed and, as such, the court has no jurisdiction to rectify-the share register as asked for by the petitioner. His right to apply remains suspended so long the industrial undertaking is under the management and control of the Central Govt. under the said Industries (Development & Regulation) Act, 1951,

5. In that view of the matter, I hold that the present application is not maintainable at this stage and the petitioner's right remains' suspended under the said Act.

6. In the result I am making the following order :

No order on this application.

7. In the peculiar circumstances of this case, there will be no order as to costs.


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