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Smt. Tarubala Saha Vs. Nath Bank Ltd. (In Liquidation) and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany;Civil
CourtKolkata High Court
Decided On
Case NumberCivil Revision No. 1131 of 1971
Judge
Reported in[1972]42CompCas588(Cal),76CWN99
ActsIndian Companies Act, 1913 - Section 171; ;Code of Civil Procedure (CPC) , 1908 - Order 21, Rule 63
AppellantSmt. Tarubala Saha
RespondentNath Bank Ltd. (In Liquidation) and anr.
Appellant AdvocateD.K. Das, Adv.
Respondent AdvocateP.K. Sen, Adv.
Cases Referred and Srinivasa Naicker v. Nagappa Chettiar
Excerpt:
- .....under section 171 of the indian companies act, 1913, before institution of the suit.17. now, the privy council's judgment in phul kumari's case has been explained by the supreme court in sawai singhai's case, : [1966]1scr988 noted above. this is what the supreme court says :' in that case, the privy council was dealing with the question of the proper court-fees to be paid for a suit under section 283 of the code, which was then in force, and which corresponds to order 21, rule 63, of the present code. article 17 of schedule ii of the court-fees act (vii of 1870), with which the privy council was dealing, was expressly made to apply to 'plaint or memorandum of appeal in each of the following suits :--(i) to alter or set aside a summary decision or order of any of the civil courts not.....
Judgment:

Sankar Prasad Mitra, J.

1. This rule is against an order of the First Subordinate Judge at Alipore being Order No. 19 of January 27, 1971, in Title Suit No. 46 of 1970. The petitioner, it appears, preferred a claim against attachment of property by Nath Bank Ltd. (in liquidation). There were proceedings under Order 21, Rule 58, of the Code of Civil Procedure, which terminated against the petitioner. Thereafter, the petitioner filed a suit under Order 21, Rule 63. The suit was instituted without obtaining leave of court as contemplated by Section 171 of the Indian Companies Act, 1913. The First Subordinate Judge by his aforesaid order has directed the petitioner to obtain the leave by February 27, 1971, and has stayed all proceedings in the suit under Order 21, Rule 63, in the meantime. The petitioner is aggrieved by this order.

2. Mr. Das appearing for the petitioner has argued that no leave under Section 171 is necessary to institute a suit under Order 21, Rule 63. His contention is that a suit under Order 21, Rule 63 is a suit by way of defence and is merely a continuation of the proceedings under Order 21, Rule 58. Learned advocate primarily relied on a Division Bench judgment of this court in Kartic Chandra Pal v. Noakhali Union Bank Ltd., : AIR1969Cal158 . In this case it has been held that where a decree in favour of a bank in liquidation is transferred by the High Court to another court for execution, the executing court has jurisdiction to decide a claim under Order 21, Rule 58, of the Code, notwithstanding Section 45B of the Banking Companies Act and no leave under Section 171 of the Indian Companies Act, 1913, is necessary to prefer such a claim. The Division Bench is of the view that the transfer order carries with it also the necessary leave under Section 171 to proceed with the execution including consideration of claims and objections thereto and no leave or fresh leave under Section 171 is therefore necessary.

3. It is apparent that this case did not go beyond Order 21, Rule 58. But Mr. Das invites us to apply the same principles to suits under Order 21, Rule 63, as well. Whether or not such an extension is possible depends on numerous factors including the nature of a suit under Order 21, Rule 63, the reliefs claimed in such a suit and the forum for such a suit. We shall discuss these matters in detail later in this judgment.

4. Learned counsel for the petitioner has placed strong reliance on the judgment of the Allahabad High Court in the case of Rahmat Ali Fatehullah v. Calcutta National Bank Ltd., [1955] 25 Comp. Cas. 112, 117, A.I.R. 1955 All. 169.

5. Before we come to this case let us set out the provisions of Section 171 of the Indian Companies Act, 1913. The section reads thus :

' When a winding-up order has been made ..... no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose.'

7. The expression 'the court' in this section means the court having jurisdiction under the said Act. Now, the Allahabad High Court in the case cited above was considering the meaning of the expression ' against the company ' in Section 171. The Allahabad High Court observes at page 171 in paragraph 17 :

' The words ' against the company ' must mean a proceeding where a liability is intended to be fastened on the company or its assets and not proceeding commenced by a person with the object of escaping liability arising out of a proceeding commenced by the company itself. It would probably be useful to clarify the position a little further. If a person wants to file a suit to escape liability on the ground that the company's claim against him is unfounded, it is a proceeding against the company, but where the company has started the proceeding, that is, put forward its claim in a court of law, any remedy available by way of defence to escape liability, which the company wants to fasten on him, should not be deemed to be a proceeding commenced or continued against the company and in such a case the question, whether the claim was put forward or the suit was filed by the company before or after the winding-up order, should make no difference.'

8. Mr. Das's submission is that a suit under Order 21, Rule 63, is a remedy available to escape liability which the company in liquidation wants to fasten upon the plaintiff in that suit. In these premises, according to Mr. Das, no leave under Section 171 is necessary to file a suit under Order 21, Rule 63.

9. It seems to us that this contention of counsel for the petitioner cannot be accepted. Looking at the relevant provisions of the Code it appears that the execution proceedings come to an end with the passing of an order upon investigation of claims to, and objection to attachment of, attached property under Order 21, Rule 58, so far as the objector is concerned. This order is conclusive subject to the result of the suit, that may be instituted within the prescribed time under Order 21, Rule 63. The suit under Order 21, Rule 63, is in the nature of fresh proceedings de hors the execution. The scope of this suit, as we shall see later, is different and the forum of the suit may also be different depending on jurisdictions of courts concerned.

10. We would further point out that in the Allahabad case mentioned above a decree was passed against the defendant and the defendant wanted to escape the liability imposed by the decree by making an application by way of review. And the question arose as to whether for a review application leave under Section 171 was necessary. The Allahabad High Court held that leave was not necessary. These considerations are not, therefore, relevant in the instant case.

11. Mr. Das then drew our attention to a case of the Patna High Court and a case of the Nagpur High Court. The Patna case is the case of Mt. Bas Kuar v. Gaya Municipality, A.I.R. 1939 Pat. 138.. The Patna High Court has held that a purchaser of the property from a claimant after an order has been passed in the claimant's favour but before a suit under Order 21, Rule 63, is instituted, is an alienee -bendente lite and is, therefore, not a necessary party to the suit. More or less the same view was expressed by the Nagpur High Court in Madholal Damlal v. Gajrabi, (1) A.I.R. 1951 Nag. 194.. The Nagpur High Court has also said that all alienations during the continuance of the proceedings originated by a claim petition till the disposal of the suit under Order 21, Rule 63, are affected by the doctrine of lis pendens.

12. In both these cases the learned judges were considering the doctrine of lis pendens in relation to Order 21, Rule 58, and Order 21, Rule 63, and it is in this context that both the courts have observed that a suit under Order 21, Rule 63, is not in essence an original suit but a mere continuation of the proceedings in a claim petition. The reason is that an order under Order 21, Rule 58, is conclusive, subject to the result of a suit that may be instituted under Order 21, Rule 63. On the basis of these two judgments we cannot uphold the contention of Mr, Das, that since a suit under Order 21, Rule 63, may be said to be a continuation of proceedings under Order 21, Rule 58, for certain purposes, leave under Section 171 of the Indian Companies Act is not required. As we have said the observations were made in a particular context which we were not called upon to consider in the instant case.

13. Mr. Das then referred to a decision of the Madras High Court and a decision of the Punjab High Court. In Muhammad Yusuf Sahib v. Province of Madras, A.I.R. 1943 Mad. 341., it has been held that a suit under Order 21, Rule 63, is a continuation of the claim proceedings under Order 21, Rule 58, and, therefore, a notice under Section 80 is not necessary for a suit under Order 21, Rule 63, The Punjab High Court reached the same conclusion in Ram Sundri v. Collector, Ludhiana, A.I.R. 1959 Punj. 413. The Supreme Court had to consider this question in Sawai Singhai Nirmal Chand v. Union of India, : [1966]1SCR988 , and had expressly overruled all decisions which have held that suits under Order 21. Rule 63, did not attract the provisions of Section 80 of the Code. We shall have occasion to advert to the Supreme Court's judgment at a subsequent stage.

14. The next case of Mr. Das is the case of the Madras High Court in V. K. Kelu Achan v. Thandavan Chettiar, A.I.R. 1933 Mad. 340. A receiver was appointed under Section 92 of the Code. A decree was passed and in execution of the decree certain crops were attached. The plaintiff put in a claim to the property, but it was dismissed. He then filed a regular suit to claim his share in the property. The Madras High Court held that sanction to sue the receiver was not necessary for the suit and that, even if it were necessary, sanction of the subordinate court was sufficient.

15. We are of opinion that the principles governing leave to sue a receiver do not apply to a leave to sue a liquidator. This court in Official Liquidator v. Commissioner of Income-tax, : [1971]80ITR108(Cal) , has pointed out that the position of the official liquidator caunot be equated to that of a receiver ; and for the purpose of leave of court, the official liquidator and the receiver do not stand on the same footing. This court is of the view that owing to the express provisions made in the Companies Act, 1956, including the provisions contained in Section 446, there cannot be any question of exercising any inherent power or jurisdiction by court and the principle of equitable authority has no application. We are in agreement with this view.

16. Learned counsel for the petitioner finally invited us to consider the case of Protap Chandra Gope v. Sarat Chttndra Gangopadhyaya, [1921] 25 C.W.N. 544, A.T.R. 1921 Cal. 101. It is a judgment of Sir Ashutosh Mookherjee, Actg. C.J. sitting with Fletcher J. The court at page 546 has taken note of Lord Robertson's view expressed in Phulkumari v. Ghanskyam, [1908] I.L.R. 35 Cal. 202 (P.C.), that a regular suit under Order 21, Rule 63, is 'simply a form of appeal ' and that the plaint therein is 'for review of a summary decision'. Mr, Das submits to us that a suit under Order 21, Rule 63, being a form of appeal or a form of review of a summary decision there is no occasion for obtaining leave under Section 171 of the Indian Companies Act, 1913, before institution of the suit.

17. Now, the Privy Council's judgment in Phul Kumari's case has been explained by the Supreme Court in Sawai Singhai's case, : [1966]1SCR988 noted above. This is what the Supreme Court says :

' In that case, the Privy Council was dealing with the question of the proper court-fees to be paid for a suit under Section 283 of the Code, which was then in force, and which corresponds to Order 21, Rule 63, of the present Code. Article 17 of Schedule II of the Court-fees Act (VII of 1870), with which the Privy Council was dealing, was expressly made to apply to 'Plaint or memorandum of appeal in each of the following suits :--(i) to alter or set aside a summary decision or order of any of the civil courts not established by Letters Patent, or of any revenue court', and the Privy Council had to examine the question as to whether a suit filed under Section 283 for the purpose of the relevant article prescribing the court fee to be paid on the plaint was, or was not, a suit to alter or set aside a summary decision or order of any civil court. In answering this question in the affirmative, the Privy Council observed that the differences between the words used in the plaint in the case before it and the words used in the relevant article of the Court-fees Act, was merely verbal. In the plaint, the plaintiff had 'categorically asked from the court the several decrees which she had asked from the subordinate judge, and which the subordinate judge had refused'. In other words, the plaint did not, in terms, ask for the setting aside of the said decrees or reversing them. The Privy Council did not attach any importance to this verbal difference and held that, in substance, the plaint was one filed with the object of getting a summary decision of the court set aside as contemplated by Section 283 ..... Says the Privy Council, '..... both parties have treated the action as if it were not simply a form of appeal, but as if it were unrelated to any decree forming the cause of action'. In other words, the effect of the observations made by the Privy Council is just this that when a suit is brought under Section 283, it is no more than a suit to set aside a summary decision by which the plaintiff feels aggrieved. It would be noticed that the question which had been raised before the Privy Council had reference to the payment of proper court-fees ; and the decision of the Privy Council and its observations must, therefore, be read in the light of tne article which the Privy Council applied. It would, we think, be unreasonable to extend the said observations to the present case and treat them as enunciating a proposition of law that for all purposes, a suit brought under Order 21, Rule 63, is either a continuation of the objection, proceedings, or is a form of an appeal against the order passed in them. In our opinion, this extension is not justified, because the Privy Council could not have intended to lay down such a broad proposition. Therefore, the argument that the present suit is outside the purview of Section 80 of the Code, because it is the continuation of the attachment proceedings, must be rejected.'

18. The above quotation from the Supreme Court's judgment is a complete answer, in our view, to Mr. Das's contention that a suit under Order 21, Rule 63, is a suit in the form of an appeal or a review of a summary decision only.

19. Before we proceed any further it is relevant to enquire into the respective scope of proceedings under Order 21, Rule 58, and Order 21, Rule 63, of the Code. The scope of an enquiry under Order 21, Rule 58, is a limited one. It is confined to question of possession only. But a suit under Order 21, Rule 63, is concerned not only with the question of possession but also with the question of title. In other words, the scope of the suit is different from and wider than that of an investigation under Order 21, Rule 58. In fact, the order made in an investigation under Order 21, Rule 58, constitutes the cause of action for a suit under Order 21, Rule 63 : vide Sawai Singhai Nirmal Chand v. Union of India, : [1966]1SCR988 .

20. Secondly, a suit under Order 21. rale 63, is not necessarily tried by the same court which disposed of a claim under Order 21, Rule 58. A suit under Order 21, Rule 63, is not a suit for setting aside an earlier order passed by the executing court on application made to it under Order 21, Rule 58, but is a suit, as we have pointed out, in which the rights claimed by the respective parties are to be determined. The effect of the order passed earlier by the executing court is controlled by the final decree which is to be passed in the suit under Order 21, Rule 63. When, therefore, a court on an application made to it under Order 21, Rule 58, has passed an order in respect of property situate outside its jurisdiction, a suit under Order 21, Rule 63, cannot be entertained by such court as the suit falls within Section 16(d) of the Code of Civil Procedure ; that is to say, that suit, subject to the pecuniary or other limitations prescribed by law, for the determination of any other right to or interest in immovable property, shall be instituted in the court within the local limits of whose jurisdiction the property is situate : vide Daulatram Mohandas v. Sugrabai Rajjabali Herra, [1966] 68 Bom. L.R. 886..

21. The nature of a suit under Order 21, Rule 63, being entirely different from the nature of a proceeding under Order 21, Rule 58, the Supreme Court in Sawai Singhai's case, : [1966]1SCR988 , came to the conclusion that in order to institute a suit under Order 21, Rule 63, notice under Section 80 of the Code must be given. We may, incidentally, mention that the language of Section 80, so far as it is relevant for our purpose in this case, bears striking resemblance to that of Section 171 of the Indian Companies Act, 1913. And the Supreme Court, : [1966]1SCR988 has quoted the observations of Viscount Sumner, in the Privy Council that, Bhagchand Dagdusa Gujrathi v. Secretary of State for India A.I.R. 1927 P.C. 176 :

' The Act, albeit a Procedure Code, must be read in accordance with the natural meaning of its words and that Section 80 is express, explicit and mandatory and it admits of no implications or exceptions. '

22. In our view, Section 171 of the Indian Companies Act, 1913, is also express, explicit and mandatory and admits of no exceptions or implications. No suit, therefore, under Order 21, Rule 63, can be proceeded with or commenced against a company in liquidation except by leave of the court having jurisdiction under the said Act.

23. A Full Bench of the Lahore High Court took the same view in Shakuntla v. Peoples' Batik of Northern India, [1941] 11 Comp. Cas. 309, A.I.R. 1941 Lah. 392 (Lah.). The Lahore High Court, upon considering a number of authorities, reached the conclusion that a suit under Order 21, Rule 63, against a company in liquidation could not be commenced without the leave of the court which had ordered the winding-up. In this case, however, the Lahore High Court has said that the expression ' legal proceeding ' in Section 171 being coupled with ' suit ' means proceedings ejusdem generis, that is to say, original proceedings in a court of first instance, analogous to a suit, initiated by means of a petition similar to a plaint. It does not include proceedings taken in the course of the suit, nor proceedings arising from the suit and continued in a higher court, like an appeal from an interlocutory or final order passed in the suit. The Federal Court did not accept this view of the Lahore High Court in the case of Governor-General in Council v. Shiromani Sugar Mills Ltd., [1946] 16 Comp. Cas. 71, 14 I.T.R. 248, A.I.R. 1946 F.C. 16. The Federal Court took the view that the expression ' or other legal proceeding ' in Section 171 need not and should not be confined to original proceedings in a court of first instance analogous to a suit initiated by means of a petition similar to a plaint. But we are not concerned with that problem in the present case. The Federal Court expressed no opinion whatsoever on the other view of the Lahore High Court, namely, a suit under Order 21, Rule 63, could not be commenced without leave under Section 171 of the Indian Companies Act, 1913.

24. Mr. Sen appearing for the bank in liquidation has relied on the decisions in Rameshwarlal v. Pareek Commercial Bank Ltd., , and Srinivasa Naicker v. Nagappa Chettiar, [1971] 41 Comp. Cas. 550 (Mad.). But in view of the principles the Supreme Court has discussed in the case referred to above, we consider it unnecessary to go into these decisions.

25. The result, therefore, is that this rule is discharged. There will be no order as to costs. The liquidator will retain his costs out of the company's assets.

Salil Kumar Datta, J.

26. I agree.


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