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Hemanga Coomar Mookherjee and ors. Vs. M.C. Chakravarty - Court Judgment

LegalCrystal Citation
SubjectBanking
CourtKolkata High Court
Decided On
Case NumberCivil Revn. No. 1109 of 1951
Judge
Reported inAIR1952Cal732,[1952]22CompCas270(Cal),56CWN632
ActsBanking Companies (Amendment) Act, 1950 - Section 11; ; Code of Civil Procedure (CPC) , 1908 - Order 21, Rule 58; ; Companies Act, 1913 - Section 178; ; Banking Companies Act, 1949 - Sections 45A and 45B
AppellantHemanga Coomar Mookherjee and ors.
RespondentM.C. Chakravarty
Appellant AdvocateApurbadhan Mukherjee and ; Tarun Kumar Banerjee, Advs.; Sudhansu Bhusan Sen, Adv.
Respondent AdvocateN.C. Sen Gupta and ; Paritosh Sarkar, Advs.
Cases ReferredJadunath Boy v. The Bank of Calcutta Ltd.
Excerpt:
- .....special bench decision i have just referred to and independently of it, i am convinced that the bank's claim now prosecuted by the liquidator in this case is a claim within section 45-a and section 45-b of the act. but the point to emphasise here is that the bank's claim although filed in the proper court became, since the liquidation which intervened, a proceeding which that court could no longer entertain because the statute had divested it of all jurisdiction in the matter.23. what is going to happen in a case like this where it is not a pending proceeding within the moaning of section 11, banking companies (amendment) act, or how that is to be dealt with is however not a question which we are called upon to answer. i for myself do not propose to express any opinion on the same......
Judgment:

Chakravartti, J.

1. This Rule which involves a a short point under the Banking Companies (Amendment) Act 1950, arises out of the following facts.

2. The petitioners are the owners of Premises No. 10B Canal Circular Road, Calcutta, which they let out to Opposite party No. 3, Nur Mahammad Habib & Co. That tenant left the lands upon a notice to quit but immediately thereafter opposite Party No 2, the Orient Glass Company Ltd., entered upon the land. According to the petitioners, the entry by the Orient Glass Company Ltd., was an act of trespass and not only did they enter upon the land wrongfully, but they also caused damage to some structures standing thereon In those circumstances, the petitioners brought a suit against both Nur Mahammad Habib anct Company and the Orient Glass Company Ltd., for recovery of possession of the land and damages. That suit resulted in an ex parte decree, passed on 19th June 1950 whereby the petitioners claim for possession was allowed and a sum of Rs. 1680 was awarded to them as damages, together with a further amount as costs.

3. During the pendency of the suit the petitioners attached before judgment some properties belonging to the Orient Glass Company Limited, which are described in the petition before us as 'a few movables of trifling value.' After obtaining the decree, the petitioners applied for its-execution and prayed for recovery of possession as-also for the realisation of the decretal amount by sale of the properties attached before judgment. The proceeding that was initiated upon that application was Title Execution case No. 9 of 1950 in the Court of the Second Additional Subordinate Judge of Alipore.

4. Thereafter, on 31st August 1950, the Bank of Commerce, Limited, filed a claim petition under Order 21, Rule 58, Civil P. C., in respect of the attached movables. The Bank's case, in substance, was that on 20th September 1945, the then owners of a. Glass Factory, called the National Glass Factory, hypothecated to the Bank the entire factory, including its machinery, accessories, furniture and fittings as a security for overdrafts up to the limit of Es. 50,000 and that it was the National Glass Factory which has subsequently become the Orient Glass Company Limited. The further case of the Bank was that a sum of Es. 44096-4-0 was due to it on account of the advances taken by the-Glass Company and that because of the hypothecation referred to above, the judgment-debtor had no saleable interest in the movables concerned at the date of the attachment. The proceeding that was started on that application by the Bank was Miscellaneous case No. 9 of 1950.

5. On 1st September 1950, an order was made for the liquidation of the Bank. We are informed that it is a compulsory winding up and therefore the winding up of proceedings would commence-on the date when the application for winding up was made, under Section 168, Companies Act. The date on which that application was made does not, however, appear from the record, nor was either of the parties in a position to give it to us.

6. No steps appear to have been taken by the Company in the claim case for some time and the next thing that happened was that on 30th November 1950, the Official Liquidator, who is Opposite Party No. 1 to this Rule, appeared before the Court and informed it of his appointment as liquidator. He asked for an adjournment for two months in order to enable him to take further steps in the matter and such adjournment was granted. The case ultimately came up for hearing on 17-2-1951, when the Official Liquidator made a verbal prayer that the claim case should be transferred to the High Court under the provisions of Section 11, Banking Companies (Amendment) Act. The application was opposed by the petitioners, but their objection was overruled and the learned Judge made an order, transferring the proceeding to this Court. The actual order recorded by the learned Judge is that ' the proceedings be transferred to the Hon'ble the High Court under Sections. 45A, 45B of Part IIIA and Section 11, Banking Companies (Amendment) Act 1950.' It is against that order that the petitioners took out the present rule.

7. I may point out at this stage that Section 45A and Section 45B are not sections of the Banking Companies (Amendment) Act, 1950, as stated by the learned Judge. They were inserted by Section 10 of the Amending Act in the main Act, i.e., the Banking Companies Act (x [10] of 1949).

8. It will be convenient to set out at this stage the material provisions of the three sections to which the learned Judge has referred. Section 45A purports to define ' Court ', but in fact does a great deal more. It provides that ' Court ' means the High Court exercising jurisdiction in the place where the registered office of the banking company which is being wound up is situated and then proceeds to lay down that

'no other Court shall have jurisdiction to entertain any matter relating to or arising out of the winding up of a banking company.'

Section 45B in substance repeats what is provided for by the last part of Section 45A and states that the ' Court ' which under the previous section means the High Court.

' shall have full power to decide all claims made by or against any banking company (including claims by or against any of its branches in India) and all questions of priorities and all other questions, whatsoever, whether of Jaw or fact, which may relate to or arise in the course of the winding up of the banking company coming within the cognizance of the Court.'

9. Section 11 of the Amending Act requires to be set out in full. Its terms are :

' Where any proceeding for the winding up of a banking company or any other proceeding, whether civil or Criminal, which has arisen-out of or in the course of such winding up, is pending in any Court immediately before the commencement of this Act, it shall stand transferred on such commencement to the Court which would have had jurisdiction to entertain such proceeding if this Act had been in force on the date on which the proceeding commenced, and the Court to which the proceeding stands so transferred shall dispose of the proceeding as if this Act and the amendments made thereby were applicable thereto.'

10. The contention of Mr. Mukherjee who appeared in support of the rule was that the order made by the learned Judge was bad in law inasmuch as the claim case was not a proceeding which had ' arisen out of or in the course of the winding up ' of the Bank of Commerce, Limited. The reply of Dr. Sen Gupta who appeared for opposite party No. 1 was that the claim case was a proceeding which had arisen out of or in the course of the winding up and in support of his contention he referred to a decision of this Court in Jadunath Roy v. Bank of Calcutta, civil Rule 90 of 1951, dated 30-7-1951 (Cal.) (S B.) by the learned Chief Justice, sitting with Das and Banerjee JJ. In that case the banking company was a defendant in a partition suit and it was held that after the company had gone into liquidation all further proceedings in the partition suit would be proceedings arising out of or in the course of the winding up.

11. In my opinion, the contention of Mr. Mukherjee is plainly untenable. The argument is that the applicant in a proceeding under Order 21, Rule 58 is only resisting the execution directed against his property by some third party and is not taking any active steps himself and that, therefore, when the liquidator of a company is the claimant, he is not, while prosecuting the claim, taking any step in or towards the winding up of the company. But a winding up proceeding is a proceeding in the course of which the assets of the company are collected or realised and then applied firstly to the payment of the company's debts and, thereafter, if there is any surplus, the same is distributed among the share-holders, either as the return of the capital contributed by them or as moneys to which they are otherwise entitled as share-holders--all with a view to the ultimate dissolution of the company.

Under Section 178, Companies Act, the Official Liquidator takes into his custody or under his control all the property, effects and actionable claims to which the company is or appears to be entitled. It is thus one of the obvious and primary concerns of the Liquidator to collect or realise the assets of the company and to bring them into the fund for the payment of debts or distribution among the share-holders. When the Liquidator of a company finds that some third party is trying to execute a decree obtained against the stranger against some property of the company, what happens is that he finds an obstacle in the way of collecting or realising that property and when he files a claim case, he is obviously trying to remove that obstacle and to bring that property under contribution for the payment of the debts of the company or for the distribution of its assets among the share-holders. The proceeding taken by him is thus only a form of the process of collection of assets and is clearly a proceeding which he is required to take in the course and for the purposes of the winding up.

It is noticeable that the section uses not only the expression 'out of' but also the expression 'in the course of'. I should be prepared to hold that a proceeding under Order 2-1, Rule 58, initiated by a Liquidator or any step taken by him in a proceeding under the Rule already initiated before the liquidation concerned, is a proceeding arising out of the winding up. But even if such a proceeding cannot be said to arise 'out of' the winding up, it certainly arises 'in the course of' the winding up, because it is while carrying out the winding up proceedings and with a view to carrying them out successfully that the liquidator finds it necessary either to initiate such a proceeding or to take some step in a proceeding already initiated.

I ought to point out here that the proceeding under Order 21, Rule 58 in the present ease was not started by the Liquidator, but appears to have been started by the company itself. But the Liquidator took over the carriage of that proceeding and himself took a certain step on 17-2-1951, when he made the application for a transfer. As I have already stated, we do not know when the winding-up proceeding actually started, but even if the proceeding under Order 21, Rule 58 was not a proceeding, arising out of or in the course of the winding up at the time it was initiated, because the winding up had not yet commenced, it certainly became such a proceeding when the Liquidator took over the carriage of the proceeding and himself took the steps I have already mentioned on 30-11-1950 and 17-2-1951.

On the facts of the present case I am clearly of opinion that the proceeding under 0rder 21, Rule 58 is now a proceeding arising in the course of, if not out of, the winding up within the meaning of Section 11, Banking Companies (Amendment) Act. The contention of Mr. Mukherjee must accordingly fail.

12. Bat although the contention of Mr. Mukherjee cannot be accepted as sound, the order made by the learned Judge, it appears to me, is bad for another and an obvious reason which was completely overlooked both before us and before the Court below. As has been seen from the terms of Section 11 which I have already read, it applies only to proceedings which were 'pending in any Court immediately before the commencement of this Act'. 'This Act' means, not the Banking Companies Act of 1949 but the Amending Act of 1950. The Amending Act commenced on 18-3-1950. As I have already stated, the application under Order 21, Rule 58 was made only on 31-8-1950, which was long after the Amending Act had come into operation. The proceeding under Order 21, Rule 58, therefore, is not a proceeding which was pending before the commencement of the Amending Act and it follows that Section 11 can have no possible application to such a proceeding.

Even if the execution case itself be taken as the material proceeding in the present case, Section 11 would still not be attracted, because the application for execution was not made till 14-7-1950, which again was long after the commencement of the Act. It is, however, not necessary to refer to the commencement of the execution proceeding, because it is perfectly clear from the body of the. learned Judge's order that what he was asked to transfer and what he in fact purported to transfer was not the whole execution case, but only the claim case.

13. In my opinion, the dates I have given are sufficient to establish that no order could possibly be made in the present case under Section ll, Banking, Companies (Amendment) Act.

14. On what ground the learned Judge himself made the order is wholly obscure. He formulates the question for his decision to be 'whether the claim case filed by the Bank of Commerce relates to the winding up of the Bank,' and after referring to the contention of the decree-holder that it did not so relate, he proceeds to state that it was a question to be determined in the course of the trial on merits. In the very next breath he states that 'the Bank is in liquidation and the claim case by the Bank relates to the winding up of the Bank'. One does not know what the learned Judge was thinking about and what process of reasoning was influencing him in furnishing the reasons for the order he made. The judgment recorded by the learned Judge is of no assistance whatsoever.

15. I may also point out that if Section 11 did apply, as the learned Judge has held, there could be no question of his transferring, the proceeding to the High Court. Under the terms of the section they 'stand transferred' and, therefore, the only order which the learned Judge could legally and logically make would be only an order transmitting the records to this Court.

16. These, however, are subsidiary matters and the order of the learned Judge should be set aside on the clear and simple ground that he applied a section which had no application to the proceeding which he had before him.

17. Dr. Sen Gupta invited us to state in our judgment what the actual position regarding the proceeding under Order 21, Rule 58 now was and in what manner it would be correct for his client to proceed. He invited us further to hold that the execution case itself stood transferred to this Court under the provisions of Section 11, as interpreted in the decision he cited. We do not feel called upon to answer either of those questions, since they were not raised before the Court below and do not arise out of the Eule before us. The position is a somewhat anomalous one, not covered directly by either Section 45-A or Section 45-B or Section 11.

The first two sections confer an exclusive jurisdiction on the High Court regarding all matters relating to or arising out of the winding up of a banking company and it is obvious that the sections are limited to the matters covered thereby and have reference to a stage when the winding up proceedings have commenced. Section 11 provides for an automatic transfer of pending proceedings which have arisen out of or in the course of a winding up. That section could not apply to the facts of the present case in any event for the reasons I have given, but the position is under Sections. 45-A and 45-B and to what extent the proceedings at Alipore are now affected by those sections or how long they will continue to be affected, are matters not free from difficulty. The execution case, taken by itself, had no concern with the winding up of the Bank and it was obviously not affected by Sections. 45-A and 45-B at the time it was initiated, whether the winding-up proceedings had already commenced or not.

Even the proceeding under Order 21, Rule 58 was started on 31-8-1950, and if the winding-up proceedings had not already commenced as they do not appear to have the application was properly made before the Alipore Court. Sections 45-A and 45-B were still out of the way. If the commencement of the winding-up proceeding was subsequent, the sections came into play when those proceedings commenced and they came to affect the proceeding under Order 21, Rule 58 when the Liquidator intervened and took it over, but, again, whether the effect was that the whole execution case would thereafter have to be prosecuted in the High Court or only the claim case and if the former, whether it would have to be prosecuted in the High Court up to the end, are matters which require careful considerations.

A portion of the execution case relates to matters with which the Banking Company has not and never had any concern and even if the claim case be regarded at the present moment as inextricably bound up with the execution case, the former will come to an end some day and thereafter the Bank or its winding-up will cease to have any connection with the execution case as between the judgment-debtors and the petitioners. Since Section 11 does not apply, how the claim case is to be brought upto the High Court and how the execution case is to go back to Alipore, if it is to be returned after the claim case is disposed of, are further questions. These are some of the matters which will have to be considered in a proper, proceeding raised before ,the proper Court. We are not prepared to accede to Dr. Sen Gupta's invitation to go out of our way and decide them in this Rule.

18. For the reasons I have given above, this Rule is made absolute. The order of the learned Judge dated 17th February 1951, is set aside and parties are left to agitate the remaining matters in issue between them on proper contentions raised before the proper Court.

19. As the Rule succeeds on a point which was not taken by the petitioners either before us or in the lower Court, there will be no order as to costs in this Eule.

P. B. Mukharji J.

20. I entirely agree with the reasons and the conclusion stated in the judgment just delivered by My Lord.

21. The order of the Subordinate Judge cannot be sustained. The order is in these terms :

'the proceedings be transferred to the Hon'ble the High Court under Section 45-A, Section 45-B of Part III A and Section 11, Banking Companies Amendment Act, 1950.'

It seems to me that on the 'reading of the sections the learned Judge mentions, he had clearly no jurisdiction to make the order. If the sections apply then the proper Court under the Banking Companies (Amendment) Act is only the High Court and no other Court. It is not, therefore, for that Court to make an order for transfer. The Subordinate Judge in making this order of transfer was acting entirely beyond his jurisdiction. The language of Section 11 is 'it shall stand transferred.' In fact in the Special Bench decision of this Court in Jadunath Boy v. The Bank of Calcutta Ltd., civil Revn. No. 90 of 1951 (Cal.), the-Bench observed :

'The statute provides that the proceedings shall stand-transferred. The transfer is automatic. No order of the Court is necessary. On formal information from the High Court, the records of the proceeding must be sent to the High Court.'

22. The Eule can also be disposed of on the short point that before a transfer can take place under Section 11, Banking Companies (Amendment) Act it has in my opinion to be a proceeding which was 'pending in any Court immediately before the commencement of this Act.' Not all pending proceedings are to stand transferred under this section but only those pending immediately be fore the commencement of the Act. In this case: the Bank made the claim under Order 21 Rule 58, Civil; Procedure Code on 31st August 1950. At that, date the amending statute was already in operation, it having come into force on 18th March 1950. This,. therefore, was not a claim pending immediately, before the commencement of the Act so as to., attract the operation of Section 11.

In my judgment Section 11 of this Act does not pro vide and cannot be said to permit transfer of proceedings not pending before but after the commencement of the Act. The situation after the Act comes into force is met by the provisions in Sections. 45-A and 45-B of the statute which deprive all Courts except the High Courts of jurisdiction in these matters. Among other things Section 45-A divests all Courts of jurisdiction to entertain any matter, relating to or arising out of the winding up of a banking company and Section 45-B among other things invests the High Court with the exclusive juris diction to determine all claims by or against any banking company and all questions of priorities and all other questions whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of the banking company: coming within the cognizance of the Court.

Both on the authority of the Special Bench decision I have just referred to and independently of it, I am convinced that the Bank's claim now prosecuted by the liquidator in this case is a claim within Section 45-A and Section 45-B of the Act. But the point to emphasise here is that the Bank's claim although filed in the proper Court became, since the liquidation which intervened, a proceeding which that Court could no longer entertain because the statute had divested it of all jurisdiction in the matter.

23. What is going to happen in a case like this where it is not a pending proceeding within the moaning of Section 11, Banking Companies (Amendment) Act, or how that is to be dealt with is however not a question which we are called upon to answer. I for myself do not propose to express any opinion on the same. The Special Bench decision on which reliance has been placed does not deal with this question. It does not proceed on the basis which is material for us here to consider that is whether the proceeding can at all be said to be pending immediately before the commencement of that Act.

24. On these grounds I concur in the order made by My Lord.


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