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Union of India (Uoi) Vs. Official Liquidator and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 129 of 1961
Judge
Reported inAIR1963Cal214
ActsCompanies Act, 1956 - Sections 483, 643(1) and 643(2); ;Code of Civil Procedure (CPC) , 1908 - Section 90; ;Companies Court Rules, 1959 - Rules 301 to 304
AppellantUnion of India (Uoi)
RespondentOfficial Liquidator and anr.
Appellant AdvocateS. Roy and ;Sabyasachi Mukherji, Advs.
Respondent AdvocateR.N. Pyne, Adv.
DispositionAppeal dismissed
Cases ReferredLake v. Lake
Excerpt:
- .....on the 25th november, 1960 upon going through the report of the assistant registrar (company) the learned judge directed the matter to be placed in his list on 16th december 1960 to give an opportunity to the central government and the official liquidator to make their submissions on the points raised. on the 16th december, 1960 the learned counsel mr. r. chaudhuri appeared for the central government and the official liquidator and wanted to contend that the relevant rules of the supreme court were ultra vires the companies act, 1956. the learned judge thereupon requested mr. gouri mitter a learned counsel of this court, to appear as emicus curiae. on 20th january, 1961 after hearing the argument of mr. chaudhuri, the learned judge directed the assistant registrar (company) to write to.....
Judgment:

Bose, C.J.

1. This is an appeal from an order made by S.P. Mitra J, on the 9th March, 1961 declaring certain rules framed by the Supreme Court of India under the provisions of the Indian Companies Act, 1956 ultra vires.

2. In course of the winding up of Fire and General Insurance Co. of (India) Ltd. and other companies in liquidation the question for payment of Auditor's fees in terms of Rule 304 of the Companies (Court) Rules 1959 as framed by the Supreme Court of India under Section 643 of the Companies Act 1956 came up for consideration before the learned Company Judge. On the 25th November, 1960 upon going through the report of the Assistant Registrar (Company) the learned Judge directed the matter to be placed in his list on 16th December 1960 to give an opportunity to the Central Government and the Official Liquidator to make their submissions on the points raised. On the 16th December, 1960 the learned counsel Mr. R. Chaudhuri appeared for the Central Government and the Official Liquidator and wanted to contend that the relevant rules of the Supreme Court were ultra vires the companies Act, 1956. The learned Judge thereupon requested Mr. Gouri Mitter a learned counsel of this Court, to appear as emicus curiae. On 20th January, 1961 after hearing the argument of Mr. Chaudhuri, the learned Judge directed the Assistant Registrar (Company) to write to the Registrar of the Supreme Court informing him of the contentions raised by Mr. Chaudhuri. The Assistant Registrar thereupon wrote to the Registrar of the Supreme Court as directed but no reply was received from the Registrar.

3. The relevant rules of the Companies (Court) Rules 1959 which have a bearing on the question at issue are Rules 301, 302, 303 and 304 of the Rules framed by the Supreme Court. Before the learned Company Judge it was strenuously contended by Mr. Chaudhuri appearing for the Central Government and the Official Liquidator that these Rules which had been framed by the Supreme Court under Section 643 of the Companies Act, 1956 which empowers the Supreme Court to frame certain specific Rules as contemplated by that section after consulting the High Courts were ultra vires and it was after hearing the arguments if Mr. Chaudhuri and of Mr. Gouri Mitter that the teamed Judge upheld the contentions put forward on De-half of the Central Government. Having thus succeeded before the teamed Company Judge in inducing the learned judge to give effect to the contentions raised on its behalf, the Central Government has now preferred an appeal against their success and It is contended by Mr. Subimal Roy, the learned counsel representing the Union of India before us, that the said Rules 301 to 304 are more vires and the whole argument of Mr. Chaudhuri challenging the vires of those provisions was based on misconception and the decision of the learned Judge on the points is erroneous. As we entertained doubt about our Jurisdiction to entertain such an appeal by the Union of India who was the successful party before the trial Court and whose contentions were fully given effect to by the learned Judge and the party appealing could by no stretch of Imagination be regarded as a party aggrieved by the order or the learned Judge, we asked the learned counsel to address be on the question of maintainability of the appeal. Thelearned counsel has therefore argued not only the the question of maintainability of the appeal but also the main question as to the vires of Rules 301 to 304 of the companies (Court) Rules of 1959.

4. Now adverting to the question of the competency of the appeal it has to be pointed out that a right of appeal is a creature of statute. Nobody has an inherent or natural right of appeal. The provision to which our attention has been drawn as conferring a right of appeal in matters with which we are concerned in this case is Section 483 of the Companies Act 1956 which is as follows:

'Appeals from any order made or decision given, in the matter of winding up of a Company by the Court Shall lie to the same Court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the Court in cases within its ordinary Jurisdiction.'

5. The corresponding section in the Companies Act, 1913 was Section 202 although it is to be pointed out that there was some difference in the wording of that section. The expression 'subject to the same conditions' as occurring in Section 202 of the previous Act has been construed to mean that the order should be such as would be appealable if it had been passed in the exercise of the ordinary jurisdiction of the Court and it was held that an order made by a single Judge of the High Court in the exercise of its ordinary original jurisdiction would be appealable under Clause 15 of the Letters Patent if it was a judgment within the meaning of that clause, in other word the view taken was that a right of appeal under Section 202 was co-extensive with the right of appeal under Clause 15 of the Letters Patent. But a further principle which has to be borne in mind in considering the question of the competency of an appeal Is whether the party appealing is a party who can be said to have been aggrieved or prejudicially affected by the decision or order appealed from. It is well settled that a party cannot appeal against the decision in his favour or in other words no person has a right of appeal from a decision unless his interest is adversely or prejudicially affected by it. The present appeal clearly militates against this principle governing the right of appeal. In the case of East India cotton Mills Ltd., in the matter of, AIR 1949 Cal 69, Das J. (as his Lordship then was) had occasion to construe the expression 're-hearing' as occurring in Section 202 of the previous Act and after reviewing the history of the legislation with respect to that section in England and in India the learned Judge pointed out that this expression was an anomaly which evidently had escaped the attention of the legislature and according to the learned Judge the 're-hearing' as contemplated by Section 202 was to take place in the same manner as an appeal could be entertained and disposed of. This expression 're-hearing' has been dropped in enacting Section 483 of the Companies Act, 1956. Mr. Subimal Roy has however drawn our attention to a decision of this Court reported in Secretary of State for India v. Siba Prosad Jana, 27 Cal LJ 44/: (AIR. 1919 Cal 972) where Sir Asutosh Mookerlee J. pointed out that an erroneous admission by a counsel on a point of law is of no effect and does not preclude the party from claiming his legal rights in the Appellate Court. In this case a suit had been instituted by one Shiba Prosad against the Secretary of State for India in Council claiming right to obtain lease from the Government in respect of certain lands described in the schedule to the plaint which had been leased out to the predecessor of the plaintiff for a term of 22 years on a progressive rate of rent. The plaintiff had claimed re-settlement ofthe lease. , in the court below there was no serious dispute as to the question that the plaintiff was entitled to re-settlement. The controversy really centred round the terms on which the re-settlement would be made and particularly whether there should be a covenant for renewal. The trial Judge held that the plaintiff was entitled to obtain a lease on certain terms with the exception or the covenant for renewal. The Secretary of State thereupon appealed to the High Court and the Government Pleader contended before the Court in support of the appeal that the plaintiff was rot entitled as a matter of right to a re-settlement although this point had been practically conceded in the Court below. Sir Asutosh MOOkerjee J. in dealing with this question made the following observations:

'notwithstanding the fact that the right of the plaintiff to obtain a fresh lease was conceded in the Court below, it is unquestionably competent to the Government pleader to take up this line of argument, because as ruled by the Judicial Committee in Jotendra Mohun Tagora v. Ganendra Mohun Tagore, (9 Beng LR 377 (PC)) and Beni Pershad v. Dudhnath Roy, (ILR 27 Cal 156 (PC)), an erroneous admission by a counsel on a point of law is at no effect and does not preclude the party from claiming his legal rights in the Appellate Court.'

After enunciating this proposition the learned Judge proceeded to consider the question of the right of the plain-tiff to obtain a resettlement and decided this point infavour of the plaintiff but modified the decree passed by the learned Subordinate Judge to a certain extent, on other rounds. There was no question that the Secretaryof State in Council was competent to file an appeal against the decree of the trial court passed against it.

6. To the same effect is the decision of the Judicial Committee to which our attention has been drawn by Mr. Roy and which is reported in Societe Belge de Banque v. Girdhari Lal Chowdhury . In this case Lord Atkin laid down the proposition that a counsel's admission on a point of law cannot be binding upon a Court and the Court is not precluded from deciding the right of the parties on a different view of the law. At page 92 Lord Atkin J. observed as follows:

'Their Lordships find it difficult to believe that there was some misunderstanding on appeal as to the acceptance by counsel for the bank of all the trial judge's findings. But if counsel did accept such a finding it could only amount to art admission on a point of law which cannot be binding upon a Court: and their Lordships do not consider themselves percluded from deciding the rights of the parties on a different view of the law.'

7. Upon these authorities It was urged before us that It is open to us to examine the correctness of the decision of the learned Company Judge and to find out for ourselves as to whether the construction put by him on Sections 643 and 462 and other provisions of the Companies Act and upon Rules 301 to 304 is right or not.

8. In the case before the Privy Council the main defence taken up by the defendant in a suit for money brought by the plaintiff bank was that there was no concluded agreement on which the claim of the Bank could be founded. This point found favour with the Subordinate Judge. Before the High Court on appeal the learned counsel for the plaintiff bank under a misunderstanding acceded the finding of the trial Court and proceeded to argue the case on that basis. The Privy Council treated this as an admission of a point of law which could not be binding on the Court.

9. In the case before us there is no question of any admission by counsel. The counsel for the Central Government put forward the contention that Rules 301 to 304 of the Companies Court Rules were ultra vires, argued me point in all its aspects and succeeded in inducing the learned Judge to decide the point in favour of the Central Government. This cannot be construed as a mere admission on point of law. Moreover in the Privy Council case the trial court had made a decree in favour of the plaintiff bank. The High Court of Lahore reversed the decree on appeal. The plaint ff bank thereupon preferred an appeal to the Privy Council, which the plaintiff bank was entitled to do as the Decree of the High Court was adverse to the plaintiff. So the appeal was competent and in such an appeal, the plaintiff bank was relieved of the effect of an admission made by the Bank's counsel on a point of law under a misconception. Such is not the case before us.

10. In a comparatively recent decision of the Court of Appeal in England reported in Lake v. Lake (1955) 2 All ER 538 where in answer to a petition for divorce brought by a husband the wife raised the defence, denying adultery, and in the alternative that even if the adultery was proved, the same had been condoned, the trial court found, that the adultery had been proved but that it had been condoned, and on that ground, dismissed the Husband's petition. The wife preferred an appeal. Sir Raymond Evershed M. R. observed at page 541:--

'As counsel for the husband observed, the wife raised as a substantive defence that if she had committed adultery (though she denied it) then that adultery had been condoned and in that matter she was successful, indeed on her husband's petition she was the successful party at the trial; and it may be said in mitigation of her apparent embarrassment now, because of the finding of adultery, that after all she did succeed in one of the defences she deliberately put forward and it ill becomes her now to complain of that fact in this or in any other Court.' Hodson LJ. at page 542 observed;--

'This is an attempt by a successful wife to appeal against an order which she has obtained in her favour, in my judgment this court cannot entertain such an appeal.'

11. In my view no appeal lies from the order of S.P. Mitra, J. and on this preliminary point this appeal is dismissed. There will be no order for costs of this appeal.

12. The Official Liquidator, however, will retain his costs out of the assets as between attorney and client.

Datta, J

13. I respectfully agree with my Lord the Chief Justice that the appeal should be dismissed and costs should be borne by the parties as directed by him.

14. This appeal arises out of an order of his Lord-ship Mr. Justice Sankar Prasad Mitra made on the 9th day of March in respect of fees payable to the Auditors for auditing the accounts of the companies.

15. On the 4th May 1960 the Official Liquidator suggested to the Registrar of Companies, High Court, that the fees payable to the Auditor for auditing Liquidator's accounts were not governed by Rule 304 of the Supreme Court Company Rules. Thereafter evidently there was correspondence between the Official Liquidator and the Under-Secretary, Government of India. Thereupon on the 16th/17th November, 1960 the Official Liquidator wrote to the Registrar of Companies that according to the Undersecretary, Government of India, audit fees under Rule 304 cannot be paid before the secured creditors have been paid off and that necessary orders may be obtained from this Hon'bleCourt. Thereafter this matter appeared before S.P. Mitra, J. for administrative directions.

16. Thereupon His Lordship directed that the matter should appear on the list on the 16th December, 1960 to enable the Central Government and Official Liquidator to make their submissions.

17. On the 16th December 1960 Mr. R. Chowdhury, learned counsel appeared both for the Central Government and the Official Liquidator and indicated that he would contend that the rules framed by the Supreme Court were ultra vires. Thereupon S. p. Mitra, J. asked Mr. Gouri Mitter to act as amicus curiae.

18. On the 20th January 1961 the learned counsel made their submissions to the Court. At this stage S.P. Mitra J. directed the Registrar of Companies, High Court, to intimate the Registrar, Supreme Court, as to the contention made before him. This intimation was given with-out any avail.

19. Thereupon on the 9th March, 1961, S.P. Mitra, J. held after considering the submissions made before him that 'Rules 301 to 304 contradict express provisions in the Companies Act, 1956, and as such they are of no effect.' Therefore, it is patent that the contentions strenuously advanced on behalf of the Union of India and the Officicial Liqdator were accepted by the learned Judge and therefore the order or Judgment was wholly in favour of the Union of India and the Official Liquidator. Nonetheless, the Union of India has filed this appeal impleading the Official Liquidator and the Registrar of Supreme Court inter alia on the grounds that the learned Judge erred in holding that the implied powers of the Court relating to audit have been taken away by Rules 301 to 304 of the Companies (Court) Rules 1959 framed by the Supreme Court and that in framing Rules 301 to 304 of the Companies (Court) Rules, 1959, the Supreme Court has gone beyond the powers conferred on it by Section 643 of the Companies Act.

20. In these circumstances, the question as to whether an appeal lies assumes great importance.

21. Mr. Roy, learned counsel- appearing for the Union of India, submitted that an appeal lies though the order is in his favour. In support of this contention he relied upon 27 Cal LJ 447= (AIR 1919 Cal 972) where it was held inter alia that 'an erroneous admission by a counsel on a point of law is of no effect and does not preclude the party from claiming his legal rights in the appellate court,' and where it was held that a counsel's admission on a point of law cannot he binding upon the court and the court is not precluded from deciding the rights of the parties on a true view of the law.

22. In both the cases the unsuccessful party filed the appeals. Again in both the cases the order or decree was against the appellant in the lower court, though a contention was advanced in the Appeal Court on behalf of the appellant that the appellant was not bound by the admission of his counsel on the basis of which an adverse finding had been given by the lower court on one of the matters. Therefore it seems that it was appreciated that those decisions were not prima facie helpful to the appellant. In order to overcome these difficulties it was urged before us that the more fundamental principle implicit in those decisions relating to admission by counsel was applicable in cases where the counsel on an erroneous view or misconception presses a point before the Court on behalf of his client.

23. It was further suggested before us that if amongst others an adverse finding based on an admission can bereversed in an appeal filed by the unsuccessful party by the appeal court, there is no reason why the lower court's decree based solely on an erroneous admission or for that matter an argument by a counsel based on an erroneous view or misconception of law cannot be reversed by the appeal court.

24. In my view those two cases are confined to the admissions on points of law. The principle can have no application when a party advances arguments in support of his contention of law, the court considers them and accepts the same. This is not a case of admission on points of law. This is an adjudication on a question of law. Moreover, it is one thing for an unsuccessful party against whom the order or decree had been made to contend that the findings of the lower court including an adverse finding based on an admission of law are unfounded and should be reversed. It is another and different thing when the successful party makes the appeal solely on the ground that the finding against him based upon an admission of law should be reversed. Moreover, it is clear that an appellant cannot feel aggrieved if his contentions after accepted and the order or decree is in his favour though the reasons given for the order or decree may not be to his liking. It is still more crystal clear that the appellant cannot be aggrieved when the court not only makes the order or decree in his favour but also accepts his submissions. There is no reported case in which it has been held that an appeal is competent by a party wholly successful in the lower court upon the basis of points advanced on his behalf.

25. Hence, in my view, no appeal lies and consequently the appeal must be dismissed.

26. It will however be not out of place to shortly indicate the arguments advanced before us.

27. In order to appreciate the contentions advanced before us It is necessary to set out Section 462 Section 643(1)(a) and Rules 301 to 304 of the Supreme Court Rules. They are as follows:--

'Section 462. Audit of Liquidator's accounts. -- (1) the liquidator shall, at such times as may be prescribed but not less than twice in each year during his tenure of office, present to the court an account of his receipts and payments as liquidator.

(2) The account shall be in the prescribed form, shall be made in duplicate, and shall be verified by a declaration in the prescribed form.

(3) The Court shall cause the account to be audited in such manner as it thinks fit; and for the purpose or the audit, the liquidator shall furnish the court with such vouchers and information as the court may require, and the court may, at any time, require the production of, and inspect, any books or accounts kept by the liquidator.

(4) When the account has been audited, one copy thereof shall be filed and kept by the court, and the-other copy shall be delivered to the Registrar for filing; and each copy shall be open to the inspection of any creditor, contributory or person interested.

(5) The liquidator shall cause the account when audited: or a summary thereof to be printed, and shall send a printed copy of the account or summary by post to every creditor and to every contributory:

Provided that the court may in any case dispense with compliance- with this sub-section.'

'Section 643. Power of Supreme Court to make rules.

(1) The Supreme Court, after consulting the High courts(a) shall make rules providing for all matters relating. to the winding-up of companies which, by this Act, are tobe prescribed; and may make rules providing for all such matters as may be prescribed except those reserved to the Central Government by Sub-section (5) of Section 503, Subsection (1) of Section 549 and Sub-section (3) of Section 550.'

'Rule 301. Registrar to send copy of account to the auditor--

As soon as the accounts are filed, the Registrar snailforward to the auditor one copy thereof for purposes of audit with a requisition in Form No. 147 requesting that the accounts may be audited and a certificate of audit issued to the Court not later than 2 months from the date of receipt of the copy of the account.

Rule 302. Audit of the Official Liquidator's accounts.--

The accounts shall be audited by one or more Chartered Accountants appointed by the Court or, if the Court sodirects, by the Examiner of Local Fund Accounts of the State concerned. The audit shall be a complete check of the accounts of the Official Liquidator and of each of the companies in liquidation in his charge. The Official Liquidator shall produce before the Auditor all his books and vouchers for the purpose of the audit, and shall give the auditor all such explanations as may be required of him in respect of the accounts.

Rule 303. Audit certificate to be filed.-- After the audit of each of the accounts of the Official Liquidatorfiled in Court, the auditor shall forward to the Registrar a certificate of audit relating to the account with his observations and comments if any on the account, together Official copy thereof and shall forward another copy to the Official Liquidator. The Registrar shall file the original certificate with the records and forward the copy to the Registrar of Companies together with a copy of the account to which it relates.

Rule 304. Audit fees.-- (1) Audit fees according to wefallowing scale on the gross amount brought to credit, in-cluding the produce of calls on contributors, interest on investments and rents from properties but after deducting (a) the amount spent out of the money received in carrying of the business of the company and (b) the amounts paid be the Official Liquidator to secured creditors (other than debenture holders) shall be paid to the auditor and debited if account of the liquidation to which the audit relates:--On the amount brought to credit including the produce of calls on contributories, interest on investments and rents from properties, but after deducting (a) the amount spent out of the money received in carrying on the business of the company and (b) amounts paid by the Official Liquldator to secured creditors (other than debenture holders) ..... .1/2 per cent.

On disbursements, other than payments to secured creditors not being debenture holders ....... ,1/2 per cent.(2) Where the audit is by the Examiner of Local FundAccounts audit fees calculated on the above scale shall be paid into the public account of India in the Reserve Bank of India to the credit of the State Government concerned.'

28. Mr. Roy contended that Mr. Justice S.P. Mitra overlooked that the point before him was whether Rule 3was ultra vires or not and not whether Rules 301 to 304was ultra vires. Therefore the suggestion was, that, in any event His Lordship should not have held that Rules 301 to were ultra vires.

29. Mr. Roy further contended that the words 'in such manner as it thinks' in Clause 3 of Section 462 referred to the manner of audit by the auditor. The manner accordingto Mr. Roy relates to the scope of the audit -- whether it Should be partial audit or complete audit and so forth.Therefore, Clause 3 of Section 462 confer jurisdiction on the court to determine only the manner of audit by the auditors. To put it differently, Clause (3) of Section 462 however does not deal with the stages anterior to or subsequent to the audit. The question of payment of fees to the auditor according to him has nothing to do with the manner or audit. It is a payment to the auditor for work done. In other words, it is the right of the auditor to get payment and liability of the Liquidator to give payment. Hence it cannot attract Clause (3) of Section 462. Consequently the Supreme Court being competent under Sub-clause (a) of Section 643 to frame rules for all matters relating to winding up may frame rules for stages subsequent to the audit, to WIT the payment of the auditor's fees.

30. Mr. Roy further contended that the words 'cause the accounts to be audited' have been used so as to make it clear that the duty of auditing the accounts was not imposed on the court itself. Hence no emphasis should be laid on the words 'cause the accounts to be audited' in the, sense that 'cause' should include the appointment of the auditor and the payment of the fees to the auditor. Hence again, according to Mr. Roy, the rules were within the ambit of the Supreme Court under Section 643(1)(a) of the Act

31. In the view that we have taken about the competency of the appeal it is not necessary to express anyopinion on the question whether Rules 301 to 304 of theCompanies (Court) Rules 1959 are ultra vires of Clause (3) ofSection 462.


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