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-4 7 6 BANSIDHAR SHANKARLAL v. MOHD. IBRAHIM & ANR. September 25, 1970 [J. C. SHAH AND A. N. GROVER, JJ.J Constiturion of India, Art. 133 (!) (/>) and (c)-Supreine Court will not certif:, appeal when on merirs it agrees with High Court. Companies Acr, 1913, ss. 171 and 179-Company in liquidation Liqutdatorsjoining in second cppeal against decree orderingejectment of companyfrom land-Landlord filing application for execurion of decree wilhom obtainingpermissionunder s. 171 of Companies Act from Com• pany Judge-Applicationwhether maintainable. The tirst respondentinstituted an action in theCourt of the Subordi· nate JudgeAliporefor a decreeof ejectmentin respectof landoccupied by a company.The suit was decreed.Before the decreewas passedthe companytook a loanfromthe appellantand mortgagedits fixedassetsin favour of theappellant.After the passingof thedecreethe company exe~ted a secondmortgageof its fixe? assetsin favour of theappellant agamst another loan.The decreeobtamed by the firstrespondentagainst thecompanywas confirmedin firstappeal.Thereuponthe companyand thefirstappellantfiled Second Appeal No. 1380 of 1954 in theHigh Court of Calcutta.The appellantalso filed a suitin the ~aid HighCourt onits originalside to enforcethe twomortgages in his favourand obtaineda preliminarymortgage decree in thesuit.Anothercreditor ot the companyapplied for andobtainedan orderdirectingthat the com· pany be woundup. The liquidators of the companyand the appellant prosecuted SecondAppeal No. 1380 of 1954.The decree of the first appellatecourt was confirmed by the HighCourt.The first respolldent theninstitutedan applicationfor enforcemen!of thedecreein ejectment againstthe company.The appellantresisted the applicationon theground thatthe samewas not maintainablesince leaveof nhe High Courtunder s. J 71 of theCompanies Act, 1913had not beenobtained.. Thereafter on themotionof thefirstrespondentthe Company Judge grantedleave toexecutethe decreein Second Appeal No. 1380 of1954 .. The Subordi· nateJudgebeforewhom the · proceedinj!S were.pendingdismissedthe objectionsof theappellantagainst excutionof thedecreeand the o~er of dismissalwas confirmed by the firstappellatecourt and the High Court.The appellant'sapplicationsfor a certificatefor leave to appealto this Court was also rejected. In appealby specialleave shallengingthe refusal of certificate. ' HELD : (i) Theobjectof s. 171 is plain. It is intendedto ensure thatthe assets ~f a company ordered tobe ~ound upby theCoutt ~hall be administeredfor the benefitof allthecreditors and. th~t s~me creditors only shall notobtainan advantage over othersby .mstit~tm.g or prose cuting proceedingsagainst the company.The secl!on lS mtended to maintaincontrol of the Courtwhichhas madean orderof windingup onproceedingswhich may be pendingagainst the company or. may. be initiatedafter ·the order of windingup, andthe Courtmay i;emamsem;d of all thosemattersso the.I its affairs are administered eqmtablyand in an orderlyfashion. [480 B.C) A B c )) F G B A B c D r G B BANSIDHAR v. IBRAHIM (Shah,/.) 477 If sanction of the Court under s. 179 to prosecutethe appealbefore the High Court was obtainedby theliquidatorsin thepresent case-and it must be so assumed-the contentionraised on behalfof the appellant lostall significance for an executionapplicationis only a• continuation of thesuitandthe controlof the High Cou'rt enuresduringtho execution proceedings also. It would be giving effect toa technicaliiy divorced tram theobjectof s. 171 of theCompanies A.ct to holdthat evenin a suitfiledor prosecutedwith the sanction of the Court thedecreemay not be enforced by a successfulparty without' leave underthat section. [480 B-0]. Even grantingthat . sanctionunder s. 179 doesnot dispensewith the leaveunder s. 171 of theAct, to institutea proceedingin eicecution apimt a company ordered tobewoundup, there is nothing in the Act which makes the leavea conditionprecedentto theinstitution of a pro ceeding in executionof a decreeagainst the companyand 'failure to obtainleave b(lfore the institution of the proceedings entailsdismissal of the proceedina. The suit or proceedingmstituted without leave of the Courtmay be regarded as ineffective u11fil leave is obtainedbut once leave ii obtined the proceeding will be deemed to be institutedon the date grantina leave. [480H-48!B] Har NarainMisra v. KanhalyaLal Lohawal/a, I.LR. [1939]2 Cal. 42S and GodavariSugar and Refintrles Ltd. v. Kambhampatl Gopalo·• krlshnamurthy cl Ors., AJ.R. 1960 A.P.74, disapp~oved. Na:JrA.hmed v. Peoples Bank of NorthernIndia Ltd., I.L.R. [1942] Lah. S!7, SureshChandraKhannabish v. Bank of Calcutta Ltd. (1950) 54 Cal. W.N.832 F.B., PeoplesIndustrial Bank Ltd. v. Ramchandra Shukul, I.L.R. SZ All 430, RoopnarainRamchcndra Private Ltd. v. Brahmapootra Tea Co. (Indio)Ltd. d: A.nr. 65 C.W.N. 1060 and Suresh Clumdro v. The Bank of Calcuttli, 21 Company Cases UO, referredto. (II) .This Court wouldnot be justified in certifyiiia t,11 appeal in which the c.nly questionwhich may be uraecl i1 the one on. whichit had exprelled an opinionaaainst the appe1iant.[ 482Al CIVILAPPELLATE JUlUSDICTION : Civil Appe81 No. 1927 of 1966. Appeal by special leave from the order dated l>ecember 24. 1965 of the Calcutta High Court in Supreme CourtAppeal No. 55 of 1965. G. L. Sangh#, Jnan:endra Lal and B. R. Agarwala, for the appellant. Suku.mar Ghose, for respondent No. 1. The Judgment of the Court was· delivered by Shah, 1. Mohammed Ibrahim(hereinafter called "the plain· tift'.') institutedan action in the Court of the SubordinateJudge. Alipore for a decree in ejectment in respect of land occupied b~ the Luxmi Spinning & Weaving Mins Ltd. as his tenant.The suit was decreed on October 1, 1953. Before the decree was. 478 SUPREME COURT REPORTS (1971] 2 S.C.R. ;passed, the Companyhad executedon January 31, 1951a deed A in favourof Bansidharmortgagingits fixed assets for securing repayment of Rs. 1,25,000/-. After the decree of theTrial ·Court, the Companyexecuted on January 21,, 1954a second deedalso in favourof Bansidharmortgagingthe fixed assets for repaymentof an add,itional sum of Rs. 2,00,000/-. Thedecree -0f the SubordinateJudge in the ]1laintiff's suit was confirmedon August4, 1954.Againstthat decreethe Company .and Bansidhar preferredsecond appeal No. 1380 of 1954 to theHighCourt of Calcutta.~ Dansidhar also filed asuitin the· HighCourtof Calcuttaon its original side to enforce the two mortgagesin his favourand obtaineda preliminarymortgage decree in the suit B -00 May13, 1955, Anothercreditor of the Company appliec;l c for and obtaine~ on August22, 1955an orderdirectingthat the Company.be wound up. · Theliquidators of the Companyand Bansidharprosecutedthe Second Appeal No. 1380 of 1954.The decree of theDistrictCourt was confirmed by the High Court in it$ appellatejurisdictionon February22, 1958.The plain' . tiff then institutedan applicationfor enforcementof thedecree inejectmentagainst the Companywithout obtaining leave .of the HighCourtof Calcuttaunder s. 171 of the Indian Companies Act,1913. On December17, 1958,Bansidhar filed a petition contendingthat the application for enforcement of thedecree D was notmaintainablewithout leave o( the HighCourtwhich orderedthat the Companybe wound up. On themotion of the plaintiffthe CompanyJudge grantedleave to executethe decree. E in Second. AppealNo. 1380 of 1954. The SubordinateJudge before whom theproceedings were pending,dismissedthe appli cation filed. by Bansidhar,and the order of dismissal was con; firmedby theAdditionalDistrict Judge and by- the HighCourt in Second Appeal.Bansidhar'spetition for a certificatefor appeal to thisCourtunder Articles 133(l)(b) and (c) of the Consti tution was also rejected.Bansidharthen prefe.rred two petitions forspecialleave to this Court-one againstthe orderof theHigh Courtdismissinghis Second Appeal against the ordet in the exe cutionproceedings,and the otheragainstthe orderof theHigh Courtrefusingto certifythe appeal under Art. L~3(1)(b) and (c)of theConstitution.This Court dismissed the petitionagainst theorderof theHighCourtin SecondAppealand granted specialleave to appeal againstthe orderof theHighCourtrefu- ~ing to certifythe case. The orderpassed by the High Court in Second Appeal having affirmed theorderof theDistrictCourt unless the appeal preferredto thisCourtinvolved some substantialquestion of law Qf publicor privateimportance,the casecouldnot be certified underArt. 133 ( 1 )(b) even if theprop6sedappeal involved direc-- F G H I BANSIDHAR V. IBRAHIM (Shah, J.) 479 A tly or,indirectlysome claimor questionrespectingproperty of value not less than Rs. 20,000/-. The High Court.could not also certify thecase as a fit onefor appealunder Art. 133(l)(c) unless in the view oftheCourtit raiseda questionof some gene :ral or public importance. B c D E F G H Couns.el fortheappellantsays that theSubordinateJudge was ~ncompetent to entertainthe application for executingthe decreein SecondAppealNo. 1380 of 1954unlessthe HighCourt ofCalcuttain itscompanyjurisdictiongranted leave to execute thedecreeunder s. 171 of theIndianCompaniesAct, 1913. Counselurged that leaveof theHighCourt is by thetermsof s. 171 of theIndianCompaniesAct madea conditionprecedent to the institutionof a proceedingagainst a Companyordered to be wound up by theCourt,and thatthe applicationfor execu tion of thedecreewithoutin the.first ins,tance obtaining leave of If·~ HighCourt was entertainedwithout authority.The ques t10n sought to be raised in the proposedappeal, it was urged, was. of generalor publicimportance. In any caseit was contend ed thatthere is conflictof opinionamong the Courtsin India on the• trueinterpretationof s. 171 of the Indian Companies Act,1913,and s. 446 of theCompaniesAct, 1956(which re placed s. 171 of the Act of 1913),and the HighCourtwas boundto grantthe certificateapplied for either under s. 13 ( 1) (b) orunderArt. 133(1)(c) or boththe clauses. Our attention is invitedto the-decisionof theHighCourt of Calcuttain Har Narain Misra v. KanhaiyaLal Lohawalla(1) and ofthe High Courtof Andhra Pracjesh in.· Godavari Sugar and RefineriesLtd. v. KambhampatiGopalakrishnamurthy and' Others('). In these casesit was held that leave of the High Court whichhas orderedwindingup of a Company is acondition pre.l cedent to theinstitutionof proceedingsagainst a Company in liquidation, 3illd thatproceedinginitiated without obtainingleave oftheCourt in the firstinstancemust be dismissed. '!here are, however,other cases whichtake a contraryview. Nazrr Ahmed v. PeoplesBank of Northern India Ltd.('); Suresh ChandraKhannabish v .. TheBank of Calcutta Ltd.(4). People's IndustrialBank Ltd. v. Ramchandra Shukul('); Roopnarain Ram chandraPrivate Ltd v. BrahmapootraTea Co.(India)Ltd. & Anr:{ 6). · Section 171 of theIndianCompaniesAct, 1913provided that- (I) I. L. R. [193912 Cal. 425~ (3) I. L. R.0942)Lah. 517. (5) I. L. R. 52 All. 430. (2) A.J.R. 1960 A. P. 74. (4) <1950) 54 Cal. W. N. 832 F.B. (6) 65 Cal. W. N. 1060. 480 SUPREME COURT REPORTS {1971] 2 S.C.R, "When a windingup orderhas beenmadeor a pro visionalliquidatorhas beenappointed, no suit or other legalproceedingshall be proceededwith or commenced againstthe Companyexcept by leaveof theCourtand subjectto suchterms as the Courtmay impose." A B This section is in termsanalogousto s. 231 of theEnglish Com paniesAct, 1948(11 & 12 Geo. 6, Ch.38).The object of s. 171 is plain. It is intendedto ensurethat the assetsof a Company prdeted tobewoundup bytheCourtshall be adminis teredfor the benefitof all the creditors,and thatsome creditol"S onlyshallnot obtabn an advantageover othersby instituting or prosecutingproceedingsagainst the Company. This section is intendedto maintaincontrol of theCourtwhichhas madean C orderfor windingup on proceedingswhich may be pendingagainst theCompanyor maybe initiatedafter the orderof windingup, andthe Courtmay remainseized of allthosematters so that its .affairsare administeredequitably and in anorderlyfashion. Whenthe Second Appeal No. 1380 of 1954 was pending beforethe HighCourtof Calcuttaat theinstanceof theCompany .andBansidharagainst the decreepassed by theDistrict Court D in ejectrnent,the Company was orderedto bewoundup by order of'theHighCourtof Calcuttaand the liquidatorswere appoint- ed.The liquidatorsprosecutedthe appeal.There is no evidence· on the recordwhetherthe liquidatorsobtained the sanctionof theCourtunder s. 179(l)(a) of theCompany'sAct 1913. But thereis noreasonto supposethat the liquidatorsdid notobtainE othe simction of theCourt. If sanc,tion of theCourtunder s. · 179 to prosecutethe appeal before the, HighCourt was obtained,and it '.must be soassumed,the contentionraised on behalfof Bansi dhar losesall significancefor an executionapplication is only a continuationof thesuitand tile controlof theHighCourt en suresduringthe executionproceedingalso. If the sanctionof theCourthas beenobtainedfor theprosecutionof the. suit, i~ would be plainlyunnecessaryto obtainfresh sanctionto the institutionof executionproceedingat theinstanceof thesuccess- F ful party. It is truethat the sanctionobtained by the liquidators isgrantedunder s. 179 of theCompaniesAct to initiateor en torce aclaimof theCompany or to defendan action,whereasG theleaveof theCourtto institute or to continuea suit againsr theCompanyin windingup is obtainedunder s. 171. It would begivingeffect to a technicallydivorced from the trueobjectof the sectionto holdthat evenin a suit filed orprosecutedwith thesanctionof theCourt,the decreemay not be enforcedby a successfulparty withoutleave under s. 171 of theAct. Evengrantingthat sanctionunder s. 179 doesnot dispense withthe leaveunder s. 171 of theAct,to institutea proceeding inexecutionagainst a Companyordered to be wound up, we do H I A B DE BANSIDHAR V. IBRAHIM (Shah, J.) notthink ¢.at there is anythingin theActwhichmakesthe leave aconditionprecedentto theinstitutionof a proceedingin exe cution of a decreeagainstthe Companyand failureto obtain leavebeforeinstitution of the proceedingentails dismissalof the proceediug.The suit or proceedinginstituted without leave of the Court may, inourjudgment,the regarded as ineffectiveuntill leave is obtainedbut once leave is obtainedthe proceeding will be deemedinstitutedon thedategrantingleave. InBuckleyon theCompaniesAct, 13th Edn.,at p.499it is observed: "Leave to continueafter winding up a debenture holder's · actioo, whetherpreviouslyor subsequently comrilenced, v.ill be given unl.ess theliquidator is able and willing to give inthewindingup thereliefwhich couldbe obtainedin the action." The CalcuttaHigh Courtin Suresh Chandra v. The Bunk '?f Calcutta( 1 ) examinedthe decisioTJs of theEnglishCourts m some details and observedthat as regards s. 171 of theIndian Companies Act,1913,the HighCourthas jurisdictionto grant leaveto proceedwith the suitor otherproceedingsagainst a Companyin liquidation even if suchleave was not obtainedfor itscommencement.The proceedingsmay at bestbe regarded as institutedon thedateon whichthe leave was obtainedfrom theHighCourt. Considerlng the questionboth on principleand authority we are unable to agreewith the view expressedby theCalcuttaHigh Courtin Har Narain Misra's case( 2 ) andin Godavari Sugar and Refineries Ltd. case( 3 ) by theAndhraPradeshHigh Court. Counselfor theappellant,however, urged that this Court is not concernedin thisappeal with the correctnessof oneor the otherof the two conflicting views. Counsel says theCourt has. ' onlyto considerthe correctnessof the view of theHighCourt G refUsi.ng to grantthe certificate.In ourjudgment,it wouldbe afutileexercise if we come to theconclusionthat the view taken bytheHighCourton themeritsof thecase is true,still io certitf the casefor appeal.The proposedappeal only involvesthe ques tion aboutthe maintainabilityof theexecutionproceeding com menced by the plaintiffand againstthe Companyin liquidation withoutleave of theHighCourtwhichhas orderedthe company Hto be woundup. We entertainno doubtthat the HighCourt {I) ·21 CompanyCases 110. (2) !. L. R. ·. 392 Ce!. 425. (3) A. I .R. 1960 A. P. 74. 48,2 SUPREME COURT REPORTS (1971] 2 S.C.R. was rightin the viewit hastakenon themeritsand the conten tionsraised.We do notthinkthat we will be justifiedin certi fying an appeal in whichthe onlyquestionwhich may be urged istheoneon which we haveexpressedour opinionagainst the appellant. A The appealfails and is dismissed.The appellant will pay B the costs of theplaintiffin thisCourt. G.C. Appeal dismissed. |
