Shankarlal Aggarwal & Ors Vs.
Shankarlal Poddar & Ors [1963] INSC 14 (24 January 1963)
24/01/1963 AYYANGAR, N. RAJAGOPALA AYYANGAR,
N. RAJAGOPALA IMAM, SYED JAFFER SUBBARAO, K.
MUDHOLKAR, J.R.
ACT:
Company Law-Sate-Confirmed by Company
Judge-Set aside by Division Bench-Administrative and judicial ordersDistinction-Discretion
exercised by company Judgeinterference, on ground that certain factors were not
considered by him-Letters Patent Appeal against order of Company Judge Whether
maintainable-Clause 15 of Letters Patent of Calcutta High Court-Indian
Companies Act, 1913 (7 of 1913), s. 202.
HEADNOTE:
Luxmi Spinning and Weaving Mills Ltd. was
ordered to be wound up compulsorily by an order of the High Court of Calcutta
on a petition of the first respondent, Shankar Lal Poddar. Before the winding
up order, the appellants instituted a mortgage suit against the said company
and joint Receivers were appointed by the High Court. Later on, joint
Liquidators were appointed in the winding up proceedings. The joint Liquidators
applied for directions regarding the sale of the assets and properties of the
company and the Court sanctioned the same. Tile sate was held after complying
with the requirements of law with regard to advertisement. etc. The highest bid
of Nandlal Agarwalla was for Rs. 3,37,000/and the bid of the appellant firm was
Rs.3,35,000/-. The bid of Nandlal was accepted and he was directed to pay
immediately 25% of the bid money. As he stated that he had not brought cash, he
was allowed to go and bring the same. As he did not turn up in spite of waiting
for him for some time, the appellant firm was asked to stand by their previous
bid for Rs. 3,35,000/but they refused to do so. The property was then put up
for sale once again and the highest bid of the appellant firm of Bansidhar
Shankarlal for Rs. 2,25,000/was accepted. The sale was confirmed by the Company
judge. The first respondent filed an appeal against the order confirming the
sale and his appeal was allowed by a Division Bench of the Calcutta High Court.
The liquidators were ordered to resell the property after due advertisement.
The appellants came to this Court by special leave against the decision of the
Division Bench.
The questions for consideration before this
Court were(1)Whether the order of the Company judge confirming the 718 sale was
merely an administrative order passed in the course of the administration of
the assets of the company under liquidation, and therefore not a judicial order
subject to appeal, (2) whether on a proper construction of s. 202 of the Indian
Companies Act it was a condition for the availability of an appeal that the
order should be open to appeal under cl. 15 of the Letters Patent of the
Calcutta High Court and if the above were answered in the affirmative whether
independently of s. 202, the order of the Company judge in this case amounted
to Judgment within cl. 15 of the Letters Patent, and (3) whether the appellate
court acted improperly in interfering with the order of the Company judge.
Held, that the order of the Company judge
confirming the sale was not an administrative but a judicial order. It is not
correct to say that every order of the Court, merely for the reason that it is
passed in the course of the realisation of the assets of the Company, must
always be treated merely as an administrative one. The question ultimately
depends upon the nature of the order that is passed. An order according
sanction to a sale undoubtedly involves a discretion and cannot be termed
merely an administrative order, for before confirming the sale the court has to
be satisfied, particularly where the confirmation is opposed, that the sale has
been held in accordance with the conditions subject to which alone the
liquidator has been permitted to effect it, and that even otherwise the sale
has been fair and has not resulted in any loss to the parties who would
ultimately have to share the realisation.
It is not possible to formulate a definition
which would satisfactorily distinguish between an administrative and a judicial
order. That the power is entrusted to or wielded by a person who functions as a
court is not decisive of the question whether the act or decision is
administrative or judicial. An administrative order would be one which is
directed to the regulation or supervision of matters as distinguished from an
order which decides the rights of parties of confers or refuses to confer
rights to property which are the subject of adjudicating before the court. One
of the tests would be whether a matter which involves the exercise of
discretion is left for the decision of the authority, particularly if that
authority were a court, and if the discretion has to be exercised on objective,
as distinguished from a purely subjective consideration, it would be a judicial
decision. It has sometimes been said that the essence of a judicial proceeding
or of a 'judicial order is that there would be two parties and a lis between
them which is the subject of adjudication, as a result of that order or a
decision on an issue between a proposal and an opposition. No doubt it 719
would not be possible to describe an order passed deciding a lis before the
authority that is not a judicial order but it does not follow that the absence
of a lis necessarily negatives the order being judicial. Even viewed from this
narrow standpoint, it is possible to hold that there was a lis before the
Company judge which he decided by passing the order. On the one hand were the
claims of the highest bidder who put forward the contention that he had satisfied
the requirements laid down for the acceptance of his bid and was consequently
entitled to have the sale in his favour confirmed, particularly so as he was
supported in this behalf by the Official Liquidators. On the other band, there
was the first respondent and the large body of unsecured creditors whose
interests, even if they were not represented by the first respondent, the court
was bound to protect. If the sale of which confirmation was sought was
characterised by any deviation from the conditions subject to which the sale
was directed to be held or even otherwise was for a gross undervalue in the
sense that very much more could reasonably be expected to be obtained if the
sale were properly held, in view of the figure of Rs. 3,37,000/which had been
bid by Nandlal Agarwalla it would be the duty of the court to refuse the
confirmation in the interests of the general body of creditors, and this was
the submission made by the first respondent. There were thus two points of view
presented to the court by two contending parties or interests and the court was
called upon to decide between them, and the decision vitally affected the
rights of the parties to property Under the circumstances, the order of the
Company Judge was a judicial order and not administrative one. and was
therefore not inherently incapable of being brought up it. appeal.
Held, also, that Letters Patent Appeal was
competent. The second part of s. 202 of the Indian Companies Act which refers
to "the manner" and "the condition subject to which appeals may
be had" merely regulates the procedure to be followed in the presentation
of appeals and of hearing them, the period of limitation within which the
appeal is to be presented and the forum to which the appeal would lie and does
not restrict ox impair the substantive right of appeal which has been conferred
by the opening words of s. 202.
The words "order or decision"
occurring in the first part of s. 202, though wide, would exclude merely
procedural orders or those which do not affect the rights or liabilities of
parties.
Held, also that the appellate court did not
act improperly in interfering with the order of the Company judge The Company
Judge did not take into consideration the fact that certain bidders had left at
the time when the property was put 720 up for auction once again. 'The judges
of the Division Bench were justified in considering that the sale to the
appellants ought not to have been confirmed.
Madan Gopal Daga v. Sachindra Nath Sen (1927)
I. L. R. 55 Cal. 262 reversed.
Bachharaj Factories Ltd. v. The Hiraji Mills
Ltd., I. L. R.
(1955) Bom. 550 and Western India Theatres
Ltd. v. Ishwarbhai Somabhai Patel, 1. L. R. (1959) Bom. 295, approved.
Asrumati Debi v. Kumar Rupendra Deb Raikot
(1953) S. C. R.
1159 and State of Uttar Pradesh v. Dr. Vijay
Anand Maharaj [1963] 1 S.C.R. 1 referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 214 of 1960.
Appeal by special leave from the judgment and
order dated December 11, 1958, of the Calcutta High Court in Appeal from Original
Order No. 176 of 1956.
S.T. Desai, Himmatsinghka and B. P.
Maheshwari, for the appellants.
N.C. Chatterjee, B. M. Bagaria, M. V. Goswami
for B. C.
Misra, for respondent No. 1.
1963. January 24. The judgment of the Court
was delivered by AYYANGAR , J.-The principal point raised for consideration in
this appeal by special leave relates to the correctness and legality of an
order by a Division Bench of Calcutta High Court refusing to confirm a sale by
the liquidators of the assets of a company which is being wound up. The company
in question-the Luxmi Spinning & Weaving Mills Ltd. a company incorporated
under the Indian Companies Act-was carrying on business at Calcutta. On a
petition of the 1st respondent-Shankarlal Poddar-made to the 721 High Court of
Calcutta, this company was ordered to be wound up compulsorily by order dated
August 22, 1955. But before this order was passed, certain matters had
transpired to which it is necessary to advert. The appellants claiming that
they had advanced loans to the company under two registered deeds of mortgage
and alleging that there had been default on the party of the company in
performing its obligations as to payment of interest etc. under the said deeds
instituted a mortgage suit in the High Court of Calcutta for the usual reliefs
under 0. 34, Civil Procedure Code. Pending the disposal of the suit they moved
the Court for the appointment of a receiver, and the second appellant and the
Managing Director of the company were appointed joint receivers and they took
possession of the assets of the company.
By reason of this circumstance, when the
order for winding up was passed in August, 1955 though the Official Receiver
was appointed as Official Liquidator, still he was directed not to interfere
with the possession of the joint Receivers.
Subsequently by a further order dated
September 8, 1955 two independent persons who are respondents 2 & 3 before
us were appointed as joint Receivers in the suit and they were also directed to
function as joint Liquidators in the winding Up proceedings.
The joint Liquidators applied for directions
to the Court as regards the sale of the assets and properties of the company
and the Court by an order dated December 20, 1955 directed their sale by public
auction after due advertisement in the manner set out in the order and notice
of this sale was directed to be given to the appellants who had by that date
obtained a mortgage decree in their suit. At this stage it is necessary to
mention that in the winding up proceedings the validity of the appellants'
claim as creditors and as secured creditors is challenged, 722 and a claim by
the State of West Bengal to arrears of certain taxes in regard to which
priority is claimed is also pending Adjudication by the Company judge.
In pursuance of the aforesaid directions of
the court Dated December 20, 1955 the liquidators held certain auctions of
which it is unnecessary to refer since these proved infructuous, but ultimately
the appellants and others agreed to have the sale of the Assets to be held free
of all charges and encumbrance and to their claims to security over the
properties being transferred to the sale-proceeds when paid into Court.
Consequention this agreement the Court made an order on july 10, 1956 by which
the joint Liquidators were directed to sell the properties free of all
encumbrances, the sale proceeds realised being held in Court to answer the
claims of the creditors according to such properties as might be determined by
the Court.
The sale by public auction thus directed was
duly advertised to be held on September 8, 1956 at 2 p.m. The conditions
subject to which the properties were to be sold which were approved by the
Court included, inter alia, (1) that the sale was subject to a reserve price to
be determined by a valuer and surveyor which however was not to be made scaled
known to the bidders but had to be kept in a cover until the bidding was over,
(2)the sale was subject to confirmation by the Court, (3) that it was in the
discretion of the liquidators to accept or reject any bid, (4) as far as
possible the highest bid was to be accepted provided the liquidators considered
that the bid was for a sufficient amount(5) immediately on acceptance of the
bid by the liquidators the bidder was required to deposit 25 per cent of the
amount of the bid in cash "in default whereof the liquidators were at
liberty to put up the property again for sale", (6) the purchaser was to
pay the 723 balance of purchase moneys within two weeks from the date of
confirmation by the Court.
The sale was held as advertised. There were
in all 36 bids for lot No. 1 which consisted of' the business and properties of
the company starting with a bid for Rs. 1,50,000/from 8 bidders including the
1st appellant who himself personally bid for Rs. 3,00,000/-. Thereafter there
was keen competition between one Nandlal Agarwalla and the appellant firm of
Bansidhar Shankarlal and after successive bids by these two the highest bid
reached was that by Nandlal Agarwalla who bid for Rs. 3,37,000/-, the penultimate
bid of the appellant firm being Rs. 3,35,000/-. No further bids were offered
and thereupon the joint Liquidators accepted the bid of Nandlal and he was
directed to pay immediately Rs. 84,250/this being 250/ of his bidmoney.This
bidder, however, stated that he had not brought the cash and then the Receivers
offered to take instead a cheque from his solicitors, if he so desired, but
this also the bidder declined and thereafter Nandlal Agarwalla left the place
giving the impression on those there, including the joint Liquidators that he
had gone to bring the money.
The liquidators waited for about 20 minutes
but as he did not turn up they again put up the property for sale. Before doing
so, however, they-the liquidators enquired of the appellants whether they would
stand by their previous bid for Rs. 3,35,000/in which case they were informed
that theirs would be treated as the highest bid. They would not agree and
thereupon the liquidators put the property to auction again and the starting
bid was by the appellant firm of Bansidhar Shankarlal who, as stated earlier,
had, at the former bidding, offered Rs. 3,35,000/now starting the bid with Rs.
1,50,000,/and after 8 more bids there were no further bids beyond Bansidhars'
for Rs. 2,25,000/-. This bid was accepted by the official liquidators subject
to 724 confirmation by the Court after they ascertained by opening the scaled
cover received from the valuer that this amount was not below the price for
which the property could be sold. Immediately on the acceptance being intimated
Bansidhar paid the amount required to be paid by the conditions of the sale.
The liquidators took out a Master's summons
on September 11, 1956 stating these facts and prayed for an order from the
Company judge that the sale be confirmed or such other directions be given as
the Court may deem fit and proper.
The summons was opposed by the 1st respondent
and the main point urged by him was that when Nandlal Agarwalla's bid was
accepted by the joint Liquidators, several others who had come to bid for the
property left the auction room under the impression that that sale was going
through and that the subsequent sale at which the appellant was the highest
bidder was not such as could be confirmed by the Court.
'the summons was heard by the Company
judge-P.B. Mukharji, J.and the learned judge passed an order acceding to the
prayer of the liquidators. to confirm the sale. Thereupon the 1st respondent
filed an appeal against the order confirming the sale and also applied for the
stay of delivery of possession of the properties of the company to the
appellant. In the application for stay the appellate court passed an order in
these terms :
"On Bansidhar Shankarlal giving an
undertaking to this Court to purchase the property for Rs. 3,35,000/should the
appeal be allowed and on Bansidhar Shankarlal depositing with their Solicitors
Rs. 16,000/to be held by the Solicitors free from lien and subject to further
order of this Court to abide by the result of the suit challenging the mortgage
in favour of Bansidhar Shankarlal, there will be no further orders in this
application and Bansidhar 725 Shankarlal will be entitled to possession of the
factory and its assets on a sum of Rs. 16,000/-being deposited with their
Solicitors." There were a few more directions made by the Court to which
however it is unnecessary to refer.
The appeal was allowed and the order
confirming the sale was set aside and the liquidators were directed to resell
the property after due advertisement. it is from this decision of the Division
Bench that this appeal has been preferred by special leave.
Learned Counsel for the appellants urged
before us the following points :
(1) The sale by auction by the joint
Liquidators effected after obtaining the sanction of the Court on December 20,
1955 under s. 179 (c) of the Indian Companies Act, 1913 was merely an act
performed by them in the course of their administration of the assets of -the
company and the action of the judge in confirming such sale also partook of the
nature of an administrative act, and not being a .judicial order no appeal lay
against it.
(2) Even if the order of the Company judge
was a judicial order, still it was not a judgment within cl. 15 of the Letters
Patent of the Calcutta High Court and so no appeal lay to the Division Bench.
(3) No doubt, s. 202 of the Indian Companies
Act permits appeals against orders and decisions in the course of a winding up
but that provision is of no avail, because for an order to be appealable under
s. 202, it has, in the case of an order of a Single judge of the High Court, to
satisfy the requirements of cl. 15 of the Letters Patent.
726 (4) Even if the order of Mukharji, J.,
was a judicial order capable of appeal, still it was a discretionary order and
could not be interfered with by an appellate court merely because they
considered that it was not a correct order to pass.
In the light of these submissions the
questions to be considered are : (1) whether the order of the Company judge
confirming the sale was merely an administrative order passed in the course of
the administration of the assets of the company under liquidation and therefore
not a judicial order subject to appeal, (2) (a) whether on a proper
construction of s' 202 of the Indian Companies Act it was a condition for the
availability of an appeal that the order should be open to appeal under cl . 15
of the Letters Patent of the High Court, (b) If the above were answered in the
affirmative, whether independently of s. 202 the order of the Company judge in
this case amounted to a judgment within cl 15 of the Letters Patent, and (3)
-whether the appellate court acted improperly in interfering with the order of
the learned Company judge.
We shall deal with these points in that
order. (1) First as to the scheme of the relevant provisions under the
Companies Act. Section 179 of the Companies Act, 1913 specifies the powers of
the official liquidator. It enacts, to quote only the words material for the
present appeal :
"179. Powers of Official liquidator. The
official liquidator shall have power., with the sanction OF the Court, to do
the following things :(a) ..........................
(b) ..........................
727 (c) to sell the immovable and movable
property of the company by public auction or private contract, with power to
transfer the whole thereof to any person or company, or to sell the same in
parcels 'Though s. 180 which reads :
"180. Discretion of official
liquidator.-The Court may provide by any order that the official liquidator may
exercise any of the above powers without the sanction or intervention of the
Court..........
makes provision for eliminating the need for
the sanction of the Court required for action by the official liquidator tinder
s. 179, as such a power was not exercised in this case this section may be left
out of account. Section 183 of the Act makes provision for the exercise of
control by the Court over the liquidator and sub-s. (3) enables the official
liquidator to apply to the Court for directions in relation to any particular
matter arising in the winding up.
Section 184 of the Act requires the Court to
cause the assets of the company to be collected and applied in discharge of its
liabilities.
On the basis of these provisions, we shall
proceed to consider whether the confirmation of the sale was merely an order in
the course of administration and not a judicial order. The sale by the
liquidator "-as, of course, effected in the course of the realisation of
the assets of the company and for the purpose of the amount realised being
applied towards the discharge of the liabilities and the surplus to be
distributed in the manner provided by the Act.
It would also be correct to say that when a
liquidator effects a sale he is not discharging any judicial function.
Still it does not follow that every order 728
of the Court, merely for the reason that it is passed in the course of the
realisation of the assets of the company must always be treated , as merely an
administrative one. The question ultimately depends upon the nature of the
order that is passed. An order according sanction to a sale undoubtedly
involves a discretion and cannot be termed merely a ministerial order' for
before confirming the sale the Court has to be satisfied, particularly where
the confirmation is opposed, that the sale has been held in accordance with the
conditions subject to which alone the liquidator has been permitted to effect
it, and that even otherwise the sale has been fair and has not resulted in any
loss to the parties who would ultimately have to share the realisation.
The next question is whether such an order
could be classified as an administrative order. One thing is clear, that the
mere fact that the order is passed in the course of the administration of the
assets of the company and for realising those assets is not by itself
sufficient to make it an administrative, as distinguished from a judicial,
order. For instance, the determination of amounts due to the company from its
debtors which is also part of the process of the realisation of the assets. of
the company is a matter which arises in the course of the administration.
It does not on that account follow that the
determination of the particular amount due from a debtor who is brought before
the Court is an administrative order.
It is perhaps not possible to formulate a
definition which would satisfactorily distinguish, in this context, between an
administrative and a judicial order. That the power is entrusted to or wielded
by a person who functions as a Court is not decisive of the question whether
the Act or decision is administrative or judicial. But we conceive that an
administrative order would be one which is directed' 729 to the regulation or
supervision of matters as distinguished from an order which decides the rights
of parties or confers or refuses to confer rights to property which are the
subject of adjudication before the Court. One of the tests would be whether a
matter which involves the exercise of discretion is left for the decision of
the authority, particularly if that authority were a Court, and if the
discretion has to be exercised on objective, as distinguished from a purely
subjective, consideration, it would be a judicial decision. It has sometimes
been said that the essence of a judicial proceeding or of a judicial order is
that there should be two parties and a lis between them which is the subject of
adjudication, as a result of that order or a decision on an issue between a
proposal and an opposition. No doubt, it would not be possible to describe an
order passed deciding a lis before the authority, that it is not a judicial
order but it does not follow that the absence of a lis necessarily negatives
the order being judicial. Even viewed from this narrow standpoint it is
possible to hold that there was a lis before the Company judge which he decided
by passing the order. On the one hand were the claims of the highest bidder who
put forward the contention that he had satisfied the requirements laid down for
the acceptance of his bid and was consequently entitled to have the sale in his
favour confirmed, particularly so as he was supported in this behalf by the
official liquidators. On the other hand there was the 1st respondent and not to
speak of him, the large body of unsecured creditors whose interests, even if
they were not represented by the 1st respondent, the Court was bound to
protect. If the sale of which confirmation was sought was characterised by any
deviation from the conditions subject to which the sale was directed to be held
or even otherwise was for a gross undervalue in the sense that very much more
could reasonably be expected to be obtained if the sale were properly held in
view 730 of the figure of Rs. 3,37,000/which had been bid by Nandlal Agarwalla,
it would be the duty of the Court to refuse the confirmation in 'he interests
of the general body of creditors and this was the submission made by the 1st
respondent. There were thus two points of view presented to the Court by two
contending parties or interests and the Court was called upon to decide between
them. And the decision vitally affected the rights of the parties to property.
In this view we are clearly of the opinion
that the order of the Court was, in the circumstances, a judicial order and not
an administrative one and was therefore not inherently incapable of being
brought up in appeal.
(2) The next point for consideration is
whether even if this was a judicial order no appeal lay from it under s. 202 of
the Indian Companies Act unless the order amounted to a judgment within cl. 15
of the Letters Patent of the Calcutta High Court. Section as follows :
"202. Appeals from orders.-Re-hearings
of, and appeals from, any order or decision made or given in the matter of the
winding up of a company by the Court may be had in the same manner and subject
to the same conditions in and subject to which appeals may be had from any
order or decision of the same Court in cases within its ordinary
jurisdiction." It was submitted that assuming the order of the Company
judge was "an order or decision made or given in the matter of the winding
up of a company by the Court" the last words of the section "subject
to the same conditions in and subject to which appeals may be had from any
order or decision of the same Court in cases within its ordinary
jurisdiction" restricted the right of appeal conferred by the 1st limb of
the section to those which might be preferred under cl. 15 of the Letters
Patent in the case of a judgment of a 731 Single judge of the High Court. In
support of this submission learned Counsel relied on the decision of the
Calcutta High Court in Madan Gopal Daga v. Sachindra Nath Sen (1)It was there
held that an order made in the winding up of a company by a Single judge of a
High Court in order to be appealable under s. 202 must satisfy the requirements
of cl. 15 of the Letters Patent, viz., that it must be "a Judgment"
within the meaning of that clause. C. C. Ghose, J. rejected the construction
that the words "same manner and subject to the same conditions"
occurring in s. 202 were merely a reference to the procedure to be observed as
regards the manner of filing an appeal or the forum to which the appeal lay and
not the substantive right to prefer an appeal. Buckland, J. who agreed with
Ghose, J. considered that though the word "manner" might refer to the
procedure for filing an appeal, the word "conditions" could not be
given any such limited meaning but would import a reference to the limitation
on the right to appeal itself as laid down in cl. 15 of the Letters Patent
where the order appealed from was that of a judge of the High Court. It must be
mentioned that in the appeal now before us the objection that no appeal lay
from the order of Mukherji, J. was raised before the Bench, but the learned
judges rejected it on the ground that the order of the learned judge was
"a judgment" within cl. 15 of the Letters Patent and so appealable
under that provision.
This interpretation of the scope of s. 202 of
the Companies Act has not been accepted by several other High Courts. The leading
case in support of the other view is Bachharaj Factories Ltd. v. The Hiraji
Mills Ltd.(2). The learned judges were dealing with an appeal against an order
of the Company judge adjourning a petition for winding up in order to enable
certain shareholders to file a suit for a declaration that certain debentures
were not valid in law.
The (1) (1927) I.L.R. 55 Cal. 262.
(2) I.L.R. (1955) Bom. 550, 732 Company Judge
made the order under s. 170 of the Companies Act which provides that on hearing
a petition for winding up the Court may dismiss or r adjourn the hearing
conditionally or unconditionally or make any interim order etc. A preliminary
objection was taken to the hearing of the appeal on the ground that the order
from which the appeal was preferred was not a judgment within the meaning of
cl. 15 of the Letters Patent and therefore no appeal lay. It was urged that
under s. 202 the right of appeal conferred was subject to "the same
conditions" to which appeals might be had from the decision of the Court
in cases within its ordinary jurisdiction and since the said condition was not
fulfilled the appeal was incompetent. Chagla, C. J.
repelled this contention and pointed out that
the Courts which dealt with winding up petitions and to whose orders s. 202 applied
were not merely the High Courts but also the District Courts. If the
construction of the section on whose correctness the preliminary objection was
based were upheld it would mean that in the case of an order made by a District
Court the appeal ability of that order would be dependent on its satisfying the
conditions of appeal for "decisions" laid down under the Civil
Procedure Code. Under the Code "orders or decisions" are classified
into two heads-decrees and orders. Whereas an appeal lies by virtue of s. 96 of
the Code against every decree which is defined in s. 2 of the Code, only
certain types of orders under particular provisions of the Code Which are
listed in s. 104 are capable of appeal and Done others. It was ,not in dispute
that very few of the orders passed in a winding up would amount to decrees
within the Code. There was no doubt either that most of the orders or decisions
in winding up would not be comprehended within the class of appealable orders
specified in s. 104 or 0. 43. r. I. if therefore the contention of the
respondent were accepted it would mean that in the case of orders passed by the
District Courts appeals would lie only against what would be decrees under 733
the Code as well as appealable orders under s. 104 and 0.43.
r.1 and very few of the orders passed in the
Courts of the winding up would fall within these categories. On the other hand,
the expression "judgment" used in cl. I 5 is wider.
The learned judge pointed out that the
position would therefore be that a decision rendered or an order passed by a
District Court would not be appealable because the conditions laid down by the
Civil Procedure Code were not satisfied, yet an exactly identical order or
decision by the judge of the High Court would be appealable because it might
constitute a judgment within cl.15. The learned judge therefore rejected a
construction which would have meant that the same orders passed by District
Courts and by a Single judge of a High Court would be subject to different
rules as to appeal ability. The learned judge observed that the right of appeal
was conferred by the 1st limb of s. 202 and that the second limb merely dealt
with the procedural limitations of that appeal. He further pointed out that the
expression "order or decision" used in s. 202 itself indicated that
the order or decision was not merely procedural in character but that which
affected the rights and liabilities of parties. The learned judge referred to
the decisions in Madan Gopal Daga v. Sachindra Nath Sen (1), and the cases following
it and expressed his dissent with the reasoning which found favour with the
judges of the Calcutta High Court. The decision in Bachhraj Factories Ltd. (2)
was later followed by the same Court in Western India Theatres Ltd. v.
Ishwarbhai Somabhai Patel (3). We find ourselves in agreement with the view
here expressed.
Madan Gopal Daga (1), proceeds wholly on the
meaning which could be attributed to the word "conditions" in the
expression "subject to the conditions" occurring in s.202 and does
not take into account the context in which s. 202 was designed to operate and
particularly the fact that more than one grade of Court each governed by
different rules as to the nature of the decision (1) (1927) I.L.R. 55 Cal. 262.
(2) I.L.R. (1955) Bom, 550.
(3) I.L.R. (1959) Bom. 295, 734 which would
enable an appeal to be preferred could be vested with jurisdiction under the
Act. When by the proviso to s.3 of the Indian Companies Act, 1913 the Indian
Legislature enabled Jurisdiction to be vested in District Courts so as to be
constituted the "Court having jurisdiction under the Act", knowledge
must be imparted to it that the District Courts and the High Courts functioned
under different statutory provisions as regards rights of appeal from their orders
and decisions. Besides, it would also be fair to presume that they intended to
prescribe a uniform law as regards the substantive right of appeal conferred by
s. 202.
It could not therefore be that an identical
order if passed by one class of " court having jurisdiction under the
Act" would be final, but that if passed by another Court vested with
identical powers and jurisdiction would be subject to an appeal.
There is also one another aspect from which
the problem could be viewed. Taking first the provisions of the Civil Procedure
Code which would govern the orders passed by District Courts; it would be seen
that apart from "decrees" which are appealable by reason of s. 96 of
the Code, "orders" are appealable in accordance with s. 104. That
section after enumerating certain orders which are made appealable, contains a
residuary clause (i) conferring a right of appeal in respect of "any order
made under rules from which an appeal is expressly allowed by rules"-and
the rule referred to is 0. 43. r. 1. Now under s. 122 of the Code each of the
High Courts is vested with power "to make rules, to annul, alter or add to
all of any of the rules in the 1st Schedule". In exercise of this power
High Courts have in respect of the Civil Courts subject to their appellate
jurisdiction made alterations and additions in the rules including those in 0.
4 3. r. 1 . either extending or restricting the right of appeal conferred by
the Code as originally enacted. The question that arises on this 735 state of
circumstances is whether the legislature, when it enacted s. 202 of the
Companies Act, intended that the right of appeal should vary from State to
State depending on the particular rule in force in that State by reason of the
exercise by the High Court of its power under s. 122, Civil Procedure Code.
The anomaly created by the construction urged
by learned Counsel for the appellant does not stop here. Even taking the case
of the High Court’s themselves, the construction of the word 'condition' as
including the appeal ability of the decision would lead to rather strange
results. The relevant words of s. 202 are :
"Subject to the same conditions...... to
which appeals may be had from any order or decision of the same Court in cases
within its ordinary jurisdiction"-"ordinary jurisdiction" and
not ((ordinary original jurisdiction." The question that would arise is as
to what is meant by "ordinary jurisdiction" of the Court. Plainly the
words would only exclude jurisdiction vested in the Court by special statutes
as distinguished from the statutes constituting the Court. Undoubtedly; in the
case of a High Court the limits of 'whose jurisdiction are governed by its
Letters Patent, the Letters Patent would determine what the "ordinary
jurisdiction" is. But that Letters Patent is not immutable and has been
the subject of several alterations.
Thus when the Companies Act was passed in
1913, an appeal lay from every "judgment" of a Single judge of the
High Court. But in March 1919 it was amended so as to exclude the rights of
appeal from judgment passed in exercise, of revisional jurisdiction and in
exercise of the power of superintendence under s. 107 of the Government of
India Act, 1915. There can be no doubt either that the exercise of revisional
or supervisory jurisdiction is as much "ordinary jurisdiction" of the
High Court as its original or appellate 736 jurisdiction and it cannot be that
there has been any alteration in the law as regards the appeal ability of decisions
of a High Court under s. 202 of the Companies Act by reason of the amendment of
the Letters Patent. Again, the Letters Patent were amended in January, 1928
when appeals against decisions in second appeals were made subject to the grant
of leave by judges rendering such decisions. If the decision in a second appeal
were in the exercise of "ordinary jurisdiction" and there can be no
controversy about it, then the construction of s. 202 of the Companies Act in
relation to a High Court which is the primary Court exercising jurisdiction
under the Companies Act (vide s. 3 (1) of the Act) would lead to anomalous
results as judgments or decisions rendered in different types of cases, though
all of them are in the exercise of "ordinary jurisdiction", are
subject to different conditions as regards appeal ability. We thus agree with
Chagla, C. J.
that the second part of the section which
refers to "the manner" and "the conditions subject to which
appeals may be had" merely regulates the procedure to be followed in the
presentation of the appeal and of hearing them, the period of limitation within
which the appeal is to be presented and the forum to which the appeal would lie
and does not restrict or impair the substantive right of appeal which has been
conferred by the opening words of that section. We also agree with the learned
judges of the Bombay High Court that the words "order or decision"
occurring in the 1st part of s. 202, though wide, would exclude merely
procedural orders or those which do not affect the rights or liabilities of
parties. Learned Counsel for the appellant did not suggest that if this test
were applied the order of the learned Company judge would be an order or
decision merely of a procedural character from which no appeal lay.
On the footing that we accepted the
construction of s. 202 of the Companies Act which found 737 favour with the
learned judges of the Calcutta High Court in Madan Gopal Daga (1), that in
order to be appealable the decision must satisfy the test of being "'a
judgment" within cl. 15 of the Letters Patent of the High Court, learned
Counsel submitted to us elaborate arguments as to what was comprehended within
the expression r 'judgment" in cl. 15 of the Letters Patent and invited us
to hold that the order of Mukharji J., confirming the sale was not a judgment
and that the decision of the learned judges in the judgment now under the
appeal that it was "a judgment" was erroneous. There has been very
wide divergence of opinion between the several High Courts in India as to the
content of the expression "'.judgment" occurring in cl. 15 of the
Letters Patent.
This conflict of opinion was referred to by
this Court in Asrumati Devi v. Kumar Rupendra Deb Raikot (2), and in, State of
Uttar Pradesh v. Dr. Vijay Anand. Maharaj (3) where, after setting out the
cleavage of views on the question by the several High Courts, the points as to
the proper construction of the word was left open for future decision when the
occasion required. We consider that that occasion has not arisen before us
either since in view of the construction which we have adopted of s. 202 of the
Indian Companies Act the scope of the expression "'judgment" in the
Letters Patent does not call for examination or final decision.
The next contention put forward was this. The
learned Company judge had a discretion to confirm or not to confirm the sale.
In order that the discretion might be properly exercised the official
liquidators had placed every material fact in the Master's summons which they
filed and every one of those facts had been considered by the learned judge.
If, after considering those facts, the
learned judge thought that it was a fit case in which the sale could be
confirmed it was not open to an appellate court to interfere with that order
merely because on its (1) (1927) I. L. R. 55 Cal.262 (2) [1953] S.C.R. 1159.
(3) [1963] 1 S.C.R. 1.
738 appreciation of the facts it would have
refused confirmation and directed a fresh sale. Learned Counsel further
submitted that if the Company judge had applied his mind to the facts and every
fact was before him the order passed in the exercise of his discretion could be
interfered with only if any relevant facts were disregarded or if the order was
arbitrary or capricious or if the appellate court considered that there has
been a miscarriage of justice and his submission was that on the facts of this
case no such infirmities attached to the order confirming the sale.
Before considering the objection in this form
it would be proper to examine whether the liquidators were within their power
in proceeding with the sale after Nandlal Agarwalla failed to turn up after an
.appreciable interval. The power of the liquidators in this behalf was,
according to the learned Counsel for the appellant, derived from cl. 5 of the
conditions of sale which reads : "5. Immediately on acceptance of the bid
by the joint Receivers and Liquidators subject to clause I hereof, such bidder
shall deposit 25 percent, of the amount of such bid with the Joint Receivers
and Liquidators in cash, in default where of the joint Receivers and
Liquidators will be at liberty to put up the property again for sale." We
might add that this is the only clause under which, on a sale becoming
abortive, the liquidators were empowered to continue the sale without a fresh
advertisement. It would be seen that this clause requires the bidder whose bid
is accepted to deposit immediately 25% of the id amount. In the context of the
fact,; that transpired in the present case the significance of -the word
immediately' would become clear. If on the failure of Nandlal to make the 739
deposit immediately the liquidators had proceeded to hold a fresh auction it
would be apparent that all those who had come there to bid would still be
there, but what happened was that the liquidators gave time to Nandlal to go
home in the expectation that he would come back with the amount required to be
deposited. In the circumstances it was not unnatural that the persons who had
gathered there to bid were under the impression that he would bring the money
and make the deposit and as a matter of fact the narration of facts by the
liquidators in their Master's summons clearly shows that they themselves were
under this impression. In the circumstances the continued presence of the
bidders there manifestly served no purpose and several of them therefore left
the place and went away. The bidding list which is Annexure 'A' to the petition
of the liquidators showed that New India Transport Co. which had bid up to Rs'
2,55,000/-, Babulal Bhagwandas who bid up to Rs. 2.75,000/and Chabildas Agarwal
who went up to Rs. 2,85,000/were not there when the second auction was held.
The result therefore was that when after waiting for about 20 minutes the
liquidators continued the auction several had left and the appellant was able
to become the highest bidder for the price of Rs. 2,25.000/-. This feature of
the case was missed by the I earned Company judge and forms the basis of the
decision of the Division Bench. We would go further and add that on a proper
construction of condition 5 the liquidators were not entitled to proceed with the
sale in the circumstances that happened because of the interval of time they
granted to Nandlal to make the deposit which gave the impression to those who
gathered there that there would be no further auction on the same date at which
they were entitled to bid. Learned Counsel for the appellant referred us to the
fact that one S.K. Chakrabarti who in the first auction had bid up to Rs.
2,98,000/was present at the resumed auction and that he bid then only for Rs.
2,00,000/and that 740 this feature of the resumed auction was not noticed by
the learned judges in appeal. We consider that this is not a very relevant
circumstance for a decision of the question either as regards the power of the
liquidators to hold the fresh sale without advertisement or whether the sale at
the resumed auction had been at an undervalue. It is possibly profitless to
speculate how or why it happened that persons who half an hour earlier had been
willing to bid for much ,larger figures suddenly permitted the appellant to
become the purchaser for Rs. 2,25,000/. It may be mentioned that at the resumed
bidding there were only six bidders of whom three had not bid at the earlier
auction at all, though apparently they were present-Shantilal Bansidhar, Power
& Machinery Construction Co., and Relay Corporation. Besides these three,
there were only two others-Mahabir Prasad who had earlier bid for Rs. 2,10,000/and
now contented himself with a bid for Rs. 1,90,000/-and S.K. Chakraborty who
though originally thought that the property was worth having for Rs.
2,98,000/now refused to go beyond Rs. 2,00,000/-. These facts show that if
those others who had gathered there at the beginning of the auction but who
left the place under the impression that Nandlal would make the required
payment had continued there, the appellant's bid for Rs. 2,25,000/would not
have been the highest bid. We consider therefore the learned judges of the
Division Bench were justified in considering that the sale to the appellant
ought not to have been confirmed.
There was one further point made by learned
Counsel that when the learned Judges allowed the appeal of the respondent they
should not have directed a resale of the property by a fresh auction but should
have confirmed the sale to the appellants at the price of Rs. 3,35,000/which
was the amount of their bid at the first auction. The basis of this argument
was the undertaking which 741 they gave at the time of the disposal of the
application for interim stay pending the hearing of the appeal. We have already
extracted the terms of that undertaking. It is not easy to 'find any legal
basis for this argument. It is true that in the event of the appeal being
allowed the Court might have, possibly with the consent of the 1st respondent
before us, insisted upon the appellant taking the property for Rs. 3,35,000/but
that surely cannot give the appellants any legal right to insist that the
property be sold to them. It, was a condition for the grant of the indulgence
of stay and by no stretch of language could that be read as implying that the
appellants had a right to purchase the property. It is true that the appellants
have made a grievance about this matter in the application for leave to this
Court as well as in the statement of the case but that hardly improves the
position.
This matter may also be looked at from a
slightly different point of view. Immediately Nandlal failed to turn up on
September8, 1956 the liquidators enquired of the appellants whether they were
willing that their penultimate bid be treated as the highest bid and they be
declared purchasers.
This offer was refused as apparently they
were satisfied that they would be able to get the property for a much less sum.
Thereafter the liquidators took out a Master's summons seeking sanction of the
Court for the sale to them for Rs. 2,25,000/-. The appellants supported that
application. In other words, they wanted that the Court should confirm the sale
to them for Rs. 2,25,000/and that was the order which they obtained from the
learned Company judge. It' was only when the appeal. was filed and an
application for stay was moved before the appellate court by the 1st respondent
here that the offer which is embodied in the undertaking was.
made. In the circumstances it is difficult to
see what justification there is for the contention that the learned judges 742
should, when they allowed the appeal, have, confirmed the salt to them for
Rs.3,35,000/-. We consider there is no substance in this submission.
The result is the appeal fails and is
dismissed with the costs of the 1st respondent.
Appeal dismissed.
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