Hemendra Lal Roy and Others vs B. Gupta, Official Liquidator of Giridih Electric Supply Corporation Ltd. (in Liquidation)

This is an appeal under Clause 10 of the Letters Patent from an order of Agarwala J., dismissing an application for restitution in a proceeding u/s 185, Companies Act, 1913. Section 185 is in these words:

The Court may, at any time after making a winding up order, require any contributory for the time being settled on the list of contributories and any trustee, receiver, banker, agent, or officer of the company to pay, deliver, surrender or transfer forthwith, or within such 1 Line as the Court directs, to the Official Liquidator any money, property or documents in his hands to which the company is prima facie entitled.

The company concerned in this case is the Giridih Electric Supply Corporation Limited of which the appellants were directors for some time. In 1935 the company went into liquidation under an order of this Court. In 1939 the Official Liquidator made an application to this Court u/s 185, Companies Act, for delivery to Mm of the property said to be in possession of the appellants as agents or officers of the company. The property consisted of the power house with the machinery and plant and other accessories and also the land on which the power house stood. The application was resisted by the appellants on the ground that they were in possession of the property on their own behalf and not as agents or officers of the company, and therefore the application was not maintainable u/s 185. The application was, however, allowed by order dated 5th January 1940. From that order an appeal under the Letters Patent was filed and the appellants obtained an interim stay order. But before that order could be communicated to the Official Liquidator, he took delivery of possession under a writ issued by this Court. The appeal was allowed on 9th May 1940, and the order of 5th January was reversed on the finding that the property was not in the possession of the appellants as agents or officers of the company at the date of liquidation. The appellate Court, however, found that the company was prima facie entitled to the moveables and the claim of the appellants was frivolous. As to the immovable property, it found that the company failed to establish its title thereto.

On 2lst May 1940 the appellants filed an application for restitution under Sections 144 and 151, Civil P.C. This application was heard by Agarwala J. and he held that Section 144, Civil P.C., had no application, because it refers to cases where a decree has been varied or reversed whereas the order u/s 185, Companies Act, which was reversed was not a decree. As regards Section 151, Civil P.C., he held that the inherent power of the Court under that section is discretionary, and that in the present ease if such power were to be exercised, it would cause injustice. Accordingly he dismissed the application on 16th August 1940.

Dr. J.N. Banerji on behalf of the respondent took the preliminary objection that the appeal is not competent, because the order appealed against is not a judgment within the meaning of Clause 10 of the Letters Patent. He relied on the Privy Council cases of Tata Iron and Steel Company Ltd. v. Chief Revenue-Authority Bombay AIR 1923 P.C. 148 and AIR 1925 155 (Privy Council) . In both these cases the question was whether the appeal to the Privy Council was competent and their Lordships had to construe the words "final judgment" in the clause of the Letters Patent corresponding to Clause 31 of the Letters Patent of our High Court, which provides for appeals to His Majesty in Council. On the other hand, Mr. G.C Mukherji for the appellants relied on the Privy Council decision in Hurrish Chunder Chowdhry v. Kalisunderi Debi (1983) 9 Cal. 482. In this case their Lordships held that the decision by the judge appointed to dispose of matters relating to appeals to Her Majesty in Council, refusing to transmit for execution Her order restoring a decree was a judgment within the meaning of Section 15 of the Letters Patent of 1865 (corresponding to Clause 10 of the Letters Patent of this High Court) and was appealable. This case is in point and affords a complete answer to the objection taken. The preliminary objection must, therefore, be overruled.

On the merits, the order of the learned Judge cannot be supported. Though this is manifestly a case for restitution not u/s 144 but u/s 151, Civil P.C., restitution has been refused because in the opinion of the learned Judge injustice would be done, if restitution were to be allowed in the face of the appellate Court''s finding that the appellants'' claim with respect to moveables was frivolous. As regards the immovable property, he considered that as the appellants erected the structure on the land while they were managing the company, "there may be equities which may have to be worked out as between the company and themselves in a proper proceeding." He was, therefore, not prepared to exercise the discretionary power u/s 151. No doubt the inherent power of the Court u/s 151 is discretionary and is to be exercised for the ends of justice; but justice always implies that it must be administered according to law. The appellate Court distinctly held that the application u/s 185 was not maintainable and the "liquidator must proceed by way of a suit and not by way of these summary proceedings." The position, therefore, is this: The Court of first instance said that possession should be given in the summary proceeding, whereas the appellate Court said "possession could be taken only by means of a suit." The Official Liquidator came into possession in execution of the order of the Court of first instance, and to maintain his possession thus obtained would be to nullify the order of the appellate Court. The law requires that the order of the appellate Court must be given effect to by the Court of first instance. In this view the order now under appeal is opposed to law and must be set aside.

During the pendency of this appeal, the interest of the company in liquidation was sold under the direction of the Judge exercising powers under the Companies Act. The purchaser has been impleaded in this appeal as respondent and is represented by Dr. J.N. Banerji. It has been argued by him that as the property has passed to the possession of the purchaser, no restitution should, be granted. But the purchase is affected by the rule of lis pendens and further it appears that before the sale it was distinctly made clear that the purchaser would get merely the right, title and interest of the Official Liquidator. That being so, the purchaser cannot now be heard to say that no order can be passed in this appeal to his prejudice.

In the circumstances, restitution must be allowed, but subject to this condition, which j is necessary to impose for the ends of justice, that delivery of possession to the appellants will be postponed for three months from this date to enable the respondent to bring a suit, if so advised and obtain such relief as may be open to him in law. The appeal is accordingly allowed and restitution is granted subject to this condition. There will be no order for costs.