Modern Transporters (P.) Ltd. (In Liquidation) vs Jagdishraj Mehta and Others

Bhopinder Singh Dhillon, J.—Modern Transporters Private Ltd. was ordered to be wound up. Mulkh Raj Mehta, Dewan Chand Magon and Gian Chand Magon were the directors of the said company. In C.O. No. 89 of 1963, proceedings for misfeasance against the said three directors under sections 542 and 543 of the Companies Act were initiated. The matter was tried by a learned single judge of this court and it was ultimately held that Mulkh Raj Mehta, director, was liable to a sum of Rs. 10,000 individually, Dewan Chand Magon, director, to a sum of Rs. 10,000 and Gian Chand Magon to Rs. 6,000. All the three directors were made liable individually and joint liability was not imposed. This order of the learned judge was appealed against by Mulkh Raj Mehta, Dewan Chand Magon and Gian Chand Magon in L.P.A. No. 359 of 1966, and the same was also challenged by the official liquidator in L.P.A. No. 364 of 1966. The appeal of the directors was that they were not liable and the order fixing their liability be set aside, whereas the appeal on behalf of the official liquidator was that the liability of the directors be increased and that they should be made liable severally and jointly. The appeal filed by the directors was dismissed whereas the appeal filed on behalf of the official liquidator was accepted to the extent that the liability against all the three directors was made severally and jointly. However, the amount of the liability was not increased. This appeal admittedly was decided on September 24, 1970. Before this appeal was decided, Mulkh Raj Mehta, admittedly, died on April 21, 1969. It is again an admitted fact that the legal representatives of Mulkh Raj Mehta were not brought on record and in fact the judgment of the Letters Patent Bench making the liability several as well as joint, as far as Mulkh Raj Mehta was concerned, was made against a dead person.

It may be pointed out here that as far as the individual liability of Mulkh Raj Mehta was concerned, the sum of Rs. 10,000 plus interest, whatever amount was due in accordance with the order of the learned single judge, was realised from him during his lifetime. In respect of Dewan Chand Magon and Gian Chand Magon, proceedings for recovery of the amount for which they were adjudged liable were taken. But no amount could be recovered from both these directors. After the judgment in Letters Patent Appeal was passed, the official liquidator took proceedings for recovery of the amount from Dewan Chand Magon and Gian Chand Magon and also initiated execution proceedings against the estate of Mulkh Raj Mehta on the ground that the Letters Patent Bench fixed the joint liability of all three directors. In these execution proceedings objections were taken by the legal representatives of Mulkh Raj Mehta that the order of the Letters Patent Bench having been passed against a dead person, the estate of Mulkh Raj Mehta is not liable for any such liability which was fixed against a dead person. During the pendency of the proceedings, the land which was originally owned by Mulkh Raj Mehta was attached and auctioned, but the sale was not confirmed and the amount realised out of sale proceeds had been deposited in the court.

The learned counsel for the official liquidator vehemently contends that the order -of the Letters Patent Bench is not a decree as, according to him, the provisions of the CPC are not applicable to the cases under the Companies Act. It is contended by the learned counsel that the said order is in fact a payment order as postulated under the provisions of sections 542 and 543 of the Companies Act. Therefore, the order passed against Mulkh Raj Mehta who was dead can be executed. I am afraid this contention cannot prevail. It is conceded by the learned counsel for the official liquidator that even in case the proceedings are to be taken under sections 542 and 543 of the Companies Act no order can be passed without the person concerned having been given an opportunity of being heard. It is basic that where an order in the form of a decree or any other liability is fixed, the same cannot be fixed against a dead person. When Mulkh Raj Mehta was alive the order of the learned single judge fixing his �individual liability to the extent of Rs. 10,000 was in operation. His joint liability was only fixed after he was dead and his legal representatives had not been brought on record. In this view of the matter it is not necessary to decide in this case whether the order passed by the Letters Patent Bench was a decree or an order not amounting to decree or not. The matter may be viewed from another angle. If the order of the Letters Patent Bench is a decree no decree can be passed against a dead person and if the same is passed the decree is a nullity and if it be taken as an order not amounting to a decree even then no order can be passed against a dead person enhancing his liability. From whatever angle the matter may be viewed, it is obvious that the decision of the Letters Patent Bench, as far as Mulkh Raj is concerned, is a nullity. His legal representatives are well within their rights to take this objection when the property belonging to them is being attached in pursuance of an order which was passed against a dead person.

Mulkh Raj Mehta admittedly died on April 21, 1969. The moment he died his property vested in his legal representatives because inheritance cannot remain in abeyance. On that date there was no liability on his property. The liability created subsequently was created when the property succeeded to by the legal representatives of Mulkh Raj Mehta completely vested in them free of any charge. In this view of the matter I am of the opinion that the realisation of the amount from the legal representatives of Mulkh Raj Mehta qua the liability of Dewan Chand Magon or Gian Chand Magon, the two directors, cannot be upheld.

The learned counsel for the official liquidator has pointed out the issue drawn in this case, which is as follows :

" Whether the appeal against Mulkh Raj Mehta had abated before the order of the Letters Patent Bench and if so, what is the effect thereof on the present proceedings for execution of the decree against Jadgish Raj Mehta."

The learned counsel submits that the question of the abatement of the appeal against Mulkh Raj Mehta may also be examined. In view of the findings given by me earlier it would not be necessary to go into this question. But since the issue has been framed it would be proper for me to express my opinion on this matter as well. Rule 6 of the Companies (Court) Rules, 1959, reads as under :

" Save as provided by the Act or by these Rules, the practice and procedure of the court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules......"

"Code " is defined in Sub-rule (4) of Rule 2 of the Companies (Court) Rules, 1959, as " Code " means the Code of Civil Procedure, 1908. In view of the provisions of this Rule it is obvious that until and unless the counsel for the petitioner can show that there is any provision in the Companies (Court) Rules, 1959, or in the Companies Act, contrary to the provisions of the CPC which may be applicable to the question of abatement of a case the provisions of the CPC will certainly apply. It is conceded by the learned counsel for the petitioner that there is no provision in the Companies Act or the Rules which govern the question of abatement arising in cases under the Companies Act. That being so, in view of the provisions of Rule 6 of the Companies (Court) Rules, 1959, the provisions of abatement as contained in the Code of Civil Procedure, will apply to the petition under the Companies Act and so also the appeals filed under the Companies Act. That being so, Mulk Raj Mehta having died much before the appeal was decided by the Letters Patent Bench and his legal representatives not having been brought on record the appeal as against him had certainly abated and, in fact, the decision made against him when he was no more in this world, is a nullity. I accept the objections filed by Jagdish Lal Mehta, one of the legal representatives of Mulkh Raj Mehta. The sale and attachment of the property is set aside. The property shall return to the legal representatives of Mulk Raj Mehta and the auction-purchaser will be entitled to refund of the amount paid by him in accordance with the law.