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Judgment
Rajamannar, C.J.—It is very unfortunate that the learned Judge should have embarked on considerations which, in our opinion, are not
germane to the disposal of the application made by the Official Liquidator under S. 179 (i) of the Indian Companies Act for leave to file a suit. We
agree with the learned Judge that the said provision in the Indian Companies Act was intended to prevent frivolous and wasteful litigation by an
Official Liquidator. At the same time, it is obvious that the Court, when approached by the Official Liquidator for sanction to institute a suit cannot
decide on the merits of the case. No doubt in one part of the judgment, the learned Judge definitely refrained from dealing with the strict legal
merits of the claim, but later on he expressed a definite opinion that he should not allow the suit to be filed to recover a large sum of interest on the
basis of S. 55 of the Transfer of Property Act in the absence or a specific agree men to pay interest. It locks as though the learned Judge was
much influenced by what he apparently considered to be improper on the part of the Official Liquidator, namely, to have issued suit notices and
prepared a plaint and thereafter filed an application for sanction to institute the suit. While we agree with him that leave of the Court under S. 179 is
not a mere formality, we cannot see anything improper in the Official Liquidator, it he bona fide believed that there was a fair claim which he could
put forward on behalf of the company making every preparation for the institution of the suit. We do not see why the Official Liquidator should first
apply and obtain the sanction of the Court and thereafter begin to prepare his case We do not think that the Liquidator demurred in any way to
what is undoubtedly proper, namely, that the final responsibility should rest on a liquidation Court in the matter of backing on litigation on behalf of
the company. We see no justification for issuing notice to the Province of Madras the defendant in the proposed suit. In our opinion S. 179 does
not contemplate a formal application which has to be decided after notice to the opposite party. An application under that section is strictly
between the Official Liquidator and the Court. It appears to us to be unreasonable that the party against whom a suit is proposed to be filed should
be given an opportunity to oppose an application by the Official Liquidator to institute the suit.
We have no hesitation in holding that sanction should be accorded to the Official Liquidator to institute the proposed suit. We do not understand
what the learned Judge meant when he said that he would not allow the suit to be filed solely on the basis of S. 55 of the Transfer of Property Act.
That section, among other things declares that in the absence of a contract to the contrary, the seller is stifled, where the ownership of the no party
has passed to the buyer, before payment of the whole of the purchase money, to a charge on the property in the hands of the buyer for the amount
of the purchase money or my part thereof reaming unpaid and ''or interest on such amount or part V on the date on which possession naps been
delivered. We are not now concerned with what defence the Province may have to the claim for interest. But the provision in S. 55 to which we
have referred certainly mows that the claim put forward by he Official Liquidator cannot be frivolous or vexatious. We therefore allow the appeal
and set aside the order of the learned fudge dismissing the appellant''s amelioration. We give sanction to the Official Liquidator to institute the
proposed suit. There will be no order as to cost; but the Official Liquidator will get his costs of the appeal from me funds of the company.