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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 u/s 179(1) 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
Section 55 of the Transfer of Property Act in the absence of a specific agreement to pay interest. It looks 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 u/s 179 is not a mere
formality, we cannot see anything improper in the Official Liquidator, if 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 embarking 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 Section 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 Section 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 entitled, where the ownership of the
property has passed to the buyer, before payment of the whole of the purchase money, to a charge upon the property in the hands of the buyer for
the amount of the purchase money or any part thereof remaining unpaid and for interest on such amount or part from the date on which possession
has been delivered. We are not now concerned with what defence the Province may have to the claim for interest. But the provision in Section 55
to which we have referred certainly shows that the claim put forward by the Official Liquidator cannot be frivolous or vexatious.
We, therefore, allow the appeal and set aside the order of the learned Judge dismissing the appellant''s application. We give sanction to the
Official Liquidator to Institute the proposed suit. There will be no order as to costs; but the Official Liquidator will get his costs of the appeals from
the funds of the company.