Suresh Chandra Khasnabish vs The Bank of Calcutta Ltd.

Banerjee, J.—This is an appeal from an order of Sinha, J., made on August 1, 1949, refusing to grant leave to the Petitioner who is the Appellant before us, to commence and/or proceed with an appeal against the Respondent company which is in liquidation. The appeal was commenced without such leave.

The appeal was filed against an order of that learned Judge made on February 14, 1949, in an aln for an order for payment of a sum of Rs.2,821-9-6 which is lying with the Registrar, Original Side, High Court. The Petitioner claims that he is secured creditor in respect of the money.

The winding up petition was presented on the same day and a Provisional Liquidator was appointed. The winding-up order was made on April 1, 1949.

The learned Judge, having regard to two decisions of this Court (Panckridge, J.) refused to give leave holding that he had no jurisdiction to give leave to continue the appeal. He, however, observed that if he had any discretion in the matter, he would give leave to the Appellant. But he felt himself bound by the decision of Panckridge, J., and made the order from which this appeal has been preferred.

The decision of a single Judge of this Court is binding on another single Judge. This was said by Sir Lawrence Jenkins, C.J., in Chaitram Rambilas v. Bridhichand Kesrichand, ILR 42, Cal 1140, p. 1145. In Virjibun Dass Moolji v. Bisseswar Lal Hargobind, 24 CWN 1032 p. 1038, a Bench of this Court said: "No doubt when a decision of a single Judge on the Original Side of this Court is produced before another Judge, he is bound to treat it with respect, and ordinarily to follow it, if it is applicable to the circumstances of the case before him. But this does not imply that he cannot examine the matter and that it is not competent to him to take a contrary view, if he is convinced that the decision is erroneous. The answer to the question, what regard is to be had to an earlier decision of a Court of co-ordinate jurisdiction, must depend upon a variety of circumstances. One important factor is the length of time during which it has stood unchallenged. Another factor, possibly of greater importance, is whether the decision gives adequate reasons for the conclusion embodied therein. But the position is indefensible on principle, that although a Judge may feel absolutely convinced that the decision produced before him is erroneous in law, he is still bound to decide against his own opinion." There is nothing to show in this case that their Lordships'' attention was drawn to the observation of Jenkins, C.J., which I have stated above.

This matter has been dealt with in great length in a recent English case : Young v. Bristol Aeroplane Co. Ltd., (1944) 2, All E.L.R. 293. In this case Lord Greene, M.R., cited among others two cases : Olympia Oil & Cake Co. Ltd., (1916) 1 AC 314, p. 322 in which Buckley, L.J., began his judgment as follows: -

I am unable to adduce any reason to show that the decision which I am about to pronounce is right. On the contrary, if I were free to follow my own opinion, my own powers of reasoning such as they are, I should say that it is wrong. But I am bound by authority - which, of course, it is my duty to follow - and, following authority, I feel bound to pronounce the judgment which I am about to deliver.

Velazquez, Ld. V. Inland Revenue Commissioners, (1914) 3 K.B. 458, where the Court held itself bound by a previous decision of its own which, it considered, had not been overruled by an intervening decision of the House of Lords. Lord Cozens-Hardy, M. R., said at p. 461:

But there is one rule by which, of course, we are bound to abide - that when there has been a decision of this Court upon a question of principle it is not right for this Court, whatever its own views may be, to depart from that decision. There would otherwise be no finality in the law. If it is contended that the decision is wrong, then the proper course is to go to the ultimate tribunal, the House of Lords, who have power to settle the law and hold that the decision which is binding upon us is not good law.

Recently, My Lord the Chief Justice, has made observations to the same effect in a Bench decision of this Court. The observations of Buckley, L.J., and Lord Cozens-Hardy, M.R., were made with reference to Appeal Court decisions, but, I do not see on principle, why they should not apply to single Judge''s decisions of this Court. I respectfully adopt the view expressed by Jenkins, C.J., and hold that the principle laid down by him must be followed. Otherwise, as Lord Cozens-Hardy, M.R., said, there would be no finality in the law. Lord Greene''s summary after an exhaustive review of case-law is this: -

It remains to consider Lancaster Motor Co. (London) Ld. V. Bremith Ltd., (1941) 1 K.B. 676; 2 All E.R. 11 (1941), in which a Court consisting of Sir Wilfred Greene, M.R., Clauson and Goddard, L. JJ., declined to follow an earlier decision of a Court consisting of Slesser and Romer, L. JJ. This was clearly a case where the earlier decision was given per incuriam. It depended upon the true meaning (which in the later decision was regarded as clear beyond argument) of a rule of the Supreme Court to which the Court was apparently not referred and which it obviously had not in mind. The Rules of the Supreme Court have statutory force and the Court is bound to give effect to them as to a statute. Where the Court has construed a statute or a rule having the force of a statute, its decision stands on the same footing as any other decision on a question of law. But where the Court is satisfied that an earlier decision was given in ignorance of the terms of a statute or a rule having the force of a statute the position is very different. It cannot, in our opinion, be right to say that in such a case the Court is entitled to disregard the statutory provision and is bound to follow a decision of its own given when that provision was not present to its mind. Cases of this description are examples of decisions given per incuriam. We do not think that it would be right to say that there may not be other cases of decisions given per incuriam in which this Court might properly csr itself entitled not to follow an earlier decision of its own. Such cases would obviously be of the rarest occurrence and must be dealt with in accordance with their special facts. Two classes of decisions per incuriam fell outside the scope of our enquiry, namely, (i) those where the Court has acted in ignorance of a previous decision of its own or of a Court of coordinate jurisdiction which covers the case before it - in such a case a subsequent Court must decide which of the two decisions it ought to follow: and (ii) those where it has acted in ignorance of a decision of the House of Lords which covers the point - in such a case a subsequent Court is bound by the decision of the House of Lords.

On a careful examination of the whole matter we have come to the clear conclusion that this Court is bound to follow previous decisions of its own as well as those of Courts of co-ordinate jurisdiction. The only exceptions to this rule (two of them apparent only) are those already mentioned which for convenience we here summarise : (i) The Court is entitled and bound to decide which of two conflicting decisions of its own it will follow. (ii) The Court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot in its opinion stand with a decision of the House of Lords. (iii) The Court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam."

The expression per incuriam means through want of care and is sufficiently explained in the judgment of Lord Greene which I have set out.

If a single Judge makes a mistake and his decision is wrong, the proper course is to go to the Court of Appeal who has the power to settle the law. This course obviously has one great advantage. There would not be a bewildering mass of conflicting decisions, which in my view, do not help administration of justice but impede it. The decision of a High Court Judge, be it of a single Judge or of a Bench, is binding on the subordinate Courts in the Province. If there are conflicting decisions, the subordinate Courts do not know which to follow. The lawyers who have got to advise their clients do not know how to advise them. The litigants do not know how to frame their cause of action or their defence. I would desire, therefore, to lay down as a law of Jenkins, C.J., laid down many years ago that if there is a decision of a single Judge of this Court upon a question of law, (not given per incuriam), it is not right for any other single Judge whatever his own views may be to depart from it. The Judge may express his own views may be to depart from it. The Judge may express his own views about the matter but his decision should be in accordance with the previous decision. I know from my own experience at the Bar, which is not inconsiderable, what confusion and difficulties are created by conflicting decisions.

Now to the point under consideration : What is the true meaning and effect of Section 171 of the Indian Companies Act? On this point there is divergence of judicial opinion in the High Courts in India.

In a recent Full Bench case of AIR 1942 289 (Lahore) this divergence of judicial opinion has been noticed. The Full Bench after consideration of the different views on this point held that since the words used in Section 171 were borrowed from the English Law where they had a recognised legal meaning attached to them it should be assumed that the same meaning was assigned to those words by the Companies Act which borrowed the language of English statute and a suit instituted against a company in liquidation without leave u/s 171, should not be dismissed on that ground alone.

The Full Bench overruled a previous Bench decision of that Court in which a contrary view had been taken.

With respect, our views are in accordance with the view expressed by the Full Bench of the Lahore High Court.

Though the decisions of Panckridge, J., may not be binding on us in the strict sense, I think they are entitled to every respect and since we are differing form the view expressed by that learned Judge, we must give our reasons.

Companies Acts are arbitrary codes, designed to meet and regulate the growing necessities of modern commerce. The Indian Companies Act (1913) was itself to a very great extent a reproduction of the English Act of 1908, which consolidated the prior statute-law upon the subject.

The Company Law is not a part of the indigenous law of India. It has come from England. It is, therefore, permissible in construing sections of the Indian Statute to refer to the English case law on the subject. This course has the sanction of their Lordships of the Judicial Committee.

In Hansraj v. Official Liquidator, Dehra Dun - Mussoorie Electric Tramway Co., IL.R. 50, IndAp 13, their Lordships had to consider the meaning and effect of Section 186 of the Indian Companies Act, 1913, which corresponds with Section 101 of the English Act of 1862. Their Lordships observed: "Now, in considering the meaning and effect of Section 186 it is impossible to overlook the fact that it is verbatim identical with the corresponding section in the legislation of this country, a section which dates back some seventy years of 1862, and which has appeared in our company legislation ever since. It is therefore a section with an ancestral history . . . .

The old Section 101 of the English Act of 1862 has ever since 1866 been judicially interpreted and administered in accordance with the views expressed in Stringer''s case, namely, - that the section is one which provides summary proceedings against debtor-contributories to avoid proceedings in different Courts and to permit a single proceeding in the winding-up Court - but ''in those summary proceedings every objection is just as open to the person sought to be charged as it would have been if a bill had been filed.

With these observations their Lordships determined the meaning and effect of Section 186 of our Act in accordance with the meaning and effect given in England to the corresponding section of the English Act.

In this case we may likewise say that Section 171 of the Indian Companies Act has an ancestral history and the observations made by their Lordships of the Judicial Committee on Section 186 apply with equal force to Section 171 of the Indian Companies Act.

Section 171 of the Indian Companies Act of 1913 was in these terms: "When a winding-up order has been made, no suit or other legal proceeding shall be proceeded with or commenced against the Company except by leave of the Court, and subject to such terms as the Court may impose."

The corresponding English section (Section 142) of the Act of 1908 ran as follows:

When a winding-up order has been made, no action or proceeding shall be proceeded with or commenced against a company except by leave of the Court, and subject to such terms as the Court may impose.

By amendments both here and in England, the words "or a provisional liquidator has been appointed" have been added after the word "made" in the sections.

The marginal notes in the two sections may also be compared. In the English Act the marginal note is "actions stayed on winding-up order." In the Indian Act the marginal note is "Suits stayed on winding-up orders."

Section 142 of the English Statute of 1908 replaced Section 87 of the English Act of 1862. In the various amendments that this section underwent to change was made in the material words. For the sake of convenience, I may set out here Section 87 : "Where any order has been made for winding-up a company under this Act no suit, action, or other proceeding shall be proceeded with or commenced against the company except with the leave of the Court, and subject to such terms as the Court may impose."

In re Wanzer Ltd., (1891) 1 Ch. 305, it was held that a Scottish proceeding in sequestration by a landlord against a tenant company for future rent is a sequestration within 1862 Act, Section 163, and is prohibited by that section from being put in force after the commencement of the winding up of the company; but u/s 87 of the Act the Court had power to give leave to the landlord to proceed with such a sequestration.

This case has never been dissented from in England. It has been referred to in In re Vocalion (Foreign) Ltd., (1932) 2 Ch. 199.

The arguments of the eminent Counsel, Mr. Cozens-Hardy, Q.C., in that case may be noted. He said that a Scotch "sequestration" was not aimed at by Section 163, and submitted that if he was wrong on that point, he would ask for leave u/s 87 to proceed. He added that in the absence of special circumstances, leave would be given as a matter of course and referred to In re David Lloyd Co., 4 D.J. & S. 377. In re Wanser, North, J., was considering Section 173 which ran: "Where any company is being wound up by the Court or subject to the supervision of the Court, any attachment, sequestration, distress, or execution put in force against the estate or effects of the company after the commencement of the winding-up shall be void to all intents."

This section may be compared with Section 232 of the Indian Companies Act.. That provides "Where any company is being wound up by or subject to the supervision of the Court, any attachment, distress or execution put in force without leave of the Court against the estate or effects or any sale held without leave of the Court of any of the properties of the Company after the commencement of the winding-up shall be void." The words in italics have been inserted by the Amending Act of 1936. North, J., said at p. 312 : "According to decisions which are binding upon me, the 163rd section and the 87th section are to be construed together; and, therefore, ''void to all intents,'' is to be read, as qualified by the 87th section, as meaning ''void to all intents,'' unless the Court shall otherwise direct''; that is to say, unless the Court authorities the proceedings to be instituted which lead up to the sequestration, or authorities their continuance, if already instituted before the sequestration takes place."

His Lordship gave leave to continue the proceeding, though it had been commenced without the leave of the Court. His Lordship on the facts of the case imposed certain terms.

In In re David Lloyd & Co., (1877) 6 Ch.D. 339 which was an appeal from Mallins, V.C., an order had been made to wind up the company. A mortgagee had commenced an action against the company to realise his security without leave u/s 87 of the Companies Act, 1862. Leave was granted to the mortgagee to proceed with his action. The order of the ld Vice Chancellor refusing leave was discharged. Sir George Jessel, M.R., said that in the circumstances of the case leave must be given to the mortgagee to proceed with his action. James, L.J., said: "I am entirely of the same opinion. These sections in the Companies Act, and the corresponding legislation with regard to bankrupts enabling the Court to interfere with actions, were intended, not for the purpose of harassing, or impeding, or injuring third persons, but for the purpose of preserving the limited assets of the Company or bankrupt in the best way for distribution among all the persons who have claims on them." Cotton, L.J., concurred in the decision. It is clear, therefore, that the question of granting leave was not regarded by these eminent Judges as a matter of jurisdiction.

In The Queen v. The Lord Mayor of London, (1893) 2 Q.B. 146, p. 149, Wright, J., at p. 149, referring to Section 87 observed : "that section has always in practice been worked out by applying to stay the proceedings."

It would be thus seen that in England Section 87 of the Act of 1882 which was replaced by Section 142 of the English Statute of 1908 (same as our Section 171 in 1913) has consistently been applied to stay the proceedings.

The cases that I have cited are noted without comment or demur or disapproval in the monumental treatises of Lord Justice Buckley and Sir Francis Palmer. The learned authors have treated the section as one applying to stay the proceedings.

The marginal notes in Section 142 of the English Act and 171 of the Indian Act may be noted. In one it is "actions stayed on winding-up order," and in the other it is "suits stayed on winding-up order."

With regard to marginal notes, Willes, J., in Claydon v. Green, (1868) L.r. 3 C.P. 511, 522 said that the marginal notes "cannot be treated as forming part of the Act, but merely as a contemporanea expositio."

In Sheffield Waterworks v. Bennett, (1872) L.R. 7 Ex. 409, 421, Cleasby, B., said, "one may refer to the marginal reference in considering the general sense in which words are used in Acts of Parliament."

In Venour v. Sellon, (1876) 2 Ch. D. 525, Jessel, M.R., referred to the marginal notes in construing a section of an Act and observed: -

This view is borne out by the marginal note, and I may mention that the marginal notes of Acts of Parliament now appear on the Rolls of Parliament, and consequently form part of the Acts, and in fact are so clearly so that I have known them to be the subject of motion and amendment in Parliament.

But Begallay, L.J., in Attorney-General v. G. E. Ry. , (1879) 11 Ch.D. 449 took the opposite view. Following Bagallay, L.J., Lord Hanworth, M.R., in Nixon v. Attorney-General, (1930) 1 Ch.D. 566, p. 594 said, the Courts could not look at the marginal notes for the purpose of construing the section of a statute. The catchwords could not be used to explain the meaning of sections against which they appear. But in Allchin v. Coulthard, (1942) 2 All E.R. 39, p. 43, referring to the marginal notes, Lord Greene said that he could not attach to them the importance which Counsel suggested they should bear.

From the above observations, it is clear that marginal notes cannot be looked at for ascertaining the meaning of a section unless the attention of the Legislature had been drawn to them.

In this case, it is impossible to think that the marginal notes in the English Section 87 or 142 escaped the attention of the legislation or of the great Judges and the eminent authors who dealt with those sections.

I can, therefore, fairly assume that the marginal notes against this section may be taken as a guide to ascertain the meaning of the section. I do not for a moment suggest that the marginal note controls the construction of the section. If there is any conflict between the marginal note and the true meaning of the section on its plain words, no importance can be attached to the marginal note.

The marginal note in our Section 171 is reproduction of the marginal note of the English Section 142, save that the word "suit" has been substituted for the word "action". If the English section has been copied in our Act, it is only reasonable to assume that our legislature intended to take the section of the English Statute with all its implications and meaning as understood in England.

We have arrived at the meaning and effect of the Section 171 without paying much attention to the marginal note though we have taken it into consideration.

The logical sequence of the section may also be noted. Section 169 of the Companies Act runs as follows: -

The Court may, at any time after the presentation of the petition of winding up a company under this Act, and before making an order for winding-up the company, upon the application of the company or of any creditor or contributory of the Company, restrain further proceedings in any suit or proceeding against the company, upon such terms as the Court thinks fit.

This section enables the Court to make an order for the stay of proceedings against the Company at any time between the presentation of the petition and the order for winding up upon the application of either a creditor, or contributory, or the company itself. Once the winding up order has been made the matter is carried a stage further; and u/s 171 no suit or other legal proceeding may be proceeded with or commenced against the company except by the leave of the Court. The object of the winding up provision is to put all unsecured upon an equality and pay them pari passu.

Section 171 follows Section 169. Section 169 provides for stay of proceeding between the presentation of the petition and the making of the winding up order. What will happen after winding up order is made has not been provided for in the Act unless it is provided in Section 161. It would be illogical to think that the Act provides for stay of proceeding between the presentation of the petition for winding-up and the making of the order, but does not make any provision for stay after the winding-up order is made. The reason for enacting Section 169 remains after the winding-up order is made. It is, therefore, reasonable to suppose that Section 171 provides for the contingency which is not covered by Section 169. When a company has been wound up by the order of a Court no suit or other legal proceedings should be proceeded with or commenced except by the leave of the Court, to prevent the assets of the company being frittered away in vexatious litigations. The Court in granting leave considers all the circumstances of the case and decides as to whether leave should be or should not be granted, so that the assets of the company may be presented for the benefit of the creditars.

On those considerations we are of opinion that Section 171 should be read in the manner it has been read in the English Courts which I have stated above.

Counsel for the Respondent referred to Section 18 of the Presidency Towns Insolvency Act and Section 28 (2) of the Provincial Insolvency Act and to Mulla''s Commentary on the Law of Insolvency, Article 250 under the heading ''Leave must be obtained before institution of suit'' and contended that on the same principle leave should be obtained before any suit or other legal proceeding is commenced against a company for which a winding-up order has been made.

The learned author at page 174 says: " ''The real question seems to be whether the absence of leave required by the section is only a bar to the Courts dealing with the suit or whether it is a bar to the original institution of the suit? The language of the section shows that the absence of leave is a bar to the original institution of a suit. If so, the only course left open to the Court where a suit is instituted without leave, is to dismiss it. The Court has no power either to stay the suit or to allow it to continue on terms." Among other cases the learned author refers to Rendall v. Blair, (1890) 45 Ch.D. 139.

In Rendall v. Blair, the Plaintiff''s action was dismissed by Kay, J., on the ground that the Plaintiff had not obtained the previous consent of the Charity Commissioners under the 17th section of 16 and 17 Vict. C. 137. On an appeal taken from the decree of dismissal, Cotton, L.J., said (p. 150) that in that case he would not consider the question whether that consent was required but added : "but I cannot agree with the view which has been expressed by Kay, J., that the action ought to be dismissed because that consent had not been obtained before the action was commenced. No doubt the terms of the 17th section do shew that the consent ought to be applied for before the action is begun. This is so no doubt. But then it does not say that if the consent is not obtained the action must be dismissed, and cannot be proceeded with until that consent is obtained."

Bowen, L.J. and Fry, L.J., agreed.

The decree made by Kay, J., was reversed.

Rendall v. Blair, therefore, does not support the learned author''s remarks.

It is unnecessary to prolong the discussion and compare Section 171 of the Companies Act with the analogous sections of the Insolvency Acts. The words are not the same and having regard to the definite opinion we have formed as to the meaning and effect of Section 171, having regard to its history, it is useless to compare it with the sections in the Insolvency Acts.

We, therefore, hold that the Court has jurisdiction to give leave to proceed with a suit or other legal proceeding against a company in liquidation, even though such leave was not obtained before its commencement. We are unable to agree with the view expressed by Panckridge, J.

On the facts of this case Sinha, J., was inclined to give leave to the Appellant to proceed with the appeal. We also take that view and exercising our discretion in the matter, grant leave to the Appellant to continue the appeal. The costs of this appeal and of the application before Sinha, J., having regard to the special circumstances of the case, will abide the result of the appeal filed by the Appellant against the Respondent company from the order of Sinha, J., made on 14th February, 1950.

Harries, C.J.

I agree.