Case Laws Companies Act Smt Arati Dutta Vs Eastern Tea Estate Pvt Ltd

Case Laws Companies Act

Smt Arati Dutta Vs Eastern Tea Estate Pvt Ltd

PETITIONER:
SMT. ARATI DUTTA

Vs.

RESPONDENT:
EASTERN TEA ESTATE (P) LTD.

DATE OF JUDGMENT13/11/1987

BENCH:
MUKHARJI, SABYASACHI (J)
BENCH:
MUKHARJI, SABYASACHI (J)
OZA, G.L. (J)

CITATION:
1988 AIR 325 1988 SCR (1)1070
1988 SCC (2) 523 JT 1987 (4) 564
1987 SCALE (2)1479
ACT:
Companies Act 1956: Sections 397, 398, 403 and 483-
Appeal against decision of Single Judge of High Court-
Whether lies to Division Bench-Absence of procedural rules-
Effect of.
Practice and Procedure: Appeal against decision of
Single Judge-Absence of procedural rules-Cannot take away
litigant’s right to file and jurisdiction of High Court to
dispose of such appeals-High Court to frame Rules under its
Rule-making power.

 

HEADNOTE:
%
The appellant filed a petition under Sections 397 and
398 read with Section 403 of the Companies Act, 1956 in
respect of the affairs of the respondent firm which was
disposed of in terms of the compromise arrived at between
the parties. The parties agreed that no Auditor need be
appointed for the determination of the liability, and that
the determination as per the 1973 balance sheet should be
left entirely to the Court. In accordance with the said
compromise, the parties filed their balance sheets regarding
the payments made by them which related to liabilities as on
31st December, 1973.
Single Judge of the High Court computed the liabilities
of the parties on that basis.
The appellant preferred an appeal before the Division
Bench against the aforesaid decision. The Division Bench
held that as no Letters Patent was applicable to the High
Court there was no provision for an appeal against the
judgment of the Single Judge and dismissed the appeal.
On the question: whether an appeal lies to the Division
Bench under section 483 of the Companies Act, against the
orders of a Single Judge.
Disposing of the appeal,
^
HELD: Sections 397 and 398 read with section 483 of the
1071
Companies Act, 1956 indicate that an appeal would lie in the
same manner to the same court. Naturally and logically,
therefore, an appeal from the decision of the Single Judge
would lie to the Division Bench. [1076E-F]
Shankarlal Aggarwal & Ors. v. S.L. Poddar & Ors. A.I.R.
1965 S.C. 507 followed.
Shanta Genevienve Pommerat & Anr. v. Papers Pvt. Ltd. &
Ors., A.I.R. 1983 S.C. 269; M/s. Golcha Investment (P) Ltd.
v. Shanti Chandra Bafna, A.I.R. 1970 S.C. 1350 and M/s.
Tarapose & Co. v. Cochin Shipyard Ltd., A.I.R. 1984 S.C.
1072 referred to.
Absence of procedural rules does not take away a
litigant’s right to file appeals against the decision of
Single Judge when the statute confers such a right
specifically, and the jurisdiction of the High Court to
dispose of such an appeal, if so filed. If there are no
Rules, they should be framed by the High Court in its
jurisdiction of Rule-making power for filing and disposal of
such appeals. [1076G-H]
In the instant case, though the present application was
relating to sections 397 and 398, and as it arises in
respect of the orders passed under those sections, the
provisions of section 483 would be attracted and an appeal
would lie to the Division Bench. [1073F-G]
[The High Court found that only a sum of Rs.6,81,299.67
was payable by the appellants to the respondent. The Court
is of the opinion that the High Court was right in its
determination, and that is the sum which should be the
liability of the appellant. Appellant directed to pay the
aforesaid amount to the respondent in full settlement of the
dues.] [1077E-G]

 

JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1510 of
1987 etc.
From the Judgment and Order dated 4.6.1987 of the
Gauhati High Court in F.A. No. 19 of 1984.
Dr. Shankar Ghosh, Gobind Das, Ashok Sen, S.N.
Mukharji, N.R. Choudhary and G.S. Chatterjee for the
appearing parties.
The Judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. These appeals by special leave
1072
relate to the affairs of M/s. Eastern Tea Estate (P) Ltd. It
was of two branches namely, the Dutta’s and the Choudhury’s.
Due to death and lack of cordiality between the erstwhile
partners the two branches first drifted and then parted
company as it unfortunately is the fate of so many Indian
concerns and there were disputes and litigations in Court.
The Civil Appeal No. 1510 of 1987 arises from a
judgment and decision of the Division Bench of the High
Court of Gauhati dated 4th June, 1987. It appears that that
a petition was filed originally by the appellant under
sections 397 and 398 read with section 403 of the Companies
Act, 1956 (hereinafter called ‘the Act’). The company
petition came to be disposed of on 4th February, 1977 in
accordance with the compromise arrived at between the
parties. The said compromise comprised of inter alia, two
relevant paragraphs, for the present purpose, which read as
follows:
“1. Mrs. Arati Dutta will take over Chandana T.E.
and Choudhury group will take over
Martycherra T.E. On 25th January, 1976.
2. The Bank liability of the Company in respect
to Martycherra T.E. amounting to Rs.2,20,000
(Approx.) shall be shared equally of which
Rs.1,10,000 shall be paid by Mrs. Arati Dutta
on 25th January, 1976 at Silchar in presence
of Shri B.K. Das, Advocate and Shri S.K. Sen,
Advocate.
3. The entire liability of the Company would be
equally shared and for that purpose an
independent Auditor shall be appointed by
Shri S.K. Sen, Advocate who shall undertake
to start the accounting from the 1st week of
February, 1976.
4. The shares owned by Mrs. Arati Dutta and her
sons and daughters will be sold to the
Company on 25.1.76 and necessary permission
shall be taken from Hon’ble High Court in
this regard.
5. The staff salary and gratuity of the
employees of the Head Office of the Hon’ble
High Court is obtained shall be considered as
the Liability of the Company and will be
borne by the two parties equally.
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6. Mrs. Arati Dutta shall have to pay another
sum of Rs.12,500 to the Company in addition
to her payment of 5% liability of the
Company.”
Thereafter there were differences between the parties
and it could not be adjusted as the parties could not agree
as to audit. On 9th November, 1982 the parties agreed that
no auditor need be appointed in the matter of determination
of liability and the matter of determination of liability as
per the 1973 Balance-sheet should be left entirely to the
Court. In accordance with the compromise the parties were
asked to submit their Balance-sheets regarding the payments
made by them which related to liabilities in the Balance-
sheet as on 31st December, 1973. The parties filed their
Balance-sheets and the learned Single Judge of the High
Court computed the liabilities of the parties on that basis.
Aggrieved, however, by the said decision, the appellant
preferred an appeal before the Division Bench of the said
High Court. The first question that was raised before the
Division Bench was whether the appeal lay to the Division
Bench under section 483 of the Act which dealt with appeals
from orders. The said section was as follows:
“483: Appeals from orders-Appeals from any order
made or decision given in the matter of winding up
of a company by the Court shall lie to the same
Court to which, in the same manner in which, and
subject to the same conditions under which,
appeals lie from any other order or decision of
the Court in cases within its ordinary
jurisdiction.”
It was submitted by learned counsel that though the
first application by the appellant was under sections 397
and 398 read with section 403 of the Act the same could be
taken in the matter of winding up of a company to which the
reference has been made in section 483. On the other hand,
it was submitted that no appeal lay. It appears to us that
though this present application was relating to sections 397
and 398 and as it arises in respect of the orders passed
under sections 397 and 398 of the Act, the provisions of
section 483 would be attracted and an appeal would lie to
the Division Bench. This conclusion seems to follow from an
analysis of the sections as interpreted by the various
decisions of this Court as well as one judgment of the Delhi
High Court to which we will refer. However, it is sufficient
for the present purpose for us to refer to the observations
of this Court in Shanta Genevienve Pommerat & Anr. v. Papers
Pvt. Ltd. & Ors. A.I.R. 1983 S.C. 269 where this Court
observed that an appeal under sections 397 and 398 read with
403 of the Companies Act would lie to the same
1074
court to which, in the same manner in which, and subject to
the same conditions under which the appeals lie from any
order or decision of the court in cases within its ordinary
jurisdiction. This Court made the following observations at
page 269 of the report:-
“Now an order under sections 397, 398 and 403 of
the Companies Act, on the face of it, cannot be
said to be an order made or decision given, in the
matter of the winding up of a company. Relief,
undoubtedly under section 397 and/or 398 is in
fact an alternative to winding up. No doubt order
under sections 397 or 398 could be an order made
or decision by the High Court. Having jurisdiction
under the Companies Act the appeal will lie to the
Division Bench of the same High Court. This is not
disputed.
Chapter XLII of the Bombay High Court Rules
provides for appeals to appellate Court. The Rules
make provision for certain type of appeals to be
placed in the first instance, for admission before
a Bench of the High Court to be appointed by the
Chief Justice. It is not in dispute that the
appeal preferred by the present appellants was not
one such appeal which can be placed for admission
under Rule 966-A and it follows from this Rule
that the appeals other than those mentioned in
that Rule are not to be placed for admission. This
point is no more res integra in view of the
decision of this Court in M/s Golcha Investment
(P) Ltd. v. Shanti Chandra Bafna., (A.I.R. 1970
S.C. 1350) wherein after considering the provision
contained in Rule 966-A, it was held that appeals,
other than those set out in the Rule are not to be
placed for admission and they were entitled to be
admitted as a matter of course. This Court
accordingly quashed the order dismissing the
appeal in limine observing that the appellate
court erred in summarily dismissing the appeal
because it was bound to entertain the same and
dispose it of on merits. This observation will
mutatis mutandis apply to the present appeal.”
References may also be made to the decisions of this
Court in Shankarlal Aggarwal & Ors. v. S.L. Poddar & Ors.,
A.I.R. 1965 S.C. 507; M/s. Golcha Investments (P) Ltd. v.
Shanti Chandra Bafna (supra) and M/s. Tarapose & Co. v.
Cochin Shipyard Ltd., A.I.R. 1984 S.C. 1072. The Delhi High
Court in Gokulchand D. Morarka and another v. Company Law
Board and others, 44 Company Cases 173
1075
correctly in our opinion explained the position. There the
High Court found that pending the petition for winding up of
the company filed by two of its creditors for failure to pay
a debt in spite of statutory notice, the Company Law Board
had filed a petition under sections 397 and 398 of the
Companies Act and in an application applied for interim
reliefs of removal of the sole Director and Constitution of
a Board to manage the Company. The Company Judge passed ex-
parte orders restraining the Company from disposing of its
assets and restraining debenture trustees from enforcing
their rights. Thereupon, an application was filed under
section 442 for stay of the petition and that petition under
sections 397 and 398 was filed by 125 shareholders and a
Bank has also filed another winding-up petition claiming a
large money. Pending the winding up petitions the Company
Judge heard two applications together and passed a common
order for removal of the sole director and constitution of a
Board of Directors with a retired Judge as the Chairman.
Appeals were taken to a Division Bench against another order
of the Company Judge. It was held over-ruling the
preliminary objections that the order passed by the Company
Judge was appealable under section 483 of the Companies Act,
1956 because firstly, any order passed under section 397 or
section 398 was one which was passed in lieu of winding up
and hence, it was “in the matter of winding up” and,
secondly, the order passed in C.A. No. 323 of 1971 expressly
fell within the scope of section 442 as the order had been
passed after at least two applications had been filed for
the winding up of the Company.
The Court further held that there was nothing in
section 483 of the Companies Act 1956, which took away or
curtailed the right of appeal provided by section 5(1) of
the Delhi High Court Act, 1966, and clause 10 of the Letters
Patent (Punjab) as applicable to the Delhi High Court; and
that the jurisdiction conferred on the Bombay Judge of the
High Court under section 10 of the Companies Act was none
other than its ordinary civil jurisdiction and appeal lay
also under clause 10 of the Letters Patent to a Division
Bench from the order of the Company Judge.
In this case in the High Court of Gauhati, however,
unlike the Bombay High Court or the Calcutta High Court or
the Delhi High Court, no Letters Patent was applicable to
the Gauhati High Court. It was therefore held that there was
no provision for an appeal to the judgment of the learned
Single Judge of the High Court. In our opinion the decision
in Shankar Lal Aggarwal & Ors. v. Shankar Lal Poddar & Ors.
(supra) of this Court indicated the true position where
1076
this Court held that section 202 of the Companies Act, 1913
was in parimateria with the present section. This Court
preferred the view of the Chief Justice Chagla of the Bombay
High Court reported in Bachharaj Factories Ltd. v. Hirjee
Mills Ltd. A.I.R. 1955 Bombay 355 to the view expressed by
the Calcutta High Court in Madan Gopal Daga v. Sachindra
Nath Sen, A.I.R. 1928 Calcutta 295 wherein it was held that
an order or the decision made or given in the matter of
winding up of a company to be appealable had to satisfy the
requirements of clause 15 of the Letters Patent. This
interpretation was not accepted by other High Courts and the
Bombay High Court held differently. The view of the Bombay
High Court was preferred by this Court in the aforesaid
decision and it was observed as follows:
“We thus agree with Chagla C.J., that the second
part of the section which refers to ‘the manner’
and ‘the conditions subject to which appeals may
be had’ merely regulates the procedure to be
followed in the presentation of the appeals and of
hearing them, the period of limitation within
which the appeal is to be presented and the forum
to which appeal would lie and does not restrict or
impair the substantive right of appeal which has
been conferred by the opening words of that
section.”
In our opinion this position is clear from the
observation of this Court in Shankar Lal Aggarwal & Ors. v.
Shankar Lal Poddar & Ors., (supra) that the appeal lies to
the same High Court irrespective of the powers under the
Letters Patent. Sections 397 and 398 read with section 483
indicate that the appeal would lie in the same manner to the
same court and naturally and logically an appeal from the
decision of the Single Judge would lie to the Division
Bench. This in our opinion follows logically from the ratio
of decision of this Court in Shankarlal Aggarwal & Ors. v.
Shankarlal Poddar & Ors. (supra) as well as other decisions
referred hereinbefore. It is true that there is perhaps no
procedure to file an appeal from the decision of the learned
Single Judge of the Gauhati High Court. If that is so rules
should be framed by the High Court in its jurisdiction of
Rule-making power for filing and disposal of such appeals.
But absence of the procedural rules do not take away a
litigant’s right to file such appeals when the statute
confers such a right specifically and the jurisdiction of
the High Court to dispose of such an appeal if so filed.
We, therefore, propose to deal with the decision of the
High Court. Here, we are further helped by the fact that
there is an appeal
1077
from the decision of the learned single judge being Appeal
No. 1511/87. In either view of the matter the view taken by
the High Court is before us. As noted, the learned single
judge was asked by parties by agreement to compute the
liabilities in view of the failure of the parties to agree
to another auditor. We have heard Sree Ghosh, learned
counsel for the appellant and we have also heard Sree A.K.
Sen, learned counsel for the respondent. Sree Sen’s
contention was that the current liabilities came to a sum of
Rs.6,65,841.63. He further submitted that the parties having
agreed to divide the liabilities equally, the liability to
the share of the appellant came to a sum of about Rs.3.32
lacs. As the appellant had paid a sum of Rs.1.36 lacs the
contention of the appellant was that the appellant has to
pay a further sum of Rs.2 lacs. In the alternative, it was
urged by the appellant that what could be demanded from the
appellant was the liabilities which were outstanding and not
paid off by the time the settlement had been arrived at
between the parties in January 1976. But having regard to
all the events and terms of settlement we are in agreement
with the Division Bench of the High Court that so far as the
Bank liability of Martycherra T.E. was concerned, the same
had to be taken at the figure of Rs.2,20,000 as stated in
clause (2) of the Agreement and not at Rs.6,28,000 and odd
as given in the Balance-sheet of 31st December, 1973. The
Division Bench computed the liability which came to a total
of Rs.16,34,675.46 which has computed after deducting a sum
of Rs.2,20,000 which was governed by clause (1) and it
comprised of Bank Liability. The Division Bench took into
consideration that the appellant had paid a sum of
Rs.1,36,038.06 after the compromise. She had not paid
anything more than this. Therefore it follows that only a
sum of Rs.6,81,299.67 was payable by the appellant to the
respondent. The Division Bench, in our opinion, correctly
modified the determination on that figure and that is the
sum which should be the liability of the appellant. Sree
Ghosh, learned counsel for the appellant tried to submit
before us that a sum of Rs.1,36,038.06 should be given
credit in computing the liability of the appellant and
according to him the Division Bench fell into an error in
not deducting this liability of his client. We are unable to
agree with this view. In the aforesaid view of the matter we
uphold the direction of the Division Bench in so far as they
computed the liability and direct that the appellant would
pay that sum to the respondent in settlement of the dues
referred hereinbefore.
sum of Rs.1,36,038.06 was directed to be paid at the
time of the admission of the appeal by the Division Bench of
the High Court. If that money has been paid or realised by
the respondent the appel-
1078
lant would pay the balance amount of Rs.6,81,299.67 and if
the money is paid the respondent will by virtue of this
order be entitled to withdraw the same and give credit to
the appellant for the same. The balance sum will be paid by
15th March, 1988. In default of payment by that date the
amount will carry 18% interest.
The appeal is disposed of accordingly by so holding. In
view of the aforesaid position, decision in C.A. No. 1511/87
which is from the decision of the learned Single Judge no
longer survives and is disposed of accordingly.
SLP (C) No. 8152 of 1987 which is a cross-petition
filed against the decision of the Division Bench of the
Gauhati High Court no longer survives and is disposed of
accordingly.
Parties will pay and bear their own costs.
N.P.V. Appeal disposed of.
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