PETITIONER:
\nSHANKARLAL AGGARWAL AND ORS.<\/p>\n
Vs.<\/p>\n
RESPONDENT:
\nSHANKARLAL PODDAR AND ORS.<\/p>\n
DATE OF JUDGMENT:
\n24\/01\/1963<\/p>\n
BENCH:
\nAYYANGAR, N. RAJAGOPALA
\nBENCH:
\nAYYANGAR, N. RAJAGOPALA
\nIMAM, SYED JAFFER
\nSUBBARAO, K.
\nMUDHOLKAR, J.R.<\/p>\n
\nACT:
\nCompany Law-Sate-Confirmed by Company Judge-Set aside by
\nDivision Bench-Administrative and judicial orders-
\nDistinction-Discretion exercised by company Judge-
\ninterference, on ground that certain factors were not
\nconsidered by him-Letters Patent Appeal against order of
\nCompany JudgeWhether maintainable-Clause 15 of Letters
\nPatent of Calcutta High Court-Indian Companies Act, 1913 (7
\nof 1913), s. 202.<\/p>\n
<\/p>\n
HEADNOTE:
\nLuxmi Spinning and Weaving Mills Ltd. was ordered to be
\nwound up compulsorily by an order of the High Court of
\nCalcutta on a petition of the first respondent, Shankar Lal
\nPoddar. Before the winding up order, the appellants
\ninstituted a mortgage suit against the said company and
\njoint Receivers were appointed by the High Court. Later on,
\njoint Liquidators were appointed in the winding up
\nproceedings. The joint Liquidators applied for directions
\nregarding the sale of the assets and properties of the
\ncompany and the Court sanctioned the same. Tile sate was
\nheld after complying with the requirements of law with
\nregard to advertisement. etc. The highest bid of Nandlal
\nAgarwalla was for Rs. 3,37,000\/- and the bid of the
\nappellant firm was Rs.3,35,000\/-. The bid of Nandlal was
\naccepted and he was directed to pay immediately 25% of the
\nbid money. As he stated that he had not brought cash, he
\nwas allowed to go and bring the same. As he did not turn up
\ninspite of waiting for him for some time, the appellant firm
\nwas asked to stand by their previous bid for Rs. 3,35,000\/-
\nbut they refused to do so. The property was then put up for
\nsale once again and the highest bid of the appellant firm of
\nBansidhar Shankarlal for Rs. 2,25,000\/- was accepted. The
\nsale was confirmed by the Company judge. The first
\nrespondent filed an appeal against the order confirming the
\nsale and his appeal was allowed by a Division Bench of the
\nCalcutta High Court. The liquidators were ordered to re-
\nsell the property after due advertisement. The appellants
\ncame to this Court by special leave against the decision of
\nthe Division Bench.
\nThe questions for consideration before this Court
\nwere(1)Whether the order of the Company judge confirming the
\n718
\nsale was merely an administrative order passed in the course
\nof the administration of the assets of the company under
\nliquidation, and therefore not a judicial order subject to
\nappeal, (2) whether on a proper construction of s. 202 of
\nthe Indian Companies Act it was a condition fort he
\navailability of an appeal that the order should be open to
\nappeal under cl. 15 of the Letters Patent of the Calcutta
\nHigh Court and if the above were answered in the affirmative
\nwhether independently of s. 202, the order of the Company
\njudge in this case amounted to Judgement within cl. 15 of
\nthe Letters Patent, and (3) whether the appellate court
\nacted improperly in interfering with the order of the
\nCompany judge.
\nHeld, that the order of the Company judge confirming the
\nsale was not an administrative but a judicial order. It is
\nnot correct to say that every order of the Court, merely for
\nthe reason that it is passed in the course of the
\nrealisation of the assets of the Company, must always be
\ntreated merely as an administrative one. The question
\nultimately depends upon the nature of the order that is
\npassed. An order according sanction to a sale undoubtedly
\ninvolves a discretion and cannot be termed merely an
\nadministrative order, for before confirming the sale the
\ncourt has to be satisfied, particularly where the con-
\nfirmation is opposed, that the sale has been held in
\naccordance with the conditions subject to which alone the
\nliquidator has been permitted to effect it, and that even
\notherwise the sale has been fair and has not resulted in any
\nloss to the parties who would ultimately have to share the
\nrealisation.
\nIt is not possible to formulate a definition which would
\nsatisfactorily distinguish between an administrative and a
\njudicial order. That the power is entrusted to or wielded
\nby a person who functions as a court is not decisive of the
\nquestion whether the act or decision is administrative or
\njudicial. An administrative order would be one which is
\ndirected to the regulation or supervision of matters as
\ndistinguished from an order which decides the rights of
\nparties of confers or refuses to confer rights to property
\nwhich are the subject of adjudicating before the court. One
\nof the tests would be whether a matter which involves the
\nexercise of discretion is left for the decision of the
\nauthority, particularly if that authority were a court, and
\nif the discretion has to be exercised on objective, as
\ndistinguished from a purely subjective consideration, it
\nwould be a judicial decision. It has sometimes been said
\nthat the essence of a judicial proreeding or of a ‘judicial
\norder is that there would be two parties and a lis between
\nthem which is the subject of adjudication, as a result of
\nthat order or a decision on an issue between a proposal and
\nan opposition. Nodoubt it
\n719
\nwould not be possible to describe an order passed deciding a
\nlis before the authority that is not a judicial order but it
\ndoes not follow that the absence of a lis necessarily
\nnegatives the order being judicial. Even viewed from this
\nnarrow standpoint, it is possible to hold that there was a
\nlis before the Company judge which he decided by passing the
\norder. On the one hand were the claims of the highest
\nbidder who put forward the contention that he had satisfied
\nthe requirements laid down for the acceptance of his bid and
\nwas consequently entitled to have the sale in his favour
\nconfirmed, particularly so as he was supported in this
\nbehalf by the Official Liquidators. On the other band,
\nthere was the first respondent and the large body of
\nunsecured creditors whose interests, even if they were not
\nrepresented by the first respondent, the court was bound to
\nprotect. If the sale of which confirmation was sought was
\ncharacterised by any deviation from the conditions subject
\nto which the sale was directed to be held or even otherwise
\nwas for a gross undervalue in the sense that very much more
\ncould reasonably be expected to be obtained if the sale were
\nproperly held, in view of the figure of Rs. 3,37,000\/- which
\nhad been bid by Nandlal Agarwalla it would be the duty of
\nthe court to refuse the confirmation in the interests of the
\ngeneral body of creditors, and this was the submission made
\nby the first respondent. There were thus two points of view
\npresented to the court by two contending parties or
\ninterests and the court was called upon to decide between
\nthem, and the decision vitally affected the rights of the
\nparties to property Under the circumstances, the order of
\nthe Company Judge was a judicial order and not
\nadministrative one. and was therefore not inherently
\nincapable of being brought up it. appeal.
\nHeld, also, that Letters Patent Appeal was competent. The
\nsecond part of s. 202 of the Indian Companies Act which
\nrefers to “the manner” and “the condition subject to which
\nappeals may be had” merely regulates the procedure to be
\nfollowed in the presentation of appeals and of hearing them,
\nthe period of limitation within which the appeal is to be
\npresented and the forum to which the appeal would lie and
\ndoes not restrict ox impair the substantive right of appeal
\nwhich has been conferred by the opening words of s. 202.
\nThe words “order or decision” occurring in the first part of
\ns. 202, though wide, would exclude merely procedural orders
\nor those which do not affect the rights or liabilities of
\nparties.
\nHeld, also that the appellate court did not act improperly
\nin interfering with the order of the Company judge The
\nCompany Judge did not take into consideration the fact that
\ncertain bidders had left at the time when the property was
\nput
\n720
\nup for auction once again. ‘The judges of the Division
\nBench were justified in considering that the sale to the
\nappellants ought not to have been confirmed.
\nMadan Gopal Daga v. Sachindra Nath Sen (1927) I. L. R. 55
\nCal. 262 reversed.
\nBachharaj Factories Ltd. v. The Hiraji Mills Ltd., I. L. R.
\n(1955) Bom. 550 and Western India Theatres Ltd. v.
\nIshwarbhai Somabhai Patel, 1. L. R. (1959) Bom. 295,
\napproved.
\nAsrumati Debi v. Kumar Rupendra Deb Raikot (1953) S. C. R.
\n1159 and State of Uttar Pradesh v. Dr. Vijay Anand Maharaj
\n[1963] 1 S.C.R. 1 referred to.<\/p>\n
<\/p>\n
JUDGMENT:
\nCIVIL APPELLATE JURISDICTION : Civil Appeal No. 214 of 1960.
\nAppeal by special leave from the judgment and order dated
\nDecember 11, 1958, of the Calcutta High Court in Appeal from
\nOriginal Order No. 176 of 1956.
\nS.T. Desai, Himmatsinghka and B. P. Maheshwari, for the
\nappellants.
\nN.C. Chatterjee, B. M. Bagaria, M. V. Goswami for B. C.
\nMisra, for respondent No. 1.
\n1963. January 24. The judgment of the Court was delivered
\nby
\nAYYANGAR , J.-The principal point raised for consideration
\nin this appeal by special leave relates to the correctness
\nand legality of an order by a Division Bench of Calcutta
\nHigh Court refusing to confirm a sale by the liquidators of
\nthe assets of a company which is being wound up. The
\ncompany in question-the Luxmi Spinning & Weaving Mills Ltd.-
\na company incorporated under the Indian Companies Act-was
\ncarrying on business at Calcutta. On a petition of the 1st
\nrespondent-Shankarlal Poddar-made to the
\n721
\nHigh Court of Calcutta, this company was ordered to be wound
\nup compulsorily by order dated August 22, 1955. But before
\nthis order was passed, certain matters had transpired to
\nwhich it is necessary to advert. The appellants claiming
\nthat they had advanced loans to the company under two
\nregistered deeds of mortgage and alleging that there had
\nbeen default on the party of the company in performing its
\nobligations as to payment of interest etc. under the said
\ndeeds instituted a mortgage suit in the High Court of
\nCalcutta for the usual reliefs under 0. 34, Civil Procedure
\nCode. Pending the disposal of the suit they moved the Court
\nfor the appointment of a receiver, and the second appellant
\nand the Managing Director of the company were appointed
\njoint receivers and they took possession of the assets of
\nthe company.
\nBy reason of this circumstance, when the order for winding
\nup was passed in August, 1955 though the Official Receiver
\nwas appointed as Official Liquidator, still he was directed
\nnot to interfere with the possession of the joint Receivers.
\nSubsequently by a further order dated September 8, 1955 two
\nindependent persons who are respondents 2 & 3 before us were
\nappointed as joint Receivers in the suit and they were also
\ndirected to function as joint Liquidators in the winding Up
\nproceedings.
\nThe joint Liquidators applied for directions to the Court as
\nregards the sale of the assets and properties of the company
\nand the Court by an order dated December 20, 1955 directed
\ntheir sale by public auction after due advertisement in the
\nmanner set out in the order and notice of this sale was
\ndirected to be given to the appellants who had by that date
\nobtained a mortgage decree in their suit. At this stage it
\nis necessary to mention that in the winding up proceedings
\nthe validity of the appellants’ claim as creditors and as
\nsecured creditors is challenged,
\n722
\nand a claim by the State of West Bengal to arrears of
\ncertain taxes in regard to which priority is claimed is also
\npending Adjudication by the Company judge.
\nIn pursuance of the aforesaid directions of the court Dated
\nDecember 20, 1955 the liquidators held certain auctions of
\nwhich it is unnecessary to refer since these
\nproved infructuous, but ultimately the appellants and others
\nagreed to have the sale of the Assets to be held free of all
\ncharges and encumbrance and to their claims to security over
\nthe properties being transferred to the sale-proceeds when
\npaid into Court. Consequention this agreement the Court
\nmade an order on july 10, 1956 by which the joint
\nLiquidators were directed to sell the properties free of
\nall encumbrances, the sale proceeds realised being held in
\nCourt to answer the claims of the creditors according to
\nsuch properties as might be determined by the Court.
\nThe sale by public auction thus directed was duly advertised
\nto be held on September 8, 1956 at 2 p.m. The conditions
\nsubject to which the properties were to be sold which were
\napproved by the Court included, inter alia, (1) that the
\nsale was subject to a reserve price to be determined by a
\nvaluer and surveyor which however was not to be made scaled
\nknown to the bidders but had to be kept in a cover until the
\nbidding was over, (2)the sale was subject to
\nconfirmation by the Court, (3) that it was in the discretion
\nof the liquidators to accept or reject any bid, (4) as far
\nas possible the highest bid was to be accepted provided the
\nliquidators considered that the bid was for a sufficient
\namount(5) immediately on acceptance of the bid by the
\nliquidators the bidder was required to deposit 25 per cent
\nof the amount of the bid in cash “in default whereof the
\nliquidators were at liberty to put up the property again for
\nsale”, (6) the purchaser was to pay the
\n723
\nbalance of purchase moneys within two weeks from the date of
\nconfirmation by the Court.
\nThe sale was held as advertised. There were in all 36 bids
\nfor lot No. 1 which consisted of’ the business and
\nproperties of the company starting with a bid for Rs.
\n1,50,000\/- from 8 bidders including the 1st appellant who
\nhimself personally bid for Rs. 3,00,000\/-. Thereafter there
\nwas keen competition between one Nandlal Agarwalla and the
\nappellant firm of Bansidhar Shankarlal and after successive
\nbids by these two the highest bid reached was that by
\nNandlal Agarwalla who bid for Rs. 3,37,000\/-, the pen-
\nultimate bid of the appellant firm being Rs. 3,35,000\/-. No
\nfurther bids were offered and thereupon the joint
\nLiquidators accepted the bid of Nandlal and he was directed
\nto pay immediately Rs. 84,250\/- this being 250\/ of his bid-
\nmoney.This bidder, however, stated that he had not brought
\nthe cash and then the Receivers offered to take instead a
\ncheque from his solicitors, if he so desired, but this also
\nthe bidder declined and thereafter Nandlal Agarwalla left
\nthe place giving the impression on those there, including
\nthe joint Liquidators that he had gone to bring the money.
\nThe liquidators waited for about 20 minutes but as he did
\nnot turn up they again put up the property for sale. Before
\ndoing so, however, they-the liquidators enquired of the
\nappellants whether they would stand by their previous bid
\nfor Rs. 3,35,000\/in which case they were informed that
\ntheirs would be treated as the highest bid. They would not
\nagree and thereupon the liquidators put the property to
\nauction again and the starting bid was by the appellant firm
\nof Bansidhar Shankarlal who, as stated earlier, had, at the
\nformer bidding, offered Rs. 3,35,000\/- now starting the bid
\nwith Rs. 1,50,000,\/and after 8 more bids there were no
\nfurther bids beyond Bansidhars’ for Rs. 2,25,000\/-. This
\nbid was accepted by the official liquidators subject to
\n724
\nconfirmation by the Court after they ascertained by opening
\nthe scaled cover received from the valuer that this amount
\nwas not below the price for which the property could be
\nsold. Immediately on the acceptance being intimated
\nBansidhar paid the amount required to be paid by the
\nconditions of the sale.
\nThe liquidators took out a Master’s summons on September 11,
\n1956 stating these facts and prayed for an order from the
\nCompany judge that the sale be confirmed or such other
\ndirections be given as the Court may deem fit and proper.
\nThe summons was opposed by the 1st respondent and the main
\npoint urged by him was that when Nandlal Agarwalla’s bid was
\naccepted by the joint Liquidators, several others who had
\ncome to bid for the property left the auction room under the
\nimpression that that sale was going through and that the
\nsubsequent sale at which the appellant was the highest
\nbidder was not such as could be confirmed by the Court.
\n‘the summons was heard by the Company judge-P.B. Mukharji,
\nJ.and the learned judge passed an order acceding to the
\nprayer of the liquidators. to confirm the sale. Thereupon
\nthe 1st respondent filed an appeal against the order
\nconfirming the sale and also applied for the stay of
\ndelivery of possession of the properties of the company to
\nthe appellant. In the application for stay the appellate
\ncourt passed an order in these terms :
\n“On Bansidhar Shankarlal giving an undertaking
\nto this Court to purchase the property for Rs.
\n3,35,000\/- should the appeal be allowed and on
\nBansidhar Shankarlal depositing with their
\nSolicitors Rs. 16,000\/- to be held by the
\nSolicitors free from lien and subject to
\nfurther order of this Court to abide by the
\nresult of the suit challenging the mortgage in
\nfavour of Bansidhar Shankarlal, there will be
\nno further orders in this application and
\nBansidhar
\n725
\nShankarlal will be entitled to possession of
\nthe factory and its assets on a sum of Rs.
\n16,000\/-being deposited with their
\nSolicitors.”
\nThere were a few more directions made by the Court to which
\nhowever it is unnecessary to refer.
\nThe appeal was allowed and the order confirming the sale was
\nset aside and the liquidators were directed to resell the
\nproperty after due advertisement. it is from this decision
\nof the Division Bench that this appeal has been preferred by
\nspecial leave.
\nLearned Counsel for the appellants urged before us the
\nfollowing points :
\n(1) The sale by auction by the joint Liquidators effected
\nafter obtaining the sanction of the Court on December 20,
\n1955 under s. 179 (c) of the Indian Companies Act, 1913 was
\nmerely an act performed by them in the course of their
\nadministration of the assets of -the company and the action
\nof the judge in confirming such sale also partook of the
\nnature of an administrative act, and not being a .judicial
\norder no appeal lay against it.
\n(2) Even if the order of the Company judge was a judicial
\norder, still it was not a judgment within cl. 15 of the
\nLetters Patent of the Calcutta High Court and so no appeal
\nlay to the Division Bench.
\n(3) No doubt, s. 202 of the Indian Companies Act permits
\nappeals against orders and decisions in the course of a
\nwinding up but that provision is of no avail, because for an
\norder to be appealable under s. 202, it has, in the case of
\nan order of a Single judge of the High Court, to satisfy the
\nrequirements of cl. 15 of the Letters Patent.
\n726
\n(4) Even if the order of Mukharji, J., was a judicial order
\ncapable of appeal, still it was a discretionary order and
\ncould not be interfered with by an appellate court merely
\nbecause they considered that it was not a correct order to
\npass.
\nIn the light of these submissions the questions to be
\nconsidered are : (1) whether the order of the Company judge
\nconfirming the sale was merely an administrative order
\npassed in the course of the administration of the assets of
\nthe company under liquidation and therefore not a judicial
\norder subject to appeal, (2) (a) whether on a proper
\nconstruction of s’ 202 of the Indian Companies Act it was a
\ncondition for the availability of an appeal that the order
\nshould be open to appeal under cl . 15 of the Letters Patent
\nof the High Court, (b) If the above were answered in the
\naffirmative, whether independently of s. 202 the order of
\nthe Company judge in this case amounted to a judgment within
\ncl 15 of the Letters Patent, and (3) -whether the appellate
\ncourt acted improperly in interfering with the order of the
\nlearned Company judge.
\nWe shall deal with these points in that order. (1) First as
\nto the scheme of the relevant provisions under the Companies
\nAct. Section 179 of the Companies Act, 1913 specifies the
\npowers of the official liquidator. It enacts, to quote only
\nthe words material for the present appeal :
\n“179. Powers of Official liquidator. The
\nofficial liquidator shall have power., with
\nthe sanction OF the Court, to do the following
\nthings :-
\n(a) ……………………..
\n(b) ……………………..
\n727
\n(c) to sell the immovable and movable
\nproperty of the company by public auction or
\nprivate contract, with power to transfer the
\nwhole thereof to any person or company,
\nor to sell the same in parcels
\n‘Though s. 180 which reads :
\n“180. Discretion of official liquidator.-The
\nCourt may provide by any order that the
\nofficial liquidator may exercise any of the
\nabove powers without the sanction or
\nintervention of the Court……….
\nmakes provision for eliminating the need for the sanction of
\nthe Court required for action by the official liquidator
\ntinder s. 179, as such a power was not exercised in this
\ncase this section may be left out of account. Section 183
\nof the Act makes provision for the exercise of control by
\nthe Court over the liquidator and sub-s. (3) enables the
\nofficial liquidator to apply to the Court for directions in
\nrelation to any particular matter arising in the winding up.
\nSection 184 of the Act requires the Court to cause the
\nassets of the company to be collected and applied in
\ndischarge of its liabilities.
\nOn the basis of these provisions, we shall proceed to
\nconsider whether the confirmation of the sale was merely an
\norder in the course of administration and not a judicial
\norder. The sale by the liquidator “-as, of course, effected
\nin the course of the realisation of the assets of the
\ncompany and for the purpose of the amount realised being
\napplied towards the discharge of the liabilities and the
\nsurplus to be distributed in the manner provided by the Act.
\nIt would also be correct to say that when a liquidator
\neffects a sale he is not discharging any judicial function.
\nStill it does not follow that every order
\n728
\nof the Court, merely for the reason that it is passed in the
\ncourse of the realisation of the assets of the company must
\nalways be treated , as merely an administrative one. The
\nquestion ultimately depends upon the nature of the order
\nthat is passed. An order according sanction to a sale
\nundoubtedly involves a discretion and cannot be termed
\nmerely a ministerial order’ for before confirming the sale
\nthe Court has to be satisfied, particularly where the
\nconfirmation is opposed, that the sale has been held in
\naccordance with the conditions subject to which alone the
\nliquidator has been permitted to effect it, and that even
\notherwise the sale has been fair and has not resulted in any
\nloss to the parties who would ultimately have to share the
\nrealisation.
\nThe next question is whether such an order could be
\nclassified as an administrative order. One thing is clear,
\nthat the mere fact that the order is passed in the course of
\nthe administration of the assets of the company and for
\nrealising those assets is not by itself sufficient to make
\nit an administrative, as distinguished from a judicial,
\norder. For instance, the determination of amounts due to
\nthe company from its debtors which is also part of the
\nprocess of the realisation of the assets. of the company is
\na matter which arises in the course of the administration.
\nIt does not on that account follow that the determination of
\nthe particular amount due from a debtor who is brought
\nbefore the Court is an administrative order.
\nIt is perhaps not possible to formulate a definition which
\nwould satisfactorily distinguish, in this context, between
\nan administrative and a judicial order. That the power is
\nentrusted to or wielded by a person who functions as a Court
\nis not decisive of the question whether the Act or decision
\nis administrative or judicial. But we conceive that an
\nadministrative order would be one which is directed’
\n729
\nto the regulation or supervision of matters as distinguished
\nfrom an order which decides the rights of parties or confers
\nor refuses to confer rights to property which are the
\nsubject of adjudication before the Court. One of the tests
\nwould be whether a matter which involves the exercise of
\ndiscretion is left for the decision of the authority,
\nparticularly if that authority were a Court, and if the
\ndiscretion has to be exercised on objective, as
\ndistinguished from a purely subjective, consideration, it
\nwould be a judicial decision. It has sometimes been said
\nthat the essence of a judicial proceeding or of a judicial
\norder is that there should be two parties and a lis between
\nthem which is the subject of adjudication, as a result of
\nthat order or a decision on an issue between a proposal and
\nan opposition. No doubt, it would not be possible to
\ndescribe an order passed deciding a lis before the
\nauthority, that it is not a judicial order but it does not
\nfollow that the absence of a lis necessarily negatives the
\norder being judicial. Even viewed from this narrow
\nstandpoint it is possible to hold that there was a lis
\nbefore the Company judge which he decided by passing the
\norder. On the one hand were the claims of the highest
\nbidder who put forward the contention that he had satisfied
\nthe requirements laid down for the acceptance of his bid and
\nwas consequently entitled to have the sale in his favour
\nconfirmed, particularly so as he was supported in this
\nbehalf by the official liquidators. On the other hand there
\nwas the 1st respondent and not to speak of him, the large
\nbody of unsecured creditors whose interests, even if they
\nwere not represented by the 1st respondent, the Court was
\nbound to protect. If the sale of which confirmation was
\nsought was characterised by any deviation from the
\nconditions subject to which the sale was directed to be held
\nor even otherwise was for a gross undervalue in the sense
\nthat very much more could reasonably be expected to be
\nobtained if the sale were properly held in view
\n730
\nof the figure of Rs. 3,37,000\/- which had been bid by
\nNandlal Agarwalla, it would be the duty of the Court to
\nrefuse the confirmation in ‘he interests of the general body
\nof creditors and this was the submission made by the 1st
\nrespondent. There were thus two points of view presented to
\nthe Court by two contending parties or interests and the
\nCourt was called upon to decide between them. And the deci-
\nsion vitally affected the rights of the parties to property.
\nIn this view we are clearly of the opinion that the order of
\nthe Court was, in the circumstances, a judicial order and
\nnot an administrative one and was therefore not inherently
\nincapable of being brought up in appeal.
\n(2) The next point for consideration is whether even if
\nthis was a judicial order no appeal lay from it under s. 202
\nof the Indian Companies Act unless the order amounted to a
\njudgment within cl. 15 of the Letters Patent of the Calcutta
\nHigh Court. Section as follows :
\n“202. Appeals from orders.-Re-hearings of,
\nand appeals from, any order or decision made
\nor given in the matter of the winding up of a
\ncompany by the Court may be had in the same
\nmanner and subject to the same conditions in
\nand subject to which appeals may be had from
\nany order or decision of the same Court in
\ncases within its ordinary jurisdiction.”
\nIt was submitted that assuming the order of the Company
\njudge was “an order or decision made or given in the matter
\nof the winding up of a company by the Court” the last words
\nof the section “subject to the same conditions in and
\nsubject to which appeals may be had from any order or
\ndecision of the same Court in cases within its ordinary
\njurisdiction” restricted the right of appeal conferred by
\nthe 1st limb of the section to those which might be
\npreferred under cl. 15 of the Letters Patent in the case of
\na judgment of a
\n731
\nSingle judge of the High Court. In support of this
\nsubmission learned Counsel relied on the decision of the
\nCalcutta High Court in Madan Gopal Daga v. Sachindra Nath
\nSen (1)- It was there held that an order made in the winding
\nup of a company by a Single judge of a High Court in order
\nto be appealable under s. 202 must satisfy the requirements
\nof cl. 15 of the Letters Patent, viz., that it must be “a
\nJudgment” within the meaning of that clause. C. C. Ghose,
\nJ. rejected the construction that the words “same manner and
\nsubject to the same conditions” occurring in s. 202 were
\nmerely a reference to the procedure to be observed as
\nregards the manner of filing an appeal or the forum to which
\nthe appeal lay and not the substantive right to prefer an
\nappeal. Buckland, J. who agreed with Ghose, J. considered
\nthat though the word “manner” might refer to the procedure
\nfor filing an appeal, the word “conditions” could not be
\ngiven any such limited meaning but would import a reference
\nto the limitation on the right to appeal itself as laid down
\nin cl. 15 of the Letters Patent where the order appealed
\nfrom was that of a judge of the High Court. It must be
\nmentioned that in the appeal now before us the objection
\nthat no appeal lay from the order of Mukherji, J. was raised
\nbefore the Bench, but the learned judges rejected it on the
\nground that the order of the learned judge was “a judgment”
\nwithin cl. 15 of the Letters Patent and so appealable under
\nthat provision.
\nThis interpretation of the scope of s. 202 of the Companies
\nAct has not been accepted by several other High Courts. The
\nleading case in support of the other view is Bachharaj
\nFactories Ltd. v. The Hiraji Mills Ltd.(2). The learned
\njudges were dealing with an appeal against an order of the
\nCompany judge adjourning a petition for winding up in order
\nto enable certain shareholders to file a suit for a
\ndeclaration that certain debentures were not valid in law.
\nThe
\n(1) (1927) I.L.R. 55 Cal. 262.
\n(2) I.L.R. (1955) Bom. 550,
\n732
\nCompany Judge made the order under s. 170 of the Companies
\nAct which provides that on hearing a petition for winding up
\nthe Court may dismiss or r adjourn the hearing conditionally
\nor unconditionally or make any interim order etc. A
\npreliminary objection was taken to the hearing of the appeal
\non the ground that the order from which the appeal was
\npreferred was not a judgment within the meaning of cl. 15 of
\nthe Letters Patent and therefore no appeal lay. It was
\nurged that under s. 202 the right of appeal conferred was
\nsubject to “the same conditions” to which appeals might be
\nhad from the decision of the Court in cases within its
\nordinary jurisdiction and since the said condition was not
\nfulfilled the appeal was incompetent. Chagla, C. J.
\nrepelled this contention and pointed out that the Courts
\nwhich dealt with winding up petitions and to whose orders s.
\n202 applied were not merely the High Courts but also the
\nDistrict Courts. If the construction of the section on
\nwhose correctness the preliminary objection was based were
\nupheld it would mean that in the case of an order made by a
\nDistrict Court the appealability of that order would be
\ndependent on its satisfying the conditions of appeal for
\n“decisions” laid down under the Civil Procedure Code. Under
\nthe Code “orders or decisions” are classified into two
\nheads-decrees and orders. Whereas an appeal lies by virtue
\nof s. 96 of the Code against every decree which is defined
\nin s. 2 of the Code, only certain types of orders under
\nparticular provisions of the Code Which are listed in s. 104
\nare capable of appeal and Done others. It was ,not in
\ndispute that very few of the orders passed in a winding up
\nwould amount to decrees within the Code. There was no doubt
\neither that most of the orders or decisions in winding up
\nwould not be comprehended within the class of appealable
\norders specified in s. 104 or 0. 43. r. I. if therefore the
\ncontention of the respondent were accepted it would mean
\nthat in the case of orders passed by the District Courts
\nappeals would lie only against what would be decrees under
\n733
\nthe Code as well as appealable orders under s. 104 and 0.43.
\nr.1 and very few of the orders passed in the Courts of the
\nwinding up would fall within these categories. On the other
\nhand, the expression “judgment” used in cl. I 5 is wider.
\nThe learned judge pointed out that the position would
\ntherefore be that a decision rendered or an order passed by
\na District Court would not be appealable because the
\nconditions laid down by the Civil Procedure Code were not
\nsatisfied, yet an exactly identical order or decision by the
\njudge of the High Court would be appealable because it might
\nconstitute a judgment within cl.15. The learned judge
\ntherefore rejected a construction which would have meant
\nthat the same orders passed by District Courts and by a
\nSingle judge of a High Court would be subject to different
\nrules as to appealability. The learned judge observed that
\nthe right of appeal was conferred by the 1st limb of s. 202
\nand that the second limb merely dealt with the procedural
\nlimitations of that appeal. He further pointed out that the
\nexpression “order or decision” used in s. 202 itself
\nindicated that the order or decision was not merely
\nprocedural in character but that which affected the rights
\nand liabilities of parties. The learned judge referred to
\nthe decisions in Madan Gopal Daga v. Sachindra Nath Sen (1),
\nand the cases following it and expressed his dissent with
\nthe reasoning which found favour with the judges of the
\nCalcutta High Court. The decision in Bachhraj Factories
\nLtd. (2) was later followed by the same Court in Western
\nIndia Theatres Ltd. v. Ishwarbhai Somabhai Patel (3). We
\nfind ourselves in agreement with the view here expressed.
\nMadan Gopal Daga (1), proceeds wholly on the meaning which
\ncould be attributed to the word “conditions” in the
\nexpression “subject to the conditions” occurring in s.202
\nand does not take into account the context in which s. 202
\nwas designed to operate and particularly the fact that more
\nthan one grade of Court each governed by different rules as
\nto the nature of the decision
\n(1) (1927) I.L.R. 55 Cal. 262. (2) I.L.R. (1955) Bom, 550.
\n(3) I.L.R. (1959) Bom. 295,
\n734
\nwhich would enable an appeal to be preferred could be vested
\nwith jurisdiction under the Act. When by the proviso to s.3
\nof the Indian Companies Act, 1913 the Indian Legislature
\nenabled Jurisdiction to be vested in District Courts so as
\nto be constituted the “Court having jurisdiction under the
\nAct”, knowledge must be imparted to it that the District
\nCourts and the High Courts functioned under different
\nstatutory provisions as regards rights of appeal from their
\norders and decisions. Besides, it would also be fair to
\npresume that they intended to prescribe a uniform law as
\nregards the substantive right of appeal conferred by s. 202.
\nIt could not therefore be that an identical order if passed
\nby one class of ” court having jurisdiction under the Act”
\nwould be final, but that if passed by another Court vested
\nwith identical powers and jurisdiction would be subject to
\nan appeal.
\nThere is also one another aspect from which the problem
\ncould be viewed. Taking first the provisions of the Civil
\nProcedure Code which would govern the orders passed by
\nDistrict Courts; it would be seen that apart from “decrees”
\nwhich are appealable by reason of s. 96 of the Code,
\n“orders” are appealable in accordance with s. 104. That
\nsection after enumerating certain orders which are made
\nappealable, contains a residuary clause (i) conferring a
\nright of appeal in respect of “any order made under rules
\nfrom which an appeal is expressly allowed by rules”-and the
\nrule referred to is 0. 43. r. 1. Now under s. 122 of the
\nCode each of the High Courts is vested with power “to make
\nrules, to annul, alter or add to all of any of the rules in
\nthe 1st Schedule”. In exercise of this power High Courts
\nhave in respect of the Civil Courts subject to their
\nappellate jurisdiction made alterations and additions in the
\nrules including those in 0. 4 3. r. 1 . either extending or
\nrestricting the right of appeal conferred by the Code as
\noriginally enacted. The question that arises on this
\n735
\nstate of circumstances is whether the legislature, when it
\nenacted s. 202 of the Companies Act, intended that the right
\nof appeal should vary from State to State depending on the
\nparticular rule in force in that State by reason of the
\nexercise by the High Court of its power under s. 122, Civil
\nProcedure Code.
\nThe anomaly created by the construction urged by learned
\nCounsel for the appellant does not stop here. Even taking
\nthe case of the High Courts themselves, the construction of
\nthe word ‘condition’ as including the appealability of the
\ndecision would lead to rather strange results. The relevant
\nwords of s. 202 are :
\n“Subject to the same conditions…… to which
\nappeals may be had from any order or decision
\nof the same Court in cases within its ordinary
\njurisdiction”-“ordinary jurisdiction” and not
\n((ordinary original jurisdiction.”
\nThe question that would arise is as to what is meant by
\n“ordinary jurisdiction” of the Court. Plainly the words
\nwould only exclude jurisdiction vested in the Court by
\nspecial statutes as distinguished from the statutes
\nconstituting the Court. Undoubtedly; in the case of a High
\nCourt the limits of ‘whose jurisdiction are governed by its
\nLetters Patent, the Letters Patent would determine what the
\n“ordinary jurisdiction” is. But that Letters Patent is not
\nimmutable and has been the subject of several alterations.
\nThus when the Companies Act was passed in 1913, an appeal
\nlay from every “judgment” of a Single judge of the High
\nCourt. But in March 1919 it was amended so as to exclude
\nthe rights of appeal from judgment passed in exercise, of
\nrevisional jurisdiction and in exercise of the power of
\nsuperintendence under s. 107 of the Government of India Act,
\n1915. There can be no doubt either that the exercise of
\nrevisional or supervisory jurisdiction is as much “ordinary
\njurisdiction” of the High Court as its original or appellate
\n736
\njurisdiction and it cannot be that there has been any
\nalteration in the law as regards the appealability of
\ndccisions of a High Court under s. 202 of the Companies Act
\nby reason of the amendment of the Letters Patent. Again,
\nthe Letters Patent were amended in January, 1928 when
\nappeals against decisions in second appeals were made
\nsubject to the grant of leave by judges rendering such
\ndecisions. If the decision in a second appeal were in the
\nexercise of “ordinary jurisdiction” and there can be no
\ncontroversy about it, then the construction of s. 202 of the
\nCompanies Act in relation to a High Court which is the
\nprimary Court exercising jurisdiction under the Companies
\nAct (vide s. 3 (1) of the Act) would lead to anomalous
\nresults as judgments or decisions rendered in different
\ntypes of cases, though all of them are in the exercise of
\n“ordinary jurisdiction”, are subject to different conditions
\nas regards appealability. We thus agree with Chagla, C. J.
\nthat the second part of the section which refers to “the
\nmanner” and “the conditions subject to which appeals may be
\nhad” merely regulates the procedure to be followed in the
\npresentation of the appeal and of hearing them, the period
\nof limitation within which the appeal is to be presented and
\nthe forum to which the appeal would lie and does not
\nrestrict or impair the substantive right of appeal which has
\nbeen conferred by the opening words of that section. We
\nalso agree with the learned judges of the Bombay High Court
\nthat the words “order or decision” occurring in the 1st part
\nof s. 202, though wide, would exclude merely procedural
\norders or those which do not affect the rights or
\nliabilities of parties. Learned Counsel for the appellant
\ndid not suggest that if this test were applied the order of
\nthe learned Company judge would be an order or decision
\nmerely of a procedural character from which no appeal lay.
\nOn the footing that we accepted the construction of s. 202
\nof the Companies Act which found
\n737
\nfavour with the learned judges of the Calcutta High Court in
\nMadan Gopal Daga (1), that in order to be appealable the
\ndecision must satisfy the test of being “‘a judgment” within
\ncl. 15 of the Letters Patent of the High Court, learned
\nCounsel submitted to us elaborate arguments as to what was
\ncomprehended within the expression r ‘judgment” in cl. 15 of
\nthe Letters Patent and invited us to hold that the order of
\nMukharji J., confirming the sale was not a judgment and that
\nthe decision of the learned judges in the judgment now under
\nthe appeal that it was “a judgment” was erroneous. There
\nhas been very wide divergence of opinion between the several
\nHigh Courts in India as to the content of the expression
\n“‘.judgment” occurring in cl. 15 of the Letters Patent.
\nThis conflict of opinion was referred to by this Court in
\nAsrumati Devi v. Kumar Rupendra Deb Raikot (2), and in,
\nState of Uttar Pradesh v. Dr. Vijay Anand. Maharaj (3)
\nwhere, after setting out the cleavage of views on the
\nquestion by the several High Courts, the points as to the
\nproper construction of the word was left open for future
\ndecision when the occasion required. We consider that that
\noccasion has not arisen before us either since in view of
\nthe construction which we have adopted of s. 202 of the
\nIndian Companies Act the scope of the expression “‘judgment”
\nin the Letters Patent does not call for examination or final
\ndecision.
\nThe next contention put forward was this. The learned
\nCompany judge had a discretion to confirm or not to confirm
\nthe sale. In order that the discretion might be properly
\nexercised the official liquidators had placed every meterial
\nfact in the Master’s summons which they filed and every one
\nof those facts had been considered by the learned judge.
\nIf, after considering those facts, the learned judge thought
\nthat it was a fit case in which the sale could be confirmed
\nit was not open to an appellate court to interfere with that
\norder merely because on its
\n(1) (1927) I. L. R. 55 Cal.262 (2) [1953] S.C.R. 1159.
\n(3) [1963] 1 S.C.R. 1.
\n738
\nappreciation of the facts it would have refused confirmation
\nand directed a fresh sale. Learned Counsel further
\nsubmitted that if the Company judge had applied his mind to
\nthe facts and every fact was before him the order passed in
\nthe exercise of his discretion could be interfered with only
\nif any relevant facts were disregarded or if the order was
\narbitrary or capricious or if the appellate court considered
\nthat there has been a miscarriage of justice and his
\nsubmission was that on the facts of this case no such
\ninfirmities attached to the order confirming the sale.
\nBefore considering the objection in this form it would be
\nproper to examine whether the liquidators were within their
\npower in proceeding with the sale after Nandlal Agarwalla
\nfailed to turn up after an .appreciable interval. The power
\nof the liquidators in this behalf was, according to the
\nlearned Counsel for the appellant, derived from cl. 5 of the
\nconditions of sale which reads : –
\n“5. Immediately on acceptance of the bid by
\nthe.joint Receivers and Liquidators subject to
\nclause I hereof, such bidder shall deposit 25
\npercent, of the amount of such bid with the
\nJoint Receivers and Liquidators in cash, in
\ndefault where of the joint Receivers and
\nLiquidators will be at liberty to put up the
\nproperty again for sale.”
\nWe might add that this is the only clause under which, on a
\nsale becoming abortive, the liquidators were empowered to
\ncontinue the sale without a fresh advertisement. It would
\nbe seen that this clause requires the bidder whose bid is
\naccepted to deposit immediately 25% of the id amount. In
\nthe context of the fact,; that transpired in the present
\ncase the significance of -the word immediately’ would become
\nclear. If on the failure of Nandlal to make the
\n739
\ndeposit immediately the liquidators had proceeded to hold a
\nfresh auction it would be apparent that all those who had
\ncome there to bid would still be there, but what happened
\nwas that the liquidators gave time to Nandlal to go home in
\nthe expectation that he would come back with the amount
\nrequired to be deposited. In the circumstances it was not
\nunnatural that the persons who had gathered there to bid
\nwere under the impression that he would bring the money and
\nmake the deposit and as a matter of fact the narration of
\nfacts by the liquidators in their Master’s summons clearly
\nshows that they themselves were under this impression. In
\nthe circumstances the continued presence of the bidders
\nthere manifestly served no purpose and several of them
\ntherefore left the place and went away. The bidding list
\nwhich is Annexure ‘A’ to the petition of the liquidators
\nshowed that New India Transport Co. which had bid up to Rs’
\n2,55,000\/-, Babulal Bhagwandas who bid up to Rs. 2.75,000\/-
\nand Chabildas Agarwal who went up to Rs. 2,85,000\/- were not
\nthere when the second auction was held. The result
\ntherefore was that when after waiting for about 20 minutes
\nthe liquidators continued the auction several had left and
\nthe appellant was able to become the highest bidder for the
\nprice of Rs. 2,25.000\/-. This feature of the case was
\nmissed by the I earned Company judge and forms the basis of
\nthe decision of the Division Bench. We would go further and
\nadd that on a proper construction of condition 5 the
\nliquidators were not entitled to proceed with the sale in
\nthe circumstances that happened because of the interval of
\ntime they granted to Nandlal to make the deposit which gave
\nthe impression to those who gathered there that there would
\nbe no further auction on the same date at which they were
\nentitled to bid. Learned Counsel for the appellant referred
\nus to the fact that one S.K. Chakrabarti who in the first
\nauction had bid up to Rs. 2,98,000\/- was present at the
\nresumed auction and that he bid then only for Rs. 2,00,000\/-
\nand that
\n740
\nthis feature of the resumed auction was not noticed by the
\nlearned judges in appeal. We consider that this is not a
\nvery relevant circumstance for a decision of the question
\neither as regards the power of the liquidators to hold the
\nfresh sale without advertisement or whether the sale at the
\nresumed auction had been at an undervalue. It is possibly
\nprofitless to speculate how or why it happened that persons
\nwho half an hour earlier had been willing to bid for much
\n,larger figures suddenly permitted the appellant to become
\nthe purchaser for Rs. 2,25,000\/- . It may be mentioned that
\nat the resumed bidding there were only six bidders of whom
\nthree had not bid at the earlier auction at all, though
\napparently they were present-Shantilal Bansidhar, Power &
\nMachinery Construction Co., and Relay Corporation. Besides
\nthese three, there were only two others-Mahabir Prasad who
\nhad earlier bid for Rs. 2,10,000\/- and now contented himself
\nwith a bid for Rs. 1,90,000\/-and S.K. Chakraborty who though
\noriginally thought that the property was worth having for
\nRs. 2,98,000\/now refused to go beyond Rs. 2,00,000\/-. These
\nfacts show that if those others who had gathered there at
\nthe beginning of the auction but who left the place under
\nthe impression that Nandlal would make the required payment
\nhad continued there, the appellant’s bid for Rs. 2,25,000\/-
\nwould not have been the highest bid. We consider therefore
\nthe learned judges of the Division Bench were justified in
\nconsidering that the sale to the appellant ought not to have
\nbeen confirmed.
\nThere was one further point made by learned Counsel that
\nwhen the learned Judges allowed the appeal of the respondent
\nthey should not have directed a resale of the property by a
\nfresh auction but should have confirmed the sale to the
\nappellants at the price of Rs. 3,35,000\/- which was the
\namount of their bid at the first auction. The basis of this
\nargument was the undertaking which
\n741
\nthey gave at the time of the disposal of the application for
\ninterim stay pending the hearing of the appeal. We have
\nalready extracted the terms of that undertaking. It is not
\neasy to ‘find any legal basis for this argument. It is true
\nthat in the event of the appeal being allowed the Court
\nmight have, possibly with the consent of the 1st respondent
\nbefore us, insisted upon the appellant taking the property
\nfor Rs. 3,35,000\/- but that surely cannot give the
\nappellants any legal right to insist that the property be
\nsold to them. It, was a condition for the grant of the
\nindulgence of stay and by no stretch of language could that
\nbe read as implying that the appellants had a right to
\npurchase the property. It is true that the appellants have
\nmade a grievance about this matter in the application for
\nleave to this Court as well as in the statement of the case
\nbut that hardly improves the position.
\nThis matter may also be looked at from a slightly different
\npoint of view. Immediately Nandlal failed to turn up on
\nSeptember8, 1956 the liquidators enquired of the appellants
\nwhether they were willing that their penultimate bid be
\ntreated as the highest bid and they be declared purchasers.
\nThis offer was refused as apparently they were satisfied
\nthat they would be able to get the property for a much less
\nsum. Thereafter the liquidators took out a Master’s summons
\nseeking sanction of the Court for the sale to them for Rs.
\n2,25,000\/-. The appellants supported that application. In
\nother words, they wanted that the Court should confirm the
\nsale to them for Rs. 2,25,000\/- and that was the order which
\nthey obtained from the learned Company judge. It’ was only
\nwhen the appeal. was filed and an application for stay was
\nmoved before the appellate court by the 1st respondent here
\nthat the offer which is embodied in the undertaking was.
\nmade. In the circumstances it is difficult to see what
\njustification there is for the contention that the learned
\njudges
\n742
\nshould, when they allowed the appeal, have, confirmed the
\nsalt to them for Rs.3,35,000\/-. We consider there is no
\nsubstance in this submission.
\nThe result is the appeal fails and is dismissed with the
\ncosts of the 1st respondent.
\nAppeal dismissed.<\/p>\n
<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
PETITIONER: SHANKARLAL AGGARWAL AND ORS. Vs. RESPONDENT: SHANKARLAL PODDAR AND ORS. DATE OF JUDGMENT: 24\/01\/1963 BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA IMAM, SYED JAFFER SUBBARAO, K. MUDHOLKAR, J.R. ACT: Company Law-Sate-Confirmed by Company Judge-Set aside by Division Bench-Administrative and judicial orders- Distinction-Discretion exercised by company Judge- interference, on ground that certain factors … Read more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":""},"categories":[4928],"tags":[],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29802"}],"collection":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/comments?post=29802"}],"version-history":[{"count":1,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29802\/revisions"}],"predecessor-version":[{"id":115019,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/posts\/29802\/revisions\/115019"}],"wp:attachment":[{"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/media?parent=29802"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/categories?post=29802"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kopykitab.com\/blog\/wp-json\/wp\/v2\/tags?post=29802"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}