1981 (12) TMI 174 - HC - Companies Law

Summary

Issues Involved:
1. Doctrine of Notice
2. Notice to Official Liquidator under Section 531(A) of the Companies Act
3. Recognition of assignment of decree
4. Jurisdiction and procedural requirements under Order 21, Rule 16 of the CPC

Detailed Analysis:

1. Doctrine of Notice:
The primary issue in this Civil Revision Petition revolves around the "Doctrine of Notice." The question is whether the notice of rights and claims of a defunct company, now under liquidation, should be given to the company's director or the Official Liquidator. The court held that the Official Liquidator, who took control on 22nd April 1976, must be given notice under Section 531(A) of the Companies Act, which aligns with Sections 320 and 321 of the Indian Companies Act of 1948. The court emphasized that the Official Liquidator has supervisory and scrutinizing powers over the company's transactions, including assignments made before the winding-up order.

2. Notice to Official Liquidator under Section 531(A) of the Companies Act:
The court underscored the necessity of notifying the Official Liquidator about the assignment of the decree. The court stated, "when once the order for winding up has been made... it is well established position of law that from the date of the order of the winding up the activities of the company... are subject to the supervision of the Official Liquidator." The court rejected the argument that notice to the Official Liquidator was unnecessary because the assignment occurred two years before the liquidator's appointment. The court concluded that the Official Liquidator must be informed to scrutinize the assignment's validity.

3. Recognition of Assignment of Decree:
The court addressed the procedural aspect of recognizing the assignment of the decree. The lower court had previously recognized the assignment without notifying the Official Liquidator, leading to the current revision petition. The court found that the assignment must be scrutinized by the Official Liquidator, who should be notified to ensure the transaction's legality and to protect the interests of the company's shareholders.

4. Jurisdiction and Procedural Requirements under Order 21, Rule 16 of the CPC:
The court examined the procedural requirements under Order 21, Rule 16 of the CPC, which mandates notice to the transferor and judgment-debtor before executing a decree by an assignee. The court cited several precedents, including Dhanai Ram v. Sri Ram and Sarifa Khatun v. Asimannessa Bibi, emphasizing that the absence of necessary notice invalidates the execution proceedings. The court concluded that the Official Liquidator must be notified to assume jurisdiction properly and ensure that the execution proceedings are valid.

Conclusion:
The court allowed the Civil Revision Petition, remitting the matter back to the lower court for reconsideration in light of the observations made. The court ordered that both parties be given an opportunity to present evidence, both oral and documentary. The court emphasized that notice must be given to the Official Liquidator to ensure the assignment's legality and protect the company's shareholders' interests. The court concluded with no order as to costs.