1936 (2) TMI 18 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Judge to pass a decree and direct its execution.
2. Legality and procedural propriety of the order.
3. Interpretation and application of Sections 188 and 189 of the Indian Companies Act, 1913.

Issue-Wise Detailed Analysis:

1. Jurisdiction of the Company Judge to Pass a Decree and Direct its Execution:
The primary issue was whether the learned Company Judge had jurisdiction under the Indian Companies Act to make an order directing Messrs. John Brothers to deposit a specified sum into the bank account of the Agra Spinning and Weaving Mills Co. Ltd., and to enforce this order as a simple money decree. The appellants argued that the Company Judge lacked jurisdiction to pass such an order and that the official liquidator should have filed a suit for the realization of the amount. The Court noted that the learned Company Judge's order did not specify the section under which it was made and that no such question of jurisdiction was raised before him. The respondents contended that the order was based on Sections 188 and 189 of the Indian Companies Act, 1913.

2. Legality and Procedural Propriety of the Order:
The Court examined whether the procedure adopted by the learned Company Judge was legal and proper. It was argued that the order was illegal and passed with material irregularity. The Court scrutinized Section 188, which allows the Court to order any contributory, purchaser, or other person from whom money is due to the Company to pay the same into a specified bank. The Court found that there was no precedent for such a view and that previous rulings in England adopted a contrary stance regarding similar provisions. The Court concluded that the position of Messrs. John Brothers was merely that of persons who entered into a contract with the liquidator during the course of liquidation, and they were not contributories whose liabilities could be enforced by the liquidator.

3. Interpretation and Application of Sections 188 and 189 of the Indian Companies Act, 1913:
The Court analyzed the wording and scope of Section 188, which states that the Court may order payment into a bank instead of to the liquidator and enforce such an order in the same manner as if it directed payment to the liquidator. The Court clarified that the natural construction of this section is to allow enforcement of an order directing payment to a bank only if such an order could be enforced against the official liquidator. The appellants did not fall under Section 185 as they were not contributories or trustees, and thus, the order could not be enforced under Section 188. The Court also considered the interpretation of the terms "purchaser" and "other person from whom money is due" within the context of the Act, concluding that these terms did not extend to persons in the position of the appellants.

The Court cited precedents from English law, such as In re United English and Scottish Assurance Company and In re Vimbos Limited, which supported the view that the liquidation court did not have jurisdiction to enforce payment from third parties through summary processes. Additionally, the Court referred to a similar case from the Punjab Chief Court (Tarachand Jeramdas v. The Official Liquidator of the Peoples Bank of India Ltd.), which held that the Companies Act did not provide for the recovery of moneys from persons other than those expressly mentioned in Section 149 by summary process.

Conclusion:
The Court concluded that the learned Company Judge lacked jurisdiction to pass the order in the summary manner adopted. Consequently, the Letters Patent appeal was allowed, and the order of the learned Company Judge was set aside. The Court made no orders as to costs, considering the appellants admitted the claim's correctness and the jurisdictional issue was not seriously contested before the Company Judge.