1953 (4) TMI 9 - HC - Companies Law

Winding up - Liquidator to exercise certain powers subject to sanction and Power of court to assess damages against delinquent, directors, etc.

Issues Involved:
1. Whether the decision of Sir Jamshedji Kanga constituted an award under the Arbitration Act.
2. Whether a compromise in a misfeasance summons can be recorded under Order XXIII, Rule 3 of the Civil Procedure Code.
3. Validity of the sanction given by Mr. Justice Coyajee instead of Mr. Justice Tendolkar for the compromise.
4. Whether the appellant's offer of guarantee was withdrawn.

Detailed Analysis:

1. Whether the decision of Sir Jamshedji Kanga constituted an award under the Arbitration Act:
The primary issue was whether Sir Jamshedji Kanga's decision constituted an award under the Arbitration Act. The court analyzed the nature of Kanga's role, distinguishing between an arbitrator and a valuer. The judgment emphasized that if a person is not required to hold a judicial inquiry or give a judicial decision but can rely on personal skill, knowledge, or experience, the decision does not constitute an award. The document clearly indicated that Kanga was to act as a valuer, not an arbitrator, as he was given "absolute discretion" to decide. The court noted that a judicial decision must be based on evidence and follow set rules, which was not required here. Therefore, Kanga's decision was not an award but a discretionary determination, and the learned judge below was correct in holding that it did not constitute an award.

2. Whether a compromise in a misfeasance summons can be recorded under Order XXIII, Rule 3 of the Civil Procedure Code:
The court examined whether Order XXIII, Rule 3, which applies to suits, could be applied to misfeasance proceedings. Under Section 141 of the Civil Procedure Code, the procedure for suits applies to all proceedings in any court of civil jurisdiction, including misfeasance proceedings. The court rejected the contention that misfeasance proceedings were criminal or quasi-criminal, clarifying that they are similar to civil suits where allegations are made, and the court passes an executable order. The judgment highlighted that compromises in misfeasance summonses are practical and often necessary to save costs and time. The court cited precedents and forms from Palmer's Company Precedents, demonstrating that compromises in misfeasance claims are recognized and recorded in practice.

3. Validity of the sanction given by Mr. Justice Coyajee instead of Mr. Justice Tendolkar for the compromise:
The appellant argued that the sanction for the compromise should have been given by Mr. Justice Tendolkar, who was handling the misfeasance summons, rather than Mr. Justice Coyajee. The court clarified that under Section 234 of the Companies Act, the sanction of "the court" is required, and any judge sitting on the Original Side of the High Court constitutes the court for this purpose. The allocation of work among judges is an administrative matter, and the sanction given by Mr. Justice Coyajee was valid and sufficient under the law. The court distinguished between sanction for compromise (Section 234) and condonation of default (Section 281), affirming that the former does not require the same judge handling the misfeasance summons to give the sanction.

4. Whether the appellant's offer of guarantee was withdrawn:
The appellant contended that his offer to guarantee the liability of another director was withdrawn. Evidence was taken before Mr. Justice Tendolkar, including testimony from Sir Jamshedji Kanga. The appellant did not testify to counter Kanga's evidence. The court found that the offer of guarantee was not withdrawn and upheld the finding of the lower court. The appeal was argued based on the facts as found by the learned judge, leading to the conclusion that there was a valid and binding compromise.

Conclusion:
The appeal was dismissed with costs. The court upheld the lower court's decision that Sir Jamshedji Kanga's determination was not an award, that compromises in misfeasance summonses could be recorded under Order XXIII, Rule 3, that the sanction given by Mr. Justice Coyajee was valid, and that the appellant's offer of guarantee was not withdrawn. Liberty was granted to the attorneys for the respondents to withdraw the amount deposited for security for costs.

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