1962 (3) TMI 32 - SC - Companies Law

Whether the appellant company having been ordered to be wound up by an order of a court of competent jurisdiction and the official liquidator being in charge of the same, the appeal by the managing director and agent was not properly filed and is not maintainable? Held that - We do not think that section 457 of the Companies Act, 1956, or the corresponding provision in the 1913 Act contemplates that on an order of winding up by the court any person other than the liquidator shall have the power to institute or defend any suit, prosecution or other legal proceeding, etc. Harcharan Dass having ceased to be the managing director or managing agent was not competent to file the appeal or continue it on behalf of the company. The argument that there is no automatic cesser of the power of Harcharan Dass as agent or that the appeal is a continuation of the suit is not available to Harcharan Dass in view of the clear provisions in section 334(e) and section 457 of the Companies Act, 1956. We, therefore, hold that the preliminary objection must succeed and the appeal must be held to be incompetent, hence dismissed.

Summary

Issues:
- Competency of managing director to file or continue an appeal after the company has been ordered to be wound up by an official liquidator.

Analysis:
The judgment in this case revolves around the issue of whether the managing director of a company, after the company has been ordered to be wound up by a court and an official liquidator appointed, is competent to file or continue an appeal. The appellant, the Sirmur Chemical and General Industries Ltd., had been ordered to be wound up by the court, and the official liquidator was put in charge of the company. The managing director, Harcharan Dass, filed an appeal challenging the winding-up order. The respondent, the Union of India, raised a preliminary objection that the appeal was not maintainable as the managing director was not competent to file or continue the appeal after the liquidator had taken charge of the company.

The court analyzed the relevant provisions of the Companies Act, 1956, and the Indian Companies Act, 1913, to determine the legal position in this scenario. Section 334(e) of the Companies Act, 1956, states that the managing agent of a company shall be deemed to have vacated his office upon the commencement of the winding up of the company. Similarly, section 87B of the 1913 Act contains a corresponding provision. The court noted that the petition for winding up was presented on a specific date, and therefore, the managing agent ceased to hold office from that date. Additionally, the powers of the liquidator include the authority to institute or defend legal proceedings on behalf of the company with the court's sanction.

The court rejected the argument presented by the appellant's advocate that the managing director could continue to act as an agent and file or continue the appeal on behalf of the company. The court emphasized that upon the winding-up order, the managing director ceased to have the authority to represent the company in legal matters. The court held that the managing director, having ceased to be in office as per the relevant provisions, was not competent to file or continue the appeal. The court concluded that the preliminary objection raised by the respondent was valid, and the appeal was deemed incompetent. Consequently, the appeal was dismissed with costs.

In summary, the judgment clarifies that once a company has been ordered to be wound up by a court and an official liquidator appointed, the managing director or agent of the company loses the authority to file or continue legal proceedings on behalf of the company. The powers to represent the company in legal matters shift to the official liquidator, as per the provisions of the Companies Act, 1956, and the Indian Companies Act, 1913.