1966 (9) TMI 69 - HC - Companies Law

Summary

Issues Involved:
1. Delay in filing the petition to bring on record the legal representatives of the deceased 4th defendant.
2. Whether the right to sue survives against the legal representatives of the deceased 4th defendant.

Detailed Analysis:

1. Delay in Filing the Petition to Bring on Record the Legal Representatives of the Deceased 4th Defendant:
The plaintiff-company filed an application on 17th February 1964 to bring on record the legal representatives of the deceased 4th defendant. The proposed legal representatives opposed this, stating that the 4th defendant had died about 11 months prior, and the plaintiff had not filed the petition within the 90 days prescribed by the Limitation Act. Additionally, there was no sufficient reason for the delay in filing the petition to set aside the abatement, which should have been filed within 60 days after the expiry of the initial 90 days.

The lower court excused the delay, holding that there was sufficient cause for not filing the petition in time. The High Court, upon revisiting the objections, noted that the counter-affidavit dated 24th March 1964 contained only a vague statement about the death of the 4th defendant without specifying the exact date. The plaintiff-company was based in Tirupathi, while the 4th defendant resided in a village in Chingle-put District, which justified the delay. The High Court found no jurisdictional error by the lower court in excusing the delay and bringing the legal representatives on record.

2. Whether the Right to Sue Survives Against the Legal Representatives of the Deceased 4th Defendant:
The claim in the plaint was to recover money against all defendants jointly and severally under section 86D of the Indian Companies Act, 1913. The court examined whether such a suit would abate upon the death of the 4th defendant. Section 86D prohibits a company from making loans to its directors or their associated firms and holds directors jointly and severally liable if there is a default in repayment.

The High Court rejected the argument that the suit would abate against the 4th defendant upon his death. It differentiated between the general right of suit under section 86D and the special procedure under section 235 of the Indian Companies Act, 1913. Section 235, which deals with the misfeasance of directors during the winding up of a company, was cited by the petitioners, who relied on a decision by the Madras High Court in Peerdan Juharmal Bank Ltd., which held that proceedings under section 235 could not continue against the legal representatives of a deceased director.

However, the High Court clarified that section 235 provides a limited right specific to the winding-up process and does not extinguish the general liability of a director under section 86D. The decision in Peerdan Juharmal Bank Ltd. was limited to the scope of section 235 and did not apply to the general right of suit under section 86D. Therefore, the suit to recover money from the defendants based on section 86D did not abate upon the death of the 4th defendant.

Conclusion:
The High Court dismissed the civil revision petitions, upholding the lower court's decision to excuse the delay in filing the petition to bring on record the legal representatives of the deceased 4th defendant and confirming that the right to sue survives against the legal representatives. The petitions were dismissed with costs in C.R.P. No. 872 of 1966, and no order as to costs was issued for the other revision petitions.