1968 (8) TMI 68 - HC - Companies Law

Custody of company s property, Winding up - Power to apply to court to have questions determined or powers exercised and Power of court to assess damages against delinquent directors, etc.

Summary

Issues Involved:
1. Was the liquidator appointed in accordance with law?
2. Did the authority of Ram Samujh Singh to operate upon the account in the Rangoon branch of the Punjab National Bank end on or after January 6, 1957?
3. Was there any collusion between the opposite parties to allow Ram Samujh Singh to withdraw the amount in dispute?
4. Were both or either of the two opposite parties liable to pay the amount in dispute to the liquidator?
5. Was the claim of the applicant time-barred?
6. Does this court have jurisdiction under section 518 of the Companies Act to determine the liabilities of the opposite parties?
7. To what relief, if any, is the applicant entitled?

Detailed Analysis:

Issue 1: Was the liquidator appointed in accordance with law?
There was no serious dispute regarding this issue. The applicant provided evidence from the minutes book of the shareholders' meetings of Indo-Allied Industries Limited, showing that a resolution was passed at the annual general meeting on January 6, 1957, to wind up the company and appoint Sri K. P. Misra as the liquidator. This fact was published in the official gazette dated January 19, 1957. The appointment of the liquidator was thus duly proved to be in accordance with section 485(1) of the Companies Act.

Issue 2: Did the authority of Ram Samujh Singh to operate upon the account in the Rangoon branch of the Punjab National Bank end on or after January 6, 1957?
This issue was difficult to answer due to the lack of clear evidence. The liquidator informed the Rangoon branch of the Punjab National Bank about his appointment but did not explicitly state that Ram Samujh Singh's authority to operate the account was terminated. The Rangoon branch initially recognized the liquidator's authority but later allowed Ram Samujh Singh to withdraw the funds after the Burmese Exchange Control Department rejected the transfer application. The terms of the contract between the bank and Ram Samujh Singh were not proved, and the state of the law in Burma was unclear. Therefore, this issue could not be conclusively determined.

Issue 3: Was there any collusion between the opposite parties to allow Ram Samujh Singh to withdraw the amount in dispute?
There was no evidence of collusion between Ram Samujh Singh and the Rangoon branch of the bank. Collusion implies a deceitful agreement to defraud a third party, and there was no proof of such an agreement. The facts were not inconsistent with other reasonable explanations, and there was no evidence of secret collusion. Therefore, it was concluded that there was no collusion between the parties.

Issue 4: Were both or either of the two opposite parties liable to pay the amount in dispute to the liquidator?
The Rangoon branch did not refuse to pay the liquidator but was unable to transfer the funds due to the Burmese Exchange Control Department's rejection. The liquidator did not make a demand upon the Rangoon branch after this rejection. According to the principle established in Joachimson v. Swiss Bank Corporation, a demand by the customer is necessary for a cause of action against the banker. Since no demand was made, and the Rangoon branch was nationalized before any cause of action accrued, the liability, if any, was transferred to the People's Bank No. 7 of Rangoon. Therefore, the Punjab National Bank was not liable, but Ram Samujh Singh was accountable to the liquidator for the amounts he realized on behalf of the company.

Issue 5: Was the claim of the applicant time-barred?
Since the Punjab National Bank was not liable, the question of limitation against it did not arise. As for Ram Samujh Singh, proceedings under section 543(1) of the Companies Act for misappropriation of funds would be barred by section 543(2) if not initiated within five years from the date of the appointment of the liquidator or the misapplication. No such application was made, so action under section 543(1) against Ram Samujh Singh was barred by time.

Issue 6: Does this court have jurisdiction under section 518 of the Companies Act to determine the liabilities of the opposite parties?
The court has jurisdiction under section 518(1) of the Act to determine any question in the winding up of the company. This provision allows the court to exercise powers in a voluntary winding up as it would in a winding up by the court. The jurisdiction is determined by the place of registration of the company. Therefore, the court has jurisdiction to determine the questions raised in this case.

Issue 7: To what relief, if any, is the applicant entitled?
The applicant can obtain no relief beyond the determination of two of the three questions raised. The application partly succeeds and partly fails. The parties will bear their own costs.