1955 (6) TMI 7 - DSC - Companies Law

Summary

Issues Involved:
1. Applicability of Section 333 of the Companies Act, 1948, to a receiver and manager appointed by debenture holders.
2. Whether the allegations against the receiver constitute "misfeasance" under Section 333.
3. Applicability of Section 333 to the liquidator.
4. Whether the allegations against the liquidator constitute "misfeasance" under Section 333.
5. Discretion of the court to allow proceedings under Section 333.

Detailed Analysis:

1. Applicability of Section 333 to a Receiver and Manager:

The receiver, Mr. Aizlewood, argued that he is not within the category of persons to whom Section 333 applies. The court agreed, stating that a receiver and manager appointed by debenture holders is not a "manager" within the meaning of Section 333. The court emphasized that the receiver's primary duty is to the debenture holders, not the company, and his role is to realize the security for the debenture holders, not to manage the company's affairs for the company's benefit. The court noted, "a person appointed as receiver and manager is concerned, not for the benefit of the company but for the benefit of the mortgagee bank, to realise the security."

2. Allegations Against the Receiver as "Misfeasance":

The court examined whether the allegations against the receiver constituted "misfeasance" under Section 333. The court concluded that the allegations, which included stopping building work and failing to obtain the best price for the property, did not amount to "misfeasance." The court stated, "a mortgagee, or a receiver exercising the mortgagee's powers of sale, is under no such duty to the mortgagor to obtain the best possible price for the property charged." The court also found that the claims related to negligence, which does not fall within the scope of Section 333.

3. Applicability of Section 333 to the Liquidator:

The liquidator, Mr. Browne, could not argue that Section 333 did not apply to him, as liquidators are explicitly mentioned in the section. However, the court examined whether the specific allegations against him fell within the scope of "misfeasance" as understood under Section 333.

4. Allegations Against the Liquidator as "Misfeasance":

The court found that the allegations against the liquidator, which included failing to make a proper application to the Central Land Board and failing to preserve the company's assets and goodwill, did not constitute "misfeasance." The court noted that the liquidator could not take over the company's assets until the receiver was discharged and that the liquidator was not accountable to the plaintiff in the manner alleged. The court stated, "the liquidator was not, in the circumstances, accountable to the plaintiff in the way alleged."

5. Court's Discretion to Allow Proceedings Under Section 333:

The court also considered whether it was appropriate to allow the proceedings to continue under Section 333. The court decided it was not, particularly because the plaintiff had other remedies available, such as applying to the court under Section 246 to control the liquidator's actions. The court concluded, "the proceedings ought now to be stayed against both the receiver and the liquidator."

Conclusion:

Both appeals were allowed. The court found that the receiver was not within the category of persons to whom Section 333 applies and that the allegations against both the receiver and the liquidator did not constitute "misfeasance" under Section 333. The court also exercised its discretion to stay the proceedings, noting that the plaintiff had other remedies available.