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TMI Blog1942 (4) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 was repaid. On November 13, 1934, the Bank instituted a suit for the balance. A preliminary decree was passed in favour of the Bank for Rs. 83,359-6-11 with future interest at six per cent. The original applicant under section 171 was Mst. Basanti Devi, widow of one Murlidhar who had died in 1934. He had been the Bank's principal client. On the death of Mst. Basanti Devi, the present appellant Anand Behari Lal, took her place. He is sometimes referred to as their adopted son, but there was apparently no formal adoption; He had lived with them since his childhood, and has succeeded to the property. The case of the applicant under section 171 was that there had been an assignment of the mortgage and preliminary decree obtained by the Bank against Madan Theatres, and leave of the Court was required under section 171 to enable the assignee, Mst. Basanti Devi, to continue the proceedings on the mortgage. It is not disputed by counsel in this appeal that such leave was necessary. The deed of assignment, Ex. I, was executed on April 23,1935. It purports to be for a consideration of Rs. 80,000 made up as follows: Rs. 60,000 set off against the amount due from the Bank to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ? Before we come to the findings of the learned Chief Judge on these issues we may mention certain admitted facts about the Bank and the alleged transfer. The Bank was started as a private Bank on December 14, 1929, with head office at Cantonments, Lucknow, and branches at Hazaratganj and Aminabad, Lucknow and at Cawnpore. There were two directors, Mr. D. C. H. Dinshaw and Captain Anderson, and five other share-holders; all these held originally one share of the value of Rs. 50 each. Mr. Dinshaw's holding was eventually increased to 3856 shares; by what means is not known; it is not disputed that he never paid for them. He was the Managing Director, The Bank appears to have been run to a large extent on the deposits of Murlidhar, an intimate acquaintance of Mr. Dinshaw. It is not disputed that he deposited between three and four lakhs of rupees with the Bank. There is documentary evidence, which is not disputed, that he was allowed interest at the rate of 8 or 9 per cent, on fixed deposits and at the rate of 2 per cent, on his current account. Nor is it disputed that he withdrew large amounts before his death, which occured in 1934- What the actual amount to his credit w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forthcoming, but it was not established that it was either lost or destroyed; in fact it was probably in the possession of Anand Behari Lal who for reasons best known to himself was unwilling to produce it. Secondary evidence to prove it was not, therefore, admissible; 3.even if secondary evidence were admitted it was not sufficient to prove it; 4.Balak Ram had no authority under the general law of agency to execute the deed of transfer, there being no evidence on the record to show that Dinshaw or Ram Nath Dave directed him to do so. On the first issue the learned Chief Judge found that the consideration of Rs. 80,000 entered in the deed was partly fictitious, in that as much as Rs. 60,000 was not due from the Bank to Mst. Basanti Devi. He held that the real consideration amounted only to Rs. 57,687-11-0, and that this was inadequate there, being ample security to satisfy the Bank's decree. On the second issue the finding was that section 54 of the Provincial Insolvency Act did not apply, because the assignment of the decree had been made more than three months before the petition of the creditors for the compulsory winding up of the Bank. On the third issue the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Feroze Shah [1936] 6 Comp. Cas. 57 . The implications of sections 171, 229 and 231 were particularly considered in the Allahabad case, while in the Peshawar case attention was concentrated mainly on section 229. Section 171 reads: "When a winding up order has been made or a provisional liquidator has been appointed no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose." We are concerned only with the first part of section 229 namely : "In the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent." Sub-section (1) of section 231 reads: "Any transfer, delivery of goods, payment, execution or other act relating to property which would, if made or done by or against an individual, be deemed, in his insolvency a fraudulent preference, shall, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the granting of leave under section 171 was a mere formality, the Court having no power to refuse leave. Mr. Justice Mukerji did not expressly decide this question, but it was argued that his judgment showed that he held that he had the same powers in the case of a decree obtained by a secured creditor and meant to exercise those powers, as he had already held himself to be entitled to exercise in the case of the holder of a decree awarding damages. The judgment of Boys, J., further shows that the members of the referring Bench, Weir and Sulaiman, JJ., were in agreement that a winding up Judge has jurisdiction to refuse leave to a secured creditor and were equally in agreement that he has no jurisdiction to order a secured creditor to come in and justify his decree. "Weir, J., further held that the winding up Judge, while he has jurisdiction to refuse leave, has jurisdiction to refuse only temporarily to enable him to decide whether he will : ( a )direct the liquidator to pay up the decree: or ( b )allow the decree-holder to file a suit to proceed: or ( c )direct the liquidator to file a suit to get the decree set aside; that the winding up Judge has no jurisdiction t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahabad Full Bench were agreed that the rules referred to in section 229 should not be construed in any narrow sense, but should be held to include rules contained in the sections of the Provincial Insolvency Act, rules made under any power conferred by that Act and rules of practice unless there is something in the Companies Act itself already providing for the matter in question or in conflict with the rule which it is proposed to import. But while this too supports the view that the Court acting under section 229 has the same powers as an Insolvency Court "with regard to the respective rights of secured and unsecured creditors" there are certain observations in the judgment of Boys, J., and Niamatullah, J., on which the learned Counsel for the appellant has relied for his contention that the learned Chief Judge had no jurisdiction to annul the transfer. Boys, J., remarked: "It would in my view be surprising indeed if the Legislature had meant by language merely requiring leave to be obtained to confer power to tear up a decree and also the security upon which it was founded. In my view our answer must then be guided by the two considerations; the winding up Judge has juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this they may do it themselves with the leave of the Court under section 54-A of the Insolvency Act. In the present case the transfer was made in favour of a person who admittedly prior to the transfer was a creditor of the Bank, and an unsecured creditor. We see no reason why the transfer should not be challenged by the Official Liquidator in the interest of the other creditors. The observations of Niamatullah, J., to which we have been particularly referred relate mainly to the position of third persons. He remarked that there was no provision in the Companies Act conferring jurisdiction on the Court, to adjudicate in winding up proceedings on the right of third persons whose claims come in conflict with the rights of the company. The only provisions which relate to such third persons are contained in sections 231 and 232. After quoting these sections he observed that it could be seen at a glance that they are parallel to sections 53 and 54 of the Insolvency Act. With regard to this we may say that while section 231 may be considered to be parallel to section 54 of the Insolvency Act, we can see nothing in common between the other two sections. Niamatullah, J., then remarked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules" referred to in section 229 should be restricted to "rules made under an Act" and that this section does not import all the provisions of the Insolvency Act into Company law. We are clearly of opinion, however, that this narrow view should not be adopted, if only because it is not easy to understand what statutory rules are referred to, and why a reference to them was thought necessary. If the word "rules" is understood in the sense of "provisions" the section creates no difficulty. The only other question which we consider is necessary to examine is the question whether Balak Ram was competent to execute the deed of transfer Ex. 1. The power-of-attorney in his favour was not registered, but the material portions of it were copied into a register kept by the Imperial Bank of India at Lucknow, apparently in 1934. These support the appellant's case. The learned Chief Judge, however, was of opinion that secondary evidence of the power-of-attorney from this source was not admissible it not being shown that the original had been lost or destroyed. Anand Behari Lal's story was that he had returned the power-of-attorney to Balak Ram or Ram Nath a few days after the execution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was little prospect at the time of avoiding liquidation. Another argument put forward was that the transferee was entitled to assume that everything had been done regularly. A number of authorities were cited on this point, namely Sree Meenakshi Mills Ltd. v. Callinjee Sons [1935] 5 Comp. Cas. 103 , D. Pudumjee Co. v. N.H. Moos [1926] AIR 1926 Bom. 28 , W.A. Mahony v. The Liquidator of the East Holy ford Mining Co. Ltd. [1886] 7 Eng. Ir. App. 869 and Wilson v. The West Hartlepool Harbour and Railway Co. 55 ER. 606. The last case is authority for the proposition that where a company, through their directors, hold out an officer of the company as their agent for a particular purpose and ratify his acts, they cannot afterwards dispute acts done by him within the scope of the agency. We think it is obvious that this proposition has no application to the facts of the present case. Nor do we think that the other cases cited are any more in point. We are not here considering the claim of a transferee who was a stranger to the Bank, but one who had probably been familiar with its character from its very inception; and who knew at least something abo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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