9911796707
TMI Blog1966 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... including the abovementioned company, Steel Equipment Construction Private Ltd. The said decree also created a charge on the assets of the said company being premises No. 22, G. T. Road, and the machinery lying thereat for payment of the decretal amount and interest. On 1st June, 1963, the petitioner through its solicitors gave a statutory notice of demand to the abovementioned company by registered post. On the same day, a suit was instituted by the said company in the Howrah court being Title Suit No. 177 of 1963 against the petitioner and other parties for a declaration that the said consent decree in Suit No. 543 of 1961 was verbally adjusted between the parties and the petitioner herein had agreed to finance the company with further advances. Thereupon the said company also obtained in the said Howrah suit an exparte interim order restraining the petitioner from committing breach of the said alleged verbal agreement pleaded in the Howrah suit. On 6th July, 1963, the petitioner received a reply to their statutory notice, dated 1st June, 1963, from the said company wherein it was alleged, inter alia , that the said consent decree in Suit No. 543 of 1961 of this court was adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely on specific facts and not even, the last balance-sheet which was published and distributed to the shareholders. In my view, on the omission of the respondent is not sufficient to discharge the burden of proof, and in any event not sufficient in this matter) Hence, this contention must be rejected. Mr. Sen secondly submitted that, in any event, there should be a winding up order, as the claim being founded on a decretal debt, leaves no room for bona fide disputes. Mr. Gouri Mitter, learned counsel for the respondent-company, on the other hand urged that the company was not competent to guarantee the liabilities of the sister concern and consequently the consent decree passed thereon was void and a nullity, and further and in the alternative that the consent decree dated 5th September, 1962, which affected the immovable properties outside the said jurisdiction, was without jurisdiction. The learned counsel appearing for the parties made their respective submissions at length on these two points not only with great zeal but with considerable ability backed by industry and learning. At the outset, it is necessary to consider the position when a debt is disputed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial part of the debt upon which the winding up petition was made." Therefore, according to this decision, the bona fide dispute need not extend to the whole debt but it is sufficient if a substantial part thereof is bona fide disputed. In the case of Bharat Vegetable Products's case ( supra ) , the same trend is discernible. In the case of a bona fide dispute, the court may decide finally the disputes as to the debt in order to save costs as was done in In re Imperial Silver Quarries Company [1868] 16 WR 1220 and Landauer Co. v. Alexander Co. [1919] SC 492 or the court may adjourn the petition to enable the question to be decided in an action, with or without a direction that the entire amount of the debt or a part thereof be paid into court or dismiss the petition. (See same paragraph at Halsbury's Laws of England ) . In England, the modern practice in case of a disputed debt is to dismiss the petition. In our High Court, the most general practice, it seems to me, is to stay the winding up petition and direct one of the parties to file a suit for resolving the controversies as to the disputed debt. This has been done in cases where the dispute turned on a ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. It can be attacked in proceedings in which reliance is placed on such a decree. In this connection, reference may be made to the cases of Rajib Panda ( supra ) , Peary Lal Ray Chaudhuri's case ( supra ), Aswini Kumar Samadhar's case ( supra ) and the case of Britannia Building Iron Co. v. Govinda Chandra Bhattacherjee [1960] 64 CWN 324 . It is also well known that the plea of waiver, estoppel or acquiescence cannot arise in cases where the decree is void and consequently a nullity. In this connection, reference may be made to the cases of Golab Sao's case ( supra ) and York Corporation v. Henry Leetham Sons Ltd. [1924] 1 Ch. 557 .Hence, if a decree is vitiated and is null and void on any of the grounds mentioned above, then that decree will lose its efficiency in any subsequent proceedings. Therefore, in a winding-up court it can be challenged collaterally as it can be done in the ordinary civil courts and the pleas of res judicata and acquiescence, waiver and estoppel are of no avail. It may, however, be noticed that in the ordinary civil courts, if the plea of illegality and/or nullity was taken in the suit and the court had decided it, it is bindin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto the consideration of a judgment-debt on the ground of absence of consideration, fraud, collusion, miscarriage of justice and mistake. It has been held that a debt barred by the law of limitation is not a good petitioning creditor's debt, Ex parte Tynte [1880] 15 Ch. D. 125. It has been again held that a debt founded on an illegal consideration cannot support a bankruptcy or insolvency petition : Wells v. Girling [1819] 1 Brod. B. 447 and Raja Ram v. Chandi Prasad AIR 1932 Oudh 107 . It has been held that a debt founded on immoral consideration cannot be recognised by bankruptcy court; a debt arising out of wager or gambling has not been recognised by the court even though supported by a judgment. The bankruptcy court cannot allow proof when it is based on a contract against the policy of the bankruptcy law or is a result of a secret agreement between the bankrupt and the third party. It follows from this unusual and extraordinary power assumed by the bankruptcy court for the beneficial winding up of the estate of the insolvent that the plea of res judicata is no answer and cannot prevent the court from enquiring into the consideration even in cases where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In my opinion, the same principle applicable to a debt simpliciter is applicable to a decretal debt and the same course should be followed. In our High Court, the trend is to refer one of the parties to a suit, when there is a bona fide dispute. The same rule should be applicable in the case of a decretal debt. Therefore, though at one stage of the argument I indicated that I will give my considered opinion on the points involved and either allow the application or reject it, I do not now propose to do so, having regard to the authoritative pronouncement of the court. It may be observed that, if I felt myself free, I would have done so and thereby saved the parties from costs and delay. Hence, the question in this case is whether the points raised to attack the said consent decree are points of substance or only mere cloak to hide the inability to pay, bearing in mind that the decree raises a strong presumption. It is not usual, it seems from the judgments referred to hereinbefore, to indicate why the grounds are substantial but only state the conclusion. In my opinion, having regard to the elaborate arguments advanced before me, the reasons as to why the debt is bona fide o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d matter. But in this case both the parties, plaintiff or defendant in the original action and in the cross-action, were equally insisting on the contract. The president, who appears to have been exercising the powers of the company, had an interest to maintain it, and took a large benefit under the judgment. And as the contract on the face of it is quite regular and its infirmity depends on extraneous facts which nobody disclosed, there was no reason whatever why the court should not decree that which the parties asked it to decree. Such a judgment cannot be of more validity than the invalid contract on which it was founded." The consent decree in the above case was set aside in another suit. In my opinion, again when a decree is void by reason of ultra vires , it can be successfully attacked in any collateral proceeding even in cases of proceeding other than insolvency or winding-up proceedings though it cannot be set aside. This follows from the ordinary rules of law. This rule, in my opinion is again applicable in bankruptcy and winding-up proceedings where the court's jurisdiction is of wider amplitude. This rule was applied by the winding-up court in the case of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Association, there developed an opposite trend. This led the English courts to liberally interpret the objects clauses in the memorandum so as to include those things which are implied or incidental or ancillary or consequential to the main purposes. This also led the Parliament to give liberal powers to alter the objects of the company. In England, the Cohen Committee went so far as to recomend the abolition of the doctrine of ultra vires . This recommendation, however, was not accepted. The relative objects clauses are set out below : ( a )To carry on the business of buildings and structural engineers, makers and sellers of steel products and equipments and contractors for the supply of labour. ( b )To enter into contracts with Government, Central or local, companies or firms for the supply of steel or other metal or wood products and equipment or for the carrying out of any structural or other works for such Governments, companies or firms. ( c )To enter into partnership or into any arrangement for sharing profits, union of interest co-operation and joint adventure, reciprocal con cession, otherwise, with any person or association of persons or company carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of the company directly. It does not seem to me that any power can be spelled out from these clauses which can enable the company to be a guarantor not for its own but for the debts of stranger, though it may be a sister concern without any consideration. Clause (1) contains the words "subsidize " and " assist companies". In my opinion, the word " subsidize " is insufficient to enable the company to guarantee the debts or dues of a sister concern itself when the sister concern is not a " subsidiary ". It is now necessary to turn to the word "assist". It has been the subject matter of judicial decisions in England. In this connection, reference was made to the case of In re Financial Corporation, Goodsons Claim [1953] 1 All ER 634 and the case of In re Friary Holroyd and Healy's Breweries Ltd. [1922] WN 293, where the very same word "assist" occurs. It was held in the case of In re Friary Holroyd ( supra ) that the word "assist" enabled the company to stand as a guarantor of a sister company. It may, however, be noted that the relevant clause in that case is not identical to the clause before me but an amalgam of clause ( m ) and other objects of this company. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doned earlier: Bansilal Abirchand v. Ghulam Mahbub Khan AIR 1925 PC 290 . Clause 12 of the Letters Patent debars the court not only to determine but to receive and try a suit for land when the land is situate wholly outside the local limits of the Ordinary Original Civil Jurisdiction of the High Court. There is no dispute and, in my opinion, there cannot be a dispute over the statement of law. The relevant plaint lays down a case for money decree against the defendants including the respondent company on the basis of a bond of guarantee and a promissory note. The plaint further lays down a case for a charge in respect of immovable properties situate outside the jurisdiction of this court. There is a prayer for money decree, there is a prayer for leave under clause 12 of the Letters Patent followed by a prayer for declaration of charge over the immovable properties including premises No. 12, Grand Trunk Road, belonging to the defendants except the respondent company which was the 6th defendant in this suit. Section 26, Civil Procedure Code, provides that every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed. The legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of jurisdiction divide the claim into two parts ignore one and consider the other. The case, however, can be distinguished on facts. The point arose at the trial court before the trial and the determination of the suit and not, as in this case, after the trial and the determination of the suit. There is another aspect of the matter. In this case, the ownership of premises No. 22, Grand Trunk Road, during the pendency of the suit, was transferred to the defendant No. 6, the respondent company. There was a compromise decree and a decree for charge over premises No. 22, Grand Trunk Road, situate wholly in Howrah, outside the jurisdiction. Hence, on the one hand, it may be contended that the decree may be separable on the basis of Order 23, rule 3, of the Civil Procedure Code, read with the case of Ranjit Singh v. Gobardhan Chandra [1946] 50 CWN 447. On the other hand, it can be said that the present case is distinguishable from the facts of Ranjit Singh s case ( supra ) , on more than one ground. In the other case, the plaint did not start with two claims, one for money and the other for a decree for charge over the properties outside the jurisdiction, as in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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