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TMI Blog1967 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. 3/1958, was dismissed on March 22, 1960. As per the account books of the company, it was found that sums aggregating Rs. 25,417 15 p. were paid by the company and were received and retained by the Indian Bank Ltd., Vellore (hereinafter referred to as " creditor ") subsequent to April 11, 1957, the date of commencement of the winding-up of the company. Under section 536 of the Companies Act, any disposition of the property made after the commencement of the winding-up shall be void, unless otherwise ordered by the court, as such the said sums are. due from the creditor to the company. The official liquidator by notice dated February 12, 1965, demanded the payment of the said sums, but there was no compliance. The official liquidator, therefore, prayed that the creditor be summoned and examined and he directed to pay the amounts received by it with interest at 6% from the date of demand to the date of payment. The application is opposed by the creditor and it filed a counter stating, inter alia , that M/s. Vegetols Ltd., Chittoor, were borrowing monies from the creditor-bank from time to time and the company was allowed a clean fixed loan of Rs. 25,000 on a promissory no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Khaleeli personally ? (3) Is the official liquidator entitled to claim Rs. 12,417.15 p. paid into court towards the decree by the liquidator of the Carnatak Electric Supply Corporation Ltd., Madras, on January 8, 1958 ? (4) Whether the payments have been made by the company to the creditor bona fide , honestly and in the ordinary course of the company's business and current trade ? and (5) Is the application by the official liquidator barred by time ? " Company Application No. 134/65 is filed under section 536(2) of the Companies Act of 1956, and rule 9 of the Companies (Court) Rules, 1959, by the Indian Bank Ltd., Vellore, hereinafter referred to as the creditor, against the official liquidator, Vegetols Ltd. (in liquidation), for validating payments aggregating Rs. 13,000 made to the creditor by the company and directing the official liquidator to withdraw his claim for refund of Rs. 25,417.15. The facts in support of this application are stated as follows : Messrs. Vegetols Ltd., Chittoor (in liquidation), were borrowing monies from the creditor from time to time and in March, 1954, they were allowed a clean loan of Rs. 25,000 at the Vellore Branch of the bank on a prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P.W. 1 is G. Venkateswara Rao. He is the clerk of the official liquidator. He has produced the accounts of M/s. Vegetols Ltd. and deposed with reference to the entries at pages 25 and 26. From the accounts he stated that on July 12, 1957, the Indian Bank, Vellore, received a cheque for Rs. 1,000 from C. P. Sarathi Mudaliar and Sons, and that they paid that amount to Vegetols Ltd. on July 12, 1957. On September 9, 1957, a sum of Rs. 12,000 was paid to the Indian Bank Ltd. That amount was paid by Ameen Khaleeli to Vegetols Ltd. by means of a cheque. Again on January 8, 1958, another sum of Rs. 12,417 15 was paid to the Indian Bank Ltd. by Ameen Khaleeli. A draft was sent to Vellore court. That amount was sent to the Indian Bank on January 8, 1958. The cross-examination elicits the following information : With regard to the ledger entries of the company for 1957-58, at page 21 of the ledger, there are two credits in favour of Ameen Khaleeli one on September 9, 1957, for Rs. 12,000 and another on January 8, 1958, for Rs. 12,417.15 that is, credit was given to Ameen Khaleeli. There was an entry on July 13, 1957, crediting Mr. Sarathi Mudaliar with Rs. 1,000. The gist of this evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1958, from funds belonging to Ameen Khaleeli. Point No. 1 : The evidence of P.Ws. 1 and 2 proves that the company made payments of Rs. 1,000 on July 12, 1957, and September 9, 1957, towards the decree obtained against the company and others in O.S. No. 115/56 on the file of the Sub Court, Vellore. This point is held accordingly. Point No. 2 : Whether the payments were made by the company on behalf of Khaleeli personally ? Although the pleading of the creditor has given rise to this issue in the evidence of P.W. 2 it was suggested that the payments of Rs. 1,000 and Rs. 12,000 were the payments by Sarathi Mudaliar and Ameen Khaleeli, respectively, in their personal capacity. But I am not satisfied that there is any truth in this assertion, as the accounts show that they were entered in the books of account of the company as the creditors, for the amounts that they paid towards the decree obtained by the creditor. The learned counsel argued that on the language of the decree in O.S. No. 115/56, a true copy of which is filed as exhibit R-2, that under the decree the defendants were liable in their representative and personal capacities and so, the learned counsel would say tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to have been made for and on behalf of the company. He would argue that it made no difference if Khaleeli paid voluntarily or was made to pay by court process. In other words, he places this payment on the same footing as the payment of Rs. 12,000 on September 9, 1957. The claim of Amin Khaleeli has not been adjudicated by the official liquidator yet. The character and nature of the payment of Rs. 12,417.15 as determined here will guide the decision of the official liquidator. So I have to determine the character and nature of the payment. From the facts and circumstances presented in this case, there can be no doubting the fact that it was the asset of Khaleeli himself which was attached in execution of the decree in O.S. No. 115 of 1956 on the file of Sub Court, Vellore. Khaleeli was the liquidator for the Carnatak Electric Supply Corporation Ltd., Madras, and the certified copy of the Execution Petition No. 156 of 1957, filed as annexure to Company Application No. 134 of 1965, shows that execution was prayed for against Amin Khaleeli and his properties and particular attachment was prayed for under O. 21, r. 46, Civil Procedure Code, by prohibiting Amin Khaleeli, the liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the ordinary course of the company's business is In re Wiltshire Iron Company, Ex Parte Pearson [1868] 3 Ch, App. 443, 446, 447. Therein Lord Cairns L.J. discussed the scope of section 153 of the English Companies Act, 1862, corresponding to section 536(2) of the Companies Act, 1956. Lord Cairns' observations referring to the corresponding section of the English Act, section 153, which were adopted as the guiding principle, occur at pages 446 and 447 and may be appropriately extracted here: "This is a wholesome and necessary provision, to prevent, during the period which must elapse before a petition can be heard, the improper alienation and dissipation of the property of a company in extremis. But where a company actually trading, which it is the interest of every one to preserve, and ultimately to sell, as a going concern, is made the object of a winding-up petition, which may fail or may succeed, if it were to be supposed that transactions in the ordinary course of its current trade, bona fide entered into and completed, would be avoided, and would not, in the discretion given to the court, be maintained, the result would be that the presentation of a petition, gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry business carried on by the company. For these reasons, I find that the payments have not been made to the creditor bona fide in the ordinary course of company's current trade. Point No. 5 : The official liquidator has filed the application under sections 468, 447 and 536 of the Companies Act. Section 468 provides for certain categories of persons specified in the section to deliver to the liquidator any money, etc., under his control to which the company is prima facie entitled under the directions of the court. The opening words of the section are : "The court may, at any time after making a winding up order, require" the persons specified to deliver the money, etc. One of the categories of persons specified in the section is a trustee, and the official liquidator alleged that the creditor comes within the meaning of a trustee under this provision. The learned counsel for the creditor has denied that the creditor is a trustee and relied on Nandkishore Bajoria v. Gaya Sugar Mills Ltd. AIR 1953 Pat. 390 (in liquidation) for the view expressed therein that section 185 of the Companies Act, 1913, was confined to express trustees and not to constructive trustees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h applications. The third division is sub-divided into parts I and II. The first part deals with applications in specified cases and the second part deals with other applications. Article 137 is a residuary article. It reads thus : Description of application Period of limitation. Time from which period begins to run. 137. Any other application for which no period of limitation is provided elsewhere in this division. Three years When the right to apply accrues. Mitra's edition of this Act sets out the corresponding old article 181 of the Limitation Act of 1908. The old article states thus : Description of application. Period of limitation. Time from which period begins to run. 181. Applications for which no period of limitation is provided elsewhere in this schedule or by section 48 of the Code of Civil Procedure, 1908. Three years. When the right to apply accrues. It is evident that the description of the application is the same as in the old article 181 except for the deletion of the reference to section 48, Civil Procedure Code, and the substitution of the division f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention that the application by the official liquidator is barred by time. The learned counsel has raised the question of jurisdiction of the company court to pass orders of refund. He has contended that section 536 (2) is. only declaratory in that the section does not confer power specifically to pass orders directing refund, The learned counsel has cited Siemens (India) Ltd., Calcutta 's case ( supra ) , in support of his contention. In that case the official liquidators solicited orders of refund in respect of sums paid to certain creditors after the petition for winding up had been filed. The learned judge dismissed the applications by the official liquidators on the ground that he had no jurisdiction to require the persons concerned to make payments to the official liquidators and directed the official liquidators to seek such remedies as they could in the ordinary court. A contrary view was taken in certain cases. Rule 9 of the Companies (Court) Rules, 1959, says that nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or to pass orders as may be necessary for the ends of justice or to prevent abu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition and the winding up order, is compelled to refund. Buckley on the Companies Act, 13th edition, page 494, refers to both these decisions in his commentary on section 227 of the Companies Act, 1948, corresponding to section 536(2) of the present Act. The case, Siemens (India) Ltd. s case ( supra ) , relied on by the learned counsel in support of the contention that this court has no jurisdiction, had not referred to the decisions which proceeded obviously on the assumption that there was jurisdiction. The learned judge had not also discussed about the jurisdiction of the court to direct repayment under section 227(2) of the Companies Act, 1913, corresponding to section 536(2) of the present Act. I cannot, therefore, accept the contention that the court has no jurisdiction to direct re-payment. Rule 9 of the Companies (Court) Rules is an additional reason why I am inclined to accept the contention that the company court has jurisdiction to direct refund under section 536(2) of the Companies Act. No other points are raised before me. In the result, therefore, in C.A. No. 85 of 1965 there will be an order against the creditor-bank directing refund of Rs. ,000 with int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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