9911796707
TMI Blog1988 (6) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... quidation). They are also the only two shareholders. This company was ordered to be wound up by this court by its order dated February 6, 1987. It is not in dispute that the official liquidator, pursuant to the order of winding up, had complied with the necessary formalities of winding up. The respondent had invoked the jurisdiction of this court for the winding up of the aforesaid company under the provisions of section 433(e) of the Act. But, before the official liquidator could take possession of the assets of the company (in liquidation), the petitioners, claiming to be the shareholders, had filed this application for the reliefs which I have excerpted above. The reason for filing this application is that subsequent to the order of winding up passed by this court, the petitioners had paid a sum of Rs. 5,168.15 due to the respondent-company, i.e., the petitioner in the company petition, and the balance was paid after the filing of this application and, therefore, the company (in liquidation) is not due in any sum to the respondent company and hence the order of winding up passed by this court in exercise of its jurisdiction under section 433 (e) of the Act would cause considerab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decision of the Delhi High Court in Anil Kumar Sachdeva v. Four "A" Asbestos P. Ltd. [1980] 50 Comp. Cas. 122 and the provisions of rule 6 of the Rules and overruled the office objections and recalled the earlier order of winding up dated December 16, 1986. This order was taken up in appeal by the official liquidator and the same was dismissed in O.S.A. No. 7 of 1987, by an order of the Division Bench dated March 12, 1987. Subsequently, in another matter from this court which was taken to the Supreme Court by way of special leave in S.L.A. (Civil) No. 2583 of 1987, the Supreme Court made the following order: "The petitioner stated that he is willing to pay the money, and there is already a settlement between the parties. If this is the position, this will not preclude the petitioner to move the High Court for recalling the order of winding up. In view of this, he does not press this petition which is accordingly dismissed as withdrawn". That S.L.P. was against the order of this court winding up the company by name Mushrooms Ltd. and that order of winding up was affirmed in O.S.A. No. 9 of 1986. In Sudarsan Chits ( I.) Ltd. v. G. Sukumaran Pillai [1985] 58 Comp. Cas. 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overed by the decisions of the Supreme Court in Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal, AIR 1962 SC 527 and Nawabganj Sugar Mills Co. Ltd. v. Union of India, AIR 1976 SC 1152. In Manohar Lal Chopra, AIR 1962 SC 527, the Supreme Court, in its majority judgment, observed as follows (at page 532): "There is difference of opinion between the High Courts on this point. One view is that a court cannot issue an order of temporary injunction if the circumstances do not fall within the provisions of Order XXXIX of the Code: Varadacharlu v. Narasimha Charlu, AIR 1926 Mad 258 ; Govindarajulu v. Imperial Bank of India, AIR 1932 Mad 180 ; Karuppayya v. Ponnuswami, AIR 1933 Mad 500 (2) ; Murugesa Mudali v. Angamuthu Mudali, AIR 1938 Mad 190 and Subramanian v. Seetarama, AIR 1949 Mad 104. The other view is that a court can issue an interim injunction under circumstances which are not covered by Order XXXIX of the Code, if the court is of opinion that the interests of justice require the issue of such interim injunction: Dhaneshwar Nath v. Ghanshyam Dhar, AIR 1940 All 185 ; Firm Bichchha Ram Baburam v. Firm Baldeo Sahai Surajmal, AIR 1940 All 241 ; Bhagat Singh v. Jagbir Sawhney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exercise them for the purposes mentioned in section 151 of the Code when the exercise of those powers is not in any way in conflict with what has been expressly provided in the Code or against the intentions of the Legislature" . (underlining is mine). These observations clearly mean that the inherent powers are not in any way controlled by the provisions of the Code as has been specifically stated in section 151 itself. But those powers are not to be exercised when their exercise may be in conflict with what had been expressly provided in the Code or against the intentions of the Legislature. This restriction, for practical purposes, on the exercise of those powers is not because those powers are controlled by the provisions of the Code but because it should be presumed that the procedure specifically provided by the Legislature for orders in certain circumstances is dictated by the interests of justice. When this question came up for consideration again before the Supreme Court in Nawabganj Sugar Mills Co. Ltd. v. Union of India, AIR 1976 SC 1152, Krishna Iyer J., speaking for the Bench, observed as follows (at page 1154): "Rejecting, therefore, the recommendations for sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice would be caused to the interests of the company. Their case is supported by the fact that the respondent-company has also not opposed this application obviously because their claim is satisfied and hence they are not interested in seeing this company remaining under the constraints of winding-up proceedings and that is where the power of this court under rules 6 and 9 of the Rules comes into play. Rule 6 reads as under: "Practice and prdcedure of the court and provisions of the Code to apply. - Save as provided by the Act or by these Rules, the practice and procedure of the court and the provisions of the Code so far as applicable, shall apply to all proceedings under the Act and these Rules. The Registrar may decline to accept any document which is presented otherwise than in accordance with these Rules or the practice and procedure of the court". Rule 9 reads as under: "Inherent powers of court. - Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court". . A combined reading of rules 6 and 9 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in winding up but it has no power to recall the order of winding up. In my view, if the scheme of Part VII of the Act is taken as a whole, it is clear that the power conferred on the court in Part VII relating to winding up is a power to stay the proceedings of winding up and that power does not in any way conflict or nor is it inconsistent with the inherent power of the court under rule 9 of the Rules. The decisions of High Courts on which Mr. Vijayashankar relied do not deal with the inherent power of the company court under rule 9. Certain observations made by High Courts in India on this aspect of the case will be noticed presently. These observations were made by the High Courts before the Supreme Court made the rules in exercise of the power under section 643 of the Act. Section 643 of the Act reads as under: "Power of the Supreme Court to make Rules. -- The Supreme Court, after consulting the High Court- (a)shall make rules providing for all matters relating to the winding up of companies which by this Act are to be prescribed ; and may make rules providing for all such matters as may be prescribed, except those reserved to the Central Government by sub-section (5) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there also the decision of the Registrar was confirmed. It is pointed out in all the judgments that the consent of the creditors alone will not justify the court in annulling the adjudication or rescinding the receiving order. Cave J. observed that it is not right to let a man, who is unable to pay his debts in full, loose upon the public to continue his trading without the court having any right of veto. Lower down he observed that the consent of the creditors was not the only thing to be considered and added: 'The court must consider the position of the debtor, the possibility of his getting over his difficulties, and the interests of the public. It is clearly contrary to their interests that a man who is insolvent should be allowed to go on trading. In fact, it is an offence under the Act for a trader to continue trading after he knows that he is insolvent' Lower down he states: 'We should not be doing our duty to the community if we were to sanction the rescission of the receiving order. To my mind, this man is hopelessly insolvent. Without any estimate, even by himself, much less by any competent persons, of his present position-his assets and liabilities - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise the power of staying winding-up proceedings under the provisions of section 173 of the old Act. The Calcutta High Court, on the facts before it, took the view that it was not a fit case for staying further proceedings. The learned judge in para 50 of his judgment observed as follows (at page 93): "In this application, the petitioners also pray for the stay of the winding up proceedings under section 173, Companies Act. This section comes into play after an order for winding up has been made. It presupposes a good and valid winding-up order. In an application under this section, there can be no question of attacking the order. Any creditor or contributory may make an application under this section. Therefore, each of the petitioners is fully qualified to maintain this application in so far as it is one under this section. The company, however, independently of the liquidator, does not appear to me to have any locus standi in such an application. The section requires proof to the satisfaction of the court that all proceedings in relation to the winding up ought to be stayed. What has happened to justify a stay of proceedings? I have already dealt with and rejected the allegati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectors have not complied with their statutory duties as to giving information to the official receiver or furnishing a statement of the affairs ; that there has been an undisclosed agreement between the promoter and the vendor to the company as to the participation by the former in fully paid-up shares forming the consideration for the purchase of property by the company on its formation ; that the promoter has made gifts of fully paid-up shares to the directors, that there are other matters connected with the promotion, formation, or failure of the company or the conduct of its business or affairs, which appear to the court to require investigation. The same principles are apparently applicable whether the company has or has not invited the public to subscribe for its shares except, possibly, in the case of a private company where all the shareholders have full knowledge of what has been done.' This summary of the law is based on the observations of Buckley J. in the case of Telescriptor Syndicate Ltd., In re [1903] 2 Ch 174, at pages 180, 181 ; 72 L.J Ch 480 wherein reference was made to the trenchant observations of Fry L.J. in the earlier case of Hester, In re [1889] 22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985] 58 Comp. Cas. 633 that the High Court has power to recall its order of winding up. This is also made clear by the Supreme Court in S.L.A. (Civil) No. 2583 of 1987 preferred against the order of winding up which was affirmed in appeal by the Division Bench. For these reasons, taking a contrary view would be to ignore the declaration of law made by the Supreme Court. It would not be proper for this court to take such a stand because these decisions of the Supreme Court do not indicate that there was a proposition by one side and opposition by the other and a decision rendered on the basis of discussion before the Supreme Court. Mr. Vijayashankar has relied on certain commentaries on the English Companies Act like Pennington and Halsbury's Laws of England. No doubt, in those authorities, we do not find any cases relating to the power of the company court in England to recall the order of winding up. In Halsbury's Laws of England, volume 7, in para 1375, it is observed as follows: "Power to stay winding up proceedings.- The court may, at any time after an order for winding up, make an order staying the proceedings, either altogether or for a limited time, on such terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curiae, and cannot appeal.' Our attention was also invited to Halsbury's Laws of England, 4th edition, volume 7, where a similar statement of the law is to be found at page 614, para 1028. Now, it is undoubtedly true that according to the statement of law contained in these three leading text books, it is only the company, the creditors and the contributories who are entitled to appear on the winding-up petition and no other persons have a right to be heard, but this statement of the law is based on the old decision, Bradford Navigation Co., In re [1869] LR 9 Eq 80, which was carried in appeal and decided as Bradford Navigation Co., In re [1870] 5 Ch App 600. This decision was given by the English courts over a hundred years ago when a company was regarded merely as a legal device brought into being as a result of a contractual arrangement between the shareholders for the purpose of carrying on trade or business and the workers were looked upon as no more than employees of the company working under a master and servant relationship and the interest of the public as consumers or otherwise was a totally irrelevant consideration and it can have no validity in the present times ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1869] L.R 9 Eq 80 does not commend itself to us and though it has been followed by a single Judge of the Bombay High Court in Edward Textiles Limited, In re [1968] 38 Comp. Cas. 284, we do not think it represents the correct law". I have no doubt in my mind that regard being had to the provisions of rules 6 and 9 of the Rules framed by the Supreme Court in exercise of the powers under section 643 of the Act, the power of the company court to recall the winding up order is recognised by the Supreme Court in the aforesaid two decisions. But the exertion of that power is dependent on the facts and circumstances of each case. Perhaps, considerations which are relevant in regard to an order of winding up under section 433(e) may not be relevant for an order of winding up under the "just and equitable" clause. Further, the power of the company court, under section 443 of the Act, on hearing a winding-up petition, may be noticed. Section 443 reads as under: "(1)On hearing a winding up petition, the court may- (a)dismiss it, with or without costs ; or (b)adjourn the hearing conditionally or unconditionally ; or (c)make any interim order that it thinks fit; or (d)make an order for w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to change it to meet the judge's idea of what justice requires. Interpretation does, of course, imply in the interpreter a power of choice where different constructions are possible. But our law requires the judges to choose the construction which, in his judgment, best meets the legislative purpose of the enactment. if the result be unjust but inevitable, the judge may say so and invite Parliament to reconsider its provision. But he must not deny the statute. Unpalatable statute law may not be disregarded or rejected, merely because it is unpalatable. Only if a just result can be achieved without violating the legislative purpose of the statute may the judge select the construction which best suits his idea of what justice requires. Further, in our system the stare decisis rule applies as firmly to statute law as it does to the formulation of common law and equitable principles. And the keystone of 'stare decisis' is loyalty throughout the system to the decisions of the Court of Appeal and this House. The Court of Appeal may not overrule a House of Lords decision ; and only in the exceptional circumstances set out in the practice statement of July 26, 1966 (Practice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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