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TMI Blog2001 (7) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... dent. Upon the Insolvency Registrar raising an objection to the issue of insolvency notice, the appellant applied on 11-6-1999 to the learned Single judge of this court, who rejected the application and upheld the objections of the Insolvency Registrar by an order dated 11-6-1999. This appeal is preferred against that order. Since the original application is for permission to issue a notice of Insolvency against the respondent, normally, the proceedings would have been ex parte. However, in this case, the respondent has chosen to appear before the learned Single judge of this court to oppose the application for issue of insolvency notice and has been heard there. Likewise, the respondent has also appeared before us. These proceedings are, therefore, not ex parte. 2. The appellant contends that under the consent order of this Court, there is an unequivocal admission of the company of its liability in the sum of Rs. 50.00 lakhs and that, inter alia , this Court has ordered the company to pay an amount of ( sic ) the balance having been paid. Further, the respondent has, in the event of any default by the company guaranteed payment of all amounts due by the company and also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent specified in those clauses, and such person shall be deemed to be a party within the meaning of section 47 : Provided that such notice as the Court in each case thinks sufficient has been given to the surety." In short, the appellant contends that she is entitled to serve an insolvency notice under section 9 of the Presidency Towns Insolvency Act, on the respondent in respect of a consent order which has the force of a decree or an order for payment of an amount due to her as a creditor. The consent order, according to the applicant, is enforceable by virtue of section 634 of the Companies Act in the same manner as a decree in a suit. Since under the said consent order the respondent has become liable as a guarantor for the amount ordered to be paid thereunder, and for the performance of the terms of payment of the sum made payable under the order which has the force of a decree, the consent order is enforceable under section 145 of the Code of Civil Procedure. 3. In the contention of the respondent that the consent order does not contain any direction or order to the respondent to pay any sum of money to the appellant. Such an order, if any, is only agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mance of this consent terms by the respondent company." 5. The first question on which the parties have joined issue before us is whether the consent order contains an order directing the respondent to pay a sum set out in clause 3 of the consent order. Mr. Khambatta, the learned counsel appearing to the appellant, submitted that clause 3 of the order crystallises the amount payable by the company. Clause 3 of the consent order, according to the learned counsel, does not merely constitute a guarantee by the respondent to stand surety for the payment of the amount but contains an order for the purpose of the consent terms by the respondent-company. Mr. Tulzapurkar, the learned counsel for the respondent, submits that clause 3 of the consent terms is directed only against the company and not against the respondent personally and cannot be construed to be an order against the respondent personally to make any payment to the appellant. According to the learned counsel for the respondent, clause 10 ranks for all relevant purposes on the same basis as a separate guarantee executed by the respondent in favour of the appellant and nothing more. 6. On a consideration of the intent a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticularly since other consequences that might flow from it, have not been expressly prohibited. 8. The next question is as to the applicability of section 145 of the Code of Civil Procedure, to such a consent order passed by a company court in exercise of its jurisdiction under section 443 of the Companies Act. We are of view that having read the consent order as above, the respondent is a person who has given a guarantee for the performance of a decree. It seems, clear enough that if an order passed by a company court can be said to have the force of a decree then the order binding the respondent in the present case would be executable under section 145 of the Code of Civil Procedure, the order would therefore be a decree or order for payment of money within the meaning of section 9(1) of the Presidency Towns Insolvency Act. 9. In order to resolve this, it is necessary to construe section 634. At the outset, the section applies to any order made by a court under this Act. It is the subsequent part of the section on which rival submissions have been advanced. According to the learned counsel for the appellant, for the purpose of enforcement, every order passed by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application by the company for its execution must rank as an application for the execution of a decree for the purposes of that section. Section 36 of the Code operates in the same way. By that section it is enacted : The provisions of this Code relating to the execution of decrees shall, so far as applicable, be deemed to apply to the execution of orders. This section appears to their Lordships to enact that section 73 is to be deemed to apply to the execution of an order made under section 186 of the Companies Act; and if this be so, an application made to a Court for its execution must their Lordships think, be treated as, or deemed to be, an application for the execution of a decree, notwithstanding the somewhat curious fact that, although the company is a decree-holder as defined by the Code, it would appear not to hold a decree as so defined. While there appears to have been a divergence of view in India upon this question, their Lordships find themselves in agreement with the views expressed by Young, CJ., and Blacker, J., in Radhesham Beopar Co. Ltd. v. Karam Chand AIR 1941 Lahore 273." (p. 61) The Privy Council approved the judgment of the Lahore High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But it may be enforced in the same manner as a decree. It means, that though an order passed by the company court does not amount to a decree for the purpose of execution, they will be treated as though they are a decrees and all the provisions of the Code of Civil Procedure relating to the execution of the decree will then apply. . . ." (p. 281) This question, i.e., whether an order made under the Companies Act has the force of a decree also came up for decision before a Division Bench of this Court in Pushpabai Shankerlal Sura v. Official Liquidator, Sholapur Oil Mills Ltd. AIR 1970 Bom. 271. In that case, the appellant sought to invoke the provisions of articles 18 Schedule II of the Indian Court Fees Act, 1870 which applied to a memorandum of appeal "when the appeal is not from a decree or an order having the force of a decree . . . ." The order in question was passed by a company court in the course of winding up. Relying on the judgment of the Privy Council in Lyallpur Bank Ltd. s case ( supra ), this Court observed as follows :- "...When an order is made it is enforceable in exactly the same manner as a decree and it is appealable in the same manner and to the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company who had guaranteed the payment was within the powers of the court and the orders are enforceable under section 634 though these observations were made in the context of a suit entertained and tried by a company court. 16. Mr. Tulzapurkar relied on a decision in Collector of Aurangabad v. Central Bank of India AIR 1967 SC 1831, where the Supreme Court held that certain taxes or dues recoverable under the Hyderabad Land Revenue Act (other than land revenue) may be recoverable as if they were an arrear of land revenue. This, however, did not convert the other taxes or the sales tax into a land revenue. It would only be the procedure for its recovery of land revenue that would be applicable. The Supreme Court rejected the arguments that sales tax dues should be given the same priority that was given to arrears of land revenue under the Hyderabad Land Revenue Act since all that was applicable was the procedure for recovery of land revenue. We are unable to apply the ratio of that case to the present case since here there is no question of the nature of a tax retaining its character even though the procedure for recovery is separately provided as in the case before the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (India) Ltd. AIR 1999 SC 2354 1 . That was a case in which the company against which a winding up petition had been filed, applied for dismissal of the petition on the ground that the winding up petition cannot be entertained in view of section 8 of the Arbitration and Conciliation Act, 1996. The application was dismissed by the company judge who held that the power to pass a winding up order against the company is vested with the company court and it cannot be exercised by the arbitrator. There was no dispute that the appellant-company was bound to pay the amount due to the respondent in lieu of the goods supplied by him. The Supreme Court observed that the proceedings for winding up in a company petition cannot be taken as proceedings regarding settlement of disputes arising out of rights and liabilities of the parties. A winding up petition is a petition which is not essentially for the benefit of the petitioner-creditors alone as it is undisputedly for the benefit of all concerned, i.e., creditors, shareholders, debtors and contributories, etc. It is, in fact, a representative petition on behalf of all for bringing it to the notice of the court that either the company is un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 125 at page 131 and held that even though a winding up petition is rejected, the question as to whether the money is owed to the petitioner or not is left open to be agitated and decided by a civil court if the petitioner files a suit. The learned counsel for the respondent, therefore, submits that a company court hearing a petition for winding up does not conclusively adjudicate upon the merits of the claim or the defence, and does not pass any final order or decrees, one way or the other. We consider it of significance that the case cited above does not deal with a situation where the company admits its liability and consents to an order under which it becomes liable to pay the admitted amount. In such a case, there can be no question of the company court having to decide or adjudicate any claim whatsoever, but would merely have to pass a decree on admission. 21. The next decision relied upon by the learned counsel for the respondent is an unreported decision of a Division Bench of this Court in Maharashtra Distilleries Ltd. v. Kalyani Forge Ltd. [Appeal No. 1292 of 1998 in Company Petition No. 409 of 1997 dated 21-12-1998]. In that case, the company court, i.e., the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed under section 531 of the Companies Act to require the petitioning creditor to bring back the amounts paid to it by the company. Taking the view that an order for winding up does not enure for the benefit of the individual creditor who obtains the order but for all creditors, the court held that an individual creditor is not entitled to enrich himself by collecting payment on the strength of the consent terms, but he must be relegated to the same position in which he was when he presented the petition for winding up. 23. The court held that the petitioning creditor who had received certain amounts under the consent terms must bring back the amount and cannot use section 531 as a shield to retain the money since that section is one of the sections which deals with the effect of antecedent transactions and makes any payment made by the company six months before the commencement of its winding up a deemed fraudulent preference of its creditors and further invalidates such transactions. This decision obviously dealt with payments which were not antecedent. Firstly, while rendering this decision, the extent of jurisdiction of the civil court was not considered and moreover, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ends of justice or to prevent abuse of the process of the Court." Rule 6 of the said Rules reads as follows : "Practice and procedure of the Court and provisions of 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." The submission of the learned counsel for the appellant, apart from section 443, is that full plenitude of the inherent powers of the court is narrowed down or restricted by any provisions of the Companies Act. Thus, the commonly used expression company court is only a convenient way of describing the seat of a High Court Judge dealing with matters under the Companies Act. It does not deny the special or pecuniary jurisdiction or remove the ordinary original jurisdiction of this Court. Therefore, the orders passed by this Court under the Companies Act, nevertheless remain orders passed in exercise of its ordinary original civil jurisdiction, ves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( a ), ( b ), ( c ) and ( d ) do not form a genus or a class at all. They are very different from each other. It is, therefore, difficult to apply the principles of ejusdem generis is even if one takes only clause ( d ) into consideration. Clause ( d ) enables the court to make an order for winding up the company, or make any other order that it thinks fit. According to us, it is clear that an order for winding up may be said to be in a class of its own and, therefore, the words following it, i.e., "or any other order that it thinks fit" do not contemplate a variant of a winding up order. On the other hand, it appears that the other orders contemplated are orders other than those related to winding up and would include orders such as, an order for purchase of shares belonging to the petitioner; vide Shankuntala Rajpal v. Mckenzie Philip (India) (P.) Ltd. [1988] 64 Comp. Cas. 585 (Delhi); the power to issue an order for recall of a winding up order; vide G.T. Swami v. Goodluck Agencies [1989] 1 Comp. LJ 212 (Kar.); an order for sale of the company s assets and to have the sale proceeds deposited in the court for the purpose of making payment to one of the creditors vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Companies Act. We are, therefore, unable to agree with the contention of learned counsel for the appellants that till the date set for hearing of the petition, the hearing of the company petition had not commenced and that the Court had no jurisdiction to pass any interim orders." (p. 433) 29. Undoubtedly no decision has been cited before us in which it is clearly held that a company court has power to pass an order having force of a decree to pay money to a party before it. We are also conscious of the position that in a winding up petition, it is not possible for a company court to assess evidence and to draw up a decree in favour of the petitioner and then to proceed to wind up the company. It is well-settled that where a debt is bona fide , a company court will not entertain a winding up petition. We are, however, of view that where a company admits its liability in a certain sum towards the petitioner, the situation must be viewed differently. In such a situation, there is no need for a court to fold its hands and consider itself powerless to make an appropriate order for payment of money. 30. The learned counsel for the respondent relied on the decision in T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es back to the date of the presentation of the winding up petition, consent orders, in the present case, would not be covered by that section since it must be taken to have been made after the commencement of the winding up petition. 33. On this issue, we are of view that the power to direct payment of money to a petitioning creditor in a winding up petition is not a power which is outside the purview of a company court. That the exercise of such a power is also proper where the debt is admitted and the debtor-company solemnly agrees to discharge it. In fact, winding up proceedings have long been held to be a proper remedy for enforcing payment of just debt and a mode of execution. 34. In Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan, Court Receiver, High Court AIR 1966 SC 1707 where the right of a Court Receiver to maintain a winding up petition was questioned, the Supreme Court held that a Receiver s power under rule 41, rule 1 of the Code of Civil Procedure did not extend only to bringing a suit. It was held that the power of a Receiver under Order 40, Rule 1 intended to preferring petition for winding up of a company which was another mode of realisation of the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner to the power to a suit vide Madhusudan Gordhandas Co. s case ( supra ). 36. We further hold that such an order for payment of money when passed will have the same force as a decree of a court passed in a suit and shall be executable as such and in accordance with the provisions of the Code of Civil Procedure. 37. We have taken this view also a matter of public policy. According to us, it would constitute a serious abuse of the process of law if a debtor-company is allowed to ward-off a company petition filed against it by one of its creditors by simply signing on the consent terms and inviting the court to pass a decree in terms thereof and then raise pleas which defeat the very purpose of the consent order. In the present case it is clear that the respondent got the company petition disposed of by going so far as to guarantee performance of the consent terms which involved payment of the amount admitted by the company and also invited the order against itself to do so and has been chosen to oppose even the issue of an insolvency notice on the grounds discussed above, including the ground that the court had no jurisdiction to pass an order in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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