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TMI Blog1975 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... itra, as his heirs and legal representatives. Thereafter, on February 12, 1970, judge's summons was taken out at the instance of the official liquidator for leave to proceed with the said misfeasance application against the said heirs and legal representatives of Dr. Sinha and for their substitution in place of Dr. Sinha. On November 9, 1970, S. P. Mitra J., as his Lordship then was, passed an order for substitution. This appeal has been preferred on December 7, 1970, against the said order. 3. Mr. R. Chaudhuri, counsel for the appellant, has drawn our attention to the words in Section 543(1) of the said Act, and relying upon several English and Indian decisions, has submitted that the misfeasance proceeding, in the very nature of such proceeding, cannot continue against the heirs and legal representatives of a deceased director. Mr. B. Das, counsel for the official liquidator, however, has justified the correctness of this order of Mitra J, mainly on the ground that the heirs and legal representatives of the said delinquent director have enriched themselves by inheriting money or property of the said company which Dr. Sinha wrongfully retained. 4. Mr. Das also has raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m any order made, or decision given, in the matter of the winding up of a company by the court shall lie to the same court to which, in the same manner in which, and subject to the same conditions under which, appeals lie from any order or decision of the court in cases within its ordinary jurisdiction. 5. On a plain construction of the said section, the first part gives the party affected a substantive right of appeal against any order which may be made in the matter of winding up of a company and the words in the matter of winding up must be construed as in connection with or in the course of such winding up . The latter part of the section only sets out the procedure or the mode and the manner in which such appeal can be filed. 6. In connection with the maintainability of this appeal, Mr. Das has also submitted that the order under appeal is not a judgment under Clause 15 of the Letters Patent. According to him, the order under appeal has only decided to substitute the heirs of Dr. S. N. Sinha at the instance of the official liquidator before the court of first instance and the rights and liabilities of the appellants have not been finally determined. Relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding has been held to be possible in spite of the express provision of Section 543 of the Companies Act, 1956. If the court has the power to substitute the heirs on the ground that the children can be made liable for the conduct of their father, a decision to that effect has been made on the company court's jurisdiction and thus the test of the said Full Bench decision is satisfied. It has been held by Mitra J. that the heirs may be liable in the same way as the director might be liable for misfeasance or breach of trust under certain contingencies and it is on that basis the learned judge has substituted the heirs of Dr. Sinha although Dr. Sinha died before he was even examined under Section 543 of the Act. The learned judge has not only decided a substantive law of importance but also has indirectly decided the rights of the company court to determine the liability of the heirs of such delinquent director to the limited extent of the properties inherited by them. 8. In this connection reference may be made to Shankarlal Aggarwala v. Shankarlal Poddar on which the counsel for both the parties have relied. In the said decision an order was passed by the company court confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h an appeal is expressly allowed by Rules . Section 122 of the Code empowers the High Court to make rules in different States. If the conditions relating to appeal in respect of an order passed by a company court in the districts are to be determined by rules framed by different High Courts in different States, the maintainability of an appeal against such order or decision would be different in different States. Similarly, in the same State also the right to appeal in respect of such order or decision would be different if such order is passed by a company judge of the High Court and a district judge of a civil court in the State. Reliance may be placed upon the observations of Ayyangar J., at page 13, which are as follows : We thus agree with Chagla C.J. that the second part of the section which refers to ' the manner ' and ' the conditions subject to which appeals may be had ' merely regulates the procedure to be followed in the presentation of the appeals and of hearing them, the period of limitation within which the appeal is to be presented and the forum to which appeal would lie and does not restrict or impair the substantive right of appeal which has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions the liability of the estate of such delinquent director in case of such misfeasance or breach of trust. There is complete silence of any liability directly or indirectly to be imposed upon the heirs and legal representatives of such director on the ground that such heirs and legal representatives have enriched themselves by wrongfully misappropriating the assets of the company. In this connection reliance may be placed upon Official Liquidator, Supreme Bank Ltd. v. P. A. Tendolkar, [1973] 43 Comp Cas 382 (SC) where Beg J., at page 398, has stated. But we think that the power under Section 235 of the Act of 1913 which corresponds to Section 543 of the Act of 1956 would not extend beyond making a declaration against a deceased director provided he, in his lifetime, all heirs, after his death, have had due opportunity of putting forward the case, on behalf of the allegedly delinquent director. If either a liquidator or the heirs of a delinquent director, against whom a declaration of liability has been made, can question the determination of liability of the deceased delinquent who was alive at the time of judgment against him, it is obvious that the appellate court could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter his examination by the company court in the misfeasance proceedings. Even, in such a case, although the liability of Mr. Tendolkar was declared, his estate was not followed up in the hands of his heirs or legal representatives. In the present case, Dr. Sinha died before he was even examined and no declaration of liability against him could be made. Thus, even from a practical point of view even if the appellants were substituted in place of Dr. Sinha no compulsive order could be made against them, although the company court might decide against the delinquent directors who are jointly and severally liable. Further, the son and the two married daughters of Dr. Sinha could not have any personal knowledge about their father's dealings and affairs with the said company in liquidation. 14. The common law doctrine of actio personalis moritur cum persona, as argued by the counsel for both the parties, cannot have any application to cases under a special statute such as the Companies Act. In view of the express words used in the said Section 543 and the observations of the Supreme Court, we are of opinion that the learned judge is not justified in substituting the names of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the company, or any past or present director, manager or liquidator, or any officer of the company has misapplied or retained or become liable or accountable for any money or property of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court may, on the application of the liquidator, or of any creditor or contributory made within three years from the date of the first appointment of a liquidator in the winding up or of the misapplication, retainer, misfeasance or breach of trust, as the case may be, whichever is longer, examine into the conduct of the promoter, director, manager, liquidator or officer, and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just. (2) This section shall apply notwithstanding that the offence is one for which the offender may be criminally responsible. 7. Section 543 of the Companies Act, 1956, reads as follows : 543. (1) If in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust as the court thinks just. (2) The provisions of this section shall have effect notwithstanding that the offence is one for which the offender may be criminally liable. (3) Where in the case of a winding up in England an order for payment of money is made under this section, the order shall be deemed to be a final judgment within the meaning of paragraph (g) of Sub-section (1) of section one of the Bankruptcy Act, 1914. 9. From a perusal of the abovementioned provisions in regard to the proceedings relating to misfeasance committed by directors or other officers of a company it is clear that the above-mentioned 3 sections have been expressed in identical terms with very minor variations. 10. Section 236 of the Indian Companies Act of 1913 was in terms same as Section 165 of the English Companies Act, 1862. In construing Section 165 of the English Companies Act, the English courts were of the uniform opinion that Section 165 of the Companies Act, 1862, conferred power on the court to examine the delinquent director or officer of a company in regard to misfeasan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor or officer mentioned in the section and compel him to pay such amount as would compensate the company for the loss occasioned to the company by the misfeasance or breach of trust of such directors or officers by means of an application in the winding-up proceeding itself without being required to recover the loss from such delinquent director or officer by means of a separate suit, so that complete justice might be done between the parties and a complete winding-up effected . Reference may be made to the observations of Giffard L.J. in Stringer's case, [1869] 4 Ch D 475, 493. 12. The decision in the abovementioned English case relating to the construction of Section 165 of the English Companies Act of 1862 was followed by different courts in India in interpreting Section 235 of the Indian Companies Act, 1913. Harrison J. in S. B. Billimoria, Official Liquidator v. Cecilla Mary De Souza, AIR 1926 Lah 624 was of the opinion that Section 235 which was introduced in the Indian Companies Act, 1913, from the English Companies Act of 1862, could not have any different meaning. Harris J. in Official Liquidators of the Mufassil Bank Ltd. v. Jugal Kishore, [1938] 8 Comp Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubt, was aware of the construction put by the courts on Section 235 of the repealed Act. Notwithstanding the same, Parliament enacted Section 543 of the Companies Act, 1956, in identical terms as Section 235 of the repealed Act. In the premises it has to be held that the legislature intended that Section 543 would have the same meaning as was held to be the meaning of Section 235 of the repealed Act by the courts for the long series of years before the 1913 Act was repealed. Reference in this connection may be made to the case of Bengal Immunity Co. v. State of Bihar, and especially to the observations of the Supreme Court appearing at paragraph 22 of the judgment at page 674 of the report. Parliament in the Companies Act, 1956, made certain sections applicable to heirs and legal representatives in express terms, e.g., Sections 429, 430, 431 as well as Section 542. In refraining from making Section 543 applicable to the deceased director or officer, etc., the legislature has, in my opinion, approved of the established accepted construction of Section 235 of the repealed Act as laid down by different courts in the cases mentioned here-inabove. 16. S. V. Venkatasubbu v. Utilities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der : 583. Winding up of unregistered companies.--(1) Subject to the provisions of this part, any unregistered company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered company with the exceptions and additions mentioned in Sub-sections (2) to (5). (2) For the purpose of determining the court having jurisdiction in the matter of the winding up, an unregistered company shall be deemed to be registered in the State where its principal place of business is situate or, if it has a principal place of business situate in more than one State, then, in each State where it has a principal place of business ; and the principal place of business situate in that State in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company. (3) No unregistered company shall be wound up under this Act voluntarily or subject to the supervision of the court. (4) The circumstances in which an unregistered company may be wound up are as follows :-- (a) if the company is dissolved, or has ceased to carry on business, or is carrying on busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Poddar. The Supreme Court observed in the said case : We thus agree with Chagla C.J. that the second part of the section which refers to ' the manner ' and ' the conditions subject to which appeals may be had ' merely regulate the procedure to be followed in the presentation of the appeals and of hearing them, the period of limitation within which the appeal is to be presented and the forum to which appeal would lie and does not restrict or impair the substantive right of appeal which has been conferred by the opening words of that section. We also agree with the learned judges of the Bombay High Court that the words 'order or decision' occurring in the first part of Section 202, though wide, would exclude merely procedural orders or those which do not affect the rights or liabilities of parties. 20. In any event, in my opinion, Section 583 of the present Act does not confer any power upon the court to direct substitution in a proceeding initiated under Section 543 of the Companies Act, 1956. In directing substitution in such a proceeding the court makes the order which is beyond its jurisdiction and thus such an order is a judgment within t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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