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Bombay High Court
Balkrishna Mahadeo Vartak vs Indian Association Chemical … on 1 January, 1800
Equivalent citations: 1958 28 CompCas 179 Bom
Author: Chainani
Bench: H Chainani, Y Tambe


Chainani, J.

1. The father of appellants Nos. 1 and 2 and husband of appellant No. 3 had given on lease a land S. No. 128 of Mouje Kothrud in Haveli Talika to the respondent company on February 11, 1944. One of the conditions of the lease was that the company should not sub-lease or transfer the land to any other person without the permission of the lessors. The company, however, assigned its leasehold rights to one of its directors, G.N. Patwardhan for a consideration of Rs. 8,200. The land is now in the possession of Patwardhan. The company subsequently filed a suit for setting aside the assignment in favour of Patwardhan. This was dismissed. In 1953 an order was made for the winding up of the company and an official liquidator was appointed. He obtained a decree for over Rs. 8,000 against Patwardhan. This decree has not yet been executed. The appellants were paid rent for three years by the liquidator, but it is their case that they have not received rent due to them since 1953. It is also the contention of the appellants that the company has committed several breaches of the conditions of the lease According to them, a large number of trees standing on the land had been wrongfully cut down. They, therefore, gave notices to the company and Patwardhan terminating the lease. They also asked for possession of the land being given to them. Thereafter, they made an application to the District Judge under section 446 of the Companies Act, 1956, for leave to file a suit against the company in order to obtain possession of the land. The learned District Judge rejected the application. The appellants have, therefore, appealed.

2. Mr. Khare, who appears for the official liquidator, has contended that the appeal is not competent. Section 483 of the Act provides that appeals from 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. Mr. Khare has urged that the order passed by the District Judge refusing to grant leave to the appellants to file a suit against the company cannot be said to be an order made or decision given in the matter of winding up. We are unable to accept this argument. In our opinion, the words “in the matter of the winding up of a company” are sufficiently wide to include an order of the kind appealed against. In Maneklal v. Saraspur Manufacturing Co. Ltd., an appeal was entertained against an order passed by the District Judge refusing to grant leave to the appellant to proceed with a suit. The question whether an appeal lay against such an order was, however, not raised or decided in this case. A Full Bench of the Lahore High Court held in Sansar Chand v. Punjab Industrial Bank Ltd. on interpretation of the corresponding section 202 of the old Companies Act, that :

“….. (it) is wide enough to cover appeals against any order made in the matter of winding up of a company provided such an order finally decides a dispute between the parties or deprives the appellant of a substantial and important right and is not a mere formal or interlocutory order .”

3. This decision of the Lahore High Court has been referred to with approval in Bachharaj Factories Ltd. v. Hirjee Mills Ltd., in which it was observed that section 202 of the old Companies Act, which corresponds to section 483 of the present Act, conferred a substantial and a very valuable right and that the court must be anxious not in any way to cut down or impair that right. It was held that the first part of the section provided a right of appeal against an order or decision which was not purely procedural in character, but which affected the rights or liabilities of parties, and that the second part of the section, which dealt with the manner and the conditions in which an appeal might be preferred did not in any way cut down or impair the substantive right conferred by the first part of the section, but only referred to the procedural aspect of an appeal and the forum to which the appeal would lie.

4. Section 446 provides that when a winding up order has been made, no suit shall be commenced except by leave of the court and subject to such terms as the court may impose. The object of the section is to save the company, which is being wound up, from unnecessary litigation and to protect its assets for equitable distribution amongst its creditors and its shareholders. The consequence of the winding up order, therefore, is that no suit can be filed against the company without obtaining the leave of the court. An application for such leave is, therefore, made necessary by the order for winding up. In dealing with such an application, the court has necessarily to consider the interest of the company and to see that its assets are not wasted in frivolous and unnecessary litigation. An order of decision on such an application is, therefore, clearly an order or decision in the matter of winding up. It is not a mere procedural order for it affects the valuable right to obtain relief by filing a suit. An appeal, therefore, lies against such an order or decision under section 483 of the Act.

5. We are, therefore, of the opinion that the present appeal is maintainable.

6. The next question to be considered is whether this is a fit case in which leave to file a suit against the company should be granted. Mr. Patwardhan, who appears for the appellants, has stated that the appellants do not wish to file a suit in order to recover arrears of rent due to them. Their claim in regard to these arrears will be decided by the liquidator. They only want leave to file a suit for obtaining possession of the land leased by them. This land is not in the possession of the company at present. It is in the possession of Patwardhan, to whom the leasehold rights had been assigned by the company. The right of the appellants to obtain possession cannot also be adjudicated upon by the liquidator in the winding up proceedings. Leave to file a suit should ordinarily be granted, where the question at issue is one which cannot be gone into and decided in the winding up proceedings.

7. We, therefore, think that the appellants should be granted the permission asked for by them.

8. Accordingly, we set aside the order passed by the District Judge and grant permission to the appellants to file a suit against the respondent company in order to obtain possession of the land given by them on lease to the respondent company. The appellants will be entitled to recover their costs of the appeal from the respondent company.

9. Appeal allowed.

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