JUDGMENT
1. This is an appeal under Section 202 of the Indian Companies Act, 1913, against the order of the Company Judge (Sahai, J.), dated the 13th September 1963, in a proceeding under Section 235 of
that Act. That proceeding was initiated on an application by the Official Liquidator for action under that section against 23 persons including several Directors of the Company under liquidation, viz., the Gaya Sugar Mills, Ltd. He alleged that, while in charge of the assets of the Company, they committed various acts of misfeasance, malfeasance, non-feasance, breach of trust, etc., and, that, consequently action should be taken against them under, Section 235.
2. It is, however, conceded by counsel for both sides that, against some of the persons named by the Official Liquidator, the Company Judge did not take further action, he continued the proceeding under Section 235 only against some of the Directors; but, at the preliminary stage of the proceeding, Counsel for the Liquidator and for Lakshmipat Singhania and Bridhi Chand Bhalotia (the two respondents here) requested him to take up first the question whether, at that stage, the proceeding should go on against Lakshmipat Singhania and Bridhi Chand Bhalotia (two of the Directors named in paragraph 9). It was also conceded by counsel for both sides that such a proceeding should go on only if there was a prima facie case against them. The learned Company Judge then addressed himself to this limited question, and, after a full discussion, passed the following order:
“In the result, I do not think that a prima facie case for action under Section 235 has been made out against either of the two Directors in question. Hence, I direct that these two persons be released from the enquiry at this stage.”
It is conceded by counsel for both sides have that, after releasing these two Directors, the Company Judge is proceeding with the enquiry against some Directors mentioned in the original application of the Official Liquidatoi
3. Mr. Lalnarayan Sinha for the respondents raised a preliminary objection to the maintainability of this appeal. According to him. notwithstanding the wide language used in Section 202 of the Indian Companies Act, 1913, their Lordships of the Supreme Court in Shankarlal Aggarwala v. Shankarlal Poddar, AIR 1965 SC 507 at p. 534 have held that the “order or decision”, referred to in that section, would exclude “merely procedural orders or decision which do not affect the rights or liabilities of the parties.” According to him, therefore, where only a tentative decision Is taken to drop the proceeding against two of the Directors at that stage, no order finally affecting the rights and liabilities of the parties has been passed by the Company Judge, and that consequently no appeal lay.
4. I am inclined to accept this contention. There can be no doubt, in view of the aforesaid judgment of the Supreme Court, that it is not every order or decision of a Company Judge that is appealable under Section 202. Those orders which do not affect
the rights and liabilities of the parties will not be appealable. If a Company Judge, at the preliminary stage of the hearing of an application under Section 235 against several persons, considers that, at that stage, there was not a prima facie case against two of the persons, and hence decides to drop the proceeding against them, the order cannot be said to affect the rights or liabilities of the parties. The proceeding is still continuing against others, and, if, in the course of that proceeding, some other facts come to light, which have a bearing on the conduct of Lakshmipat Singhania and Bridhi Chand Bhalotia, the Company Judge will undoubtedly have jurisdiction to reconsider his order. Hence, his order under appeal cannot be said to have been attained that finality to make it appealable.
5. The language of Section 235(1) of the Indian Companies Act, 1913, may now be carefully examined. That sub-section says (omitting the immaterial portions):
"Where, in the course of winding up of a company, it appears that .... any past or present director ..... .has misapplied or retained or become liable or accountable for any money or property of company, the Court may. on the application of the liquidator,. .... examine into the conduct of the .... director... ...
and compel him to repay or restore the money or property or any part thereof respectively with interest as 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 fit”
This sub-section consists of two parts. In the first part, the jurisdiction of the Company Judge to enquire into the conduct of the Directors arises only If there is a prima facie case. This is clear from the words “it appears that” occurring in the first part. If, however, he considers that there is a prima facie case, he may further examine the conduct of the Directors, and finally pass orders against them, as indicated in the second part of the sub-section. An order passed either rejecting the application of the Liquidator finally or allowing it and directing the Directors concerned to recoup the loss to the Company would undoubtedly be a final order affecting the rights and liabilities of the parties and, as such, appealable But, where, in the initial stage of a proceeding under Section 235, the Company Judge merely says that, at that stage, there is no prima facie case against two of the Directors and decides that the proceeding against them should be dropped and that the enquiry should be continued against some of the other Directors, the; order cannot be said to decide finally the rights and liabilities even in respect of those two Directors. The Companv Judge’s jurisdiction to decide this question as a prelimi-
nary issue is beyond doubt, and, as already pointed out, the first two paragraphs of his judgment show that counsel for both sides and only conceded his jurisdiction to decide this preliminary matter but expressly desired him to decide it. Mr. Lalnarayan Sinha further stated that, by using the words “at that stage” in the operative portion of the order, the Company Judge merely indicated that it would be left open for him to consider on a future occasion if sufficient materials are made out whether it would be proper to re-open the enquiry in respect of these two Directors either on the basis of fresh materials or otherwise according to law. In our opinion, this interpretation of the effect of the order of the Company Judge is correct.
6. For these reasons, we hold that the appeal is incompetent, and hence we dis miss the same. There will be no order a? to costs.