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Allahabad High Court
In Re: The Allahabad Union Bank … vs Unknown on 28 October, 1927
Equivalent citations: AIR 1928 All 165
Author: Ashworth


Ashworth, J.

1. This is an application under Section 183 (5), Companies’ Act, 1913, on the part of an alleged creditor of the Allahabad Union Bank Ltd., now under liquidation by the Court, asking that a decision of the official liquidators (no date is mentioned), rejecting the petitioner’s claim to realise against the company in liquidation the balance of a decretal sum due under a decree of the Subordinate Judge of Allahabad passed on 31st October 1924, should be reversed.

2. The facts of the case are as follows: The Allahabad Union Bank Ltd. (hereafter called the company in liquidation) by a resolution of the shareholders, entered into voluntary liquidation on 29th June 1924. The liquidators appointed were Messrs. S.K. Day and Co. of Calcutta and Mr. Kashi Narain Malaviya, a vakil of the Allahabad High Court, who were appointed as joint liquidators on a remuneration of Rs. 2,000. Mr. Malaviya never accepted the appointment. On 17th July 1924 an order was passed by the Company Judge of this Court, directing the voluntary liquidation to be continued under the supervision of this Court. It may be remarked, although this fact is immaterial to the present question, that two years later, viz. on 21st May 1926, this order was superseded by an order that liquidation should be by the Court. Before the order of 17th July 1924, the present petitioners brought a suit on 10th July 1924 against two of the directors and the manager, Kedar Nath Mitter, and the Allahabad Union Bank Ltd., which was described as being under voluntary liquidation through S.K. Day liquidator, at least such is stated in the present application. On 31st October 1924, a decree for Rs. 3,099 with costs and future interest was passed against all four defendants by the Subordinate Judge. The sum of Rs. 2401-11-0 has been realized from the two directors in their personal capacity. The official liquidators appointed by this Court refused to entertain the claim for the balance of Rs. 1,399-15-0. Their reasons appear to be as follows. Under Section 171, Companies Act (Act 7 of 1913) the suit in pursuance of which the decree was obtained could not be proceeded with after the 17th July 1924 because on that date liquidation was under the supervision of the Court and it is not contested that Section 171 applies to such liquidation as well as to liquidation by the Court. The official liquidators, therefore, hold that the decree obtained is a nullity as against the company in liquidation. As regards the suggestion that the decree may be treated as a nullity, but the claim as a claim on the promissory note still exists, their contention is that the decree still operates as against the two directors personally and consequently it cannot be said that the decree is altogether a nullity. So long as a decree, operative in part, subsists on the basis of the promissory note it is impossible to treat the promissory note as in existence.

3. The petitioners impugn these arguments as follows: They first maintained that the suit against the bank was at any rate in order from the 10th up to the 17th July 1924. Even this contention seems open to question and, if it were necessary would be decided by me against the applicants. The suit was brought against the bank through S.K. Day liquidator. Mr. S.K. Day could in no way at that date be considered a liquidator. In the first place it was not S.K. Day personally who was appointed liquidator by resolution, but S.K. Day & Co. In the second place, S.K. Day & Co. were not appointed liquidators alone but jointly with Mr. Malaviya. Where two persons are appointed liquidators jointly, it is my view that the refusal of one of them to act renders abortive the resolution appointing them. One of them cannot take up the work alone, it clearly being the intention of the shareholders that they should act jointly and not separately. Then it is said that if the decree against the company in liquidation be abortive the promissory note will, so to speak, revive. For the reasons urged by the liquidators this argument is impossible. The decree is not altogether abortive. It subsists against the two directors personally. Lastly it is urged that Section 171, Companies Act, will not operate as a bar to the validity of the decree against the bank because the liquidators must be deemed to have waived this invalidity. It is said that the present official liquidators are but the legal successors of S.K. Day and he never raised any objection to the process of the suit against the bank. This argument is met partly by the fast that, as held above, Mr. S.K. Day had no locus standi as a liquidator., Apart from this I find no authority for holding that the liquidators could waive the bar created by Section 171 in such a way as to require them to admit a claim under decree rendered inoperative by that bar.

4. I have been referred to a decision by a single Judge of the Madras High Court reported in (June) Narasimham v. [Donepudi) Subramaniam (All India Reporter 1927, Madras p. 201), where it wags held that a decree obtained against a certain insolvent or certain insolvents would not be inoperative by reason of the requisite leave to sue not having been obtained, if such insolvent did not raise the plea at the time of the suit. This decision is not relevant. I was distinctly held in that case that the Official Receiver was not made a party to the suit and was therefore not bound by the decree. It was merely held that the decree might operate as against the insolvent. The finding that the Official Receiver was not bound by the decree is one that is destructive of the present application. In like manner the official liquidators in this case are entitled to disown, the decree. So the decision relied on, instead of being in favour of the petitioners is against them. The counsel for the petitioners with great pertinacity maintains that his clients should be allowed to produce their account books to prove the claim. For the reasons set forth above by me there does not now exist any claim except the decree. In refusing to satisfy the decree the liquidators have been held to be justified and there is nothing else in existence creating any liability against the insolvent company. For the above reasons I hold that this application must fail. As an official liquidator has argued the case himself I make no order as to costs.

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