Patna High Court
In Re: Monghyr Electric Supply Co. Ltd. ... vs Unknown on 9 September, 1966
Equivalent citations: AIR1968PAT166, [1967]37COMPCAS84(PATNA)
ORDER U.N. Sinha, J.
1. This is an application filed by the Official Liquidator of Monghyr Electric Supply Company Limited fin liquidation), under Section 20 of the Arbitration Act, 1940, praying that the Bihar State Electricity Board may be directed to file an agreement dated the 6th July. 1956 between Monghyr Electric Supply Company Limited and the Governor of Bihar, with respect to the dues and claims of the company for its undertaking taken over by the Government of Bihar. Further prayers are that after a perusal of the agreement, an order may be parsed referring the dispute to an arbitrator to be appointed by mutual consent, and and if not to an arbitrator appointed by the Court. To this application the respondents are the Bihar State Electricity Board and the Government of Bihar, through the Secretary of the Electricity Department, added subsequently.
2. The circumstances: under which this application has been filed are these: The Registrar of Companies. Bihar had moved this Court for winding up Monghyr Electric Supply Company Limited, and by an order passed on the 18th December, 1962, the Company was ordered to be wound up by the Court. The Official Liquidator is in charge of the liquidation. In August, 1965 the Official Liquidator had filed a report praying that the State Electricity Board may be directed to pav Rs. 45,637, being the balance of the claim admitted by them, without prejudice to the right of the Official Liquidator to claim any further amount of compensation as and when fixed by an arbitrator. A further prayer was made to the effect that the Court may appoint an arbitrator to adjudicate the dispute that has arisen with respect to the valuation of the properties of the Company taken over by the Government of Bihar. By an order passed on the 17th September, 1965 (Item No. 5 of Order No. 48) notice was issued to the State Electricity Board to show cause why the Board should not be directed to pay compensation to the Official Liquidator. The question of appointment of an arbitrator was postponed until the appearance of the Board.
The Board filed a show cause petition on the 1st December, 1965. It was contended in the petition that the sale deed dated the 6th July, 1956, which was the basis of the Company's case, was between the Company and the Governor of Bihar and the Board had come in possession of the undertaking of the Company only by virtue of Section 60 of the Electricity (Supply) Act, 1948. It was stated that the State of Bihar was a necessary party to the Company's petition. It was alleged that the Official Liquidator's claim was barred by Limitation. Amongst other allegations, controverting the Company's claim, it was mentioned that according to paragraph 6(ii) of the deed of the 6th July, 1956, in the absence of agreement between the parties regarding the valuation of the materials and properties, liability to further payment arises only after the decision of the arbitrator on the point of valuation. It was alleged that the Board was justified in withholding the amount of Rs. 45,637 claimed by the Company in the circumstances mentioned in that show cause petition and it was contended that the prayer of the Official Liquidator for payment of this money should be reacted.
To this show cause petition a reply was given by the Official Liquidator in the shape of a report filed on the 13th Jan., 1966. The same prayer for an order on the State Electricity Board for payment of money was repeated and this Court was asked to appoint an arbitrator to adjudicate over the disputed valuation in terms of paragraph 6(ii) of the sale deed. This report was followed by another petition by the State Electricity Board filed on the 22nd February, 1966, The contentions raised by the Board in their show cause petition dated the 1st December, 1965 were repeated. It was added that the Company Judge had no jurisdiction to appoint an arbitrator. The necessity of adding the State of Bihar as a party was repeated. It was on the same day, namely, the 22nd February, 1966, that this application under Section 20 of the Arbitration Act was filed by the Official Liquidator. Thereafter, by order dated the 22nd March. 1968 (Item No, 1 of Order No. 56), notice was issued to the Government of Bihar, in pursuance of an application filed by the Company to make it a party, to show cause why the Government of Bihar should not be made a party-respondent. On the 10th May, 1966, the Government of Bihar was ordered to be made a party by Order No. 57 Item No. 2. It may be mentioned that the Government of Bihar has not entered appearance in this case, which is being contested only on behalf of the Bihar State Electricity Board.
3. One of the contentions raised on behalf of the Board is that this application filed under Section 20 of the Arbitration Act is not entertainable by this Court, as it is not a "Civil Court" within the meaning of the Arbitration Act. According to learned counsel for the Board, a party to an arbitration agreement may apply, to a "Court having jurisdiction in the matter to which an agreement relates", that the agreement be filed in Court, but it is argued that the meaning of the expression "Court" in this context has to be found out from the definition given in Section 2(c) of the Arbitration Act. The definition of the word "Court" given in the Arbitration Act is as follows:--
'' 'Court' means a Civil Court having jurisdiction to decide the questions forming the subject-matter of th,_ reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 2; include a Small Cause Court."
It is contended that the expression "Civil Court" mentioned in Section 2(c) is not synonymous with a Court which may have jurisdiction to decide civil rights between parties. Sri Shreenath Singh appearing for the Official Liquidator has, on the other hand, relied upon Section 446(2) of the Companies Act, 1956 and has contended that this application has validly been presented to this Court, which is winding up the Company The relevant portion of Section 446(2) of the Act runs as follows:--
"446(2). The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of -
(a) any suit or proceeding by or against the company;"
Sri Singh has urged that this Court has jurisdiction to entertain and dispose of all suits and proceedings by the Company, notwithstanding anything contained in any other law for the time being in force, and therefore, this proceeding is entertainable by this Court in winding up. In my opinion, the contentions raised by the learned counsel for the Board, disputing the jurisdiction of this Court, are not valid. Even if we go to the definition given in Section 2(c) of the Arbitration Act, "Court" means a Civil Court which can decide a matter in dispute if the same had been the subject-matter of a suit. Now, under Section 446(2) of the Companies Act, this Court can entertain a suit instituted by the Company and decide the subject-matter of the reference, if it were the subject-matter of the suit, and, therefore, there does not appear to be any bar to the entertainment of the present application. Even if it were permissible to be so punctilious in ascertaining the meaning of the expression "Civil Court" within the meaning of the Arbitration Act, as is contended by the learned counsel for the Board, the expression "notwithstanding anything contained in any other law for the time being in force" appearing in Section 446(2) of the Companies Act must give jurisdiction to this Court, winding up the Company, to entertain this application under Section 20 of the Arbitration Act. If the arguments advanced on behalf of the Board were to be accepted, then there is no forum where the question raised by the Company can be agitated.
Section 446(1) of the Companies Act will prevent the Company from raising the question anywhere else, except by leave of this Court.
4. The next contention raised on behalf of the Board, which falls for consideration, is a bar of limitation It is contended by Sri K. D. Chatterji appearing for the Board, that the Limitation Act, 1963 (Act No. 36 of 1963) is applicable in this case and this application under Section 20 of the Arbitration Act is barred under Article 137 as the Company's right to apply had accrued in 1960 f either on the 9th January, 1960, or on the 12th March, 1960 or on the 18th May, 1960). Learned counsel for the Official Liquidator has, on the other hand, contended that Article 137 of the Limitation Act does not apply to this application filed under the Arbitration Act, apart from the fact as to when the right to apply had accrued. According to him, even of any Article of the Limitation Act applied, the right to apply had not accrued prior to the 9th June, 1962. For the purpose of considering the applicability of Article 137 of the Limitation Act and the contentions as to when the right to apply had accrued, or could have accrued, paragraph 6(ii) of the deed dated the 6th July, 1956 has been filed on the 20th August, 1966, with an affidavit of the Official Liquidator, and paragraph 6(ii) is quoted therefrom:--
"6(ii) That the vendors and assignors And the officers of the Electricity Department under the purchaser and assignee will each make a detailed valuation within three months from the date of vesting and in case the total valuation of all items on which there would be agreement would exceed Rs. 4,81,350 (Rupees Four Lacs Eightyone Thousand, three hundred and fifty only), the amount towards consideration already received by the vendors and assignors, such excess amount shall be paid by the purchaser and assignee to the vendors and assignors within one month of the date of such agreed valuation. The matter of valuation of any items on which there may be difference between the parties shall be referred to the arbitration of a single arbitrator appointed with the mutual consent of both the parties whose decision on the point of valuation will be final and binding on them."
Article 137 of the Limitation Act reads thus:--
"Description of suit Period of limitation Time from which period begins to run.
137. Any other application for which no period of limitation is provided in this Division "
Three years.
When the right to apply accrues.
The relevancy of the three dates given by Sri Chatterji, namely, the 9th January, 1960, 12th March. 1960 and the 18th May, 1960 are as follows: On the 9th January, 1960, Mr. J Kurivan, Chief Electrical Engineer, Bihar. had sent a letter to the Managing Agents of the Monghyr Electric Supply Company Limited on the final valuation of the assets of the undertaking. A copy 'if this letter has been made Annexure A to the petition of the Board filed on the 22nd Februarv. 1966. In this letter, after valuing the assets, building and the land and adding to it a solatium of 10 per cent. it was mentioned that the balance of Rs. 3.02.351 was due to the Company after oavment of Rs. 7, 29, 139. Thereafter, the letter stated thus:--
"I am therefore to request you to please indicate your acceptance of the above valuation within a fortnight from the date of receipt of this letter so that arrangement for payment may be made without delay. If it is not acceptable by you, then you should refer the matter to arbitration according to the terms and conditions of the agreement. It is however made clear again that since the delay has been due to your non-acceptance of the valuation, the State Electricity Board will not be liable for payment of interest with effect from the date of communication of the valuation to you.
You are also requested to please furnish clearance certificates from the Income Tax and Sales Tax Department and also about the refund of excess service connection charges realised from the consumers and security deposit of the consumers."
Then, on the 12th March, 1960. Mr. Kuriyan describing himself as the Chief Engineer of the Bihar State Electricity Board sent another letter to the Managing Agent of the Company on the same subject. A copy of this letter has been supplied with the petition of the Board filed on the 22nd February 1966. The letter reads thus :--
"With reference to your letter Nos. 2077 and 2078 dated the 30th January. 1960. I am to observe as follows:---
(1) It is not possible to give a copy of the detailed valuation of the items, the value of which has been revised; an abstract of the same is, however, enclosed which would serve the purpose for which it is required.
(2) I do not agree that the Board is not concerned with the refund of the excess Service connection charges realised by the Co, from the consumers. In fact many genuine claims have already been lodged with the S. E. Board and it is only iust and equitable that their claim are settled without delay.
(3) In his letter No. 105-M(A)-2627 dated the 11th Feb. 1960, the Income-tax Officer, Bhagalpur, has advised the State Electricity Board that no further payment should be made to the Monghyr Electric Supply Co. Ltd. until receipt of tax clearance certificate from the Income Tax Department. A copy of his letter referred to above is enclosed for your information. In view of the advice of the Income-tax Officer, no further payment can be made until the clearance certificate already called for in Board's letter No. 62 dated 9-1-1960 has been produced. Besides this, even the revised valuation has not been accepted by you. You are again requested to please intimate your acceptance of the above valuation without further delay, on that the payment of the balance amount may be made forthwith otherwise the matter should be referred to arbitration without further argument on this issue."
(The contents of the letters dated the 30th January, 1960, mentioned herein, are not known as those letters have not been brought on the record). With a supplementary affidavit filed on behalf of the Board on the 20th August, 1966, a copy of a letter dated the 18th May, 1960 from the Secretary to the Board to the Managing Agent of the Company on the same subiect has been supplied. The letter reads thus :--
"In continuation of the Board's letter No. 1890 dated the 12th March I960 I am directed to say that the total final valuation of the assets of the Monghyr Electric Supply Undertaking, including land, building and plant and materials as made by the State Electricity Board comes to Rs. 9,37,718 (Rs. nine lakhs thirty-seven thousand and seven hundred and eighteen) only out of which a sum of Rs. 6.81,004 (Rs Six laks eighty-one thousand and four) only has already been paid to the ex-licensee On account, besides Rs. 48,135 (Rs. forty-eight thousand one hundred and thirty-five) only paid as solatium. Now in view of the prolonged delay, the Board has decided to pay the balance of the consideration money amounting to Rs. 2,56,714 (Rs. two lakhs fifty-six thou-
sand seven hundred and fourteen) only. Please arrange to receive the payment at an early date."
On behalf of the Official Liquidator, a letter from the Secretary of the Board to the Director of the Company, dated the 9th June, 1962, on the same subject, is relied upon. A copy of this letter has been annexed to the report of the Official Liquidator dated the 13th January. 1966, and it reads thus -
"With reference to your letter no, 10/22 dated the 2nd November, 1960, I am directed to say that the Board regrets its inability to reconsider the valuation already made by it and paid to the Company."
(The letter dated the 2nd November, 1960, mentioned in the quotation will be referred to in tht due course).
Upon the question of applicability of Article 137 of the Limitation Act, Sri Shreenath Singh has argued for the Official Liquidator that the application mentioned in that Article can only refer to an application filed under the Civil P. C., as has been more than once, observed by the Supreme Court of India while interpreting the corresponding Article 181 of the old Indian Limitation Act, 1908. That article prescribed the period of limitation of three years from when the right to apply accrued for applications "for which no period of limitation is provided elsewhere in this schedule or by Section 48 of the Code of Civil Procedure, 1908" Sri Chatterji has contended, on the other hand, for the Board, that the wordings of Article 137 are different from the wordings of the old Article 181. and Article 137 applies to all applications and petitions, whether they are filed under the Civil Procedure Code or under any other law. Reliance is placed on Clause 2 of the Notes on Clauses of the Bill introduced to consolidate and amend the law for the limitation of suits and other proceedings This Clause runs thus :--
"A new definition of 'application' is being inserted so as to include a petition original or otherwise. The object is to provide a period of limitation for original applications and petitions under special laws as there is no such provision now Consequential changes have been made in the definition of 'Applicant' "
In substance, Sri Chatterii's contention is that an application under Section 20 of the Arbitration Act should now be governed by Article 137 of the Limitation Act. 1963 I am, however, not in a position to accord the contention of Sri Chatterji. It does not appear to me that Article 137 of the new Limitation Act can be interpreted to mean that it will govern all applications or petitions under all laws, for which no period of limitation has been provided in the third division of the new Limitation Act. The difference in wordings between the old Article 181 and the new Article 137 does not provide any clue to the change contended for. No doubt Clause 2 of the Notes on Clauses has mentioned that a new definition of the expression "application" was being inserted, to provide a period of limitation under special laws, but it appears that this has been taken from the recommendation made by the Law Commission of India, in the Third Report on the Limitation Act, 1908. Dealing with the new definition of the expression "application/' the Law Commission stated thus;--
"We recommend that a new definition of the word 'application' so as to include any petition, original, or otherwise, should be added. The object is to provide a period of limitation for original petitions and application under special laws, as there is no such provision now. Consequent alteration in the definition of the word 'applicant' should also be made."
But, the suggestion of the Law Commission with respect to the corresponding provision of limitation was as follows:
"other applications for which no period of limitation is provided by any law for the time being in force." The period of limitation was three years from when the right to apply accrued. The Limitation Act of 1963 omitted from Article 137 the crucial words "by any law for the time being in force."
Therefore, in my opinion, the interpretation put upon by their Lordships of the Supreme Court on Article 181 of the old Limitation Act should still prevail in interpreting Article 137 of the new Limitation Act. The relevant decisions of their Lord-ships are reported in AIR 1953 SC 98. Sha Mulchand and Co. Ltd v. Jawahar Mills Ltd. and AIR 1964 SC 752, Bombay Gas & CO. Ltd. v. Gopal Bhiva. Learned counsel for the Board has contended that the question whether an application under Section 20 of the Arbitration Act can come within the purview of Article 181 was not specifically dealt with by their Lordships of the Supreme Court and in view of Section 37(1) of the Arbitration Act. 1940 it should be held that their Lordships' decisions, mentioned above, would not apply to an application under Section 20 of the Arbitration Act. I am, however, not in a position to accept this contention based on Section 37(1) of the Arbitration Act. That the Arbitration Act had not gone unnoticed is clear from the decision reported in AIR 1953 SC 98. Reference was made to Articles 158 and 178 of the old Limitation Act, which were Incorporated by amendment in 1940, and their Lordships stated that the meaning of Article 181 of the old Limitation Act should be as if the words "under the Code" are Incorporated in the first column of that Article. Merely because Article 137 of the new Limitation Act states that it shall apply to an application for which no period of limitation is provided "elsewhere in this Division", I am doubtful whether this Article can be made applicable as it residuary Article to applications made under all laws for which no period of limitation is specifically provided in the new Limitation Act. The corresponding words in Article 181, put in the Third Division, were "elsewhere in this schedule or by Section 48 of the Code of Civil Procedure, 1908", and it is difficult to conclude that the expression, "elsewhere in this Division" can have a wider connotation, when the words, "by any other law for the time being in force," suggested by the Law Commission, were not included. Hence, in my opinion, Article 137 of the Limitation Ad does not apply.
5. In any view of the matter, I am of the opinion that limitation in this case did not begin to run before the 9th June, 1962. The letter of Mr. J. Kuriyan dated the 9th January, 1960 stated, in substance, that if the Company did not accept the valuation, on receipt of the letter, the Company should refer the matter to arbitration, according to the terms and conditions of the agreement dated the 6th July, 1956. Even assuming that this letter was from the Board, it is difficult to appreciate how any cause of action could be said to have arisen for the Company to apply under Section 20 of the Arbitration Act. The agreement dated the 6th July, 1956 stated that under certain circumstances, the matter could go to arbitration and this was exactly what was being conceded on the 9th January. 1960. The same situation had prevailed when the next letter dated the 12th March, 1960 was sent by Mr. Kuriyan. In this letter also, it was stated that if the Company did not intimate its acceptance of the valuation made by the Board, the matter should be referred to arbitration without further argument on this issue. Here also, the right of the parties to refer their dispute to arbitration according to their agreement was being conceded. In my opinion, the next letter, to which reference has been made by Sri Chatterji, dated the 18th May, 1960, does not also indicate the terminus a quo for the commencement of limitation, if any. This letter reiterated the Board's total final valuation of the assets" of the undertaking. Under Clause 6 (ii) of the document dated the 6th July. 1956, the vendors and assignors and the purchaser and assignee had to make detailed valuation of the assets and if any correspondence had ensued on this matter, it can hardly be said that a right to apply under Section 20 of the Arbitration Act had accrued in the process of correspondence.
Reference may now be made to a letter dated the 2nd November. 1960, sent by the Company to the Minister in charge of the Electricity Department, a copy of which has been made annexure to the report filed by the Official Liquidator on the 13th January, 1966. It is stated therein that the Company had been persistently requesting for a copy of the itemised final valuation and in the absence of such information, the Company was not in a position to know what had been precisely the manner and method of arriving at the final valuation supplied to the Company. Towards the end of this letter it was mentioned that the agreement of July, 1956 had provided for arbitration in respect of any difference on the point of valuation of any particular item, and arbitration was possible only if details of the final valuation were made and communicated to the Company. Therefore, in my opinion, it is difficult to hold that any right to apply had accrued within the meaning of the Limitation Act, even at this stage. That the parties were still in a mood to negotiate is clear from the letter dated the 26th March, 1962 sent to the Director of the Company by the Assistant Secretary to the Board. (A copy of this letter has been supplied as Annexure by the Official Liquidator along with his affidavit filed on the 20th August, 1966). It is clear that the letter dated the 9th June. 1962 brought the correspondence and negotiation between the parties to a definite termination The letter has been quoted above and a final answer was given to the Company's representation to the Minister, dated the 2nd November, 1960, after referring to it. In my opinion, if Article 137 of the Limitation Act applies, the terminus a quo cannot be earlier than the 9th June, 1962. There is no dispute that if right to apply had accrued on this date, the present application under consideration is not barred by limitation, in view of Section 458A of the Companies Act. For the reasons given above, I must hold that all the objections taken on behalf of the Board must be negatived.
6. It will now be necessary to pass the appropriate order on the application filed under Section 20 of the Arbitration Act, 1940. The Bihar State Electricity Board, Patna, Bihar is directed to file in this Court, in this case, the original agreement dated the 6th July, 1956, within two weeks from this day. The difference which has arisen between the parties, in view of paragraph 6(ii) of the agreement, is referred to an arbitrator agreed upon by the parties. If the parties cannot agree upon an arbitrator within three weeks of the filing of the original agreement, an arbitrator will be appointed by this Court. It is clarified that bv parties are meant the Monghyr Electric Supply Company Limited (in liquidation) through the Official Liquidator on one side and the Bihar State Electricity Board on the other. In view of Section 60(1) of the Electricity (Supply) Act, 1948 (Act No. 54 of 1948) no order is passed against opposite party No. 2, which is Government of Bihar, through the Secretary, Electricity Department.