Andhra HC (Pre-Telangana)
Marshall Sons & Co. (India) Ltd. vs Vegetols Ltd. on 18 April, 1967
JUDGMENT Narasimham, J.
1. C.A. 85 of 1965 was filed under Sections 468, 477 and 536 of the Companies Act, 1956, read with rule 9 of the Companies (Court) Rules, 1959, by the official liquidator, seeking a direction from this court that the Indian Bank Ltd., Vellore, the respondent herein, shall pay Rs. 25,417.15 p. with interest at the rate of 6% from February 12, 1965, till the date of payment to official liquidator.
The following is the statement of facts submitted by the official liquidator.
2. On a petition presented on April 11, 1957, by M/s. Marshall Sons & Co., (India) Ltd., Madras, this court in O.P. No. 4/1957, directed the winding-up of M/s. Vegetols Ltd., Chittoor (herein referred to as the " company"), and the official liquidator became the liquidator of the said company. The appeal preferred against the said winding-up order, O.S.A. No. 3/1958, was dismissed on March 22, 1960.
3. As per the account books of the company, it was found that sums aggregating Rs. 25,417.15 p. were paid by the company and were received and retained by the Indian Bank Ltd., Vellore (hereinafter referred to as " creditor") subsequent to April 11, 1957, the date of commencement of the winding-up of the company. Under Section 536 of the Companies Act, any disposition of the property made after the commencement of the winding-up shall be void, unless otherwise ordered by the court, as such the said sums are due from the creditor to the company.
4. The official liquidator by notice dated February 12, 1965, demanded the payment of the said sums, but there was no compliance. The official liquidator, therefore, prayed that the creditor be summoned and examined and be directed to pay the amounts received by it with interest at 6% from the date of demand to the date of payment.
5. The application is opposed by the creditor and it filed a counter stating, inter alia, that M/s. Vegetols Ltd., Chittoor, were borrowing monies from the creditor-bank from time to time and the company was allowed a clean fixed loan of Rs. 25,000 on a promissory note dated March 5, 1954, executed by the company through its managing agents, namely, the firm of Khalsar & Co. consisting of M/s. C. P. Sarathi and M. Ameen Khalecli as partners and by the son of C. P. Sarathi, a director of Vegetols Ltd. As the amount was not paid, a suit was filed in the Sub Court, Vellore, O.S. No. 115/1956, for Rs. 21,643-1-10 being the balance due. A decree was obtained on February 4, 1957, against the executants of the note. In execution the creditor received two sums from the company in liquidation, M/s. Vegetols Ltd., a sum of Rs. 1,000 on July 12, 1957, and a sum of Rs. 12,000 on September 9, 1957, for which part satisfaction was recorded. The balance of Rs. 12,417.15 p. subsequently received by the executing court from the liquidator of the Carnatak Electric Supply Corporation Ltd. was paid to the creditor on Janauary 8, 1958. This latter amount of Rs. 12,417.15 p. was recovered in execution from out of the exclusive assets of Khaleeli, the 4th defendant in the suit, who was also liable personally under the decree. The said amount did not belong to M/s. Vegetols Ltd., and as such the claim by the official liquidator for that amount was absolutely untenable.
6. With regard to the other two sums of Rs. 1,000 and Rs. 12,000 it is alleged they were paid to the creditor for and on behalf of Mr. Khaleeli in E.P. proceedings taken against Khaleeli personally and so the official liquidator cannot have any claim for the said amounts. Further, it was also urged that Section 536(2) of the Companies Act was not attracted as regards this amount of Rs. 13,000. In any event, it is submitted that they were payments made by the company in liquidation bona fide and honestly and in the ordinary course of the company's business and should be upheld as proper transactions. The loan was an old one incurred for its normal and current business, and the decree had been obtained against the company even before the presentation of the winding-up petition, O.P. No. 4/57. The application is also barred by time.
7. On these pleadings, the following points arise for consideration :
"(1) Has the company made payment of Rs. 1,000 on July 12, 1957, and Rs. 12,000 on September 9, 1957, towards the decree obtained against the company and others in O.S. No. 115/66 on the file of the Sub Court, Vellore ?
(2) Were the said payments made by the company on behalf of Khaleeli personally ?
(3) Is the official liquidator entitled to claim Rs. 12,417.15 p. paid into court towards the decree by the liquidator of the Carnatak Electric Supply Corporation Ltd., Madras, on January 8, 1958 ?
(4) Whether the payments have been made by the company to the creditor bona fide, honestly and in the ordinary course of the company's business and current trade ? and (5) Is the application by the official liquidator barred by time ? "
8. Company Application No. 134/65 is filed under Section 536(2) of the Companies Act oi 1956, and Rule 9 of the Companies (Court) Rules, 1959, by the Indian Bank Ltd., Vellore, hereinafter referred to as the creditor, against the official liquidator, Vegetols Ltd. (in liquidation), for validating payments aggregating Rs. 13,000 made to the creditor by the company and directing the official liquidator to withdraw his claim for refund of Rs. 25,417.15. The facts in support of this application are stated as follows : Messrs. Vegetols Ltd., Chittoor (in liquidation), were borrowing monies from the creditor from time to time and in March, 1954, they were allowed a clean loan of Rs. 25,000 at the Vellore Branch of the bank on a promissory note dated March 5, 1954, executed by the company through its managing agents, the firm of Khalsar & Co., consisting of M/s. C.P. Sarathi and M. Ameen Khaleeli, the partners of the said firm and by Mr. C.P. Doraiswami Mudaliar, a director of Vegetols Ltd. As the amount was not repaid, the creditor filed a suit O.S. No. 115/56 in the Sub Court, Vellore, for Rs. 21,643-1-10 and obtained a decree, on February 4, 1957, On July 12, 1957, and on September 9, 1957, the creditor received two sums of Rs. 1,000 and Rs. 12,000, respectively, from Vegetols Ltd. towards the decree-debt. On January 8, 1958, a sum of Rs. 12,417.15 was received towards the decree-debt, from the liquidator of the Carnatak Electric Supply Corporation Ltd. The latter sum was recovered from out of the money belonging solely to Sri Khaleeli, the 4th defendant, in the suit who was also liable personally under the decree and against whom execution was levied. The said amount did not belong to Messrs. Vegetols Ltd. and the claim of the official liquidator for this sum is absolutely untenable. The other amounts were paid to the applicant for and on behalf of Mr. Khaleeli in the execution proceedings taken against him personally. The official liquidator cannot have any claim for the amounts as they are paid for and on behalf of Sri Khaleeli. Further, Section 536(2) of the Companies Act is not attracted as regards these amounts. In any event, these payments were made by Vegetols Ltd. bona fide and in the ordinary course of the company's business. The payments should, therefore, be validated.
9. The official liquidator filed a report opposing the validation of payments. He stated that it was incorrect to say that payments were made by Messrs. Vegetols Ltd. for and on behalf of Mr. Khaleeli. The entire amount was paid in discharge of the debt incurred by the company prior to the commencement of the winding-up. The payments had nothing to do with the current business of the company as no business was carried on by the company from 1956-57 onwards. The creditor was, therefore, liable to refund the payments.
10. These contentions raise the same points that arose for consideration in Company Application No. 85/65. As could be seen, the allegations and counter-allegations are substantially the same. The evidence recorded is common to these petitions which I will refer to before considering the points.
11. P.W. 1 is G. Venkateswara Rao. He is the clerk of the official liquidator. He has produced the accounts of M/s. Vegetols Ltd. and deposed with reference to the entries at pages 25 and 26. From the accounts he stated that on July 12, 1957, the Indian Bank, Vellore, received a cheque for Rs. 1,000 from C.P. Sarathi Mudaliar and Sons, and that they paid that amount to Vegetols Ltd. on July 12, 1957. On September 9, 1957, a sum of Rs. 12,000 was paid to the Indian Bank Ltd. That amount was paid by Ameen Khaleeli to Vegetols Ltd. by means of a cheque. Again on January 8, 1958, another sum of Rs. 12,417.15 was paid to the Indian Bank Ltd. by Ameen Khaleeli. A draft was sent to Vellore court. That amount was sent to the Indian Bank on January 8, 1958. The cross-examination elicits the following information : With regard to the ledger entries of the company for 1957-58, at page 21 of the ledger, there are two credits in favour of Ameen Khaleeli--one on September 9, 1957, for Rs. 12,000 and another on January 8, 1958, for Rs. 12,417.15--that is, credit was given to Ameen Khaleeli. There was an entry on July 13, 1957, crediting Mr. Sarathi Mudaliar with Rs. 1,000. The gist of this evidence is that the account books of the company show that payments were made on July 12, 1957, and September 9, 1957, on behalf of the company to the creditors; and C.P. Sarathi Mudaliar and Ameen Khaleeli figured as creditors of the company to the extent of the payment of Rs. 1,000 by the former and Rs. 12,000 by the latter.
12. R.W. 1 is the agent of the Indian Bank Ltd., Guntur. His evidence briefly is this : A promissory note was executed by the company in favour of the Indian Bank on 5th March, 1954. It was executed by the managing agents, M/s. Kalsar & Co. M/s. Kalsar & Co. was a firm of two partners, C.P. Sarathi Mudaliar and Shri Khaleeli. The Vegetols Ltd. made payments to the bank Rs. 1,000 on July 12, 1957 and Rs. 12,000 on September 9, 1957. The amount of Rs. 1,000 was paid by cheque drawn by C.P. Sarathi Mudaliar and Rs. 12,000 by cheque drawn by Khaleeli. To a question by the court, the witness said that C.P. Sarathi Mudaliar and Khaleeli made payments in their personal capacity as there was a joint and several liability. The witness admitted that the payment was received after April 11, 1957. In cross-examination, it was elicited that the suit was filed against Vegetols Ltd., (2) managing agents Kalsar & Co., (3) C.P. Sarathi Mudaliar, (4) Ameen Khaleeli and (5) C.P. Doraiswamy, director.
Particulars of the cheques drawn were also given by witness. Cheque No. MD 43071 dated July 12, 1957, was issued by C.P. Sarathi Mudaliar on the then Bank of Mysore for Rs. 1,000 in favour of the Indian Bank. Cheque No. 533573 dated September 9, 1957, for Rs. 12,000 was on the Chartered Bank of Madras drawn by Ameen Khaleeli in favour of the Indian Bank. With regard to the payment of Rs. 12,470 on January 8, 1958, the witness said that it was received through court from funds belonging to Ameen Khaleeli and that no part of it was received from the Vegetols Ltd. (company in liquidation). Exhibit H-2 is produced as the true copy of the decree. Exhibit R-l is the true copy of the judgment. The promissory note was filed in court. The gist of the evidence of this witness is that the debtor was the company, the creditor was the Indian Bank and the debt was due on March 5, 1954. One of the payments was made by Sarathi Mudaliar in a sum of Rs. 1,000 and another payment was made by Khaleeli in a sum of Rs. 12,000. A third payment was made through court on January 8, 1958, from funds belonging to Ameen Khaleeli.
13. Point No. 1 : The evidence of P.Ws. 1 and 2 proves that the company made payments of Rs. 1,000 on July 12, 1957, and September 9, 1957, towards the decree obtained against the company and others in O.S. No. 115/56 on the file of the Sub Court, Vellore. This point is held accordingly.
14. Point No. 2 : Whether the payments were made by the company on behalf of Khaleeli personally ? Although the pleading of the creditor has given rise to this issue in the evidence of P.W. 2 it was suggested that the payments of Rs. 1,000 and Rs. 12,000 were the payments by Sarathi Mudaliar and Ameen Khaleeli, respectively, in their personal capacity. But I am not satisfied that there is any truth in this assertion, as the accounts show that they were entered in the books of account of the company as the creditors, for the amounts that they paid towards the decree obtained by the creditor. The learned counsel argued that on the language of the decree in O.S. No. 115/56, a true copy of which is filed as exhibit R-2, that under the decree the defendants were liable in their representative and personal capacities and so, the learned counsel would say that payments were made by C.P. Sarathi Mudaliar and Ameen Khaleeli in discharge of their personal liabilities. It is not possible to ignore the other indispensable facts and rely on the mere language of the decree. It is the positive evidence of P.W. 1 that the debtor was the Vegetols Ltd., the company in liquidation. The payments made by the partners of the managing agency debited to the company in the accounts of the company have to be taken into account to understand the true nature of the payments. It is also significant that this part of the case of the creditor is not borne out by any evidence. The language of the decree is equivocal per se and a decision cannot possibly be rested on ambiguous language dissociated from other facts and circumstances. I am not, therefore, Satisfied that the contention has been made good by any acceptable evidence that the payments were made by C.P. Sarathi Mudaliar and Khaleeli personally in discharge of their personal obligations as distinct from the liability of the company they represented. The point is, therefore, held against the creditor's contentions.
15. Point No. 3 : Is the official liquidator entitled to claim Rs. 12,417'15 paid into court towards the decree by the liquidator of Carnatak Electric Supply Corporation Ltd., Madras ? The creditor has pleaded that a sum of Rs. 12,417.15 was received by the court from the liquidator of the Carnatak Electric Supply Corporation Ltd. and paid to the bank on January 8, 1958. The creditor further stated that it was recovered in execution from out of the monies belonging solely to Mr. Khaleeli, the 4th defendant in the suit, who was also liable personally under the decree and against whom execution was levied. The said amount did not belong to Messrs. Vegetols Ltd. This part of the case of the creditor is not contradicted by the official liquidator. P.W. 1's evidence with reference to the entries of the account books of the company was that he found that the amount was paid in the Indian Bank on January 8, 1958, by Mr. Khaleeli and a draft was sent to Vellore court. R.W. 1's evidence is that payment of Rs. 12,470 on January 8, 1958, was received by the bank through the court from funds belonging to Amin Khaleeli. The official liquidator would say that, inasmuch as Amin Khaleeli claimed this payment of Rs. 12,417.15 as a debt due from the company, this payment must be deemed to have been made for and on behalf of the company. He would argue that it made no difference if Khaleeli paid voluntarily or was made to pay by court process. In other words, he places this payment on the same footing as the payment of Rs. 12,000 on September 9, 1957. The claim of Amin Khaleeli has not been adjudicated by the official liquidator yet. The character and nature of the payment of Rs. 12,417.15 as determined here will guide the decision of the official liquidator. So I have to determine the character and nature of the payment.
16. From the facts and circumstances presented in this case, there can be no doubting the fact that it was the asset of Khaleeli himself which was attached in execution of the decree in O.S. No. 115 of 1956 on the file of Sub Court, Vellore. Khaleeli was the liquidator for the Carnatak Electric Supply Corporation Ltd., Madras, and the certified copy of the Execution Petition No. 156 of 1957, filed as annexure to Company Application No. 134 of 1965, shows that execution was prayed for against Amin Khaleeli and his properties and particular attachment was prayed for under Order 21, Rule 46, Civil Procedure Code, by prohibiting Amin Khaleeli, the liquidator of the Carnatak Electric Supply Corporation Ltd., Madras, from transfering or making payment from out of the share compensation amount in his hands to the extent of the sum of Rs. 25,003 only to himself as a shareholder and also prohibiting the aforesaid Amin Khaleeli as the shareholder from drawing or recovering the share compensation amount from the said liquidator to the tune of Rs. 25,000 until satisfaction of the decree amount and it was further prayed that the said amount might be ordered to be deposited in court. This execution petition was filed on June 29, 1957. It was in the execution of this petition that an amount of Rs. 12,417.15 was recovered. The amount so recovered was in its true nature and character an asset of Amin Khaleeli himself. Whether, under the circumstances, it could be deemed to be an asset of the company, by reason of the claim put forward by Amin Khaleeli before the official liquidator, appears rather far-fetched. To this extent, therefore, there is difference between this payment of Rs. 12,417.15 and the other two payments of Rs, 1,000 by Sarathy Mudaliar on July 12, 1957, and Rs. 12,000 by Amin Khaleeli on September 9, 1957.
17. It may be recalled that it is stated in paragraph 3 of the affidavit supporting C.A. No. 134 of 1965 that the payments of Rs. 1,000 and Rs. 12,000 referred to supra were received from the Vegetols Ltd. towards the decree debt. The learned counsel, Sri Kuppuswami, tried to explain away this statement in an effort to make out a case that these two payments were not made by the company. But then this is a material statement going against the very foundation of the case of the creditor in C.A. No. 134 of 1965 seeking validation of these payments under Section 536(2) of the Companies Act and so I cannot possibly give credence to this argument of Sri Kuppuswami cutting at the very foundation for the application. So, on the creditor's own showing, the payments of Rs. 1,000 and Rs. 12,000 stand on the different footing, and have been dealt with by me already in considering point No. 2.
18. In the result, I find that the official liquidator is not entitled to claim Rs. 12,417.15 as the payment made from the company's assets, subsequent to the commencement of the liquidation.
19. Point No. 4: This matter has been dealt with elaborately in C.A. No. 89 of 1965. The leading case on the subject of validating payments made in the ordinary course of the company's business is In re Wiltshire Iron Company, Ex Parte Pearson, (1868) 3 Ch. App. 443, 446, 447. Therein Lord Cairns L.J. discussed the scope of Section 153 of the English Companies Act, 1862, corresponding to Section 536(2) of the Companies Act, 1956. Lord Cairns' observations referring to the corresponding section of the English Act, Section 153, which were adopted as the guiding principle, occur at pages 446 and 447 and may be appropriately extracted here :
"This is a wholesome and necessary provision, to prevent, during the period which must elapse before a petition can be heard, the improper alienation and dissipation of the property of a company in extremis. But where a company actually trading, which it is the interest of every one to preserve, and ultimately to sell, as a going concern, is made the object of a winding-up petition, which may fail or may succeed, if it were to be supposed that transactions in the ordinary course of its current trade, bona fide entered into and completed, would be avoided, and would not, in the discretion given to the court, be maintatined, the result would be that the presentation of a petition, groundless or well-founded, would, ipso facto, paralyse the trade of the company, and great injury, without any counter balance of advantage, would be done to those interested in the assets of the company."
20. So, transactions that would be validated are transactions which were bona fide entered into in the ordinary course of the company's current trade.
21. The cases which were decided on the application of this principle are : Tulsidas Jasraj Parekh v. Industrial Bank of Western India, A.I.R. 1931 Bom. 2, Official Liquidators, Gorakhpur Electric Supply Co. Ltd. v. Siemens (India) Ltd., Calcutta , [1941] 11 Comp. Cas. 17, Andhra Bank Ltd. v. D.P. Narayana Rao, Provisional Liquidator, Godarari Sugars and Refineries Ltd., Madras, [1954] 24 Comp. Cas. 149, R.K. Sundraram Asari v. T.R. Abdul Haleem Saheb, A I.R. 1956 Mad. 692, Syed Raider Sahib v. M. Jayaram Pillai , [1956] 26 Comp. Cas. 164, In re T.W. Construction Ltd., [1954] 1 W.L.R. 540, 24 Comp. Cas. 180 and In the matter of J. Sen Gupta Private Ltd. (in liquidation), [1962] 32 Comp. Cas. 876.
22. Emphasis is, therefore, on the significant words of Lord Cairns in the case cited, " transactions in the ordinary course of its current trade, bona fide entered into and completed."
23. The question has, therefore, to be determined on the facts and circumstances of each case whether payments have been made by the company to the creditor bona fide, honestly and in the ordinary course of the company's current business.
24. On the creditor's own showing, the debt was incurred by the company by March 5, 1954. The winding-up petition was filed on April 4, 1957, and there is no evidence that the company was carrying on its ordinary business then. On the contrary, the official liquidator has asserted in his report that no business was carried on by the company after 1956-57. These are payments made in discharge of a debt subsequent to the winding-up and are hit by the general rule of pari passu distribution.
25. Buckley's commentary under Section 227, English Companies Act, 1948, corresponding to Section 536(2) of the Companies Act, 1956, characterises such payments as against a cardinal principle of the Act, viz., pari passu distribution. (The reference is to Buckley on the Companies Acts, 13th edition, page 494).
26. There is no attempt on the part of the creditor to connect these payments with any ordinary business carried on by the company. For these reasons, I find that the payments have not been made to the creditor bona fide in the ordinary course of company's current trade.
27. Point No. 5 : The official liquidator has filed the application under Sections 468, 447 and 536 of the Companies Act. Section 468 provides for certain categories of persons specified in the section to deliver to the liquidator any money, etc. under his control to which the company is prima facie entitled under the directions of the court. The opening words of the section are :
"The court may, at any time after making a winding up order, require"
the persons specified to deliver the money, etc.
28. One of the categories of persons specified in the section is a trustee, and the official liquidator alleged that the creditor comes within the meaning of a trustee under this provision.
29. The learned counsel for the creditor has denied that the creditor is a trustee and relied on Nandkishore Bajoria v. Gaya Sugar-Mills Ltd., (in liquidation) for the view expressed therein that Section 185 of the Companies Act, 1913, was confined to express trustees and not to constructive trustees. Section 195 referred to corresponds to the present Section 468 of the Companies Act, I of 1956.
30. The official liquidator would say that the said decision has been reversed by the Supreme Court in Gaya Sugar Mills Ltd, v. Nandkishore Bajoria, [1955] 25 Comp. Cas. 24 (S.C.). But the Supreme Court rested its decision on a different ground of principal and agent and did not express any view on the question debated now.
31. I do not, however, find it necessary to decide the question whether a creditor is a trustee, as I am inclined to treat the matter as falling under Section 536(2) of the Companies Act.
32. Section 477 of the Companies Act confers power on the court at any time after the making of a winding-up order to summon persons specified and issue summary orders on admissions made by such persons who were examined before it. In the present application, no one has- been examined and it is not the official liquidator's case that I have to pass judgment on admission under Section 477 of the Act.
33. I would now turn to Section 536(2) of the Companies Act, which seems to be more appropriate. It provides thus :
"In the case of a winding up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the court otherwise orders, be void."
34. In a number of cases with which I shall deal presently, payments made were held to be within the purview of this provision.
35. This is a provision which has been invoked by the creditor concerned to obtain relief of validation of payments which is the subject matter of C. A. No. 134 of 1965. The corresponding application is by the official liquidator claiming refund.
36. It is now sought to be argued that the application of the official liquidator is out of time, whereas the creditor's application is said to be in time. There is a manifest inconsistency in this contention.
37. The learned counsel would say that Article 137 of the new Limitation Act (Act 36 of 1963) would govern these applications. The said Act came into effect from January 1, 1964. The scheme of the new Act is that the articles are divided into three divisions. The first division deals with the suits, the second division with appeals and the third division with applications. The third division is sub-divided into parts I and II. The first part deals with applications in specified cases and the second part deals with other applications. Article 137 is a residuary article. It reads thus :
Description of application Period of limitation.
Time from which period begins to run
37. Any other application for which no period of limitation is provided elsewhere in this division.
Three years When the right to apply accrues.
Mitra's edition of this Act sets out the corresponding old Article 181 of the Limitation Act of 1908. the old article states thus :
Description of application.
Period of limitation.
Time from which period begins to run.
181. Applications for which no period of limitation is provided elsewhere in this schedule or by section 48 of the Code of Civil Proce-dure, 1908.
Three years.
When the right to apply accrues.
38. It is evident that the description of the application is the same as in the old Article 181 except for the deletion of the reference to Section 48, Civil Procedure Code, and the substitution of the division for the Schedule of the old Act.
39. The learned counsel argued that in the present scheme of divisions, Article 137 must apply to all applications, and not confined to applications under the Civil Procedure Code only as the old Article 181 was said to be.
40. It is now beyond controversy that the old Article 181 of the Limitation Act, 1908 (Act 1 of 1908), was restricted to applications under the Civil Procedure Code : vide Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd., [1953] 23 Comp. Cas. 1 (S.C.) which was affirmed in the Bombay Gas Co. Ltd. v. Gopal Bhiva, ; 25 F.J.R. 179 and Smt. Prativa Base v. Kumar Rupendra Deb Raikat, and Guggalla Venkatanarapu Reddi v. Sadhanapu Pedda Reddamma, [1958] 2 An. W.R. 316, 320.
41. It is now argued that the new division of the articles under the new limitation Act intended a change and made a change so as to apply the article to all the applications and not to confine it only to applications under the Civil Procedure Code. This contention, however, did not weigh with the Division Bench in the Union of India, Ministry of Commerce and Industry Government of India v. Seth Shanti Sarup, A.I.R. 1966 All. 530, where an attempt to apply this article to an application for a certificate under Article 133 of the Constitution did not succeed. In the judgment the learned judges referred to Article 137 of the Limitation Act of 1963, as merely corresponding to Article 181 of the Limitation Act of 1908.
42. I have to notice further that the Companies Act has indicated specific periods of limitation for certain applications, an instance of which is Section 543(2). There are provisions like Sections 468, 469 and 470 and 477 which specifically say that the court may at any time after making a winding-up order act under those provisions.
43. This makes us believe that the language of the section must be looked at as the infallible guide in the matter of consideration whether certain applications are in time or out of time. Section 536(2) which, as I said, is the more appropriate provision governing these applications does not prescribe any limitation as such. The import of the provision seems to be reasonably clear that the court could adjudicate on the matter of disposition of property of the company in liquidation as long as the winding up proceedings are pending. I cannot, therefore, accept the contention that the application by the official liquidator is barred by time.
44. The learned counsel has raised the question of jurisdiction of the company court to pass orders of refund. He has contended that Section 536 (2) is only declaratory in that the section does not confer power specifically to pass orders directing refund. The learned counsel has cited Official Liquidators, Gorakpur Electric Supply Co. Ltd. v. Siemens (India) Ltd., Calcutta, [1941] 11 Comp. Cas. 17 in support of his contention. In that case the official liquidators solicited orders of refund in respect of sums paid to certain creditors after the petition for winding up had been filed. The learned judge dismissed the applications by the official liquidators on the ground that he had no jurisdiction to require the persons concerned to make payments to the official liquidators and directed the official liquidators to seek such remedies as they could in the ordinary court.
45. A contrary view was taken in certain cases. Rule 9 of the Companies (Court) Rules, 1959, says that nothing in these rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or to pass orders as may be necessary for the ends of justice or to prevent abuse of the process of court. I shall first refer to the cases relied on by the official liquidator.
46. In re Liverpool Civil Service Association : Ex parte Greenwood, (1874) 9 Ch. App. 511 decided the same question. Greenwood was a creditor of the Liverpool Civil Service Association which owed him 208. The said creditor presented a petition for winding up the association. The association then paid him 100. The question arose whether he was to repay the amount under the provisions of Section 153 of the Companies Act, 1862, which was similarly worded as the present Section 536(2). The learned judge, Mallish L.J., held that under Section 153 it was purely a matter for the discretion of the court, that is to say, whether to allow the transaction to stand or compel the creditor to bring into court the money already received by him. In the said view, the learned judge affirmed the order that the creditor must pay back the money paid to him.
47. The reasoning of the learned judge suggests that, when a transaction is brought to the notice of the court in the winding-up proceedings, it might validate the transaction or direct a refund. That is to say, it has jurisdiction to direct either way.
48. In re Civil Service and General Stores Limited, (1888) 58 L.T. 220 was a case of summons under Section 153 of the Companies Act, 1862, by the official liquidator of the above-named company to recover from the respondents, certain creditors of the company, a sum of 175 paid to them by its directors out of the assets of the company after the commencement of the winding-up. The judgment quotes Section 153 of the Companies Act, 1862, which may be reproduced for convenience :
"Where any company is being wound up by the court or subject to the supervision of the court, all dispositions of the property, effects, and things in action of the company and every transfer of shares, or alteration in the status of the members of the company, made between the commencement of the winding-up and the order for winding-up shall unless the court otherwise orders, be void."
49. The application was ordered. It does not appear that the court's jurisdiction was doubted or questioned.
50. Halsbury's Laws of England, 3rd Edition (Vol. 6), at page 629, says quoting the authority of In re Civil Service and General Store Limited that a creditor, who receives payments between the petition and the winding up order, is compelled to refund.
51. Buckley on the Companies Act, 13th edition, page 494, refers to both these decisions in his commentary on Section 227 of the Companies Act, 1948, corresponding to Section 536(2) of the present Act.
52. The case, Official Liquidators, Gorakhpur Electric Supply Co. Ltd. v. Siemens (India) Ltd., Calcutta, relied on by the learned counsel in support of the contention that this court has no jurisdiction, had not referred to the decisions which proceeded obviously on the assumption that there was jurisdiction. The learned judge had not also discussed about the jurisdiction of the court to direct repayment under Section 227(2) of the Companies Act, 1913, corresponding to Section 536(2) of the present Act. I cannot, therefore, accept the contention that the court has no jurisdiction to direct re-payment. Rule 9 of the Companies (Court) Rules is an additional reason why I am inclined to accept the contention that the company court has jurisdiction to direct refund under Section 536(2) of the Companies Act.
No other points are raised before me.
53. In the result, therefore, in C.A. No. 85 of 1965 there will be an order against the creditor-bank directing refund of Rs. 13,000 with interest at 6% per annum from the date of application (of the official liquidator), February 25, 1965, to date of payment and proportionate costs. C. A. No. 85 of 1965 is therefore decreed in part with proportionate costs. C. A. No. 134 of 3965 is dismissed but there will be no order as to costs.
54. The learned counsel for the respondent bank submits that, inasmuch as C. A. No. 85 of 1965 is decreed in part, the creditor bank should be permitted to prove its debt before the official liquidator. It is permitted to do so within six weeks from today.