Sirmur Chemical And General Industries Limited v. Union Of Indian And Another

S. K. Das J.

This is an appeal by special leave on behalf of the Sirmur chemical and General Industries Ltd. though Harcharan Dass, managing director and agent. A preliminary objection has been taken on behalf of the respondent, the Union of India , that the appellant company having been ordered to be wound up by an order of a court of competent jurisdiction and the official liquidator being in charge of the same, the appeal by the managing director and agent was not properly filed and is not maintainable, the managing director or agent not being competent to file or continue the appeal after the liquidator in a winding up by the court had taken charge of the company

After hearing parties on this preliminary objection we have come to the conclusion that the preliminary objections should succeed. We would, therefore, state the facts so far as they relate to the preliminary objection, and give reasons for the conclusion at which we have arrived. On June 30, 1945, the erstwhile Darbar of Sirmur State in Himachal Pradesh granted a monopoly in favour of Harcharan Dass in respect of the cultivation and collection of medicinal herbs within Sirmur State to enable him to manufacture drugs therefrom and dispose of the same either within the State or by export outside the State. The monopoly right was to hold good for a period of twenty years subject to the conditions that Harcharan Dass was required to float a private limited company with a capital of Rs. 10 lakhs after obtaining the necessary permission from the Examiner of Capital Issue of the then Government of India. On September 18, 1945, a formal agreement was entered into by the Sirmur Darbar on one side ad Harcharan Dass on the other. Paragraph 8 of the agreement reserved to the Darbar the right to revoke the monopoly rights on breach f certain terms and conditions and paragraph 17 provided for a reference to arbitration in case of a dispute. On November 23, 1945, a company styled the Sirmur Chemical and General Industries Ltd. came into existence and was registered as such by the Registrar the under Indian companies Act, 1913 (VII of 1913) (hereinafter referred to as the 1913 Act) at Nahan, Harcharan Dass transferred all his rights and interests to the said company . The company started its work in April , 1946. On April 15, 19468, the Sirmur State merged in the Indian Union and on April 2, 1948, the Secretary, Sirmur Government, wrote to the managing agent of the company that the license granted on June 30, 1945, had been revoked under paragraph 8 of the agreement on account of various defaults alleged to have been committed by the company. Some correspondence between the company and the representatives of government then ensued which proved abortive. The company then sought to refer its dispute with the Government to arbitration under paragraph 17 of the agreement and notice to that effect was served on the Deputy Chief Commissioner, Himachal Pradesh. The Deputy chief commissioner refused to take part of in the arbitration. The company then appointed one Lala Hari Chand Bhatia or Amritsar as the sole arbitrator. This gentlemen proceeded ex parte and on april 26, 1949, made an award which in effect gave the company, Rs. 92, 000 plus Rs 800 as damages. On October 25, 1949, the arbitrator presented a petition under section 14 of the Indian Arbitration Act, 1940 (X of 1940), to the Court of the District Judge, Sirmur . The original award was filed along with the petition . Upon notice issued to the Dominion of India and the Chief Commissioner, Himachal Pradesh , made an application under section 162 of the 1913 act, praying that the company be would up and that a liquidator be appointed to take charge off the company. This application was made in the Court of the Judicial Commissioner, Himachal Pradesh, and was presented on July 12, 1951. This application was finally head by the Judicial Commissioner after the taking of evidence and by his judgment and order dated December 31, 1957, the learned Judicial Commissioner directed that the company be wound up and the official liquidator be put in charge. On the same day the learned Judicial Commissioner also dismissed the appeal which had been filed from the decision of the District Judge, Sirmur, dated July 19, 1951, to which we have made a reference earlierThe company through Harcharan Dass, managing director and agent, then made an application to t he Judicial Commissioner for leave to appeal to this court. This was refused by the learned Judicial Commissioner who held that after the wading up order had been made and the official liquidator was put in charge of the winding up proceedings, leave to appeal could have been sought only by the directors or by the majority of the contributories of the company and Harcharan Dass was not competent to ask for leave to appeal to this court. The company through Harcharan Dass then moved this court and obtained special leave on December 8, 1958

The legal position seem to us to be quite clear. Under let provisions of section 334, clause l(e), of Companies Act, 1956 (1 of 1956), the meaning agent of a company shall be deemed to have vacated his office as such, in all cases, on the commencement of the winding up of the company managed by the managing agent, whether by or subject to the supervision of the court or voluntarily. The corresponding provision in. he 1913 act is clause (e) of section 87s. Under section441 of the winding up was a company by the court, a resolution has be passed by the company for voluntary winding up, the winding up of the company shall be deemed to have commenced at the time of the resolution; in any the case the winding up of a company by the court shall be deemed to commence at the time of the presentation of the petition for the winding up. the corresponding precision in the 1913 act is section 168. In the case before us the petition for winding up was presented on July 12, 1951. Therefore, as from that date the managing agent, namely, Harcharan dass, shall be deemed to have vacated his office as managing agent. Sections 444 to 447 of the Companies Act, 1956, give the consequences of a winding up order. Under sub-section l(3) of section 445 a winding up order shall be deemed to be notice of discharge to the offers and employees of the company except when the business of the company is continued. The corresponding provision in the 1913 Act is contained in Sub-section (3) of section 172. The powers of the liquidator are given in section 457 of the Companies Act, 1956. One such power is to institute or defend any suit, prosecution or other legal proceeding , civil or criminal, in the name and on behalf of the company, with the sanction of the court. The corresponding provision in the 1913 Act's contained in section 179. It is obvious from the provisions referred to above that on the order of winding up which was made in the present case on December 31, 1957, Harcharan Dass as managing agent ceased to be a managing agent as from the date of the commencement ceased to be a managing agent as from the date of the commencement of the winding up and the liquidator who was appointed in the winding up as entitled to institute any legal proceeding in the name land on behalf of the company with the sanction ofthe court . The learned advocate for the appellant contended before us that though Harcharan Dass had ceased to be the managing agent under section 334, clause (e) , of the Companies Act, 1956, he still continued to be a agent and as long as the liquidator did not revoke that agency. Harcharan Dass was competent to prefer an appeal and continue it on behalf of the company. We are unable to agree. We do not think that section 457 of the Companies Act, 1956, or the corresponding provision in the 1913 Act contemplates that on an order of winding up by the court any person other than the liquidator shall have the power to institute or defend any suit, prosecution or other legal proceeding, etc. Harcharan Dass having ceased to be the managing director or managing agent was not competent to file the appeal or continue it on behalf of the company. The argument that there is no automatic censer of the power of Harcharan Dass as agent or that the appeal is a continuation of the suit is not available to Harcharan Dass in view of the clear provisions in section 334(e) and section 457 of the Companies Act, 1956We, therefore, hold that the preliminary objection must succeed and the appeal must be held to be incompetent. The appeal is accordingly dismissed with costs

Appeal dismissed.