In re Alleppey Chit Fund (Private) Ltd. v. . — 1961 DIGILAW 354 (KER)

Judgment :- 1. On the 2nd July 1959, the petitioner herein applied to the District Court, Alleppey for a winding up order against a company of which he was a contributory, and winding up was ordered by that court on the 16th October of the same year. The very institution of the petition was after the issue of Notification, G. S. R 663, dated 29th May 1959, by the Central Government under S.10(2) of the Companies Act, 1956. This notification was in supersession of all previous notifications issued by the Provincial and State Governments under the proviso to sub section (1) of S.3 of the Indian Companies Act, 1913, and it did not confer on District Courts the jurisdiction to order winding up. It is therefore not disputed that the District Court, Alleppey had no jurisdiction with respect to the subject matter of the proceeding, in other words, that it had no inherent jurisdiction as distinguished from a mere lack of territorial jurisdiction. Therefore its order was void; and, in this view, expressly so stated, the petitioner applied to this court by C. P. 31/60 for a fresh winding up order. Subsequently he seems to have thought better of it for he has now come seeking a direction that the District Court, Alleppey do retain and continue the proceedings; and he would have it that S.437 of the Companies Act, 1956 warrants such a direction. 2. S.437 runs as follows: "437. Power of High Court to retain winding up proceedings in District Court. - The High Court may direct that a District Court in which proceedings for winding up a company have been commenced, shall retain and continue the proceedings, although it may not be the Court in which they ought to have been commenced." At first sight it might appear that, in view of the last clause thereof, the language of the section is capable of the construction which the petitioner places upon it. But a more careful reading of the section shows otherwise. But a more careful reading of the section shows otherwise. The term "the Court" has been defined in S.2 (11) of the Act as meaning: "With respect to any matter relating to a company, the Court having jurisdiction under this Act with respect to that matter in relation to that company, as provided in S.10." Now, in respect of a matter regarding which no jurisdiction whatsoever has been conferred on a District Court under S.10 (2) of the Act, a District Court can never be "the Court" within the meaning of that term as defined in S.2 (11) and as used in S.437. So there can never be any question of a District Court being "the Court" in which the proceedings ought to have been commenced, and when S.437 says "although it may not be the court in which they ought to have been commenced" it clearly contemplates a court in which they could have been commenced having regard to the subject matter of the proceeding. In my view S.437 can apply only to a case where there is a defect of territorial jurisdiction and not a case where there is an inherent want of competence regarding the subject matter of the proceeding. The section does no more than what S. 3 (3) of the Indian Companies Act, 1913 which says, "Nothing in this section shall invalidate a proceeding by reason of its being taken in a wrong Court", did, excepting that it contemplates a direction by the High Court for the retention and continuance of the proceedings in the wrong court. The words "wrong Court" in S.3 (3) of the Companies Act 1913, it seems to me, cannot apply to a court which could never be the right court, in other words, to a court which has no inherent jurisdiction. It can only apply to a court which does not suffer from a lack of inherent jurisdiction, but only of what I might call incidental jurisdiction such as territorial jurisdiction. That seems to be how the provision has been understood. The text books cite Southsea Garage, Ltd. (1911) 27 T.L.R. 293 dealing with the identical language of the corresponding section of the English Act then in force, as authority for this proposition. See also Canara Bank v. Official Liquidator 4 DLR. (TC) 105 at 110 & In the matter of the General Assurance Society AIR. The text books cite Southsea Garage, Ltd. (1911) 27 T.L.R. 293 dealing with the identical language of the corresponding section of the English Act then in force, as authority for this proposition. See also Canara Bank v. Official Liquidator 4 DLR. (TC) 105 at 110 & In the matter of the General Assurance Society AIR. 1950 Rajasthan 61 at 68. 3. S.219 [1] of the English Act of 1948 which combines S.436 and 437 of our Act says that the winding up, or any proceedings therein, may "be transferred from one court to another court, or may be retained in the court in which the proceedings were commenced although it may not be the court in which they ought to have been commenced". And sub-section [2] of the section specifies the authorities by whom the powers of transfer given by subsection [1] may be exercised. Apparently sub-section [2] uses the word, "transfer" to include also the retention for which sub-section [1] provides - See also the marginal note which speaks only of transfer of proceedings and not of retention. It will be noticed that with regard to retention in the court in which the proceedings have been commenced, the language employed in subsection [1], "although it may not be the court in which they ought to have been commenced" is identical with the language of our S.437. It is regarded as settled law that the "another court" to which proceedings may be transferred must be a court which has itself jurisdiction to wind up [See Palmer's Company Precedents, 16th Edition, Part 2, page 542 and Buckley 13th Edition, page 447]. The law was thus settled by In re Real Estates Company [1893] I Chancery 398 with reference to the identical language of S.3 of the Companies [Winding-up] Act, 1890. It follows by parity of reasoning that the court in which proceedings may be retained "although it may not be the court in which they ought to have been commenced" must likewise be a court which has such jurisdiction. 4. As a general proposition I think it would be correct to say that the proceedings of a court which has no inherent jurisdiction are completely void and inoperative - see Ledgard v. Bull, ILR. 9 Allahabad 191 and Minakshi v. Subramanya ILR. 11 Mad. 4. As a general proposition I think it would be correct to say that the proceedings of a court which has no inherent jurisdiction are completely void and inoperative - see Ledgard v. Bull, ILR. 9 Allahabad 191 and Minakshi v. Subramanya ILR. 11 Mad. 28 - so that, in the absence of express statutory provision for the purpose, there can be no question of validating them, whereas, the proceedings of a court which has inherent jurisdiction but lacks only territorial or such other incidental jurisdiction are operative until set aside, and can be set aside even by a superior court only if certain conditions are satisfied. The provisions of S.530 & 531 of the Criminal Procedure Code & of S.21 of the Civil Procedure Code seem to be based on this principle. Therefore, if what the legislature meant by S.437 of the Companies Act, 1956, was that a proceeding could be validly retained and continued in a court lacking inherent jurisdiction if the High Court makes a direction in that behalf, one would have expected it to state so in clear and unambiguous terms. The actual language of S.437, as I have already shown, seems to indicate the contrary. It would be strange if, after having conferred jurisdiction primarily on the High Court, and having empowered only the Central Government to confer jurisdiction on District Courts, the legislature thought that a person should be allowed to institute proceedings in a court on which the Central Government did not think it fit to confer jurisdiction and then come to the High Court and have the proceedings validated. 5. I dismiss the petition. 6. I am grateful for the able assistance rendered to me by Mr. V. Balakrishna Eradi as amicus curiae. Dismissed.