Sudarshan Chits (India) Ltd. v. Bhairulal Salvi, B. L. Cycle, Udaipur
1989-05-29
DAMODAR THANVI, S.K.M.LODHA, SARIA KHAN
body1989
DigiLaw.ai
—Order— 1. This appeal under s. 15 of the Consumer Protection Act, 1986 ("the Act") is directed against the order dt. 7.12.88 passed by the District Forum, Udaipur in Complaint Case No. 18/Bhu/88 by which a sum of Rs. 48,632.30 was ordered to be paid by the opposite party-appellant to the complainant-respondent and also interest at the rate of 12 % p.a. on this amount from 10.8.81 until the date of realization. 2. The complainant in his complaint which was filed on 3.11.88 has alleged that he had deposited Rs. 29,181.84 from 8-8-73 to 10-8-81 with the opposite party and that inclusive of the bonus the sum of Rs. 48,632.30 is due from it. As the opposite party (the company) failed to make the payment, the complainant has prayed that the direction may be given to it to refund Rs. 48,632.30 and pay interest amounting Rs. 63,000/- and compensation Rs. 10,000/- total Rs. 73,000/-, In support of the complaint Pass Book and the receipts were submitted by the complainant. 3. The complaint was registered by District Forum and the notice was issued to the opposite-party. Notice was sent to the opposite-party by registered post on November 3, 1988 for the hearing of 18-11-88. On 18.11.88 the District Forum ordered to proceed ex parte against the Company as nobody appeared on its behalf. The District Forum ordered that the complainant should file affidavit and original documents on 19-11-88. Time was taken by the complainant for filing the affidavit and original documents on 19-11-88. On Dec. 2, 1988 affidavit and original documents were filed. The District Forum by its order dt: 7-12-88 passed the order directing the opposite-party to pay Rs. 48,632.30 with interest @ 12% p.a. from 10-8-81 until realization. The District Forum further ordered that the complainant will be entitled to recover this amount according to law through the District Forum. Aggrieved, the opposite-party has filed this appeal under s. 15 of the Act as aforesaid. 4. Notice was issued to the complainant-respondent. In pursuance of the notice, appearance was put in by CUTS, Jaipur, for the respondent. Written submission dt: 16.3.89 were filed by the respondent. It appears that certain points were stated in writing by one Shri Narendra Kumar, Working Director of Zila. Upbhokta Parishad, Udaipur to support the order under appeal. 5. We have heard Mr. B.L. Gupta, Advocate for the appellant and Mr.
Written submission dt: 16.3.89 were filed by the respondent. It appears that certain points were stated in writing by one Shri Narendra Kumar, Working Director of Zila. Upbhokta Parishad, Udaipur to support the order under appeal. 5. We have heard Mr. B.L. Gupta, Advocate for the appellant and Mr. S. M. Mathur on behalf of CUTS Jaipur for the respondent and considered the record. 6. Mr. B.L. Gupta, learned counsel for the appellant (Company) argued that as the Provisional Liquidator was appointed by the High Court of Kerala under S. 446 of the Companies Act, 1956 (for short "the Companies Act") and so without leave no proceedings could either be commenced or proceeded with. In view of this, contended, the learned counsel, that the District Forum, Udaipur had no jurisdiction to entertain, try and adjudicate the complaint under the Act. This is resisted by Mr. S. M. Mathur who submitted that the Act is a Special Act and there is no bar in entertaining, trying and adjudicating the complaint of the complainant-respondent and further that S. 446 of the Companies Act does not stand in the way of the complainant. The Act is not in derogation of any other law. It appears from the judgement of the Supreme Court dated Aug. 6, 1984 rendered in Civil Appeal No. 2528 of 1984 (Appellant Sudarshan Chits (I) Ltd. v. O. Sukumaran Pillai and others) that the appellant-company is governed by the Companies Act and that three petitions being Company Petitions No. 9/81, 8/81 and 49/81 were, moved by the creditors of the company under S, 439 of the Companies Act for winding up of the company on the ground that it was unable to pay its debts. The learned Company Judge of the High Court of Kerala passed the order winding up the company and appointed Official Liquidator to be Liquidator of the company. The order of the Company Judge was challenged in miscellaneous appeals. The Division Bench of the High Court of Kerala disposed of the appeals after approving the scheme of compromise and arrangement under S. 391 of the Companies Act and directing that the winding up order shall be held in abeyance. On certain undertakings to be filed by the company before the Court within the prescribed time to abide by the conditions imposed in the judgement.
On certain undertakings to be filed by the company before the Court within the prescribed time to abide by the conditions imposed in the judgement. Certain other directions were also given by the Division Bench which are not relevant for the present purpose. The company went in appeal before the Supreme Court of India. The Supreme Court after considering the provisions of S, 446 of the Companies Act allowed the appeal and the order of the Division Bench of the High Court of Kerala was set aside. The relevant part of the judgement of the Supreme Court is as follows :— "Having thus examined the matter from all angles, we are of the view that the High Court was in error in rejecting the application made i on behalf of the appellant-company for directing the Provisional Liquidator to prefer claims petitions on the materials and expenses to be furnished by the company. The amounts realised by the Provisional Liquidator on filing claim petition shall be handed over to the company and the appellant-Company is under an obligation to use, spend and appropriate them in the implementation of the scheme under the supervision of the Court. This appeal accordingly succeeds and is allowed and the order of the High Court under appeal is set aside. The application for the directions to the Provisional Liquidator made by the appellant-Company is granted and directions in terms of the prayer are hereby made. The appellant shall bear its own costs." S. 446 of the Companies Act deals with suits and winding up order. We may quote S. 446 of the Act in extenso,— S. 446. Suits stayed on winding up order.—(1) When a winding up order has been made or the Official Liquidator has been appointed as Provisional Liquidator no suit or other legal proceeding shall be commenced, or if pending at the date of winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.
(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, having jurisdiction to entertain, or dispose of— (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under section 391 by or in respect of the company; (d) any question of priorities of any other question whatsoever whether of law or fact, which may relate to or arise in course of the winding up of the company; whether such suit or proceeding has been instituted or is instituted or such claim or question has arisen or arise or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by the Court. (4) Nothing in sub-section (1) or sub-section(3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court. 7. The object of the winding up of company by the Court is to facilitate the protection and realization of its assets with a view to ensure an equitable distribution thereof among those entitled and to save the administration from being embarrassed by a general scramble among creditors and others. As a result of this, once the court has taken assets of company under its control and has passed an order for its being wound up, it will not be proper to allow proceedings to be started or to continue against the company and embarrass the administration, of its affairs. S. 446 of the Companies Act is intended to safeguard the interest of the company in winding up against wasteful expenditure in regard to matters capable of being determined expeditiously and cheaply by the winding up court itself, since the assets of the company are with the court which has appointed Official Liquidator as Liquidator of the company.
S. 446 of the Companies Act is intended to safeguard the interest of the company in winding up against wasteful expenditure in regard to matters capable of being determined expeditiously and cheaply by the winding up court itself, since the assets of the company are with the court which has appointed Official Liquidator as Liquidator of the company. In our considered opinion no legal proceedings could be commenced and if pending at the date of winding up of order could be proceeded with against the company except by leave of the court and subject to the terms as the court may impose. Sub-section(2) of s. 446 of the Companies Act abundantly makes clear that it is the court which is winding up the company has notwithstanding anything contained in any other law for the time being in force jurisdiction to entertain or dispose of the matters specified therein. We may usefully refer to clause (d) of sub-section (2) of S. 446 of the Companies Act which is: "any claim made, by or against the company (including claims by or against any of its branches in India)." It cannot be disputed that the winding up order was passed by the High Court of Kerala much before the commencement of the proceedings of the complaint by the complainant-respondent. It is clear from the judgement of the Supreme Court that Official Liquidator was appointed as Liquidator of the company. No leave was sought by the complainant from the court which passed the winding up order for preferring the claim against the company. In these circumstances, the District Forum should have stayed the proceedings, if it had already commenced and should not have proceeded to adjudicate the claim made under the complaint except by leave from the Company Judge of the High Court of Kerala who had passed the winding up order. S. 537 of the Companies Act deals with avoidance of certain attachments executionsetc. in winding up by or subject to the supervision of the Court. The Provisional Liquidator/Liquidator was not made party to the claim made by the complainant. For these reasons the order passed by the District Forum adjudicating the claim made by the complainant in the complaint without leave is bad in law and cannot be sustained.
in winding up by or subject to the supervision of the Court. The Provisional Liquidator/Liquidator was not made party to the claim made by the complainant. For these reasons the order passed by the District Forum adjudicating the claim made by the complainant in the complaint without leave is bad in law and cannot be sustained. We agree with the learned counsel for the appellant only to this extent that without leave the proceedings against the company should not have been commenced and if commenced without leave should not have been proceeded with. 8. It was argued by the learned counsel for the appellant that the order has been passed by the District Forum in disregard of the provisions contained in S. 13(2) of the Act. It was urged by the learned counsel for the appellant that the District Forum did not grant time for filing the version of the case as envisaged by S. 13(2) of the Act. He further submitted that a notice should have been given of the complaint to the Provisional Liquidator/Liquidator who was appointed by the court which has passed the winding up order to contest the complaint he should have been allowed 30 days time. S. 13(2) of the Act inter alia lays down that the District Forum shall if the complaint relates to any services refer a copy of such complaint to the opposite-party directing him to give his version of the case within a period of 30 days of such extended time not exceeding 15 days as may be granted by the District Forum. It may be recalled that the complaint was filed on Nov. 3, 1988 and the District Forum registered it and ordered for issuance of the notice to the opposite-party (Company) and fixed Nov. 18, 1988 as the date of hearing. On Nov. 18, 1988 as the acknowledgement was received and nobody had appeared on behalf of the opposite-party the District Forum ordered to proceed ex-parte against it and ultimately decided the complaint on Dec. 7, 1988. S. 448 of the Companies Act deals with the appointment of Official Liquidator. By S. 450 of the Companies Act the court has been empowered to appoint the Official Liquidator to be the Provisional Liquidator. After appointment, the affairs of the company are managed by the Liquidator who has been appointed by the court which has passed the winding up order.
By S. 450 of the Companies Act the court has been empowered to appoint the Official Liquidator to be the Provisional Liquidator. After appointment, the affairs of the company are managed by the Liquidator who has been appointed by the court which has passed the winding up order. Before passing any order on the complaint; in view of the provisions referred to hereinabove, it was incumbent on the District Forum to have issued notice to the Liquidator/Provisional Liquidator as to what he has to say with respect to the complaint. For all these reasons we are constrained to interfere with the order under appeal. 9. The appeal is allowed and the order dated 7-12-88 of the District Forum, Udaipur passed in Complaint Case No. 18/Bhu/88 is set aside. 10. The case is remanded to the District Forum, Udaipur to decide it afresh after issuing notice to the Official Liquidator who has been appointed as Provisional Liquidator of Sudarshan Chits (India) Ltd., Sudarshan Building, Calicut II by the High Court of Kerala, Ernakulam in accordance with law and keeping in view the provisions of S. 446 of the Companies Act, 1956 and S. 11,13(2) and 14 of the Consumer Protection Act, 1986 and the observations made hereinabove. 11. The parties shall bear their own costs of this appeal.