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2025 DIGILAW 187 (TS)

Alluri Mahesh Raju v. Godrej And Doyee Mfg Company Ltd

2025-03-26

G.RADHA RANI

body2025
ORDER : G.Radha Rani, J. This Civil Revision Petition is filed by the petitioner-defendant No.2 aggrieved by the order dated 13.12.2018 in I.A. No.665 of 2018 in COS No.26 of 2017 passed by the Commercial Court cum XXIV Additional Chief Judge, City Civil Court, Hyderabad. 2. The petitioner-defendant No.2 filed an application under Order VII Rule 11 read with Section 151 CPC to reject the plaint contending that the suit was filed by the respondent-plaintiff against defendant No.1 Company for recovery of amount alleged to be due by the company. No relief was sought against the petitioner. No allegation was made against the petitioner that the petitioner in his individual capacity owed any amount to the plaintiff company. The defendant No.1 Company was wound up on 21.12.2010. In pursuance of the order of the winding up, an official liquidator was appointed, who had taken up the defendant No.1 Company and its assets. The certified copy of the order of the winding up was filed along with the written statement. The petitioner in the writing statement clearly detailed about the winding up proceedings and appointment of the Liquidator. No documents were submitted by the plaintiff to show that the petitioner-defendant No.2 had executed any of them in his individual capacity. The invoices, the bills, the MOUs were transacted by defendant No.1 company. The plaintiff in his cross-examination by defendant No.2 dated 25.08.2018 admitted that no document was executed by the petitioner in his individual capacity. The plaint averments would not reveal any cause of action. The Companies Act, 1956 would prohibit entertaining any suit against the company, which was wound up and the case against the Company could not be proceeded with and prayed to reject the plaint. 3. The respondent-plaintiff filed counter contending that the suit was filed for recovery of money against the defendants for Rs.3,94,81,818/- as the defendant No.1 company purchased various products from the petitioner company from time to time under various invoices. The plaintiff was examined as PW.1 and Exs.A1 to A36 were marked. The plaintiff was cross-examined by counsel for the defendants. When the matter was posted for evidence, an application was filed seeking rejection of the plaint. The plaintiff company was not aware of winding up of defendant No.1 company on 21.12.2010 and appointment of liquidator and that the Liquidator had taken over the defendant No.1 company and its assets. The plaintiff was cross-examined by counsel for the defendants. When the matter was posted for evidence, an application was filed seeking rejection of the plaint. The plaintiff company was not aware of winding up of defendant No.1 company on 21.12.2010 and appointment of liquidator and that the Liquidator had taken over the defendant No.1 company and its assets. The defendant No.2 being the Chairman and Managing Director could not escape the liability on the ground that no relief was sought against him. Having signed on all the cheques, which were returned for “exceeds arrangement” marked from Exs.A6 to A22 and having received all the demand notices for repayment marked from Exs.A22 to A31, the burden would shift on the defendant No.2. Both the defendant Nos.1 and 2 were jointly and severally liable to repay the amount due to the plaintiff company. Ex.A32 - Memorandum of Understanding dated 04.02.2009 was made by defendant No.2 in his personal capacity. The defendant No.2 admitted his liability and assured repayment and stated that he was ready to face the civil and criminal proceedings if he failed to repay the debt. As such, the plaint could not be rejected without proper enquiry. 4. The learned Judge, Commercial Court, City Civil Court, Hyderabad, on considering the contentions of both the learned counsel, observed that mere winding up of defendant No.1 Company was not a bar to file the suit. The Official Liquidator can represent the matter. At the same time if the plaintiff obtains a decree against the defendant No.1, he has to approach the Official Liquidator for execution of the decree. Therefore, mere initiation of winding up proceedings against defendant No.1 was not a bar to file the suit. The cheques were issued by the petitioner-defendant No.1. Whether the said cheques and letters were addressed by him in his individual capacity or representing the company will be decided in a detailed trial. By mere initiation of winding up proceedings, the civil court was not barred to proceed with the trial and dismissed the petition. 5. Aggrieved by the said dismissal of the petition filed by him vide I.A. No.665 of 2018 in COS No.26 of 2017, the petitioner-defendant No.2 preferred this revision. 6. Heard Sri C. Srinivas, learned counsel for the petitioner and Sri J. Venudhar Reddy, learned counsel for the respondent No.1. 7. 5. Aggrieved by the said dismissal of the petition filed by him vide I.A. No.665 of 2018 in COS No.26 of 2017, the petitioner-defendant No.2 preferred this revision. 6. Heard Sri C. Srinivas, learned counsel for the petitioner and Sri J. Venudhar Reddy, learned counsel for the respondent No.1. 7. The learned counsel for the petitioner submitted that the Court below went wrong in observing that mere winding up of defendant No.1 was not a bar to file the suit ignoring the provisions of Section 446 of the Companies Act, 1956 or Section 279 of the Companies Act, 2013. Having observed that the defendant No.2 acted as Managing Director of the respondent Company, the court below went wrong in fastening the liability of the company on the defendant No.2, when the defendant No.2 was neither a guarantor nor borrower in his individual capacity. The court ought to have seen that the continuation of the trial in the suit, when the suit was barred would be wasting the time of the court and productive time of all the persons involved in the trial and relied upon the judgment of the Hon’ble Apex Court in T. Arivandandam v. T.V. Satyapal & Another, CDJ 1977 SC 013 8. The learned counsel for the respondent, on the other hand, contended that the cheques were issued by defendant No.2 and all the correspondence was also addressed by defendant No.2. Whether the cheques or correspondence were made by defendant No.2 in his individual capacity or not was a matter of trial. The petitioner- defendant No.2 has no locus standi to file the petition. The plaintiff was not a party to the winding up proceedings. There was no illegality in the order of the trial court and prayed to dismiss the revision. 9. Perused the record. 10. As seen from the record, the petitioner-defendant No.2 filed an application under Order VII Rule 11 of CPC to reject the plaint on the ground that there was no cause of action and the suit was barred by law. Order VII Rule 11 of CPC provides for rejection of plaint. It reads as follows: “ 11. Perused the record. 10. As seen from the record, the petitioner-defendant No.2 filed an application under Order VII Rule 11 of CPC to reject the plaint on the ground that there was no cause of action and the suit was barred by law. Order VII Rule 11 of CPC provides for rejection of plaint. It reads as follows: “ 11. Rejection of plaint:- The plaint shall be rejected in the following cases:— (a) where it does not disclose a cause of action; (b) where the relief claimed is undervalued, and the plaintiff, on being required by the Court to correct the valuation within a time to be fixed by the Court, fails to do so; (c) where the relief claimed is properly valued, but the plaint is returned upon paper insufficiently stamped, and the plaintiff, on being required by the Court to supply the requisite stamp-paper within a time to be fixed by the Court, fails to do so; (d) where the suit appears from the statement in the plaint to be barred by any law; (e) where it is not filed in duplicate; (f) where the plaintiff fails to comply with the provisions of rule 9”. 11. The contention of the learned counsel for the revision petitioner was that the suit was filed against the defendant No.1 company for recovery of amount due by the company. No relief was sought against him. No allegation was made against him that defendant No.2 in his individual capacity owed any money to the plaintiff company. The defendant No.2 had not executed any of the documents submitted by the plaintiff in his individual capacity. The invoices, bills and MOUs relied by the plaintiff company were transacted by defendant No.1 company. Since the defendant No.1 was an artificial person created by law, having its common seal and entity and the petitioner- defendant No.2 was the Managing Director of the Company, no liability could be fastened upon him in his individual capacity. Even in the prayer part, the decree was sought only against the defendant. No joint and several liability was even pleaded. 12. Even in the prayer part, the decree was sought only against the defendant. No joint and several liability was even pleaded. 12. On a perusal of the plaint, it was mentioned in para No.3 of the plaint that defendant No.1 company purchased various products from the plaintiff company from time to time under various invoices and thereby became liable to pay a sum of Rs.4,44,56,522-14 ps., by the end of the financial year 2008-09. In para No.4 also it was stated that on 10.11.2008, the defendant No.1 company with an intent to create security for due payments got executed sample mortgage deed by Smt. Alluri Sunanda Raj W/o.A. Mahesh Raj in respect of the land forming part of Sy. No.163 admeasuring 500 sq. yds., situated at Hydernagar Village Kukatpally, Balanagar Mandal, Ranga Reddy District and Sri Y. PVK Raju in respect of the land forming part of Sy. No.163 admeasuring 417 sq. yds., situated Hydernagar Village, Kukatpally, Balangar Mandal, Ranga Reddy District in favour of the plaintiff company. In para No.5 also it was mentioned that on 12.11.2008, the defendant No.1 company through defendant No.2 deposited the title deeds, consent letters from the respective owners of the properties with the plaintiff company. Subsequently on 04.02.2009, the plaintiff and defendant No.1 Company represented by defendant No.2 entered into a Memorandum of Understanding agreeing to the terms and conditions set forth therein. 13. Though it was stated that defendant No.2 issued several post dated cheques signed by him, it was also mentioned that the same was on behalf of defendant No.1 company drawn on Axis Bank Limited in favour of the plaintiff company for a total sum of Rs.4,30,00,000/- towards discharge of part of the liability. In para No.6, it was mentioned that the defendant No.1 company received all the demand notices but failed to pay the due amount. In para No.7 it was mentioned that after prolonged persuasion by the plaintiff company, the defendant No.1 company came forward to pay Rs.2,20,00,000/- and agreed to pay balance amount of Rs.2,33,00,000/- by its letter dated 29.03.2012. It was further stated that in pursuance to the offer and acceptance, the defendant No.1 company paid an amount of Rs.2,20,00,000/- to the plaintiff company. It was further stated that in pursuance to the offer and acceptance, the defendant No.1 company paid an amount of Rs.2,20,00,000/- to the plaintiff company. In para No.8 also it was specified that the plaintiff company handed over the original sale deeds and link documents of the mortgaged properties to the defendant No.1 company on 02.04.2012 under acknowledgment by defendant No.2 and executed release deeds in respect of the mortgaged properties on 03.04.2012. In para-9 also, it was specified that inspite of repeated demands, the defendant No.1 company failed to pay the due amounts. All the transactions were done by defendant No.2 for and on behalf of defendant No.1 company being its Chairman and Managing Director, as such, he was also made as party to the present suit. 14. Thus, the entire plaint would disclose that all the transactions were made by defendant No.2 on behalf of defendant No.1 company in the capacity of its Chairman and Managing Director. Nowhere, it was specified that defendant No.2 in his individual capacity had owed any money to the plaintiff or that he executed any document in his individual capacity as a borrower or guarantor. In the prayer portion also, no relief was claimed against the revision petitioner-defendant No.2 in his individual capacity. Thus, the plaint would not disclose any cause of action for continuing the same against the petitioner-defendant No.2 in his individual capacity. 15. The other ground on which the petitioner-defendant No.2 sought for rejection of the plaint was that the defendant No.1 company was wound up on 21.12.2010 and in pursuance of the order of winding up, an official liquidator was appointed and he had taken over the defendant No.1 company and its assets. As such, the plaint was barred under Section 446 of the Companies Act, 1956 (279 of Companies Act, 2013) to be proceeded against the company except by leave of the court and no leave was obtained to proceed against defendant No.1 company by the plaintiff. 16. As such, the plaint was barred under Section 446 of the Companies Act, 1956 (279 of Companies Act, 2013) to be proceeded against the company except by leave of the court and no leave was obtained to proceed against defendant No.1 company by the plaintiff. 16. The Official Liquidator also filed a report dated 01.03.2019 in this revision petition stating that by order dated 22.12.2010 in Company Petition No.93 of 2009, the High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh directed winding up of M/s. Pratyhankara Electronics Pvt. Ltd., (defendant No.1 company) and by virtue of Section 449 of the Companies Act, 1956, the official liquidator was appointed. The Official Liquidator also pointed out the provision of Section 446 of the Companies Act, 1956 to show that by virtue of the said provision no proceedings could be commenced against the company subsequent to the date of the order for winding up expect with the leave of the court (i.e. the Company Court of this High Court). He also pointed out to Section 537 of the Companies Act, 1956 wherein it was specified that any attachment or distress on the assets of the company in liquidation after the commencement of the winding up proceedings, without leave of the wounding up Court i.e. the High Court of Andhra Pradesh should be void. He further submitted that the company in liquidation was not having sufficient funds to its credit hence, claims were not invited. As and when funds were available, claims would be invited with the approval of the High Court and at that time, the respondent-plaintiff could prefer their claims. After adjudicating the claims so received, payment to the creditors would be made in accordance with the provisions of law as per the Companies Act, 1956. 17. Basing on such pleadings, it is considered relevant to extract Section 446 of the Companies Act, 1956. It reads as follows: “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 the winding up order, shall be proceeded with, against the company, except by leave of the court and subject to such terms as the court impose. (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; (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 or 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 arises 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 of the time being in force, be transferred to and disposed of by that court.” 18. Thus, this Court made winding up order of the defendant No.1 company on 22.12.2010 and appointed an Official Liquidator and after such winding up order and appointment of Official Liquidator as provisional liquidator, no suit can be filed or proceeded with against the company except by leave of the court and subject to the terms as the court might impose. In the present case, the suit was filed by the plaintiff in the year 2017 subsequent to the date of the winding up order passed by this High Court. The Official Liquidator was also appointed and he had taken into his custody all the properties of the company on 25.02.2011. Once the liquidation proceedings are initiated against the company, no suit can be filed against the company without the permission of this Court. Once a Liquidator is appointed, all claims against the company must be submitted to the liquidator and cannot be pursued through independent litigation. 19. Thus, the suit filed by the plaintiff against defendant No.1 company is barred under Section 446 of the Companies Act, 1956 (279 of the Companies Act, 2013). 20. Once a Liquidator is appointed, all claims against the company must be submitted to the liquidator and cannot be pursued through independent litigation. 19. Thus, the suit filed by the plaintiff against defendant No.1 company is barred under Section 446 of the Companies Act, 1956 (279 of the Companies Act, 2013). 20. The Hon’ble Apex Court in T. Arivandandam v. T.V.Satyapal & Another (supra) held that: “We have not the slightest hesitation in condemning the petitioner for the gross abuse of the process of the court repeatedly and unrepentantly resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit now, pending before the First Munsif's Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful-not formal-reading of the plaint it is manifestly vexatious, and meritless, in the sense of not disclosing a clear right to sue, he should exercise his power under Or. VII R.11 C.P.C., taking care to see that the ground mentioned therein is fulfilled. And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order X C.P.C. An activist Judge is the answer to irresponsible law suits. The trial court should insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code (Ch. XI) is also resourceful enough to meet such men, and must be triggered against them. In this case, the learned Judge to his cost realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi "It is dangerous to be too good." The trial court in this case will remind itself of s. 35- A C.P.C. and take deterrent action if it is satisfied that the litigation was inspired by vexatious motives and altogether groundless. In any view, that suit has no survival value and should be disposed of forthwith after giving an immediate hearing to the parties concerned.” 21. In any view, that suit has no survival value and should be disposed of forthwith after giving an immediate hearing to the parties concerned.” 21. Thus, continuation of the trial of the suit when the suit was barred by law against the defendant No.1 and as the plaint would not reveal any cause of action against defendant No.2 is nothing but wasting the precious time of the court and all the persons involved in the trial. The order passed by the trial court is erroneous and against the law. As such, it is considered fit to allow the revision by setting aside the impugned order. 22. In the result, the CRP is allowed setting aside the order dated 13.12.2018 in I.A. No.665 of 2018 in COS No.26 of 2017 passed by the Commercial Court cum XXIV Additional Chief Judge, City Civil Court, Hyderabad. No order as to costs. Miscellaneous petitions pending, if any, shall stand closed.