http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6  

PETITIONER: BANSIDHAR SHANKARLAL

       Vs.

RESPONDENT: MOHD.  IBRAHIM & ANR.

DATE OF JUDGMENT: 25/09/1970

BENCH: SHAH, J.C. BENCH: SHAH, J.C. GROVER, A.N.

CITATION:  1971 AIR 1292            1971 SCR  (2) 476

ACT: Constitution  of  India, Art. 133 (1)  (b)  and  (c)-Supreme Court will not certify appeal when on merits it agrees  with High Court. Companies   Act,   1913,  ss.  171   and   179--Company   in liquidation-Liquidators  joining  in second  appeal  against decree  ordering  ejectment of  company  from  land-Landlord filing application for execution of decree without obtaining permission under s. 171 of Companies Act from Company Judge- Application whether maintainable.

HEADNOTE: The  first respondent instituted an action in the  Court  of the  Subordinate Judge Alipore for a decree of ejectment  in respect  of  land  occupied  by a  company.   The  suit  was decreed.   Before the decree was passed the company  took  a loan  from the appellant and mortgaged its fixed  assets  in favour  of the appellant.  After the passing of  the  decree the  company executed a second mortgage of its fixed  assets in favour of the appellant against another loan.  The decree obtained  by  the first respondent against the  company  was confirmed  in first appeal.  Thereupon the company  and  the first appellant filed Second Appeal No. 1380 of 1954 in  the High Court of Calcutta.  The appellant also filed a suit  in the said High Court an its original side to enforce the  two mortgages in his favour and obtained a preliminary  mortgage decree in the suit.  Another creditor of the company applied for  and  obtained an order directing that  the  company  be wound up.  The liquidators of the company and the  appellant prosecuted  Second Appeal No. 1380 of 1954.  The  decree  of the  first appellate court was confirmed by the High  Court. The  first  respondent then instituted  an  application  for enforcement of the decree in ejectment against the  company. The  appellant resisted the application on the  ground  that the same was not maintainable since leave of the High  Court under s.   171 of the Companies Act, 1913 had not been  obtained., Thereafter on  the  motion  of  the  first  respondent   the Company Judge granted leave to     execute  the  decree   in Second  Appeal  No.  1380 of 1954.   The  Subordinate  Judge before  whom  the  proceedings were  pending  dismissed  the objections of the appellant against execution of the  decree

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6  

and  the  order  of dismissal was  confirmed  by  the  first appellate  court  and  the  High  Court.   The   appellant’s applications  for a certificate for leave to appeal to  this Court  was  also  rejected.  in  appeal  by  special   leave challenging the refusal of certificate. HELD : (i) The object of s. 171 is plain.  It is intended to ensure  that the assets of a company ordered to be wound  up by  the Court shall be administered for the benefit  of  all the creditors and that some creditors only shall not  obtain an  advantage  over  others by  instituting  or  prosecuting proceedings against the company.  The section is intended to maintain  control  of the Court which has made an  order  of winding  up on proceedings which may be pending against  the company  or may be initiated after the order of winding  up, and the Court may remain seized of all those matters so that its  affairs  are administered equitably and in  an  orderly fashion. [480 B-C] 477 If  sanction  of  the Court under s. 179  to  prosecute  the appeal before the High Court was obtained by the liquidators in the present case-and it must be so assumed-the contention raised on behalf of the appellant lost all significance  for an execution application is only a continuation of the  suit and  the  control  of  the  High  Court  enures  during  the execution proceedings also.  It would be giving effect to  a technicality  divorced  from  the object of s.  171  of  the Companies  Act  to  hold  that  even  in  a  suit  filed  or prosecuted with the sanction of the Court the decree may not be  enforced by a successful party without leave under  that section. [480 E-G] Even  granting that sanction under s. 179 does not  dispense with  the,  leave under s. 171 of the Act,  to  institute  a proceeding  in  execution against a company  ordered  to  be wound up, there is nothing in the Act which makes the  leave a condition precedent to the institution of a proceeding  in execution  of  a decree against the company and  failure  to obtain  leave  before  the institution  of  the  proceedings entails dismissal of the proceeding.  The suit or proceeding instituted  without  leave of the Court may be  regarded  as ineffective  until  leave  is obtained  but  once  leave  is obtained  the proceeding will be deemed to be instituted  on the: date granting leave. [48OH-481B] Har Narain Misra v. Kanhaiya Lal Lohawalla.  I.LR. [1939]  2 Cal.   425  and  Godavari  Sugar  and  Refineries  Ltd.   v. Kambhampati Gopalakrishnamurthy & Ors., A.I.R. 1960 A.P. 74, disapproved. Nazir  Ahmed v. Peoples Bank of Northern India Ltd.   I.L.R. [1942]  Lah.  517,  Suresh Chandra  Khannabish  v.  Bank  of Calcutta  Ltd.  (1950)  54  Cal.   W.N.  832  F.B.,  Peoples Industrial  Bank  Ltd. v. Ramchandra Shukul, I.L.R.  52  All 430, Roopnarain Ramchandra Private Ltd.  V. Brahmapootra Tea Co. (India) Ltd. & Anr. 65 C.W.N. 1060 and Suresh Chandra v. The Bank of Calcutta, 21 Company Cases 110, referred to. (ii)This  Court  would not be justified  in  certifying  an appeal  in which-, the only question which may be  urged  is the  one on which it ha&, expressed an opinion  against  the appellant. [482 A]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1927  of 1966. Appeal  by special leave from the order dated  December  24, 1965 of the Calcutta High Court in Supreme Court Appeal  No.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6  

55 of 1965. G.L.  Sanghi, Jnanendra Lal and B. R. Agarwala, for  the. appellant. Sukumar Ghose, for respondent No. 1. The Judgment of the Court was delivered by Shah,  J. Mohammed Ibrahim (hereinafter called  "the  plain- tiff") instituted an action in the Court of the  Subordinate Judge, Alipore for a decree in ejectment in respect of  land occupied  by the Luxmi Spinning & Weaving Mills Ltd. as  his tenant.   The. suit was decreed on October 1, 1953.   Before the decree was 478 passed, the Company had executed on January 31, 1951 a  deed in  favour  of  Bansidhar mortgaging its  fixed  assets  for securing  repayment of Rs. 1,25,000/-.  After the decree  of the Trial Court, the Company executed on January 21,, 1954 a second deed also in favour of Bansidhar mortgaging the fixed assets for repayment of an additional sum of Rs. 2,00,000/-. The decree of the Subordinate Judge in the plaintiff’s  suit was  confirmed on August 4, 1954.  Against that  decree  the Company  and Bansidhar preferred second appeal No.  1380  of 1954 to the High Court of Calcutta.  Bansidhar also filed  a suit  in the High Court of Calcutta on its original side  to enforce  the  two  mortgages in his favour  and  obtained  a preliminary  mortgage  decree in the suit on May  13,  1955. Another creditor of the Company applied for and obtained  on August 22, 1955 an order directing that the Company be wound up.  The liquidators of the Company and Bansidhar prosecuted the  Second  Appeal  No. 1380 of 1954.  The  decree  of  the District  Court  was  confirmed by the  High  Court  in  its appellate jurisdiction on February 22, 1958.  The  plaintiff then instituted an application for enforcement of the decree in ejectment against the Company without obtaining leave  of the  High  Court  of Calcutta under s.  171  of  the  Indian Companies Act, 1913.  On December 17, 1958, Bansidhar  filed a  petition contending that the application for  enforcement of  the  decree was not maintainable without leave  of  ’the High  Court which ordered that the Company be wound up.   On the motion of the plaintiff the Company Judge granted  leave to  execute the decree, in Second Appeal No. 1380  of  1954. The  Subordinate  Judge  before whom  the  proceedings  were pending,  dismissed the application filed by Bansidhar,  and the  order  of  dismissal was confirmed  by  the  Additional District  Judge  and  by the High Court  in  Second  Appeal. Bansidhar’s  petition for a certificate for appeal  to  this Court  under Articles 133(1)(b) and (c) of the  Constitution was also rejected.  Bansidhar then preferred two  petitions, for special leave to this Court-one against the order of the High Court dismissing his Second Appeal against the order in the  execution proceedings, and the other against the  order of the High Court refusing to certify the appeal. under Art. 133  (1)  (b)  and  (c) of  the  Constitution.   This  Court dismissed  the petition against the order of the High  Court in  ’Second  Appeal  and granted  special  leave  to  appeal against the order of the High Court refusing to certify  the case. The order passed by the High Court in Second Appeal,  having affirmed  the order of the District Court unless the  appeal preferred  to this Court involved some substantial  question of law of public or private importance, the case could  not be certified under Art. 1 3 3 (1 ) (b) even if the proposed appeal involved direc- 479 tly  or,  indirectly  some  claim  or  question   respecting property  of  value not less than Rs.  20,000/-.   The  High

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6  

Court  could  not  also certify the case as a  fit  one  for appeal under Art. 133(1)(c) unless in the view of the  Court it raised a question of some general or public importance. Counsel  for the appellant says that the  Subordinate  Judge was  incompetent to entertain the application for  executing the decree in Second Appeal No. 1380 of 1954 unless the High Court of Calcutta in its company jurisdiction granted  leave to  execute the decree under s. 171 of the Indian  Companies Act, 1913.  Counsel urged that leave of the High Court is by the terms of s.     171  of the Indian Companies Act made  a condition precedent to   the  institution  of  a  proceeding against a Company ordered to be    wound  up by  the  Court, and that the application for execution of the decree without in the first instance obtaining leave of the High Court  was entertained  without authority.  The question sought  to  be raised in the proposed appeal, it was urged, was of  general or  public  importance.  In any case it was  contended  that there  is conflict of opinion among the Courts in India  ,on the  true interpretation of s. 171 of the  Indian  Companies Act, 1913, and s. 446 of the Companies Act, 1956 (which  re- placed  s. 171 of the Act of 1913), and the High  Court  was bound  to grant the certificate applied for either under  s. 13(1) (b) or under Art. 133(1)(c) or both the clauses. Our  attention is invited to the decision of the High  Court of Calcutta in Har Narain Misra v. Kanhaiya Lal Lohawalla(1) and  of the High Court of Andhra Pradesh in  Godavari  Sugar and  Refineries Ltd. v. Kambhampati Gopalakrishnamurthy  and Others (2) In these cases it was held that leave of the High Court    which  has  ordered winding up of a  Company  is  a condition  precedent  to  the  institution  of   proceedings against  a  Company  in  liquidation,  and  that  proceeding initiated without obtaining leave of the Court in the  first instance must be dismissed. There are, however, other cases which take a contrary view. Nazir   Ahmed  v.  Peoples  Bank  of  Northern  India   Ltd. (3) ; Suresh   Chandra  Khannabish v. The Bank  of  Calcutta Ltd.  (4).   People’s  Industrial Bank  Ltd.  v.  Ramchandra Shukul(5); Roopnarain Ramchandra Private Ltd v. Brahmapootra Tea Co. (India) Ltd. & Anr. (6). Section 171 of the Indian Companies Act, 1913 provided that- (1) 1. L. R. [1939] 2 Cal. 425.A.I.R. 1960 A. P. 74. (3)  I. L. R. (1942) Lah. 517.(4) (1950) 54 Cal. W.  N.  832 F.B. (5) 1. L. R. 52 All. 430.(6) 65 Cal. W. N. 1060. 480 .lm15 "When  a  winding up order has been made  or  a  provisional liquidator  has  been  appointed, no  suit  or  other  legal proceeding shall be proceeded with or commenced against  the Company  except  by leave of the Court and subject  to  such terms as the Court may. impose." This section is in terms analogous to s. 231 of the  English Companies  Act, 1948 (11 & 12, Geo. 6, Ch. 38).  The  object of  s,.  171 is plain.  It is intended to  ensure  that  the assets  of  a Company ordered to be wound up  by  the  Court shall be administered for the benefit of all the  creditors, and  that some creditors only shall not obtain an  advantage over  others  by  instituting  or  prosecuting   proceedings against  the Company.  This section is intended to  maintain control of the Court which has made an order for winding  up on  proceedings which may be pending against the Company  or may  be  initiated after the order of winding  up,  and  the Court  may  remain seized of all those matters so  that  its affairs  are  administered  equitably  and  in  an   orderly fashion.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6  

When  the Second Appeal No. 1380 of 1954 was pending  before the High Court of Calcutta at the instance of the Company 1: and  Bansidhar  against the decree passed  by  the  District Court, in ejectment, the Company was ordered to be wound  up by  order of the High Court of Calcutta and the  liquidators were  appointed.  The  liquidators  prosecuted  the  appeal. There  is no evidence on the record whether the  liquidators obtained the sanction of the Court under s. 179(1)(a) of the Company’s Act 1913.  But, there is no reason to suppose that the  liquidators did not obtain the sanction of  the  Court. If  sanction  of  the Court under s. 179  to  prosecute  the appeal before the High Court was obtained, and it must be so assumed, the contention raised on behalf of Bansidhar  loses all  significance  for an execution application  is  only  a continuation  of the suit and the control of the High  Court ensures  during  the  execution  proceeding  also.   If  the sanction of the Court has been obtained for the  prosecution of the suit, it would be plainly unnecessary to obtain fresh sanction  to the institution of execution proceeding at  the instance  of  the  successful party.  It is  true  that  the sanction obtained by the liquidators is granted under S. 179 of  the Companies Act to initiate or enforce a claim of  the Company  or  to defend an action, whereas the leave  of  the Court to institute or to continue a suit against the Company in winding up is obtained under s. 171.  It would be  giving effect to a technically divorced from the true object of the section to hold that even in a suit filed or prosecuted with the sanction of the Court, the decree may not be enforced by a successful party without leave under S. 171 of the Act’ Even  granting that sanction under S. 179 does not  dispense with  the  leave  under s. 171 of the Act,  to  institute  a proceeding  in  execution against a Company  ordered  to  be wound up, we do 481 not think that there is anything in the Act which makes  the leave  a  condition  precedent  to  the  institution  of   a proceeding in execution of a decree against the Company  and failure to obtain leave before institution of the proceeding entails dismissal of the proceeding.  The suit or proceeding instituted without leave of the Court may, in our  judgment, the  regarded  as ineffective untill leave is  obtained  but once  leave  is  obtained  the  proceeding  will  be  deemed instituted on the date granting leave. In Buckley on the Companies Act, 13th Edn., at p. 499 it  is observed :               "Leave   to  continue  after  winding   up   a               debentureholder’s  action, whether  previously               or  subsequently  commenced,  will  be   given               unless  the liquidator is able and willing  to               give in the winding up the relief which  could               be obtained in the action." The   Calcutta High Court in Suresh Chandra v. The  Bank  of Calcutta(1) examined the decisions of the English Courts  in some  details  and observed that as regards s.  171  of  the Indian    Companies   Act,   1913,  the   High   Court   has jurisdiction to grant    leave  to proceed with the suit  or other  proceedings against a Company in liquidation even  if such leave was not obtained for    its   commencement.   The proceedings may at best be regarded     as instituted on the date on which the leave was obtained from    the High Court. Considering the question both on principle and authority  we are unable to agree with the view expressed by the  Calcutta High      Court  in  Har  Narain  Misra’s  case(2)  and   in Godavari Sugar and  Refineries  Ltd. case(3) by  the  Andhra Pradesh High Court.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6  

Counsel  for the appellant, however,  urged that this  Court is not concerned in this appeal with the correctness of  one or the    other  of the two conflicting views. Counsel  says the Court has,      only to consider the correctness of  the view  of the High Court, refusing to grant the  certificate. In our judgment, it would be  a  futile exercise if we  come to the conclusion that the view taken   by the High Court on the merits of the case is true, still to certify  the   case for  appeal. The proposed appeal only involves the  question about  the  maintainability  of  the  execution   proceeding commenced  by  the  plaintiff and  against  the  Company  in liquidation    without  leave  of the High Court  which  has ordered the company      to  be  wound up. We  entertain  no doubt that the High Court (1) 21 Company Cases 110.             (2) 1. L. R. 392  Cal. 425. (3) A. I.R. 1960 A. P. 74. 48 2 was  right  in the view it has taken on the merits  and  the contentions  raised.   We  do  not think  that  we  will  be justified in certifying an appeal in which the only question which may be urged is the one on which we have expressed our opinion against the appellant. The  appeal fails and is dismissed.  The appellant will  pay the costs of the plaintiff in this Court. G.C.                          Appeal dismissed. 483