20 April 1955
Supreme Court


Case number: Appeal (civil) 20 of 1955






DATE OF JUDGMENT: 20/04/1955


CITATION:  1955 AIR  604            1955 SCR  (2) 374

ACT:        Indian  Companies  Act,  (Act VII of  1913),  s.  232(1)  as        amended  by  Act XXII of 1936-The words "or  any  sale  held        without  leave of the Court of any of the properties of  the        Company"  added in the section-Whether legislature  intended        to make alteration in the low as respects sales effected  by        secured   creditor-Secured  creditor-Whether   outside   the        winding    up-Construction-Presumption    against    implied        alteration of law.

HEADNOTE:        The  secured  creditor  is outside the winding  up  and  can        realism  his  security without the leave of the  winding  up        Court,  though  if  he files a suit  or  takes  other  legal        proceedings for the realisation of his security he is  bound        under s. 171 of the Indian Companies Act to obtain the leave        of  the winding up Court before he can do so  although  such        leave would almost automatically be granted.                                    375        It is a legitimate rule of construction to construe words in        an  Act  of  Parliament with reference  to  words  found  in        immediate  connection  with  them.   It  is  also  a   well-        recognized  rule of construction that the  legislature  does        not  intend  to  make a substantial alteration  in  the  law        beyond  what it explicitly declares either in express  words        or  by clear implication and that the general words  of  the        Act  are  not to be so construed as to  alter  the  previous        policy of the law, unless no sense or meaning can be applied        to those words consistently with the intention of preserving        the existing policy untouched.        Held  therefore that having regard to the context  in  which        the  words "any sale held without leave of the Court of  any        of  the properties" added in s. 232(1) by the  amending  Act        XXII  of  1936  have been used in  juxtaposition  with  "any        attachment,  distress  or execution put into  force  without        leave  of the Court against the estate or effects" it  would        be  a legitimate construction to be put upon them that  they        refer  only  to sales held through the intervention  of  the        Court  and  not to sales effected by  the  secured  creditor        outside  the winding up and without the intervention of  the        Court,  and  that the amendment was not  intended  to  bring



      within the sweep of the general words sales effected by  the        secured creditor outside the winding up.        Held accordingly that in the present case the sale  effected        by  respondent No. 2 as the receiver of the trustees of  the        debenture holders in July 1954 was valid and binding on  all        parties  concerned  and could not be challenged  as  it  was        sought to be done by the Official Receiver.        Food Controller v. Cork(1923 A.C. 647), Kayastha Trading and        Banking Corporation Ltd. v. Sat Narain Singh ([1921]  I.L.R.        43  All. 433), Baldeo Narain Singh v. The United India  Bank        Ltd.  ([1915]  38 I.C. 91), State of West Bengal  v.  Subodh        Gopal Bose and others (1954 S.C.R. 587), Angus Robertson and        others v. George Day (L.R. [1879] 5 A. C. 63), Murugian,  P.        v.  Jainudeen,  C.  L.  ([1954]  3  W.L.R.  682),   National        Assistance Board v. Wilkinson ([1952] 2 Q.B. 648),  Vasudeva        Mudaliar and others v. Srinivasa Pillai and another  ([1907]        I.L.R.  30 Mad. 426) and The Governor-General in Council  v.        Shiromoni  Sugar  Mills Ltd. (In Liquidation)  (1946  F.C.R.        40), referred to.

JUDGMENT:        CIVIL APPELLATE JURISDICTION: Civil Appeal No. 20 of 1955.        Appeal  from the Judgment and Order dated the’ 29th  day  of        September 1954 of the High Court of Judicature at Madras  in        Original  Side  Appeal No. 113 of 1954 arising  out  of  the        order  dated  the 9th day of August 1954 of  the  said  High        Court  in  its  Ordinary  Original  Civil  Jurisdiction   in        Application No. 3542 of 1954.        376        C.   K.  Daphtary,  Solicitor-General  for  India  (H.    J.        Umrigar, Mohan Kumaramangalam and Rajinder Narain, with him)        for the appellants.        B.   H. Dhebar and P. G. Gokhale for respondent No. 1.        Samarendra Nath Mukherjee and B. N. Ghose for respondent No.        2.        N.   P. Engineer, (B.  Moropant and V.J. Taraporewala,  with        him) for respondent No. 3.        1955.  April 20.  The Judgment of the Court was delivered by        BHAGWATI J.-This appeal with a certificate under article 133        (1) (c) of the Constitution is directed against the judgment        of  the  High Court of Judicature at Madras  dismissing  the        appeal  of the Appellants and refusing to set aside  a  sale        effected by Respondent 2 of certain properties belonging  to        the Madras Electric Tramways (1904) Ltd. hereinafter  called        the  Company,  above  the  ground  at  Vepery,  Madras   and        Mylapore,  including the machinery cars, etc. and  buildings        as scrap to Respondent 3 in his capacity as the Receiver  of        the trustees of the debenture holders of the Company.        The Appellants are the Secretary and President  respectively        of  the Madras Tramways Workers Association (Registered  No.        1253)  a Trade Union registered under the Trade Unions  Act.        The  workmen employed by the Company are entitled under  the        award  of the Special Industrial Tribunal, Madras in  I.  D.        No.  9  of 1953 published in the Fort  St.  George  Gazette,        dated  the 8th July, 1953 being G. 0. Ms. No. 3024/53  to  a        payment  of  nearly Rs. 7,00,000 out of  which  the  workers        belonging  to the Madras Tramways Workers Association  alone        would  be entitled nearly to a sum of Rs. 4,35,000  and  are        thus  the major creditors of the Company.  The  Company  was        incorporated  in England with its principal office  situated        at  No. 1, Rundalls Road, Vepery, Madras-7 and  was  running        the  Tramway Service in Madras with licence issued to it  by        the Government under the Tramways Act.  It had issued



      377        1300 First Debentures of CIOO each and the debenture-holders        had  appointed the Beawer Trust Ltd., England  as  trustees.        By an Indenture made in England on the 13th October 1924 the        Company  charged  by way of first charge in  favour  of  the        trustees  all its undertaking properties and assets for  the        time  being both present and future including  its  uncalled        capital  with the payment of all moneys for the  time  being        owing on the security of the debentures and such charge  was        to rank as a floating charge.  By two subsequent deeds  made        at  Madras  dated the 26th March, 1925 and  6th  July,  1950        certain  immovable properties belonging to the company  were        mortgaged in favour of the said trustees.  The said Trustees        appointed Respondent 2, the Managing Director of the Company        and day to day management of the Tramway Service and of  the        business  of  the  Compay,  as  their  Receiver.   He   took        possession  as  such Receiver,, from the  midnight  of  11th        April,  1953  of  all the assets of  the  Company  including        moneys  in the bank to the credit of the Company  and  after        that  date  the  Tramways Service was  suspended  and  still        remains suspended.        One  J.  B. Beardsell, one of the Directors of  the  Company        filed O. P. No. 419 of 1953 as the duly constituted Attorney        of the Company for winding up the Company on the ground that        it  was  unable to pay its debts and that it bad  ceased  to        carry  on its business.  An order for the winding up of  the        Company was made by the Court on the 20th January, 1954  and        the Official Receiver, High Court, Madras, was appointed the        Official  Liquidator.   Since all the assets  including  the        moneys  of the Company were in possession of  Respondent  2,        the Official Receiver was unable to take charge of  anything        except the records of the Company.        Soon  after  the  order  for winding  up  the  Respondent  2        advertised  in the newspapers on the 23rd January, 1954  for        the  sale of the properties and assets of the  Company.   At        the  end of the conditions of sale he stated in paragraph  7        that  "the  sales  are for the time  being  subject  to  the        approval of the High Court        378        at Madras and it will be for the undersigned to obtain  such        approval  for  accepted  offers free of  all  costs  to  the        purchaser".        At  the  time  of the order of winding up,  two  suits  were        pending in the High Court, C.S. No. 191 of 1952 filed by the        Company against the State of Madras for Rs. 1,33,204-9-0 and        interest thereon being electric charges alleged to have been        collected by the State of Madras in excess of those  payable        by  the  Company and paid by the company under  protest  and        C.S.  No. 368 of 1953 filed by the State of  Madras  against        the  Company  for  the recovery  of  Rs.  9,26,123-2-3  with        interest thereon, being the difference alleged to be due  in        respect of the electric charges under the old rates and  the        revised  rates  applicable  to  the  Company.   During   the        pendency of the said suits Respondent 2 gave an  undertaking        in  Application  No. 4533 of 1953 in Civil Suit No.  368  of        1953 that he would not without the orders of the High  Court        dispose  of any of the assets of the Company which  were  in        his possession till the disposal of the suit C.S. No. 368 of        1953. The two suits aforesaid were tried together and  were        disposed of by a common judgment on the 16th March 1954.        On  the  16th  July 1954 Respondent 2  agreed  to  sell  and        Respondent  3  agreed to buy the movable properties  of  the        Company  the  particulars  of  which were  set  out  in  the        agreement  entered  into on that date, for a  price  of  Rs.        4,01,658  of  which  half was paid on  the  signing  of  the



      agreement  and the other half was agreed to be paid  out  of        the  proceeds  of sale to be made by the purchasers  of  the        assets as scrap.        On  the  23rd July 1954 the Official Receiver,  High  Court,        Madras  (Respondent 5 herein) filed an application No.  3542        of 1954 for setting aside the said sale of the assets of the        Company on the grounds, inter alia, that it was  prejudicial        to the interests of the General body of unsecured creditors,        that  the  same  had been concluded  with  undue  haste  and        without  adequate publicity and in violation  of  Respondent        2’s  said  undertaking to the Court.  It also asked  for  an        injunction restraining the Respondent 2 from                                    379        handing over and the Respondent 3 from either taking over or        breaking  up  the  assets  purchased  by  him  pending,  the        disposal of the said application.        This  application  was  based on a report  of  the  Official        Receiver  in which after setting out the relevant  facts  he        submitted  that even though under section 229 of the  Indian        Companies Act the Company which was admittedly insolvent was        governed  by rules prevailing with regard to the  respective        rights  of the secured and unsecured creditors and to  debts        provable   and   valuation  of   annuities   governing   the        administration in insolvency and secured creditors generally        stood outside the liquidation and were entitled to have  the        remedy of realising the security and proving before him  for        the  deficiency, if the properties of the Company  could  be        sold for a price higher than the amount due to the  Trustees        of  the  debenture  holders there was  a  possibility  of  a        surplus  coming  into  his  bands for  the  benefit  of  the        unsecured creditors.  If the Respondent 2 proved before  him        for  any deficiency due to the secured creditors,  it  would        certainly  affect  the rights of  unsecured  creditors,  and        moreover  though  the secured creditors  might  realise  the        security,  it  will  be in the interests  of  the  unsecured        creditors to see that a fair and proper price was  obtained.        He  therefore  submitted  that  in  the  interests  of   the        unsecured creditors it was just and necessary to have a fair        valuation  ascertained  and  an enquiry  held  to  ascertain        whether the sale by the Respondent 2 in favour of Respondent        3 was bona fide and for a proper price.  Respondent 2  filed        an affidavit in reply in August 1954 contending inter  alia,        (1) that the offer by the Respondent 3 was the highest, that        he  had received and that this had been accepted bona  fide,        (2)  that  in  the advertisement the  condition  as  to  the        previous  sanction of the Court was inserted because of  the        undertaking  that be had given to the Court in C.S. No.  368        of 1953 and that this undertaking lapsed with the  dismissal        of  the  said suit on the 16th March 1954, (3) that  he  had        been advised by the Solicitors in England for the  debenture        trustees that it was unnecessary for him to obtain        380        the  sanction of the Court and that he had  been  instructed        not  to  apply for such sanction and (4) that the  sale  was        bona  fide  and he had secured as good a price as  could  be        obtained.        By  its  judgment and order dated the 9th  August  1954  Mr.        Justice  Balakrishna Ayyar (in Chambers) dismissed the  said        application  with  costs.  The learned Judge held  that  the        question  whether Respondent 2 had violated the  undertaking        given by him was not germane to the application before  him,        that undoubtedly the Respondent 2 did give wide publicity of        his  intention  to sell the assets of the Company,  that  it        could  not be said that the sale was sub rosa on the  ground        of  want  of  wide publicity to the  intended  sale  of  the



      Company’s  assets and that the Respondent 3’s offer was  the        best offer received by the Respondent 2 looking both to  the        abstract  of  offers  appended  to  the  affidavit  of   the        Respondent  2  in the said application, and looking  to  the        other offers pointed out to him by Respondent 5. The learned        Judge  further referred to the offer of the  Corporation  of        Madras  and said that the said Corporation had not made  any        firm  offer at all and that the offer of one A. Chettiar  of        Rs.  4,25,000 made on 5th August 1954 during the hearing  of        the  application was an offer made by a person who  did  not        appear to him to be of a man of sound financial status.  The        learned  Judge in his judgment also recorded the  fact  that        during  the  hearing  of the application  the  Respondent  3        offered  to  sell to the Madras  Municipal  Corporation  the        entire  assets he had purchased at the same price  which  he        paid for it but the Corporation were not prepared to  accept        the offer.        The Respondent 5 accepted the said judgment and decision and        did  not  prefer  any  appeal against  the  same.   But  the        Appellants  who were not parties to the proceedings  applied        for  and obtained from the High Court leave to  appeal  from        the  said decision.  This appeal also was dismissed  by  the        High Court with costs on the 24th September 1954.  The  High        Court differed from the finding of the Trial Court and  held        that due publicity had not been given to the                                    381        intended sale and observed that if the matter rested  merely        on  a  decision of that point they would  have  allowed  the        appeal and set aside the sale.  They how-’ ever held that in        the  absence of fraud or want of bona fides on the  part  of        the  seller along with that of the buyer the sale in  favour        of the Respondent 3 could not be set aside.  The High  Court        further  considered the question whether the said  sale  was        void  as  being without the leave of the Court  in  view  of        section  232 of the Indian Companies Act and  answered  that        question in the negative.  The High Court further held  that        a  secured  creditor  had a right to  realise  his  security        without  seeking the assistance of the court  and  remaining        outside the winding up.        Being aggrieved by the said judgment and decree of the  High        Court  the  Appellants applied for leave to appeal  to  this        Court  and such leave was granted by the High Court  on  the        24th September 1954.        The bona fides of the Respondent 2 in the matter of the sale        were not challenged either in the Courts below or before  us        and  there were concurrent findings of fact that  the  price        obtained by Respondent 2 was the best price available  under        the  circumstances.   It was however urged  by  the  learned        Solicitor-General  for  the Appellants:-(I)  that  the  High        Court, having found that due publicity had not been given to        the intended sale, ought not to have allowed the  Respondent        3  at  that stage to raise the question as  to  whether  the        Court  had any power or jurisdiction to set aside  the  sale        except  on the ground that it was vitiated by fraud  or  for        want  of bona fides and (2) that the sale- by  Respondent  2        being a sale held without leave of the winding up Court  was        void under section 232(1) of the Indian Companies Act.   The        High  Court  bad  allowed  the Respondent  3  to  raise  the        question  even at that late stage inasmuch as it was a  pure        question of law and the learned Solicitor-General  therefore        rightly  did not press the first contention before us.   The        main  argument centered round the second  contention,  viz.,        whether the sale effected by the Respondent 2 without  leave        of  - the winding up Court was void and hence liable  to  be        set aside.



      382        The   decision  of  this  question  turns  upon   the   true        construction  of section 232 of the Indian  Companies  ’Act,        which runs as under:-        "(I)  Where any company is being wound up by or  subject  to        the  supervision of the Court, any attachment,  distress  or        execution  put in force without leave of the  Court  against        the estate or effects or any sale held without leave of  the        Court  of  any of the properties of the  company  after  the        commencement of the winding up shall be void.        (2)  Nothing  in this section applies to proceedings by  the        Government".        It  may  be noted that the words "or any sale  held  without        leave  of  the Court of any of  the  properties"  underlined        above  were  inserted  by Act XXII  of  1936.   Before  this        amendment section 232(1) was almost in identical terms  with        section 228(1) of the English Companies Act of 1948.        Two other sections of the Indian Companies Act may be  noted        in  this context, viz. section 171:"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."        and Section 229:-        "In  the winding up of an insolvent company the  same  rules        shall prevail and be observed with regard to the  respective        rights  of  secured  and unsecured creditors  and  to  debts        provable  and to the valuation of annuities and  future  and        contingent  liabilities as are in force for the  time  being        under  the law of insolvency with respect to the estates  of        persons adjudged insolvent; and all persons who in any  such        case  would be entitled to prove for and  receive  dividends        out  of  the  assets of the company may come  in  under  the        winding up, and make such claims against the company as they        respectively are entitled to by virtue of this section;"        which correspond respectively to sections 231 and 317 of the        English Companies Act of 1948.                                    383        The  position of a secured creditor in the winding up  of  a        company  has  been  thus stated by  Lord  Wrenbury  in  Food        Controller v. Cork(1):        "The  phrase  ’outside the winding up’  is  an  intelligible        phrase if used, as it often is, with reference to a  secured        creditor,  say a mortgagee.  The mortgagee of a  company  in        liquidation is in a position to say "the mortgaged  property        is  to  the  extent  of the mortgage  my  property.   It  is        immaterial  to  me whether my mortgage is in winding  up  or        not.  I remain outside the winding up’ and shall enforce  my        rights  as  mortgagee".  This is to be contrasted  with  the        case  in which such a creditor prefers to assert his  right,        not  as a mortgagee, but as a creditor.  He may say ’I  will        prove  in  respect of my debt’.  If so, he  comes  into  the        winding up".        It  is also summarised in Palmer’s Company  Precedents  Vol.        II, page 415:        "Sometimes   the  mortgagee  sells,  with  or  without   the        concurrence  of  the liquidator, in exercise of a  power  of        sale vested in him by the mortgage.  It is not necessary  to        obtain  liberty  to  exercise the power  of  sale,  although        orders giving such liberty have sometimes been made".        The secured creditor is thus outside the winding up and  can        realise  his  security without the leave of the  winding  up        Court,  though  if  he files a suit  or  takes  other  legal        proceedings for the realisation of his security he is  bound        under  section  231 (corresponding with section 171  of  the



      Indian Companies Act) to obtain the leave of, the winding up        Court  before he can do so although such leave would  almost        automatically  be  granted.   Section  231  has  been   read        together   with   section   228(1)   and   the   attachment,        sequestration,  distress  or execution referred  to  in  the        latter have reference to proceedings taken through the Court        and  if  the  creditor has resort to  those  proceedings  he        cannot  put them in force against the estate or  effects  of        the Company after the commencement of the winding up without        the leave of the winding up Court.  The        (1)  1923 Appeal Cases 647.        49        384        provisions  in  section 317 are also  supplementary  to  the        provisions of section 231 and emphasise the position of  the        secured creditor as one outside the winding up, the  secured        creditor  being, in regard to the exercise of  those  rights        and  privileges, in the same position as he would  be  under        the Bankruptcy Act.        The  corresponding  provisions of the Indian  Companies  Act        have  been  almost  bodily incorporated from  those  of  the        English  Companies  Act and if there was nothing  more,  the        position of the secured creditor here also would be the same        as  that obtaining in England and he would also  be  outside        the winding up and a sale by him without the intervention of        the Court would be valid and could not be challenged as void        under section 232(1) of the Indian Companies Act.        It was however urged that the addition of the words "or  any        sale  held  without  leave  of  the  Court  of  any  of  the        properties" had changed the position of the secured creditor        and  even though the secured creditor realised the  security        without the intervention of the Court such sale, if effected        by him without the leave of the winding up Court, was  void.        It was pointed out that these words did not find their place        in the corresponding section 228(1) of the English Companies        Act  and therefore even though any attachment,  distress  or        execution  put in force without leave of the  Court  against        the estate or effects of the company after the  commencement        of  the winding up was void under the terms of  the  section        232(1)  as it originally stood, the words "or any sale  held        without leave of the Court of any of the properties" of  the        company  were  wide enough to include not only a  sale  held        through  the  intervention  of the Court  but  also  a  sale        effected by the secured creditor without the intervention of        the  Court  whether  the sale was by private  treaty  or  by        public  auction.   It  was contended on the  other  hand  on        behalf of the contesting Respondent, Respondent 3, that  the        amendment was made in order to get over the decision of  the        Allahabad  High  Court  in  Kayastha  Trading  and   Banking        Corporation Ltd. v.                                    385        Sat  Narain  Singh(1)  and  that in  any  event  on  a  true        construction  of  section 232(1) as amended the  words  "any        sale  held" had reference in the context only to sales  held        by or effected through the intervention of the Court and not        sales   effected  by  the  secured  creditor   without   the        intervention of the Court.        The  decision of the Allahabad High Court above referred  to        had  held  on a construction of section 232(1)  as  it  then        stood,  that an execution was not put in force  merely  when        the  property of the judgment debtor was sold  in  pursuance        thereof,  but  it  was put in force when  the  property  was        attached  and  hence  where the  property  of  an  insolvent        company  was attached prior to the date of the  commencement        of  the winding up but was actually sold subsequent to  such



      date, the sale was not void and could be upheld.  There  was        an earlier decision of the Patna High Court in Baldeo Narain        Singh v. The, United India Bank Ltd.(1) in which a  contrary        decision   had   been   reached   exactly   under    similar        circumstances.   It  is well-known that  this  conflict  was        resolved  and the decision of the Allahabad High  Court  was        got over by inserting this amendment by Act XXII of 1936.        The  statement  of  objects and  reasons  is  certainly  not        admissible as an aid to the construction of a statute.   But        it   can  be  referred  to  for  the  limited   purpose   of        ascertaining  the  conditions prevailing at the  time  which        actuated  the sponsor of the Bill to introduce the same  and        the  extent  and  urgency of the evil  which  he  sought  to        remedy.  State  of  West Bengal v.  Subodh  Gopal  Bose  and        Others(3).  The amendment of section 232(1) inserted by  Act        XXII  of  1936 was designed to prevent such  sales  as  were        upheld  by  the  decision of the  Allahabad  High  Court  in        Kayastha Trading and Banking Corporation Ltd. v. Sat  Narain        Singh(1)  and  it  would be permissible  to  refer  to  that        portion  of  the statement of objects and  reasons  for  the        purpose  of ascertaining the extent and urgency of the  evil        which   was  sought  to  be  remedied  by  introducing   the        amendment.  It follows therefore that the        (1)  [1921]  I.L.R. 43 Allahabad 433  (2) [1915]  38  Indian        Cases 91.                        (3) [1954] S.C.R. 587, 628.        386        amendment  could not have been intended to bring within  the        sweep  of  the general words "or any sale held  without  the        leave of the Court of any of the properties" sales  effected        by the secured creditor outside the winding up.        Even apart from this intendment there are certain canons  of        construction which also tend to support the same conclusion.        Prior  to  the amendment the law was  well-settled  both  in        England  and in India that the secured creditor was  outside        the winding up and he could realise his security without the        intervention  of  the  Court  by effecting  a  sale  of  the        mortgaged  premises by private treaty or by public  auction.        It  was only when the intervention of the Court  was  sought        either  by  putting  in force any  attachment,  distress  or        execution  within the meaning of section 232(1) as it  stood        before the amendment or proceeding with or commencing a suit        or  other legal proceedings against the company  within  the        meaning of section 171 that leave of the Court was necessary        and  if no such leave was obtained the remedy could  not  be        availed  of  by  the  secured creditor.   The  sale  of  the        mortgaged  premises was also brought by the amendment  on  a        par with the attachment, distress or execution put in  force        at the instance of the secured creditor and having regard to        the  context such sale could only be construed to be a  sale        held  through  the  intervention of the Court  and  not  one        effected by the secured creditor outside the winding up  and        without the intervention of the Court.        It is a well-recognised rule of construction that "when  two        or more words which are susceptible of analogous meaning are        coupled together noscunter a sociis, they are understood  to        be  used  in their cognate sense.  They take,  as  it  were,        their colour from each other., that is., the more general is        restricted  to  a  sense  analogous  to  the  less  general.        (Maxwell  on Interpretation of Statutes, Tenth  Edition,  p.        332).   The Judicial Committee of the Privy -  Council  also        expressed  itself  in  similar terms in  Angus  Robertson  &        Others v. George Day(1):-        (1)  [1879] L.R. 5 A.C. 63, 69.                                    387



      "It  is a legitimate rule of construction to construe  words        in  an  Act of Parliament with reference to words  found  in        immediate connection with them".        Having regard therefore to the context in which these  words        "any  sale  held without leave of the Court of  any  of  the        properties"  have  been  used  in  juxtaposition  with  "any        attachment,  distress  or execution put into  force  without        leave  of the Court against the estate or effects" it  would        be  a legitimate construction to be put upon them that  they        refer  only  to sales held through the intervention  of  the        Court  and  not to sales effected by  the  secured  creditor        outside  the winding up and without the intervention of  the        Court.        There  is also a presumption against implicit alteration  of        law  and that is enunciated by Maxwell on Interpretation  of        Statutes, 10th Edition, at page 81 in the following terms:-        "One of these presumptions is that the legislature does  not        intend to make any substantial alteration in the law  beyond        what  it explicitly declares, either in express terms or  by        clear implication, or, in other words, beyond the  immediate        scope  and  object of the statute.  In all  general  matters        outside those limits the law remains undisturbed.  It is  in        the  last  degree  improbable  that  the  legislature  would        overthrow fundamental principles, infringe rights, or depart        from  the  general  system of law,  without  expressing  its        intention                 with                  irresistible        clearness..........................   This   passage    from        Maxwell  was  approved of by Their Lordships  of  the  Privy        Council  in  Murugian, P. v. Jainudeen, C. L.(1)  and  Their        Lordships  agreed that the law was correctly stated  in  the        passage  just  cited.   To  the same  effect  are  also  the        observations  of the Court of Appeal in National  Assistance        Board v. Wilkinson(1) where it was held that the Statute  is        not to be taken as affecting a fundamental alteration in the        general  law unless it uses words pointing  unmistakably  to        that  conclusion.   In that case at page 658  Lord  Goddard,        C.J. observed:-        (1)  [1954] 3 Weekly Law Reports 682, 687,        (2)  [1952] 2 Q.B. 648        388        "But it may be presumed that the legislature does not intend        to  make a substantial alteration in the law beyond what  it        expressly declares.  In Minet v. Leman(1), Sir John Romilly,        M. R. stated as a principle of construction which could  not        be disputed that ’the general words of the Act are not to be        so  construed  as to alter the previous policy of  the  law,        unless  no  sense or meaning can be applied to  those  words        consistently  with the intention of preserving the  existing        policy untouched’ ".        If the construction sought to be put upon the words "or  any        sale  held  without  leave  of  the  Court  of  any  of  the        properties" by the Appellants were accepted it would  effect        a  fundamental alteration in the law as it stood before  the        amendment  was  inserted in section 232(1) by  Act  XXII  of        1936.   Whereas  before the amendment the  secured  creditor        stood outside the winding up and could if the mortgage  deed        so  provided, realise his security without the  intervention        of the Court by effecting a sale either by private treaty or        by  public  auction, no such sale could be effected  by  him        after  the  amendment and that was certainly  a  fundamental        alteration in the law which could not be effected unless one        found   words  used  which  pointed  unmistakably  to   that        conclusion  or  unless  such intention  was  expressed  with        irresistible clearness.  Having regard to the  circumstances        under which the amendment was inserted in section 232(1)  by



      Act  XXII of 1936 and also having regard to the  context  we        are  not prepared to hold that the Legislature in  inserting        that  amendment intended to effect a fundamental  alteration        in law with irresistible clearness.  Such a great and sudden        change of policy could not be attributed to the  Legislature        and  it would be legitimate therefore to adopt the  narrower        interpretation  of those words of the amendment rather  than        an  interpretation  which would have  the  contrary  effect.        (Vide  the  observations of the Privy  Council  in  Vasudeva        Mudaliar & Others v. Srinivasa Pillai & another(1).        (1)  [1855] 20 Beav. 269.        (2)  (19O7) I.L.R. 30 Madras 426, 433,                                    389        It  may  be  observed in this connection  that  section  171        enacts  a  general provision with regard to suits  or  other        legal proceedings to be proceeded with or commenced  against        the company after a winding up order has been made and  lays        down  that  no  suit or other  legal  proceedings  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 general provision is supplemented by  the        supplemental provisions to be found respectively in sections        229  and  232(1)  of the Act.  Section  229  speaks  of  the        application  of insolvency rules in winding up of  insolvent        companies  and  section 232(1) speaks of  the  avoidance  of        certain  attachments,  executions,  etc.,  put  into   force        without  the  leave  of the Court  against  the  estate  and        effects of the company and also of any sale held without the        leave  of the Court of any of the properties of the  company        after  the  commencement  of the winding  up.   Section  229        recognises the position of the secured creditor generally as        outside  the winding up but enables him in the event of  his        desiring  to take the benefit of the winding up  proceedings        to  prove  his  debt, to value the same  and  share  in  the        distribution  pro rata of the assets of the company just  in        the  same  way  as he would be able to do  in  the  case  of        insolvency under the Presidency Towns Insolvency Act or  the        Provincial   Insolvency  Act.   Section  232(1)   also   has        reference to legal proceedings in much the same way as legal        proceedings  envisaged  by section 171 of the  Act  and  the        attachment,  distress or execution put in force or the  sale        held  are  all of them legal proceedings which can  only  be        resorted to through the intervention of the Court.  The word        "held" in connection with the sales contemplated within  the        terms  of  the amended section also lends  support  to  this        conclusion  and this conclusion is further fortified by  the        terms  of  section 232(2) which says that  nothing  in  this        section  applies to proceedings by the Government,  thus  in        effect  indicating  that  what are referred  to  in  section        232(1)  are proceedings within the meaning of that  term  as        used in section 171 of the Act.        390        The  Federal  Court also put a similar construction  on  the        provisions  of section 171 read with section 232(1)  of  the        Act in The Governor-General in Council v.    Shiromani Sugar        Mills Ltd. (In Liquidation)(1)        "Section  171  must,  in our  judgment,  be  construed  with        reference  to  other  sections of the Act  and  the  general        scheme  of  administration  of the assets of  a  company  in        liquidation  laid down by the Act.  In particular, we  would        refer  to  section  232.  Section 232 appears to  us  to  be        supplementary to section 171 by providing that any  creditor        (other  than Government) who goes ahead,  notwithstanding  a        winding-up order or in ignorance of it, with any attachment,        distress,  execution or sale, without the previous leave  of



      the  Court,  will find that such steps are void.   The  ref-        erence  to "distress" indicates that leave of the  Court  is        required   for   more  than  the  initiation   of   original        proceedings in the nature of a suit in an ordinary Court  of        law.   Moreover,  the  scheme  of  the  application  of  the        company’s  property  in the pari passu satisfaction  of  its        liabilities, envisaged in section 211 and other sections  of        the Act, cannot be made to work in co-ordination, unless all        creditors (except such secured creditors as are "outside the        winding-up"  in the sense indicated by Lord Wrenbury in  his        speech  in  Food  Controller V. Cork(1)  at  page  671)  are        subjected  as to their actions against the property  of  the        company  to the control of the Court.  Accordingly,  in  our        judgment,  no narrow construction should be placed upon  the        words  "or other legal proceeding" in section 171.  ’In  our        judgment, the words can and should be held to cover distress        and  execution proceedings in the ordinary Courts.   In  our        view,  such proceedings are other legal proceedings  against        the  company, as contrasted with ordinary suits against  the        company".   We  are therefore of the opinion that  the  sale        effected by Respondent 2 as the Receiver of the Trustees  of        the  debenture-holders on the 16th July 1954 was  valid  and        binding on all parties concerned and could not be challenged        as it was sought to be done by the        (1) [1946] F.C.R. 40, 55.        (2) 1923 A.C. 647.        391        Official  Receiver.  The position was rightly summed  up  by        the High Court as under:-        "We  thus  reach  the position that no leave  of  Court  was        needed  before  the  Receiver  appointed  by  the  mortgagee        debenture-holders  exercised the power of sale and  that  as        there is no allegation of want of bona fides or recklessness        or fraud against the Receiver in exercising such a power, it        would follow that the sale held by the Receiver is valid and        effectual  to convey title to the purchaser and that such  a        sale  cannot be avoided on the ground either of want of  due        notice given by the Receiver before effecting the sale or on        the ground of undervalue".        The  result therefore is that the appeal fails and  must  be        dismissed with costs of the contesting Respondent        3.   The other Respondents who have appeared before us will        bear and pay their own costs of the appeal.