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PETITIONER: M/S.  RAM CHAND AND SONS SUGAR MILLS PVT.  LTD.

       Vs.

RESPONDENT: KANHAYA LAL BHARGAVA & ORS.

DATE OF JUDGMENT: 10/03/1966

BENCH:

ACT: Code  of Civil Procedure (Act 5 of 1908), s. 151 and  O.XXIX r.  3--Director  of  Company  summoned  to  answer  material questions--company when responsible for his  non-appearance- Inherent  powers  of court to prevent abuse  of  process  of court--scope of.

HEADNOTE: The  first  respondent filed a suit  against  the  appellant company and one R for recovery of a sum of money.  The court acting  under  O.XXIX r. 3 of the Code  of  Civil  Procedure directed  J  one of the directors of the company  to  appear before it and answer certain material questions in  relation to  the  suit and when he did not appear the  appellant  was directed  to produce him, with the same result.   The  Court after giving notice to the appellant struck off its  defence in purported exercise of its inherent powers under s. 151 of the Code.  The High Court dismissed the appellant’s revision petition  whereupon  it appealed to this  Court  by  special leave.   It  was contended on behalf of the  appellant  that inherent power could not be invoked in the circumstances  of the case. HELD : (i) Whatever limitations are imposed by  construction on the provisions of s. 151 of the Code, they do not control the  undoubted power of the court conferred under s. 151  of the  Code to make a suitable order to prevent the  abuse  of the process of the Court. [860] Padam  Sen v. State of Uttar Pradesh, [1961] 1  S.C.R.  884, Manohar  Lal  Chopra v. Rai Bahadur Rao Raja  Seth  Hiralal, [1962]  Supp.   1  S.C.R. 450 and Arjun  Singh  v.  Mohindra Kumar, [1964] 5 S.C.R. 946, applied. (ii)There is nothing in O.XXIX of the Code which  expressly or  by necessary implication, precludes the exercise of  the inherent power of the Court under s. 151 of the Code.  In  a case  of default made by a director who failed to appear  in court when he was so required under the aforesaid rule,  the court  can make a suitable consequential order under s.  151 of  the Code as may be necessary for the ends of justice  or to prevent the abuse of the process of the Court. [861 E] (iii)’Any director’ in O.XXIX r. 3 need not be the same director  who has signed and verified a pleading or on  whom summons had been served.  He can be any one of the directors who  will  be  in a position to  answer  material  questions relating to the suit. [861 A-B] (iv)In the present case the court was justified in striking off the defence of the appellant company.  Unless there  was a  finding  of  collusion  between  the  appellant  and  the director  in  that  the former  prevented  the  latter  from appearing  in  court it was difficult to  make  the  company

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constructively  liable  for  the  default  of  one  of   its directors.   A  director’s  acts outside the  scope  of  his powers could not bind the company and it was not possible to hold that the director in refusing to respond to the  notice given by the court wag acting within the scope of the powers conferred on him. [861H-862 D]  857

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 166 of 1966. Appeal by special leave from the order dated August 27, 1965 of  the Punjab High Court (Circuit Bench) at Delhi in  Civil Revision No. 289-D of 1965. S.N.  Andley,  Ramevhwar Nath, Mahinder Narain,  for  the appellants. A.   K. Sen. B. Sen, B. P. Maheshwari, P. D. Bhargava and M.   S. Narasimhan, for the respondents. The Judgment of the Court was delivered by Subba  Rao.   J.--This appeal by special leave  is  directed against  the order of the Punjab High Court confirming  that of the Subordinate Judge, Delhi, striking out the defence of the appellant tinder s.  151 of the Code of civil Procedure, hereinafter called the Code. Kanhaya  Lal Bhargava, the 1st respondent, filed a  suit  on April 27, 1962, in the Court of the Subordinate Judge, First Class, Delhi, against Messrs.  Ram Chand & Sons Sugar  Mills Private  Limited, the appellant, and one Ram Sarup  for  the recovery  of a, sum of Rs. 45,112.94. Pending the  suit,  on October 27, 1964, the 1st respondent filed an application in the  said  court under O.XI, r. 21, of the Code,  read  with O.XXIX,  r. 3, thereof, for striking off the defence  or  in the  alternative for directing Jugal Kishore, a director  of the  Appellant-company, to appear in court on  December  14, 1964.  On December 3, 1964, the court made an order  therein directing  the said Jugal Kishore to be present in court  on December 14, 1964, to answer material questions relating  to the  suit.  The appellant took a number of  adjournments  to produce the said Jugal Kishore on the ground that the latter was ill.  On February 3, 1965, the court gave the  appellant a final opportunity to produce the said Jugal Kishore.  Even so, the appellant took two more adjournments to produce him, but did not do so on the ground that he was ill.  Finally on February  25,  1965, the court issued a notice  to  the  1st defendant,  appellant herein, to show cause why his  defence should not be struck off.  On March 16, 1965, after  hearing the arguments the court held that Jugal Kishore had failed to comply with the orders of the court and was persistent in his  default in spite of chances given to him; and  on  that finding,  it struck off the defence of the  appellant.   The High  Court,  on revision, held that Jugal Kishore  did  not appear  in court in spite of orders to that effect and  that the learned Subordinate Judge had Jurisdiction to strike out the  defence  of the appellant.  It  further  negatived  the contention of the appellant that it was not in its power  to compel  Jugal Kishore to appear in court on the ground  that he was the director of the company and was under its control and, therefore, the appellant-company could not be heard  to say CI/66---9 858 that  one  of the directors did not obey the orders  of  the court.  Hence the present appeal. The  argument of Mr. S, N. Andley, learned counsel  for  the

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appellant,  may  be briefly stated thus: The Code  of  Civil Procedure  provides express power for a court to strike  out defence  against a party under specified circumstances  and, therefore,  s. 151 thereof cannot be invoked to  strike  out the defence in other circumstances, for to do so will be  to override  the provisions of the Code.  Order XXIX,  r.3,  of the Code does not empower the court to require the  personal appearance  of a director other than a director  who  signed and verified the pleading within the meaning of O.XXIX, r. 1 thereof. Mr.  Sen, learned counsel for the respondent, on  the  other hand  contended  that the court had  ample  jurisdiction  to strike out the defence of a party if he was guilty of abuse of  the  process  of the court.  In  the  instant  case,  he contended  Jugal Kishore, one of the permanent directors  of the appellant-company had adopted a recalcitrant attitude in defying   the  orders  of  the  court  to  be  present   for interrogation and, therefore, the Subordinate Judge rightly, after giving every opportunity for him to be present, struck off the appellant’s defence. Section 151 of the Code reads:               "Nothing in this Code shall be deemed to limit               or otherwise affect the inherent power of  the               court to make such orders as may be  necessary               for the ends of justice or to prevent abuse of               the process of the Court." The words of the section appear to be rather wide.  But  the decisions of this Court, by construction, limited the  scope of  the  said  section In Padam Sen v. The  State  of  Uttar Pradesh  (1)  the question raised was whether a  Munsif  had inherent  powers  under  s. 151 of the  Code  to  appoint  a commissioner  to seize account books.  This Court held  that he had no such power.  Raghubar Dayal, J., speaking for  the Court, observed:               "The  inherent  powers  of the  Court  are  in               addition to the powers specifically  conferred               on   the   Court  by  the  Code.    They   are               complementary to those powers and therefore it               must  be  held  that  the  Court  is  free  to               exercise them for the purposes mentioned in s.               151  of  the Code when the exercise  of  these               powers is not in any way in conflict with what               has  been  expressly provided in the  Code  or               against the intentions of the Legislature.  It               is  also  well recognized  that  the  inherent               power is not to be exercised in a manner which               will be contrary to or               (1)   [1961] 1 S.C.R 884,887.                8 5 9               different   from   the   procedure   expressly               provided in the Code". This  Court again in Manohar Lal Chopra v. Rai  Bahadur  Rao Raja Seth Hiralal(1) considered the question whether a court had  inherent  power  under s. 151 of the Code  to  issue  a temporary  injunction  restraining a party  from  proceeding with  a  suit in another State.  In that  context,  Raghubar Dayal,  J., after quoting the passage cited above  from  his earlier judgment, interpreted the said observations thus:               "These  observations  clearly  mean  that  the               inherent powers are not in any way  controlled               by  the  provisions of the Code  as  has  been               specifically  stated  in s. 151  itself.   But               those  powers  are not to  be  exercised  when               their  exercise may be in conflict  with  what               had  been  expressly provided in the  Code  or

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             against  the  intentions of  the  Legislature.               This  restriction, for practical purposes,  on               the  exercise of these powers is  not  because               these powers are controlled by the  provisions               of the Code but because it should be  presumed               that  the procedure specifically  provided  by               the   Legislature   for  orders   in   certain               circumstances is dictated by the interests  of               justice." This Court again in Arjun Singh v. Mohindra Kumar(2)  consi- dered the scope of s. 151 of the Code.  One of the questions raised  was  whether  an  order made  by  a  court  under  a situation  to which O. IX, r. 7, of the Code did not  apply, could  be  treated  as one made under s. 151  of  the  Code. Rajagopala Ayyangar, J., made the following observations:               "It  is common ground that the inherent  power               of  the  Court  cannot  override  the  express               provisions  of  the law. in  other  words,  if               there  are  specific provisions  of  the  Code               dealing  with  a  particular  topic  and  they               expressly or by necessary implication  exhaust               the  scope of the powers of the Court  or  the               jurisdiction that may be exercised in relation               to  a matter the inherent power of  the  Court               cannot  be invoked in order to cut across  the               powers conferred by the Code.  The prohibition               contained  in the Code need not  be  expressed               but  may  be implied or be implicit  from  the               very  nature of the provisions that  it  makes               for  covering  the contingencies to  which  it               relates." Having  regard  to  the said decisions,  the  scope  of  the inherent  power of a court under s. 151 of the Code  may  be defined  thus: The inherent power of a court is in  addition to and complementary to the powers expressly conferred under the  Code.   But  that power will not be  exercised  if  its exercise is inconsistent with, or comes (1) [1962] Supp.  1 S.C.R. 450, 461. (2) [1964] 5 S.C.R. 946, 968. 8 60 into  conflict  with,  any of the  powers  expressly  or  by necessary  implication conferred by the other provisions  of the  Code.   If there are  express  provisions  exhaustively covering  a particular topic, they give rise to a  necessary implication  that no power shall be exercised in respect  of the  said topic otherwise than in the manner  prescribed  by the  said provisions.  Whatever limitations are  imposed  by construction  on the provisions of s.151 of the Code,  they’ do  not control the undoubted power of the  court  conferred under s.  151  of  the  Code to make  a  suitable  order  to prevent the abuse of     the process of the Court.               Now let us look at the relevant provisions  of               the Code.               Order  XXIX.  r. 1. In suits by or  against  a               corporation,  any pleading may be  signed  and               verified  on behalf of the corporation by  the               secretary   or  by  any  director   or   other               principal  officer of the corporation  who  is               able to depose to the facts of the case.               r.2  Subject  to any  statutory  provision               regulating service of process, where the  suit               is  against a corporation, the summons may  be               served--               (a)  on the secretary, or on any director,  or               other

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             principal officer of the corporation, or               (b)               r.    3.  The Court may, at any stage  of  the               suit, require               the  personal appearance’ of the secretary  or               of any director, or other principal officer of               the  corporation  who may be  able  to  answer               material questions relating to the suit. The  contention of the learned counsel for the appellant  is that  the  director  mentioned  in  r.  3  is  the  director mentioned  in r. 1 thereof.  To put it in other  words,  the director  who signs and verifies the pleadings can  only  be required  to appear personally to answer material  questions relating to the suit.  Though this contention appears to  be plausible, it is not sound, Rules 1, 2 and 3, of O. XXIX  of the Code use the words "any director".  Under r. 1 thereof a director who is able to depose to the facts of the case  may sign and verify the pleadings; under r. 2, a summons may  be served  upon any director; and under r. 3, any director  who may  be  able to answer material questions relating  to  the suit may be required to appear personally before the  court. The adjective "any" indicates that any one of the  directors with  the requisite qualifications, prescribed by rr.  1,  2 and  3  can perform the functions laid down in each  of  the rules  respectively.  One can visualize a situation where  a director who signed and verified the pleadings may not be in a position to answer certain material questions relating  to the suit.  861 If  so, there is no reason why the director who may be  able to answer such material questions is excluded from the scope of  r. 3. Such an interpretation will defeat the purpose  of the  said rule.  Therefore, "any director" in r. 3 need  not be the same director who has signed and verified a  pleading or  on whom summons has been served.  He can be any  one  of the  directors who will be in a position to answer  material questions relating to the suit. Even  so, learned counsel for the appellant  contended  that O.XXIX, r. 3, of the Code did not provide for any penalty in case  the director required to appear in court failed to  do so.   By  drawing an analogy from other provisions  where  a particular default carried a definite penalty, it was argued that  in the absence of any such provision it must  be  held that the Legislature intentionally had not provided for any penalty  for the said default.  In this context the  learned counsel had taken us through O.IX, r. 12, O. X, r. 4,  O.XI, 21, O.XVI, r. 20, and O. XVIII, rr. 2 and 3 of the Code.  No doubt under these provisions particular penalties have  been provided  for specific defaults.  For certain defaults,  the relevant Orders provide for making an ex parte decree or for striking out the defence.  But it does not follow from these provisions  that because no such consequential provision  is found   in   O.XXIX,  the  court  is  helpless   against   a recalcitrant  plaintiff  or defendant who happens  to  be  a company.   There  is nothing in O.XXIX of the  Code.  which, expressly   or  by  necessary  implication,  precludes   the exercise of the inherent power of the court under S. 151  of the Code.  We are, therefore, of the opinion that in a  case of default made by a director who failed to appear in  court when he was so required under O.XXIX, r. 3, of the Code, the court  can make a suitable consequential order under s.  151 of  the Code as may be necessary for the ends of justice  or to prevent abuse of the process of the court. The next question is whether the court can, as it did in the present  case, strike off the defence of the  appellant  for

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the  default  made  by  its director  to  appear  in  court. Learned  counsel for the respondent contended that both  the courts  in  effect found that the director was guilty  of  a recalcitrant attitude and that he had abused the process  of the court and, therefore, the Subordinate Judge had  rightly exercised his inherent power in striking off the defence  of the  appellant, We are satisfied, as the courts below  were, that  Jugal Kishore, the director of the  appellant-company, purposely for one reason or other, defied the orders of  the court on the pretext of illness and had certainly abused the process  of the court.  The learned Subordinate Judge  would have  been  well within his rights to take  suitable  action against  him,  but  neither of the  courts  found  that  the appellant  was responsible or instrumental for the  director not  attending  the  court.  Unless there is  a  finding  of collusion between the appellant and the director in that the former 862 prevented  the  latter from appearing in court, we  find  it difficult to make the company constructively liable for  the default  of  one of its directors.  Many situations  may  be visualized  when  one  of the directors  may  not  obey  the directions  of the company or its board of directors or  may be even working against its interests. It  cannot be disputed that a company and the  directors  of the company are different legal personalities.  The  company derives its powers from the memorandum of association.  Some of  the powers are delegated to the directors.  For  certain purposes they are said to be trustees and for some others to be  the  agents  or  managers of the  company.   It  is  not necessary in this case to define the exact relationship of a director qua the company.  The acts of the directors  within the powers conferred on them may be binding on the  company. But  their  acts outside the said powers will not  bind  the company.   It is not possible to hold that the  director  in refusing  to  respond to the notice given by the  court  was acting within the scope of the powers conferred on him.  lie is only liable for his acts and not the company.  If it  was established  that  the company was guilty of  abuse  of  the process  of  the  court  by  preventing  the  director  from attending the court, the court would have been justified  in striking off the defence.  But no such finding was given  by the courts below. The  orders  of the courts below are not  correct.   We  set aside  the said orders and direct the Subordinate  Judge  to proceed with the suit in accordance with law. The  appeal  is allowed, but, in the  circumstances  of  the case, without costs. Appeal allowed. 863