TMI Blog1954 (12) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ade in the matter of the winding up of the Hirjee Mills. That order was made under section 170 of the Companies Act and that section provides that on hearing the petition the court may dismiss or adjourn the hearing conditionally or unconditionally or make any interim order or any other order it deems fit. What is urged is that although this is an order under section 170 and although this is an order in the matter of the winding up, inasmuch as the order was made by Mr. Justice Coyajee on the Original Side of the High Court, this order does not constitute a judgment within the meaning of clause 15 of the Letters Patent and therefore no appeal lies. It is contended that the right of appeal under section 202 is conferred subject to the conditions to which appeals may be had from any order or decision of the court in cases within its ordinary jurisdiction, and it is said that the condition subject to which an appeal lies from a decision of a Judge on the Original Side of the High Court is that the decision must constitute a judgment within the meaning of clause 15 of the Letters Patent. It is therefore said that as that condition is not satisfied, the appeal is not maintainable. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but also the District Courts. Under section 3 the court having jurisdiction under the Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situate, and the proviso to that section confers the power upon the Central Government now, and in the past upon the local Government, to empower any District Court to exercise all or any of the jurisdiction by this Act conferred upon the court. Now, what is suggested is that if an order is made by a District Court, that order would be subject to conditions of appeal in the sense that that order would only be appealable if it is appealable under the Civil Procedure Code. If an order is made by a Judge on the Original Side of the High Court, then it would be appealable provided it is a judgment within the meaning of clause 15 of the Letters Patent. If this argument were to be accepted, it would result in a very extraordinary situation. Under the Civil Procedure Code under section 96 an appeal lies only against a decree, and a decree is defined by the Code. Under section 104 of the Code certain orders are made appealable. Therefore if the Civil Procedure Code were to be applicable to orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Originai Side of this court. If the question is what procedure has to be complied with before a court can entertain the appeal, then one must look to the Civil Procedure Code or the High Court Rules depending upon which court has made the order. With regard to the forum, if the District Judge makes the order, the Civil Procedure Code constitutes the Appellate Side of the High Court the forum of appeal. If the order is made by a Judge on the Original Side of the High Court, equally so under the Letters Patent the forum is a Division Bench of this High Court. But to suggest an argument that right of appeal conferred under the first part of section 202 must be construed and interpreted by the second part, which deals with merely the procedural implications of the appeal, would be in many cases practically and substantially to deny the right of appeal to a party affected by an order made in the winding up. Mr. K.K. Desai has urged that if that is the interpretation we put upon section 202 then we must hold that every order, even if it is purely procedural in character, should be appealable, because otherwise we would be importing the considerations of clause 15 of the Letters P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aiming the relief of a winding up order and according them if the learned Judge considered the merits of the matter they were entitled to that relief. The learned Judge having considered the merits held that the petitioners were not entitled to that relief and that the proper order that he should pass was to adjourn the petition. Therefore, the petitioners being deprived of the relief which they sought were being deprived of a substantial right. It is hardly necessary to point out what serious consequences a decision refusing to pass an order of winding up may have in certain circumstances. A company may go on functioning, it may go on frittering away its assets, it may go on adding to its liabilities, and serious and irreparable damage may be caused to creditors and even to shareholders. Therefore, to look upon the order passed by Mr. Justice Coyajee as merely a procedural order is really to ignore the serious consequences which that order may have. Turning to the authorities, Mr. Mathalone has reminded us that this court in Sarupchand Hukamchand In re [1944] 47 Bom. LR 159 has taken the view that when considering on all-India statute we should fall into line with the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. With respect, therefore, this judgment is not of much assistance to us in construing section 202. Turning to the second judgment, it is a judgment of a single Judge Mr. Justice Das, as he then was, and undoubtedly his views are entitled to the highest respect. The question that really came up for decision before the learned Judge was a very different question. What happened in that case was that an order for winding up was made by a company Judge on the Original Side. Subsequently another petition was presented to another Judge on the Original Side for setting aside the order of winding up, and what the learned Judge was really concerned to decide was whether under section 202 an order having been made by one Judge on the Original Side another Judge on the Original Side could re-hear the matter. But undoubtedly there are observations with regard to the construction of section 202 in the judgment of the learned Judge, and those are to be found at p. 513. The learned Judge says (p. 513): " It appears to me that the expression 'manner' indicates the procedure and the expression 'conditions' connotes the essential requirements for maintaining the appeal." Then the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I of the Civil Procedure Code could be fitted in with the scheme of section 202. The learned Chief Justice would have realised the difficulty of the situation if he had considered orders made by the District Court in the winding up of a company. But fortunately there is not a consensus of opinion on this matter among all the High Courts in India and therefore we have not to appeal to our conscience to decide whether we should agree with the judgments of the Calcutta High Court and the Allahabad High Court or not. In the first place there is a recent Judgment of the Full Bench of the Lahore High Court reported in Sansar Chand v. Punjab Industrial Bank Ltd [1929] 10 Lah. 806, (FB) . That was a case and the first case we are noticing where the order was made by a District Judge, and the question submitted to the Full Bench was whether a party aggrieved by an order passed in the course of proceedings in liquidation by the District Judge in exercise of his jurisdiction under the Indian Companies Act was entitled to appeal to the High Court irrespective of the provisions of the Civil Procedure Code which restrict the right of appeal to specified orders, and what the Full Bench hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early this order would not have been appealable. There is a judgment of our own court which, though not directly in point, is of considerable assistance in construing this section, and that is a judgment reported in Nowroji Cooper v. Official Assignee, Bombay [1936] 38 Bom. LR 575 . In that case Sir John Beaumont, Chief Justice, and Mr. Justice Rangnekar were considering the right of appeal under section 8(2) ( b ) of the Presidency Towns Insolvency Act. Now, the language of that section though not identical is very similar and that section provides that an appeal from an order made by a single Judge in the exercise of the jurisdiction conferred by this Act shall lie in the same way and be subject to the same provisions as an appeal from an order made by a Judge in the exercise of the ordinary original civil jurisdiction of the court. It is pointed out to us that this section does not use the expression "subject to the same conditions", but we fail to understand why the expression "provisions" is not wide enough to cover "conditions". Provisions of the law could not only cover conditions but any other matter that the law might provide for, and therefore in our opinion althou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation upon the appealability of an order as the Lahore High Court has done, because he says (p. 992): " ..Of course, there may be orders which are merely orders regulating procedure for the convenience of the court or for the convenience of the parties. Such orders, we take it, are not affected by these provisions. The orders made must be judicial orders intended to decide some point judicially." With respect, we do not understand what the learned Chief Justice means by a judicial order, because even a procedural order is a judicial order. But what the learned Chief Justice really meant was that it must be an order which must decide some point judicially. Therefore, in our opinion, the order made by Mr. Justice Coyajee refusing to wind up the company and adjourning the petition after hearing it on merits to a future date is an order which is appealable under section 202 of the Companies Act. Now, turning to the merits of the matter, it is necessary to state a few facts. The Hirjee Mills were incorporated in 1930 with an authorised capital of Rs. 40,00,000. The issued capital was Rs. 11,50,000 out of which 11,000 shares of Rs. 100 each were issued as fully paid. On M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the mills are set out in the petition and at the date of the petition they were Rs. 26,00,000 due to the Bank of Baroda under its mortgage, Rs. 14,50,000 also due to the bank under its cash credit account which account has been operated on a hypothecation of the goods belonging to the mills, Rs. 40,00,000 due under the second debentures, and Rs. 20,00,000 due to the employees of the Mills. With regard to the employees of the Mills the position is not only serious but tragic. Ever since January of this year nothing has been paid to the employees of the Mills, and Mr. Maneckshaw who appears for them tells us that today about Rs. 36,00,000 are due to these poor people and every month the pay bill is increasing by Rs. 4,00,000. Then there is a liability of of Rs. 12,00,000to the income-tax authorities, Rs. 6,00,000, are due to other creditors, and Rs. 23,00,000 are due to the depositors. So at the date of the petition the debt amounted to Rs. 1,41,50,000, and as we said before this is not disputed by the Mills. The bank has gone into possession under an order of this court and it has got to discharge certain liabilities. The monthly expenditure which has got to be incurred apart f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and no debt was due by the company to the petitioners. Now, in the case before us we have debentures and not a stock certificate issued to the debenture holders including the appellants, and when we turn to the debentures they contain a personal covenant by the Mills to pay to the debenture holders. Therefore the reason which led Mr. Justice Swinfen Eady to hold that the petition was not maintainable in the case before him is not present in this case, and that is made clear in two other English decisions to which our attention has been drawn by Mr. Manekshaw. One is the case in In re Borough of Portsmouth ( Kensington Fratton and Southsea ) Tramways Company [1892] 2 Ch. D. 362 . There a debenture holder, as in the case before us, presented a petition for the winding up of a company. That debenture holder had already filed an action to enforce his security and notwithstanding that the Chancery Court held that the exercise of his remedy as a debenture holder did not deprive him of his right as an ordinary creditor to present a winding up petition and that he was entitled to the order. There is another case also to the same effect reported in In re Olathe Silver Mining Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only commercially insolvent but hopelessly insolvent, however the expression "insolvent" may be construed or interpreted. There was not even a suggestion before the learned Judge below as to how the company proposed to meet its liabilities of Rs. 1,41,50,000 with assets at the most aggregating to Rs. 60,00,000. No scheme was proposed, no suggestion was made, no financier came forward to salvage the mills. Even on the other ground that it is just and equitable that the winding up order should be made, what the petitioners have to satisfy us is that the substratum of the company has disappeared. In that very case I laid down four tests to decide whether the substratum of the company was gone. Two of the tests are clearly satisfied in this case. One was that it was impossible to carry on the business of the company except by a loss, which meant that there was no reasonable hope that the object of trading at a profit could be attained; and the second was that the existing and possible assets are insufficient to meet the existing liabilities. It is true that in that case I emphasised the fact that it is not for the Judge to speculate as to whether if a company carried on its business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e main reason which has weighed with him is that the petitioners have not come to this court with clean hands, and Mr. Mathalone wanted to satisfy us that the motive of the petitioners in closing down the mills was selfish, that they were largely responsible for bringing about an impasse in the affairs of the mills, and the court will not make an order at the instance of a party which is guilty of mala fide s. We have not permitted Mr. Mathalone to go into the merits of these allegations about the mala fide s of the petitioners because in our opinion these allegations are entirely irrelevant. If the petitioners have made out a case for the winding up of the company, if they have placed materials before the court which satisfy the court that the company is insolvent, if they have placed materials before the court which satisfy the court that the substratum of the company is gone, it is difficult to understand what the motive of the petitioners has got to do with the question whether an order of winding up should be made or not. If the petitioners were to stand to benefit by the order, undoubtedly the court would say that a party cannot derive benefit by its own wrong. But when an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clients are contemplating and to enable whom to file the suit this petition was adjourned by the learned Judge. The learned Judge also gives other reasons why he has refused to make this order. He first takes into consideration the manner in which the mills suddenly came to a standstill. As we said before, they came to a standstill in February, 1954. There is not the slightest possibility of the working ever being resumed under the present dispensation. We take it that the learned Judge was thinking of the allegations of the company that the mills suddenly came to a standstill because of the machinations of the petitioners. But the stark truth remains, for which there is no answer or no explanation, that the mills have no money whatsoever which would enable them to be run. Then the second fact is that these are the only mills that have showed no profits. If anything, this circumstance should be in favour of the winding up of the company rather than against it. If the affairs of the mills had been so mismanaged that although other mills in the State of Bombay were earning profits these mills should not earn profits, that itself should be a ground for winding up and taking away t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re than Rs. 500 are due to him for wages. We therefore substitute Dinkar Sambhaji Tavde in place of the appellants as the creditor and we will make an order of winding up of the company. The court liquidator is appointed official liquidator with all powers under section 179. Powers under section 179 to be exercised by the court liquidator without the sanction of the court required under section 180. The appeal will, therefore, be allowed and we will set aside the order of the learned Judge below. With regard to costs of the appeal, the appellants must get their costs out of the assets of the Mills. The company must also get its costs out of the assets. With regard to the creditors, Mr. Manekshaw who appeared for the employees has appeared through the same solicitors as the solicitors of the petitioning creditors. The principle is well settled that if shareholders or creditors appear through the same solicitors as the successful petitioners, then they are not entitled to costs because they choose to brief separate counsel. But this is the ordinary principle which should be followed. The position here is different. Allegations of mala fide s were made against the petitioners and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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