TMI Blog1955 (4) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... stees of the debenture-holders of the Company. The appellants are the secretary and president respectively of the Madras Tramways Workers Association (Regd. 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.O. 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, Rundall's 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 1300 First Debentures of 100 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference 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 preju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rustees that it was unnecessary for him to obtain 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 had 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. The decision of this question turns upon the true construction of section 232 of the Indian Companies Act, which runs as under: "(1)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 thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidator, 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 131 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 the 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. 38 Ind. Cas. 91 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 [1954] SCR 587 at p. 628 . The amendment of section 232 (1) inserted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncil also expressed itself in similar terms in Angus Robertson Others v. George Day LR 5 App. Cas. 63 at p. 69: "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 10 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 936 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 and Others v. Srinivasa Pillai and Another ILR 30 Mad. 426 at p. 433) . 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 insolvenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 [1923] AC 647 at p. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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