9911796707
TMI Blog1966 (5) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the abovementioned company, Steel Equipment & Construction Private Ltd. The said decree also created a charge on the assets of the said company being premises No. 22, G. T. Road, and the machinery lying thereat for payment of the decretal amount and interest. On 1st June, 1963, the petitioner through its solicitors gave a statutory notice of demand to the abovementioned company by registered post. On the same day, a suit was instituted by the said company in the Howrah court being Title Suit No. 177 of 1963 against the petitioner and other parties for a declaration that the said consent decree in Suit No. 543 of 1961 was verbally adjusted between the parties and the petitioner herein had agreed to finance the company with further advances. Thereupon the said company also obtained in the said Howrah suit an exparte interim order restraining the petitioner from committing breach of the said alleged verbal agreement pleaded in the Howrah suit. On 6th July, 1963, the petitioner received a reply to their statutory notice, dated 1st June, 1963, from the said company wherein it was alleged, inter alia, that the said consent decree in Suit No. 543 of 1961 of this court was adjusted an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even, the last balance-sheet which was published and distributed to the shareholders. In my view, on the omission of the respondent is not sufficient to discharge the burden of proof, and in any event not sufficient in this matter) Hence, this contention must be rejected. Mr. Sen secondly submitted that, in any event, there should be a winding up order, as the claim being founded on a decretal debt, leaves no room for bona fide disputes. Mr. Gouri Mitter, learned counsel for the respondent-company, on the other hand urged that the company was not competent to guarantee the liabilities of the sister concern and consequently the consent decree passed thereon was void and a nullity, and further and in the alternative that the consent decree dated 5th September, 1962, which affected the immovable properties outside the said jurisdiction, was without jurisdiction. The learned counsel appearing for the parties made their respective submissions at length on these two points not only with great zeal but with considerable ability backed by industry and learning. At the outset, it is necessary to consider the position when a debt is disputed before the winding-up court. It has been he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision, the bona fide dispute need not extend to the whole debt but it is sufficient if a substantial part thereof is bona fide disputed. In the case of Bharat Vegetable Products's case (supra) , the same trend is discernible. In the case of a bona fide dispute, the court may decide finally the disputes as to the debt in order to save costs as was done in In re Imperial Silver Quarries Company [1868] 16 WR 1220 and Landauer & Co. v. Alexander & Co. [1919] SC 492 or the court may adjourn the petition to enable the question to be decided in an action, with or without a direction that the entire amount of the debt or a part thereof be paid into court or dismiss the petition. (See same paragraph at Halsbury's Laws of England) . In England, the modern practice in case of a disputed debt is to dismiss the petition. In our High Court, the most general practice, it seems to me, is to stay the winding up petition and direct one of the parties to file a suit for resolving the controversies as to the disputed debt. This has been done in cases where the dispute turned on a question of law depending on the construction of a clause or clauses in a scheme sanctioned by the winding-up court and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) , Peary Lal Ray Chaudhuri's case (supra), Aswini Kumar Samadhar's case (supra) and the case of Britannia Building & Iron Co. v. Govinda Chandra Bhattacherjee [1960] 64 CWN 324. It is also well known that the plea of waiver, estoppel or acquiescence cannot arise in cases where the decree is void and consequently a nullity. In this connection, reference may be made to the cases of Golab Sao's case (supra) and York Corporation v. Henry Leetham & Sons Ltd. [1924] 1 Ch. 557 .Hence, if a decree is vitiated and is null and void on any of the grounds mentioned above, then that decree will lose its efficiency in any subsequent proceedings. Therefore, in a winding-up court it can be challenged collaterally as it can be done in the ordinary civil courts and the pleas of res judicata and acquiescence, waiver and estoppel are of no avail. It may, however, be noticed that in the ordinary civil courts, if the plea of illegality and/or nullity was taken in the suit and the court had decided it, it is binding on the parties as res judicata even though the court may have decided it wrongly. This puts a limitation on the powers of the ordinary civil courts. When the same question of illegality or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioning creditor's debt, Ex parte Tynte [1880] 15 Ch. D. 125. It has been again held that a debt founded on an illegal consideration cannot support a bankruptcy or insolvency petition : Wells v. Girling [1819] 1 Brod. & B. 447 and Raja Ram v. Chandi Prasad AIR 1932 Oudh 107. It has been held that a debt founded on immoral consideration cannot be recognised by bankruptcy court; a debt arising out of wager or gambling has not been recognised by the court even though supported by a judgment. The bankruptcy court cannot allow proof when it is based on a contract against the policy of the bankruptcy law or is a result of a secret agreement between the bankrupt and the third party. It follows from this unusual and extraordinary power assumed by the bankruptcy court for the beneficial winding up of the estate of the insolvent that the plea of res judicata is no answer and cannot prevent the court from enquiring into the consideration even in cases where the plea as to invalidity or nullity was taken in the earlier suit and thereby confers more extensive power to the bankruptcy court to go behind the decrees than the ordinary civil courts. It must, however, be observed that this ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of a decretal debt. Therefore, though at one stage of the argument I indicated that I will give my considered opinion on the points involved and either allow the application or reject it, I do not now propose to do so, having regard to the authoritative pronouncement of the court. It may be observed that, if I felt myself free, I would have done so and thereby saved the parties from costs and delay. Hence, the question in this case is whether the points raised to attack the said consent decree are points of substance or only mere cloak to hide the inability to pay, bearing in mind that the decree raises a strong presumption. It is not usual, it seems from the judgments referred to hereinbefore, to indicate why the grounds are substantial but only state the conclusion. In my opinion, having regard to the elaborate arguments advanced before me, the reasons as to why the debt is bona fide or otherwise disputed should be indicated. This leads us to the principal question raised in the affidavit-in-opposition and canvassed before me, the question of ultra vires. It has been held that, when a person is legally incompetent to contract as in the case of an infant or minor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. And as the contract on the face of it is quite regular and its infirmity depends on extraneous facts which nobody disclosed, there was no reason whatever why the court should not decree that which the parties asked it to decree. Such a judgment cannot be of more validity than the invalid contract on which it was founded." The consent decree in the above case was set aside in another suit. In my opinion, again when a decree is void by reason of ultra vires, it can be successfully attacked in any collateral proceeding even in cases of proceeding other than insolvency or winding-up proceedings though it cannot be set aside. This follows from the ordinary rules of law. This rule, in my opinion is again applicable in bankruptcy and winding-up proceedings where the court's jurisdiction is of wider amplitude. This rule was applied by the winding-up court in the case of In re Jon Beauforte (London) , Ltd. [1953] 1 All ER 634 where Roxburgh J. observed, inter alia, as follows: "It seems to me that any compromise made on the footing that the contract is intra vires and any judgment suffered in an action in which the defence of ultra vires is not raised can be set aside, because (appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gland, the Cohen Committee went so far as to recomend the abolition of the doctrine of ultra vires. This recommendation, however, was not accepted. The relative objects clauses are set out below : (a)To carry on the business of buildings and structural engineers, makers and sellers of steel products and equipments and contractors for the supply of labour. (b)To enter into contracts with Government, Central or local, companies or firms for the supply of steel or other metal or wood products and equipment or for the carrying out of any structural or other works for such Governments, companies or firms. (c)To enter into partnership or into any arrangement for sharing profits, union of interest co-operation and joint adventure, reciprocal con cession, otherwise, with any person or association of persons or company carrying on or engaged in or about to carry on or engage in, any business or transaction which this company is authorised to carry on or engage in, or any business or transaction capable of being conducted so as directly or indirectly, to benefit this company.......... (h)To invest and deal with the moneys of the company not immediately required for the company's busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company to guarantee the debts or dues of a sister concern itself when the sister concern is not a " subsidiary ". It is now necessary to turn to the word "assist". It has been the subject matter of judicial decisions in England. In this connection, reference was made to the case of In re Financial Corporation, Goodsons Claim [1953] 1 All ER 634 and the case of In re Friary Holroyd and Healy's Breweries Ltd. [1922] WN 293, where the very same word "assist" occurs. It was held in the case of In re Friary Holroyd (supra) that the word "assist" enabled the company to stand as a guarantor of a sister company. It may, however, be noted that the relevant clause in that case is not identical to the clause before me but an amalgam of clause (m) and other objects of this company. Hence, again, in my view, there is a bona fide dispute as to a substantial ground of law. It has been also noticed that a suit has already been filed by the respondent and in fact its prayer for injunction has been refused. It was suggested that in view of those orders it is clear that the courts dealing with those matters had held in effect that there is no prima facie case, that is to say, no substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se for money decree against the defendants including the respondent company on the basis of a bond of guarantee and a promissory note. The plaint further lays down a case for a charge in respect of immovable properties situate outside the jurisdiction of this court. There is a prayer for money decree, there is a prayer for leave under clause 12 of the Letters Patent followed by a prayer for declaration of charge over the immovable properties including premises No. 12, Grand Trunk Road, belonging to the defendants except the respondent company which was the 6th defendant in this suit. Section 26, Civil Procedure Code, provides that every suit shall be instituted by the presentation of a plaint or in such other manner as may be prescribed. The legislature has not prescribed any other manner. A suit, prima facie, refers to the whole of the claim or claims made in the suit. A suit is treated as one unit, though it may contain different causes of action and/or different claims. This is evident from various sections, beginning from section 9 and ending with section 35-A. It will be noticed that the suit is registered as one unit, there is one plaint, one summons, and generally one dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , was transferred to the defendant No. 6, the respondent company. There was a compromise decree and a decree for charge over premises No. 22, Grand Trunk Road, situate wholly in Howrah, outside the jurisdiction. Hence, on the one hand, it may be contended that the decree may be separable on the basis of Order 23, rule 3, of the Civil Procedure Code, read with the case of Ranjit Singh v. Gobardhan Chandra[1946] 50 CWN 447. On the other hand, it can be said that the present case is distinguishable from the facts of Ranjit Singh's case (supra), on more than one ground. In the other case, the plaint did not start with two claims, one for money and the other for a decree for charge over the properties outside the jurisdiction, as in the instant case. In the other case, there is a provision that the decree will be executable without recourse to another suit, which is absent in the present case. Hence, in my opinion, it cannot be said that this point as to jurisdiction is not bona fide and, in my opinion, raises a substantial ground of dispute. The question of fraud, though taken in the affidavit-in-opposition, was not canvassed before me. This would have raised the question of sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
