TMI Blog1973 (12) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the extent they are necessary. Respondent No. 1 is a joint stock company belonging to what was commonly known as the Dalmia Jain group. Respondent No. 2 was also a joint stock company in the same group and while respondent No. 2 was in voluntary liquidation with respondent No. 3 as the voluntary liquidator, the liquidator proposed a scheme of arrangement under section 153 of the Act of 1913 for the amalgamation of respondent No. 2 with respondent No. 1 and after the statutory meeting of the members had been held to consider the scheme and had approved of it, the same was sanctioned by the District Judge, Delhi, by an order made on February 10, 1953. By a subsequent order of February 13, 1953, the District Judge in exercise of powers conferred on it further directed that the whole property of the transferor-company, that is respondent No. 2, would stand transferred to and vest in the transferee-company, that is respondent No. 1, and that all the liabilities of the transferor-company would, by virtue of the said order, become the liabilities of the transferee-company. Certain other directions were also made by the said order but these are not relevant for our present purpose. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition was not maintainable and the court had no jurisdiction to entertain it and as to whether, assuming that it was maintainable, it was within time. On the first question, it was contended on behalf of the appellant that on a true construction of the provisions of section 153A(1)( f ) of the Act of 1913, and its corresponding provision, i.e. , section 394(1)( vi ) of the Act of 1956, it must be held that the terms "to secure that the reconstruction or amalgamation shall be fully and effectively carried out" occurring in the said sections include within their scope an application for a direction to the transferee-company, in the case of amalgamation of companies, to pay to the creditors of the transferor-company the amount due to the creditors or to discharge the liability incurred by the transferor-company before the amalgamation, and that the payment by the transferee to the creditor of the transferor company or the discharge of liability by the transferee-company of the transferor-company would be matters which would be "incidental, consequential and supplemental" to the amalgamation even though the scheme of arrangement leading to the amalgamation did not contain any pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of being wound up, on the liquidator and contributories of the company. (3) An order made under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar, and a copy of every such order shall be annexed to every copy of the memorandum of the company issued after the order has been made; or in the case of a company not having a memorandum, of every copy so issued of the instrument con stituting or denning the constitution of the company. (4) If a company makes default in complying with sub-section (3) the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine not exceeding ten rupees for each copy in respect of which default is made. (5) The court may, at any time, after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against a company on such terms as it thinks fit and proper until the application is finally disposed of. (6) In this section the expression "company" means any company liable to be wound up under this Act and the expression " arrangement" includes a re-organization of the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the transfer of property or liabilities, that property shall, by virtue of the order, be transferred to and vest in, and those liabilities shall, by virtue of the order, be transferred to and become the liabilities of, the transferee company, and in the case of any property, if the order so directs, freed from any charge which is by virtue of the compromise or arrangement to cease to have effect. (3) Where an order is made under this section, every company in relation to which the order is made shall cause a certified copy thereof to be delivered to the Registrar for registration within fourteen days after the completion of the order, and if default is made in complying with this sub-section, the company and every officer of the company who is knowingly and wilfully in default shall be liable to a fine not exceeding fifty rupees. (4) In this section the expression ' property' includes property, rights and powers of every description, and the expression ' liabilities' includes duties. (5) Notwithstanding the provisions of sub-section (6) of section 153, the expression ' company ' in this section does not include any company other than a company within the meaning of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company. (5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy in respect of which the default is made. (6) The court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the court thinks fit, until the application is finally disposed of, (7) An appeal shall lie from any order made by a court exercising original jurisdiction under this section to the court empowered to hear appeals from the decisions of that Court, or if more than one court is se empowered, to the court of inferior jurisdiction. The provisions of sub-sections (3) to (6) shall apply in relation to the appellate order and the appeal as they apply in relation to the original order and the application". 394". Provisions for facilitating reconstruction and amalgamation of companies. - (1) Where an application is made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Liquidator has, on scrutiny of the books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. (2)Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee-company, and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect. (3)Within ' thirty ' days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration. If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty rupees. (4)In this section ( a )'property' includes property, rights and powers of every description; and ' liabilities ' includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rangement has been proposed for the purpose of or in connection with a scheme of reconstruction of a company or the amalgamation of two or more companies and such scheme provides for the transfer of the undertaking or the property of the company concerned in the scheme, the court may either by the order sanctioning the compromise or arrangement make provisions for various matters which are referred to in clauses ( a ) to ( e ) of section 153A(1) of the Act of 1913 and clauses ( i ) to ( vi ) of section 394(1) of the Act of 1956. Clause ( f ) of sub-section (1) of section 153A of the Act of 1913, which corresponds to clause ( vi ) of section 394(1) of the Act of 1956, makes provisions for matters which are not specifically enumerated in the earlier clause and provides for "such incidental, consequential or supplemental matters as are necessary to secure that reconstruction or amalgamation shall be fully and effectively carried out". It is well-settled that the amalgamation of two or more companies may either be by the formation of a third company with which the other companies are merged or by the absorption of the tranferor-company into the transferee-company and, in case where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eree company would be '' necessary to secure that the reconstruction or amalgamation would be fully and effectively carried out "The payment by the transferee-company to the petitioner or the discharge by the transferee-company of the liability of the transferor company to the petitioner could not be said to be a step in aid of the completion of the process of amalgamation. To put it differently, the process of amalgamation of the company by the absorption of the transferor-company into the transferee-company and the consequential transfer of the assets and liabilities of the transferor company to that of the transferee company did not depend or could be said to be incomplete without the discharge of such liability by the transferee-company. The liability of the transferee company to pay the creditors of the transferor-company could not be a step in aid to amalgamation but would be a consequence of it. The directions sought by the petitioner under section 153A(1)( f ) of the Act of 1913 could not, therefore, be within the scope of the said provision and the petition was accordingly not maintainable. Although the petition was not sought to be justified with reference to the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any class of the members or creditors and whether for amalgamation, reconstruction of the company or for the payment of its creditors, made provision for the manner in which the creditors of a company have to be paid, as a compromise or arrangement between the company and its creditors normally would, it is doubtful if the court would have any power either under section 392 or section 394 of the Act of 1956 or under the corresponding provisions of the Act of 1913 to make the direction of the kind sought by the petitioner and become a forum capable of making a decree or an executable order having the force of a decree, which is what the appellant in effect seeks. Section 392 of the Act of 1956, which confers much wider powers on the court than were conferred under the Act of 1913, does not empower the court to make any such direction and the only effect of the sanction of the compromise or arrangement between the company and its creditors would be that the parties become bound by the terms of the arrangement but if in terms of the arrangement payment is not made it could only invoke sub-section (2) of section 392 and order the winding up of the company if it comes to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to better secure the interests of the creditors. On the second question, learned counsel for the appellant assailed the conclusion of the learned district judge on issue No. 2 with regard to limitation and contended that on a true construction of the provisions of article 137 of the Limitation Act, 1963, and of section 30 of that Act, the court ought to have held that the present petition was beyond the scope of the provision of article 137 and there was, therefore, no period of limitation prescribed for it either under the Limitation Act of 1963 or that of the Limitation Act of 1908 and that the petition was, therefore, within time. On the other hand, learned counsel for the respondents sought to justify the conclusion of the court on the aforesaid question on the basis of a decision of the Bombay High Court in the case of Employees' State Insurance Corporation v. Bharat Barrel and Drum Manufacturing Co. P. Ltd. A.I.R. 1967 Bom. 472 which was also relied upon by the learned District Judge, Delhi, in support of the conclusion arrived at by him. Although, in the view that I have taken of the maintainability of the petition and the jurisdiction of the court to deal wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a subsequent amendment of articles 158 and 178 certainly would not have affected the meaning of that article. If, however, as a result of judicial construction, those words have come to be read into the first column as if those words actually occurred therein, we are not of opinion, as at present advised, that the subsequent amendment of articles 158 and 178 must necessarily and automatically have the effect of altering the long acquired meaning of article 181 on the sole and simple ground that after the amendment the reason on which the old construction was founded is no longer available". This decision of the Supreme Court was referred to and followed in a number of subsequent decisions of that court and reference may only be made to two of these, that is, the cases of Bombay Gas Co. v. Gopal Bhiva AIR 1964 SC 352; 25 F.J.R. 179 and Smt. Pravita Bose v. Kumar Rupendra Deb Raikat AIR 1965 SC 540. In its third report, the Law Commission of India dealt with the question of a suitable provision in the new Limitation Act for applications or petitions under special laws as it was felt that there was no such provision in the existing law of limitation. This is how the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 178 of that Act was not considered as in any manner justifying the deviation from the aforesaid construction of article 181. In view of the wider scope of article 137 as compared to that of article 181, the definition of the term "application" in section 2( b ), the history of the present legislation and the circumstances in which the change had been brought about in the context of the indication in the statement of objects and reasons, it is possible to hold that article 137 would contain within its sweep not only applications under the Code of Civil Procedure for which no provision is made in Part I of the division dealing with applications but also applications under various special statutes such as the one with which I am concerned in the present case and I am not surprised that High Courts of Bombay, Calcutta and Kerala have taken that view. In Employees' State Insurance Corporation v. Bharat Barrel and Drum Manufacturing Co. P. Ltd. AIR 1967 Bom. 472 , a Division Bench of the Bombay High Court was concerned, inter alia , with the question whether an application for relief under section 75 of the Employees' State Insurance Act, 1948, was subject to any period of li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 181 will have to be read in a more comprehensive manner to include all applications without the limitation of applications 'under the Civil Procedure Code'. More or less the same view has been taken by the Calcutta High Court in R. K. Kajaria v. Chandra Engineering ( India ) Ltd." AIR 1972 Cal. 381. If the matter had ended at that, I would have no difficulty in holding that article 137 was wider in its scope than article 181 of the Act of 1908 and would include within its sweep even applications which are made under any special statute. Such a conclusion would, however, be contrary to the decision of the Supreme Court in the case of Town Municipal Council, Athani v. Presiding Officer, Labour Court, Hubli AIR 1969 SC 1335, 1342 ; 36 FJR 177 , which does not appear to have been placed before the Calcutta and Kerala High Courts. The decision of the Bombay High CourtAIR 1967 Bom. 472 was earlier than that of the Supreme Court. In the case of Town Municipal Council, Athani ( supra ), the Supreme Court was called upon to consider if an application claiming computation of benefit for over-time work under section 33C(2) of the Industrial Disputes Act, 1947, was subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o applications under the Code of Criminal Procedure cannot be held to have materially altered the scope of the residuary article 137 which deals with other applications. It is not possible to hold that the intention of the legislature was to drastically alter the scope of this article so as to include within it all applications, irrespective of the fact whether they had any reference to the Code of Civil Procedure". It may, however, be pointed out that in the case of Nityanand M.joshi v. Life Insurance Corporation of India [1970] 36 FJR 324; AIR 1970 SC 209, 210 , a slightly larger Bench of the Supreme Court answered the question, whether an application under section 33-C(2) of the Industrial Disputes Act would be governed by article 137 of the Limitation Act, in the negative on the ground that in their Lordships' view article 137 only contemplated "applications to courts" and that the industrial tribunal or labour court were not courts and the article would have no application to proceedings before these authorities. In this case, Sikri J., as he then was, who spoke for the court, considered the earlier decision of the Supreme Court in Town Municipal Council, Athani AIR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure or otherwise to invoke the inherent jurisdiction of the court or the power of the court even though no right is conferred by any statute on the litigant to make such an application and as to whether section 30 of the new Act would apply to cases where the old Act did not prescribe any period of limitation but the new Act did, do not survive. These are, however, questions of some importance and would require serious consideration and even a cursory examination of the latter question brings out a serious lacuna in the Act. Section 30 provides for cases where the period of limitation provided under the old Act was longer than the one provided by the corresponding provision in the new Act. But what happens where the old Act did not prescribe any period of limitation for a particular proceeding but the new Act did. Could it be said in such cases that the period prescribed by the new Act was "shorter" than the one prescribed by the old Act within the meaning of the provisions of section 30 ? The plain language of section 30 would not justify such a conclusion. If that be so how would the new provision providing for limitation for the first time in the Act be administered. An instan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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