TMI Blog1973 (5) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... na, assistant, liquidation branch of this court, who stated that the official liquidator sent his application dated May 19, 1971 (exhibit P-1), to this court which was placed before Sandhawalia J. for orders with the note of the office in which the prayers made by the official liquidator were pointed out. The learned judge sanctioned the application on June 7, 1971, and in accordance with those orders, the official liquidator was conveyed the sanction of the court to the prayers made in his application. The letter sent to the official liquidator is exhibit P-2, which is signed by Shri Kapur Singh, Deputy Registrar (J.). In cross-examination, the witness admitted that no notice of the official liquidator's application was sent to the petitioner on whose petition the winding-up order was passed as no suggestion was made in the application of the official liquidator that such a notice should be issued. The official liquidator had not obtained any fresh sanction for filing of the present petition after the according of sanction by Sandhawalia J. on June 7, 1971. No evidence has been led on behalf of the respondents. The point for determination is whether rule 139 of the Companies (Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause ( a ), the Supreme Court "shall" make rules while under clause ( b ), the Supreme Court "may" make rules. The use of the words "shall" and "may" in these two clauses clearly indicates that the rules framed under clause ( a ) are mandatory while the rules framed under clause ( b ) are merely directory. It is open to the Supreme Court not to make rules for which provision is made in clause ( b ) of sub-section (1) of section 643. It cannot, therefore, be said that if the Supreme Court had made rules with regard to the matters mentioned in clause (b) of section 643(1), those rules are mandatory in character and failure to comply with those rules is fatal to the maintainability of the present petition. Under clause ( a ) of section 643(1), the rules have to be made providing for all matters relating to the winding up of companies which, by the Companies Act, have been prescribed. There is no provision in this Act prescribing that rules shall be framed with regard to the manner in which the application for directions is to be made by the official liquidator and who the parties to whom notice of that application will issue. Under section 457(1) of the Companies Act, the official li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, been argued by the learned counsel for the respondents that a Division Bench of the Gujarat High Court in East India Co. v. Official Liquidator [1970] 40 Comp Cas 297 , 309 (Guj.) has observed that: "Compliance with these requirements of rule 139 is a condition for the exercise of the power to give directions in regard to sale of the property of the company by the official liquidator. If the condition is not satisfied, the court cannot exercise th.3 power, or, in other words, the Court would lack power and the purported exercise of the power would be no exercise at all: it would be void and of no effect. This would appear to be the plain inevitable effect of the language used in rule 139 and no authority is needed to support it but we find that there are at least two decisions of high authority where identical approach has been adopted in construing similar statutory enactments." The learned judges were of the view that: " ...the official liquidator cannot take any steps for sale of the property of the company without obtaining the directions of the court, a view which also finds support from section 457, sub-section (3), which prescribes that the exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A decision given in breach of audi alleram partem would, therefore, be void as against the party affected but it would be valid as against the rest of the world." These observations clearly show that only the petitioning creditor, to whom notice of the application for obtaining sanction was not given, can raise the objection that the order passed in his absence is void or a nullity but against the rest of the world it would be a valid order. In view of this observation even if there was any violation on the part of the official liquidator to take out the summons and to have the notice of the summons sent to the petitioning creditor, the order made by Sandhawalia J., according sanction, cannot be said to be void as against the respondent to this petition who are the debtors of the petitioner and not the petitioning creditors. Reliance is then placed by the learned counsel for the respondents on the following observations of their Lordships of the Supreme Court in Smt. Jatan Kanwar Golcha v. Golcha Properties P. Ltd. (In Liquidation) [1971] 41 Comp Cas 230, 233 (SC) : "Rule 139 of the Companies (Court) Rules, 1959, provides for taking out summons for directions not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships also observed that a person, who was to be prejudicially affected, should have been given notice of the summons under the general rule of natural justice and that no order should be made affecting the rights of a party without affording a proper opportunity to it to represent its case. In that case, the appellant was vitally concerned because the land belonged to her while the structure thereon belonged to the company in liquidation. It was felt necessary that she should have been heard before the property was ordered to be sold. This judgment is, therefore, clearly distinguishable as it does not decide either of the two points, that the provisions of rule 139 of the Companies (Court) Rules are directory and not mandatory and that non-compliance with the requirements of that rule does not afford any right to the respondents-debtors of the company in liquidation to raise the objection that the sanction of the court had not been properly obtained by the official liquidator under section 457(1) of the Act and, therefore, the present petition against them is not maintainable. The essence of the provision in section 457(1) of the Companies Act is that before exercisin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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