TMI Blog1984 (9) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... registered office at No. 45, Industry House, Fair-Field Road, Bangalore-1. It is alleged by the petitioner that the former directors of the first respondent-company, Shri N. C. Soundara Pandian and Shri Jayaram Balaram Singh, approached him for financial assistance whereupon an agreement dated February 28, 1982, was executed by them under which the petitioner agreed to invest in the first respondent-company by way of deposits as well as by purchase of equity shares not exceeding one-third of the paid-up capital and half of the deposits. That agreement forms annexure A to the petition. Pusuant thereto, the petitioner claims that he invested Rs. 1,95,500 which has been duly acknowledged by the first respondent-company in a subsequent agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its liability on account of the conduct of the petitioner and the past directors. It is alleged that O. S. No. 2816 of 1982 was filed in one of the city civil courts at Bangalore and that suit came to be withdrawn as settled out of court by the petitioner who was the plaintiff and some of the defendants though the respondent-company had remained unserved on the date the settlement was reported out of court and the suit was withdrawn. It is in that circumstance, the respondents pressed into service the provisions of section 135 of the Indian Contract Act, 1872, alleging that any liability that the company had under the last of the agreements when the new directors took over the company as a going concern were absolved of that liability in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eglect, the deeming provision does not come into operation, and the ground of winding up, namely, that the company is unable to pay its debts, is not substantiated. The debt, the alleged inability on the part of the company to pay which, is the foundation for a petition under section 433( e ) of the Companies Act, the court will not wind up the company if the debt is bona fide disputed and the defence is a substantial one. The principles on which the court acts are 'first that the defence of the company is in good faith and one of substance; secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduced prima facie proof of the facts on which the defence depends.'" If that explanation of the law should hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y court under the provisions of the Act cannot convert itself into a court of original jurisdiction settling civil disputes including drawing up of a decree in favour of one or the other of the parties in proceedings under section 433 of the Act. It is true, the company court does have original jurisdiction to settle claims of all kinds when it exercises its power under section 446 of the Act. But the nature of jurisdiction and the nature of power exercised under the two sections are widely different. Under the latter section, jurisdiction is acquired only if an order is made under section 433 of the Act and not otherwise. If there is no order under section 433 of the Act including the appointment of a provisional liquidator, then there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed not disagree with that ruling, but in every case whether the benefit of section 135 of the Contract Act could be extended to the surety would depend very much on the facts of that case. In other words, it requires the examination of such evidence, interpretation of such documents as the parties may place before the court. In any event, that decision was rendered in an original suit instituted in that court and not in proceedings arising under the Companies Act, particularly section 433 of the Act. That court exercising its original civil jurisdiction has tried the suit on its merits and, on the facts of that case, came to the conclusion that the surety could not resist the claim of the bank, perhaps for what remained unsatisfied after t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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