TMI Blog1987 (11) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... - 13-11-1987 - SABYASACHI MUKHARJI AND G.L. OZA, JJ. JUDGMENT Sabyasachi Mukharji, J. These appeals by special leave relate to the affairs of M/s. Eastern Tea Estate P. Ltd. It was of two branches, namely, the Dutta's and the Choudhury's. Due to death and lack of cordiality between the erstwhile partners, the two branches first drifted and then parted company as it, unfortunately, is the fate of so many Indian concerns and there were disputes and litigation in court. Civil Appeal No. 1510 of 1987 arises from a judgment and decision of the Division Bench of the High Court of Gauhati dated June 4, 1987. It appears that that a petition was filed originally by the appellant under sections 397 and 398, read with section 403, of the Companies Act, 1956 (hereinafter called "the Act"). The company petition came to be disposed of on February 4, 1977, in accordance with a compromise arrived at between the parties. The said compromise comprised, inter alia, of two relevant paragraphs, for the present purpose, which read as follows: "1.Mrs. Arati Dutta will take over Chandana T. E. and Choudhury group will take over Martycherra T. E. on 25th January, 1976. 2.The bank li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court in cases within its ordinary jurisdiction". It was submitted by learned counsel that the first application by the appellant was under sections 397 and 398, read with section 403, of the Act and the same could be taken in the matter of winding up of a company to which reference has been made in section 483. On the other hand, it was submitted that no appeal lay [from the order on the present application]. It appears to us that though this present application related to sections 397 and 398 and as it arises in respect of the orders passed under sections 397 and 398 of the Act, the provisions of section 483 would be attracted and an appeal would lie to the Division Bench. This conclusion seems to follow from an analysis of the sections as interpreted by the various decisions of this court as well as one judgment of the Delhi High Court to which we will refer. However, it is sufficient for the present purpose for us to refer to the observations of this court in Shanta Genevieve Pomtnerat v. Sakal Papers P. Ltd., AIR 1983 SC 269; [1985] 57 Comp Cas 469 , where this court observed that an appeal under sections 397 and 398, read with section 403, of the Companies Act would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Board [1974] 44 Comp Cas 173 correctly, in our opinion, explained the position. There the High Court found that pending the petition for winding up of the company filed by two of its creditors for failure to pay a debt in spite of statutory notice, the Company Law Board had filed a petition under sections 397 and 398 of the Companies Act and in an application applied for interim reliefs of removal of the sole director and constitution of a board to manage the company. The company judge passed ex parte orders restraining the company from disposing of its assets and restraining debenture trustees from enforcing their rights. Thereupon, an application was filed under section 442 for stay of the petition and that petition under sections 397 and 398 was filed by 125 shareholders and a bank has also filed another winding up petition claiming a large sum of money. Pending the winding-up petitions, the company judge heard the two applications together and passed a common order for removal of the sole director and constitution of a board of directors with a retired judge as the chairman. Appeals -were taken to a Division Bench against another order of the company judge. It was held, ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Chagla C.J. that the second part of the section which refers to 'the manner' and ' the conditions subject to which appeals may be had ' merely regulates the procedure to be followed in the presentation of the appeals and of hearing them, the period of limitation within which the appeal is to be presented and the jorum to which appeal would lie and does not restrict or impair the substantive right of appeal which has been conferred by the opening words of that section". In our opinion, this position is clear from the observation of this court in Shankarlal Aggarwala v. Shankarlal Poddar [1965] 35 Comp Cas 1 , that the appeal lies to the same High Court irrespective of the powers under the Letters Patent. Sections 397 and 398, read with section 483, indicate that the appeal would lie in the same manner to the same court and naturally and logically an appeal from the decision of the single judge would lie to the Division Bench. This, in our opinion, follows logically from the ratio of the decision of this court in Shankarlal Aggarwala v. Shankarlal Poddar [1965] 35 Comp Cas 1 , as well as other decisions referred hereinbefore. It is true that there is perhaps no proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the compromise. She had not paid anything more than this. Therefore, it follows that only a sum of Rs. 6,81,29967 was payable by the appellant to the respondent. The Division Bench, in our opinion, correctly modified the determination on that figure and that is the sum which should be the liability of the appellant. Sree Ghosh, learned counsel for the appellant, tried to submit before us that a sum of Rs. 1,36,038.06 should be given credit in computing the liability of the appellant and, according to him, the Division Bench fell into an error in not deducting this liability of his client. We are unable to agree with this view. In the aforesaid view of the matter, we uphold the direction of the Division Bench in so far as they computed the liability and direct the appellant to pay that sum to the respondent in settlement of the dues referred to hereinbefore. A sum of Rs. 1,36,038.06 was directed to be paid at the time of the admission of the appeal by the Division Bench of the High Court. If that money has been paid or realised by the respondent, the appellant would pay the balance amount of Rs. 6,81,299 67 and if the money is paid, the respondent will, by virtue of this or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, 1976". In terms of the compromise, Shri S. K. Sen first appointed Shri H. Khound, Chartered Accountant, for the purpose of accounting and finding out the liability of the company. Shri Khound submitted his accounts on July 15, 1976, determining the liability at Rs. 12,11,522.18. But he did not take into consideration the gratuity payable to the employees and the accounting was wanting in details. Shri Sen, therefore, appointed another independent auditor, namely, M/s. Kumbhat and Co., Gauhati, to determine the liability and the latter submitted its report in September, 1976, including the gratuity and some other amount payable to the company, and determined the liabilities at Rs. 27,24,926.09. Copies of this account were sent to both the parties fixing September 19, 1976, for a sitting with Shri Sen. Mrs. Arati Dutta, the appellant, failed to attend the meeting whereupon Shri Sen declared the liability of the company at Rs. 27,24,926.09 including the gratuity payable to the employees, and he further stated that each of the parties to the agreement would have to bear 50% of the above liability as per the terms of the compromise embodied in the order of the court passed earlier. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or clause 15 of the Letters Patent. In support of this submission, Dr. Ghosh has first referred to Shanta Genevieve Pommerat v. Sakal Papers P. Ltd. [1985] 57 Comp Cas 469 (SC) wherein it was stated as below in para 5 (at page 470): "Now, an order under sections 397, 398 and 403 of the Companies Act, 1956, on the face of it, cannot be said to be an order made or a decision given, in the matter of the winding-up of company. Relief, undoubtedly, under sections 397 and/or 398 is in fact an alternative to winding up. No doubt an order under section 397 or 398 could be an order made or decision given by the High Court having jurisdiction under the Companies Act and, therefore, an appeal will lie to this Division Bench of the same High Court. This is not disputed". It has been clearly held in this decision that an appeal shall lie from an order passed under sections 397 and 398 of the Act. The decision in Shankarlal Aggarwala v. Shankarlal Poddar [1965] 35 Comp Cas 1 (SC) is more enlightening on this aspect of the case. Though that decision has dealt with this aspect of the matter in the context of the Indian Companies Act, 1913, the ratio of the same has to apply to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of that appeal. The aforesaid view of the Bombay High Court was approved by the Supreme Court in Shankarlal's case [1965] 35 Comp Cas 1, which gave some other reasons as well as to why the view taken by the Calcutta High Court in Madan Gopal, AIR 1928 Cal 295, could not be supported. This is what the Supreme Court observed in this connection towards the end of para 18 (at page 13): "We thus agree with Chagla C.J. that the second part of the section which refers to ' the manner ' and ' the conditions subject to which appeals may be had' merely regulates the procedure to be followed in the presentation of the appeals and of hearing them, the period of limitation within which the appeal is to be presented and the jorum to which appeal would lie and does, not restrict or impair the substantive right of appeal which has been conferred by the opening words of that section". (emphasis supplied) Dr. Ghosh also referred to Golcha Investment P. Ltd. v. Shanti Chandra Bajna [1970] 40 Comp Cas 1128 (SC) and to Gokulchand D. Morarka v. Company Law Board [1974] 44 Comp Cas 173 (Delhi), to buttress his submission. In view of what has been stated in the aforesaid decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... covered by para 3 as reflected in the balance-sheet as on December 31, 1973, stood at Rs. 7,36,545.57. Oat of this amount a sum of Rs. 70,703.94 which is the sum for "provisions for taxation" could not be regarded as liability in the strict sense as held by the learned single judge. The current liabilities, therefore, came to a sum of Rs. 6,65,841.63. The parties having agreed to divide the liability equally, the liability in the share of the appellant came to a sum of about Rs. 3.32 lakhs. As the appellant had paid in the meantime a sum of about Rs. 1.36 lakhs, the contention of Dr. Ghosh was that the appellant has to pay a further sum of about Rs. 2 lakhs. In the alternative, it was argued by learned counsel that what could be demanded from the appellant is the liabilities which were outstanding and not paid off by the time the settlement had been arrived at between the parties in January, 1976. Relying on this submission, it was stated that the bank liability which was shown as Rs. 11,53,567.19 in the balance-sheet of December 31, 1973, could not be taken to be the liability as in January, 1976, as accepted by the learned single judge, inasmuch as in the balance-sheet as on D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he liability to be paid by the appellant. It also contended before us that as per the balance-sheet as on December 31, 1973, the value of fixed and other current assets of Chandana T.E. came to about Rs. 11 lakhs, whereas that of Martycherra T.E.and head office which the Choudhury Group gotcame to about Rs. 14 lakhs. On the other hand, if the balance-sheet as on December 31, 1975, was taken into account, the total assets of Chandana T.E. came to about Rs. 8.5 lakhs, and that of Martycherra and the head office came to more than Rs. 17 lakhs. The appellant being virtually half owner of the company, it could not have been contemplated, argued learned counsel, that she would pay about Rs. 10 lakhs to get her half share in the properties of the company, particularly, when the value of the assets of the company were more than the liabilities. We have duly considered the aforesaid submissions of Dr. Ghose. According to us, his submission that clause 3 of the agreement dealt either with the liabilities, as these stood on the date of the compromise, or with the net liability of the company, cannot be accepted on the face of the clear statement in the affidavit-in-opposition of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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