ANDHRA PAPER MILLS CO LTD Vs. ANAND BROS

JUDGEMENT

(1.) The Andhra Paper Mills Co. Ltd., a limited company incorporated under the Indian Companies Act, was directed to be wound up by an order of this Ct. made on 23-9-1947 & one Mr. Price was appointed Official Liquidator. The Official Liquidator on behalf of the company in liquidation filed a suit, after obtaining the leave of Ct., for the recovery ef a sum of RS. 2,74,734-15-6 with further interest from the date of suit from Anand Brothers' a firm carrying on business in Madras. The suit was instituted under the provisions of Order 7 of the Original Side Rules. The deft. firm was the sole selling agent of the pltf. from 1942. By a resolution of the Board of Directors of the pltf. company dated 8-2-1947 this agency of the deft. was terminated. The amount claimed in the suit is made up of Rs. 2,39,354-15-6, the balance alleged to be due from the deft. to the pltf. company in respect of the value of stocks of paper delivered to the deft. after giving credit to the payments made by the deft. from time to time & interest at six per cent. per annum from the date of the termination of the agency, namely, 8-2-1947. As the suit had been filed under 0. 7 of the Original Side Rules, the deft. took out an appln. (No. 3037 of 1949) for the grant of leave to appear & defend the suit. In the affidavit filed in support of this appln. by a partner of the deft. firm, the proposed defence was set out. The defence is adequately summarised by the Master before whom the appln. came up in the first instance. It comprised several claims by the deft. against the pltf. company including claims for damages, the total amount of which was pleaded in reduction and discharge of the claim made by the pltf. The pltf. opposed the appln. In the counter affidavit filed by the Official Liquidator the merits of the several claims made by the deft. were not traversed, but certain legal objections were raised. It was stated that the several items of claims made by the deft. fell under one or other of the two categories, namely, legal set-off or equitable set off & they should be persued, if at all, by the deft. independently & could not form the subject-matter of the defence to the action. The claims had to be preferred at the first instance before the Official Liquidator & if they were disallowed, they could be taken up before the Ct. on appeal. In any event it was said that court-fee had to be paid on the amount of these claims. Other legal pleas with reference to particular claims were also raised, but it is unnecessary to refer to them. The Official Liquidator further submitted that even if the deft. was entitled to succeed in respect of all or any of the claims, it was not entitled to a set-off against the claim in suit, as the deft. would be entitled only to a dividend on proof of its claims. As these claims were, therefore, no defence to the action, it was urged that no leave to defend should be granted to the deft.

(2.) Another appln. was also filed by the deft. (No. 4188 of 1949) for an order converting the suit brought under the summary provisions of Order 7 of the Original Side Rules into an ordinary suit. The two applns. were heard by the Master who granted the deft. leave to defend unconditionally, except as regards an amount of Rs. 25,724 5.10 the liability for which was admitted by the deft. In view of this order, he thought it was unnecessary to pass any separate order on the other appln., though he was apparently not inclined to grant it, Mr. Narasimha Aiyar, the learned counsel for the Official Liquidator who appeared before the Master & who appeared before us contended before him that the various claims made by the deft. were really counter-claims that have to be made with appropriate court-fees & could not be defences to the suit. He also contended that the deft. would only be entitled to a dividend in respect of such claims & cannot have a set-off against the pltf's. claim. For the deft., it was contended that a set off could be & had to be allowed & that a get off in bankruptcy & winding up was wider in scope than a set off under the C. P. C. The Master did not, however, decide any of these questions which he considered to be matters to be decided by Ct. He was convinced that some at least of the items of claims put forward by the deft. would constitute pleas in defence requiring investigation as they could not be held to be sham or illusory.

(3.) The Official Liquidator preferred an appeal against the order of the Master. The appeal was heard & dismissed by Rajagopalan J. Before the learned Judge the main, if not the only point, urged on behalf of the company was that as the several claims made by the deft. were in the nature of set off & counter claims leave of the learned Judge dealing with the winding up should have been obtained by the deft. under Section 171, Companies Act, & without such leave the deft. could not be permitted to plead any set off or counter claim. It was argued before him that a set off or counter claim was really a suit which would come within the scope of the language of Section 171. On the other hand the deft. contended that leave was not necessary to raise any plea or set off or counter claim in defence to the suit & even if such leave was necessary it could be obtained later. The learned Judge did not decide any of these questions. He thought that these questions should be tried & decided in the suit itself. All that he had to consider was whether Section 171 was a bar to the grant of leave to defend. He rejected the pltf's. contention that the appln. itself was not maintainable because leave had not been obtained under Section 171 to file it. He was of the opinion that Section 171 did not bar a defence to a claim already made by the company. As a plea of set off or a counter claim obviously disclosed a triable issue, whatever may be the other factors which ultimately determine the trial of the suit, leave to defend ought to be granted & unconditionally as there was no proof of bad faith in putting forward those pleas. The appeal before us is against this order of Rajagopalan J.