SRINIVASA NAICKER Vs. A N NAGAPPA CHETTIAR

JUDGEMENT

(1.) THIS revision raised an interesting question of law. The respondent, Nagappa Chettiar, filed a suit, O. S. No. 27 of 1969, on the file of the lower court for recovery of certain monies due under a promissory note executed by the petitioners, and their defence was that the promissory note was executed in connection with the business of a company by name Chellam transports Ltd. , and that the money could, therefore, be recovered from the assets of that company only and not personally from them. The petitioners filed an application I. A. No. 95 of 1970, for a notice under Order 8-A, Civil procedure Code, to bring in Chellam Transports Ltd. , which was under liquidation by then, as a co-defendant, and this application was opposed by the respondent on the ground that be had nothing to do with Chellam Transports ltd. , and that under section 446 of the Companies Act of 1956, the petitioners have to obtain sanction of the company court for initiating proceedings against the company under Order 8-A of the Code of Civil Procedure. The Court below upheld the objection of the respondent and rejected the application on the ground that the application for initiating proceedings under Order 8-A against the company, which is in liquidation, cannot be maintained without the leave of the company court. It is the correctness of the said order which is canvassed in this revisions.

(2.) THE learned counsel for the petitioners contends that no leave of the company court is necessary for an applicant under Order 8-A rule 1 that a resort to Order 8-A will not amount to initiation of any proceeding against a company as contemplated in section 446 of the companies Act and that section 446 applies only to original proceedings such as suits, etc. , and not to interlocutory applications in a pending suit. THE learned counsel contends that the words "other legal proceedings" in section 446 (1) of the companies Act have to be construed as to denote original proceeding and that they cannot comprehend interlocutory applications in a pending proceeding. THE learned counsel compares this provisions with section 16 (2) (b) of the provincial Insolvency Act to substantiate his contention that the words "other legal proceeding" can refer only to original proceedings initiated against the company. In Periakarupa THEvar v. Vellai alias Ocha THEvar the scope of section 141, Civil Procedure Code, came up for consideration. In that case there was an ex parte order in a reference proceeding under section 146, Criminal Procedure Code, and when the ex parte order was sought to be set aside under Order 9, rule 13, invoking section 141 of the Code of Civil procedure, a Division Bench of this court held that section 141 could not be called into play, that section 141 relates to original matters in the nature of suits, that the proceedings in a civil court under section 146, Criminal procedure Code, cannot with any propriety be called "original" in character and that, therefore. Order 9, rule 13, cannot be invoked in relation to reference proceedings. Kuppuswami Ayyar J. in Calicut Bank Ltd. v. Nakkat, however, construed the word "proceeding" in section 171 of the companies Act, 1913, as applying to execution proceedings also, and held that it was not confined to original proceedings alone, and that a claim petition which was itself a proceeding in execution, fell within the mischief of the section. It has also been clearly laid down by the Federal Court in governor-General in Council v. Shiromani Sugar Mills that the expression "other legal proceeding" in section 171, need not, and therefore should not be construed to mean original proceedings in a court of first instance, analogous to a suit initiated by means of a petition similar to a plaint, that section 171 must be construed with reference to other section of the act and the general scheme of administration of the assets of a company in liquidation laid down by the Act, and that leave of court is required for execution proceeding against a company in the ordinary course even though they are not original proceeding. In that case their Lordships of the Federal Court held that though a proceeding under section 46 of the Income-tax Act cannot be construed as a proceeding in any ordinary court of law which will be comprised within the words "other legal proceedings" occurring in section 171, the income-tax authorities have to apply for leave of the winding up court before issuing the certificate contemplated in section 46 (2) by the Collector for the collection of arrears of income-tax. In view of this decisions it is not possible to confine the scope of section 446 only to original proceedings as contended for by the learned counsel for the petitioners. It was then contended on behalf of the petitioner that the Order 8-A, having been invoked by them in defence of the suit filed against them, section 446 of the Companies act cannot stand in their way. Reliance has been placed on the following decisions : In Andhra Paper Mills Co. Ltd. v. Anand Bros a Division bench of this court had occasion to consider whether leave of the company court under section 171 has to be obtained by a defendant for setting up a crossclaim or set off in a suit filed by a company in liquidation and Rajamannar C. J. had expressed as follows : "on the principle and the in the interests of fairness and justice, we think that a party against whom the company has instituted a suit, should not be prevented from establishing that on a proper taking of the account between the company and the party, i. e. , after adjusting mutual credits and debits, no amount is due to the company or that the extent of its liability is more or less reduced. When the company had made a claim, any plea which has the effect of reducing the claim if successful would be a plea in defence. It may be for certain purposes, as for example, for court-fees, a written statement containing a plea of set-off or counter-claim is treated as a cross-suit, but that is not conclusive of the matter. THEre can be no doubt that the pleading by the defendant is defensive in character. If it is so, then section 171 cannot apply. " *