JYOTI PRASAD SINGH Vs. PATMOHANA COLLIERIES LTD

JUDGEMENT

(1.) This appeal is by the decree-holder against an order of the Additional Subordinate Judge of Asansol, dated 15 December 1928, staying the execution of a decree. The Patmohana Collieries Ltd. went into voluntary liquidation and appointed Mr. Charles Ernest Walker, Mr. Benjamin Stanley, and Edwin John Carter liquidators in September 1927. The appellant had obtained a decree against the company in 1924, and in 1928, on his application, certain immovable properties belonging to the company, were attached. On 17 November 1928, the liquidators filed an application before the Additional Subordinate Judge of Asansol for stay of execution of the decree and for vacating the order of attachment and the sale proclamation that had been published in connexion thereof. The learned Subordinate Judge, by his order dated 15 December 1928, dismissed the execution proceedings. The decree-holder appeals to this Court and it is contended on his behalf that the order of the Court below is without jurisdiction. The learned Subordinate Judge is of opinion that the assets of the company should be applied in satisfaction of its liabilities pari passu under Section 207, Companies Act; so he had no jurisdiction to continue the execution, and the decree-holder was not entitled to execute the decree against the assets of the company and to realize the full amount to the detriment of the other creditors. It is argued that the learned Subordinate Judge had no jurisdiction to pass an order like the one with which we are now dealing. We think that this contention is correct.

(2.) Under the Companies Act the winding up of a company may be attested in three ways: (1) by the Court, (2) by voluntary liquidation, (3) subject to the supervision of the Court. The provisions relating to these three modes of liquidation are given in the Act under separate heads. In the case of winding-up by the Court Section 171 provides that when a winding-up order has been made, no suit or other legal proceedings shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.

(3.) Under Section 222 in the case of winding-up under the supervision of the Court, it is provided that when any company is being wound up by or subject to the supervision of the Court, any attachment, distress or execution put in force without leave of the Court against the estate or effects of the company after the commencement of the winding up shall be void. No such corresponding provision is to be found under the sub-head, "voluntary winding-up." Section 207, Clause (1), under that head, lays down that the assets of the company shall be applied in satisfaction of its liabilities pari passu. The learned Subordinate Judge thinks that because of this statutory provision that the assets of the company in voluntary liquidation must be distributed proportionately, he has no power to continue the execution in the ordinary way. The question is not exactly what " the Court" can do when the company has gone into voluntary liquidation, but the question is as to whether the learned Subordinate Judge has the power to make the order he has made. The Court" has been defined in Section 2 (3) of the Act as meaning the Court having jurisdiction under the Act. So that all orders to be passed under the Act must be passed by the Court which has jurisdiction under the Act and that is the High Court; and it is clear that the Court of the Subordinate Judge, Asansol, executing the decree is not a Court which had jurisdiction under the Companies Act, 1913. The provision that the assets of the company in voluntary liquidation shall be applied in satisfaction of its liabilities pari passu is intended for the guidance of the private liquidator. The legislature did not like to leave him with an unlimited power so as to enable him to give unfair or fraudulent preference to a particular creditor. No such procedure is to be found in the case of liquidation by the Court or liquidation under the supervision of the Court, where "the Court" is the proper authority to order distribution of the assets in such proportion as it thinks proper. If the liquidator is confronted with a decree which has to be satisfied out of the assets of the company before distribution of the assets among the creditors, the proper procedure is to approach the Court, meaning a Court having jurisdiction under the Act, under Section 215 for proper direction.