Case: M. K. Ranganathan And Another Vs. Government Of Madras And Others

such sale could be effected by him after the amendment and that was certainly a fundamental alteration in the law which could not be effected unless one found words used which pointed unmistakably to that conclusion or unless such intention was expressed with irresistible clearness.Having regard to the circumstances under which the amendment was inserted in S. 232(l) by Act 22 of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness. Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate, therefore, to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the contrary effect.(Vide the observations of the Privy Council in - Vasudeva Mudaliar v. Srinivasa Pillai, 30 Mad 426 at p. 433 (I) ).24. It may be observed in this connection that S. 171 enacts a general provision with regarded to suits or other legal proceedings to be proceeded with or commenced against the company after a winding up order has been made and lays down that 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.This general provision is supplemented by the supplemental provisions to be found respectively in Ss. 229 and 232(1) of the Act. Section 229. speaks of the application of insolvency rules in winding up of insolvent companies and S. 232 (I) Speaks of the avoidance of certain attachments, executions, etc., put into force without the leave of the Court against that estate or effects of the company and also of any sale held without the leave of the Court of any of the properties of the company after the commencement of the winding up.Section 229 recognises the position of the secured creditor generally as outside the winding up but enables him in the event of his desiring to take the benefit of the winding up proceedings to prove his debt, to value the same and share in the distribution pro rata of the assets of the company just in the same way as he would be able to do in the case of insolvency under the Presidency Towns Insolvency Act or the Provincial Insolvency Act.Section 232(1) also has reference to legal proceedings in much the same way as legal proceedings envisaged by S. 171 of the Act and the attachment, distress or execution put in force or the sale held are all of them legal proceedings which can only be resorted to through the intervention of the Court. The word "held" in connection with the sales contemplated within the terms of the amended section also lands support to this conclusion and this conclusion is further fortified by the terms of S. 232(2) which says that nothing in this section applies to proceedings by the Government, thus in effect indicating that what are referred in S. 232 (1) are proceedings within the meaning of that term as used in S. 171 of the Act.25. The Federal Court also put a similar construction on the provisions of S. 171 read with S. 232 (I) of the Act in - Governor- General in Council v. Shiromani Sugar Mills Ltd., AIR 1946 FC l6 at pp. 20-21 (J);"Section 171 must, in our judgment, be construed with reference to other sections of the Act and the general scheme of administration of the assets of a company in liquidation laid down by the Act. In particular, we would refer to S. 232. Section 232 appears to us to be supplementary to S. 171 by providing that any creditor (other than Government) who goes ahead, notwithstanding a winding-up order or in ignorance of it, with any attachment, distress, execution or sale, without the previous leave of the Court, will find that such steps are void.The reference to "distress" indicates that leave of the Court is required for more than the initiation of original proceedings in the nature of a suit in an ordinary Court of law. Moreover, the scheme of the application of the companys property in the pari passu satisfaction of its liabilities, envisaged in S. 211 and other Sections of the Act, cannot be made to work in co-ordination, unless all creditors (except such secured creditors as are "outside the winding -up" in the sense indicated by Lord Wrenbury in his speed in 1923 AC 647 (A) at p. 671) are subjected as to their actions against the property of the company to the control of the CourtAccordingly, in our judgment, no narrow construction should be placed upon the word "or other legal proceeding" in S. 171. In our judgment, the words can and should be held to cover distress and execution proceedings in the ordinary Courts. In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against the company."We are, therefore, of the opinion that the sale effected by respondent 2 as the Receiver of the Trustees of the debenture-holders on 16-7-1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the Official Receiver. The position was rightly summed up by the High Court as under:"We thus reach the position that no leave of Court was needed before the Receiver appointed by the mortgagee debenture-holders exercised the power of sale and that as there is no allegation of want of bona fides or recklessness or fraud against the Receiver in exercising such a power, it would follow that the sale held by the Receiver is valid and effectual to convey title to the purchaser and that such a sale cannot be avoided on the ground either of want of due notice given by the Receiver before effecting the sale or on the ground of undervalue ."

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]16. The corresponding provisions of the Indian Companies Act have been almost bodily incorporated from those of the English Companies Act and if there was nothing more, the position of the secured creditor here also would be the same as that obtaining in England and he would also be outside the winding up and a sale by him without the intervention of the Court would be valid and could not be challenged as void under S. 232(1), Indian Companies Act.17. It was, however, urged that the addition of the words " or any sale held without leave of the Court of any of the properties" had changed the position of the secured creditor and even though the secured creditor realised the security without the intervention of the court such sale, if effected by him without the leave of the winding up Court , was void.The decision of the Allahabad High Court above referred to had held on a construction of S. 232(1) as it then stood, that an execution was not put in force merely when the property of the judgment-debtor was sold in pursuance thereof, but it was put in force when the property was attached and hence where the property of an insolvent company was attached prior to the date of the commencement of the winding up but was actually sold subsequent to such date, the sale was not void and could be upheld.Even apart from this intendment there are certain canons of construction which also tend to support the same conclusion.Prior to the amendment the law was well-settled both in England and in India that the secured creditor was outside the winding up and he could realise his security without the intervention of the Court by effecting a sale of the mortaged premises by private treaty or by public auction.It is a well-recognised rule of construction that "when two or more words which are susceptible of analogous meaning are coupled together noscuntur a sociis. They are understood to be used in their cognate sense. They take, as it were, their colour from each other, that is, the more general is restricted to a sense analogous to the lessregard to the circumstances under which the amendment was inserted in S. 232(l) by Act 22 of 1936 and also having regard to the context we are not prepared to hold that the Legislature in inserting that amendment intended to effect a fundamental alteration in law with irresistible clearness. Such a great and sudden change of policy could not be attributed to the Legislature and it would be legitimate, therefore, to adopt the narrower interpretation of those words of the amendment rather than an interpretation which would have the contrary effect.It may be observed in this connection that S. 171 enacts a general provision with regarded to suits or other legal proceedings to be proceeded with or commenced against the company after a winding up order has been made and lays down that 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.This general provision is supplemented by the supplemental provisions to be found respectively in Ss. 229 and 232(1) of the Act. Section 229. speaks of the application of insolvency rules in winding up of insolvent companies and S. 232 (I) Speaks of the avoidance of certain attachments, executions, etc., put into force without the leave of the Court against that estate or effects of the company and also of any sale held without the leave of the Court of any of the properties of the company after the commencement of the windingin our judgment, no narrow construction should be placed upon the word "or other legal proceeding" in S. 171. In our judgment, the words can and should be held to cover distress and execution proceedings in the ordinary Courts. In our view, such proceedings are other legal proceedings against the company, as contrasted with ordinary suits against theare, therefore, of the opinion that the sale effected by respondent 2 as the Receiver of the Trustees of the debenture-holders on 16-7-1954 was valid and binding on all parties concerned and could not be challenged as it was sought to be done by the Official Receiver.